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Page 2 of 16
Table of Contents
EXECUTIVE SUMMARY .............................................................................................................................. 4
INTRODUCTION ......................................................................................................................................... 5
BACKGROUND ................................................................................................................................................... 5
PURPOSE .......................................................................................................................................................... 5
ENVIRONMENTAL ANALYSIS ...................................................................................................................... 6
MACRO-‐ENVIRONMENT ANALYSIS ........................................................................................................................ 6
PORTER’S FIVE FORCES ANALYSIS ......................................................................................................................... 7
ORGANISATION ANALYSIS ......................................................................................................................... 8
STRATEGY ......................................................................................................................................................... 8
Key Stakeholders ....................................................................................................................................... 8
Outside Interests ....................................................................................................................................... 8
PERFORMANCE .................................................................................................................................................. 9
Financial Performance ............................................................................................................................... 9
Internal Current Performance ................................................................................................................... 9
Internal Long Term Development ............................................................................................................ 10
MARKETING .................................................................................................................................................... 10
CAPABILITIES ................................................................................................................................................... 10
SWOT ANALYSIS ............................................................................................................................................. 10
HIGH-‐LEVEL OPTION ANALYSIS ................................................................................................................ 12
CONCLUSION ........................................................................................................................................... 13
RECOMMENDATIONS .............................................................................................................................. 13
REFERENCES ............................................................................................................................................ 14
APPENDIX 1 – WALMART 5-‐YEAR FINANCIAL PERFORMANCE STATISTICS ................................................ 15
Page 3 of 16
ASSIGNMENT COVER SHEET FOR SUBMISSION OF INDIVIDUAL AND GROUP WORK
Department/School Open Universities Australia Course/Unit Code
Assignment Number
Assignment Due Date
Group/Session name (if applicable)
OMBA660 BUSM4045
1 27/01/2013
Session 3 2012-2013: CLN Strategic Analysis Report: Walmart
Course/Unit Name Program Title
This statement should be completed and signed by the student(s) participating in preparation of the assignment. Declaration and Statement of Authorship: I/we hold a copy of this assignment, which can be produced if the original is lost/ damaged. This assignment is my/our original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgement is made. No part of this assignment has been written for me/us by any other person except where such collaboration has been authorised by the lecturer/teacher concerned and is clearly acknowledged in the assignment. I/we have not previously submitted or currently submitting this work for any other course/unit. This work may be reproduced, communicated, compared and archived for the purpose of detecting plagiarism. I/we give permission for a copy of my/our marked work to be retained by the School for review and comparison, including review by external examiners. I/we understand that Plagiarism is the presentation of the work, idea or creation of another person as though it is your own. It is a form of cheating and is a very serious academic offence that may lead to expulsion from the University. Plagiarised material can be drawn from, and presented in, written, graphic and visual form, including electronic data, and oral presentations. Plagiarism occurs when the origin of the material used is not appropriately cited. Enabling plagiarism is the act of assisting or allowing another person to plagiarise or to copy your work
Family name Given Name Student Number Student Signature Date
Cross Daniel S2106762 Daniel Cross 27/01/2013
Kanellis Bill S3225039 Bill Kanellis 27/01/2013
Rega Joseph S3362256 Joseph Rega 27/01/2013
Smith Matt S3339865 Matt Smith 27/01/2013
Business Strategy
MBA (Executive)
Lecturer/Teacher’s Name Tutor (or Marker’s) Name (if applicable) Ryszard Bliszczyk Ryszard Bliszczyk
Further information relating to the penalties for plagiarism, which range from a notation on your student file to expulsion from the University, is contained in Regulation 6.1.1 Student Discipline (http://www.rmit.edu.au/browse?SIMID=m62x4h7g8iep1) and Academic Policy: ‘Plagiarism’ (http://www.rmit.edu.au/course-admin/operating-procedures). For Assessor only: Assessor’s comments___________________________________________________________________________________
_____________________________________________________________________________________________________ _____________________________________________________________________________________________________ Grade:
School Date Stamp
(For office use only)
Page 4 of 16
Executive Summary
As the US market for everyday low price (ELDP) consumer goods had become saturated by 2006, Walmart,
the world’s largest retailer turned its focus to international expansion. With predicted growth in the retail
sector of 20% per annum from 2007 onward along with rising incomes and consumerism, Walmart turned its
attention to India. As previous forays by Walmart into the German and South Korean markets had failed due
to lack of market knowledge, Walmart sought a joint venture (JV) with Bharti, an established cell phone
operator in India with the intention of leveraging their local market expertise.
In 2006, the JV announced its intention to open hundreds of Walmart branded stores in India. This
announcement sent shockwaves through the retail industry in India which consisted predominantly of Small
and Medium Enterprises (SME’s), and local ‘ma n’ pa’ stores. Walmart’s reputation of driving small retailers
out of business threatened these stores generating socio-economic unrest, resistance and adverse publicity
for the JV.
Analyses conducted identified significant risks to the JV such as underdeveloped state of IT and logistical
infrastructure, the highly unorganised nature of the Indian retail sector, and the Indian government’s intention
to maintain its balance of trade terms through self-sufficiency in the manufacture of consumer goods.
Subsequently, this paper recommends that the JV does not currently pursue a strategy to sell directly to
Indian consumers by investing in the rollout of hundreds of retail stores. Rather, to enable Walmart in
achieving long term success in India an alternative strategy is proposed.
It is recommended that the JV adapt its business strategy through the development of a business-to-
business wholesale capability, allowing it to use its buying power to procure goods from Indian
manufacturers and leverage its strengths in IT & logistical capability to supply Indian SME’s. In doing so, the
JV stands to win both supplier and SME confidence and co-operation, enabling them to grow and prosper
together with Walmart as they receive access to cheap EDLP goods and Walmart benefits from high volume
scale sales via its supply to the hundreds of thousands of SMEs.
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INTRODUCTION
Background
As the U.S. market is saturated, shareholder demand on return led senior executives at Walmart to seek
international expansion. The opportunity to leverage their successful domestic business model to achieve
further growth in sales and profits on a global scale seemed the next logical growth step.
In an effort to prevent recurrence of failed entries into Germany and South Korea Walmart adapted their
global expansion strategy to include joint ventures (JV) with local organisations when entering a new market.
This adaption made it possible for Walmart to partner with organisations familiar with local markets, and with
proven networks and infrastructure in place. In its expansion into India, Walmart partnered Bharti Enterprise,
a successful leading cell phone operator in India.
Together with Bharti, Walmart announced its intention of opening hundreds of Walmart branded stores
across India over 5 years. As part of the 50:50 Bharti Walmart JV, Bharti own and operate the retail outlets
whilst allowing a back-end entry into one of the largest world markets for Walmart to exploit their expertise in
logistics, supply chain management and sourcing. Bharti also leverages Walmart expertise in outlet
operations.
Walmart’s current entry model into India leans toward a global convergence strategy rather than one of
localisation. Walmart have acknowledged there is a need to strike a balance of international integration. In
the retail sector challenges of a localisation strategy extend to Indian government policy, and uncertainty in
IT and transport infrastructure.
Purpose
This report will analyse what Walmart must do to achieve long-term success in India and make
recommendations that address the strategic question of whether Walmart should continue with its entry
model into India given market conditions in 2006. If not what could be a viable alternative strategy?
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ENVIRONMENTAL ANALYSIS
Macro-‐environment Analysis
The market analysis in Table 1 has been conducted of India holistically as a place for international
corporations to commence retail business operations. As a developing market, India is a highly attractive
option with market predictions for India indicating significant growth. India rates 2nd as one of the top 10
emerging markets of 2004, with the lowest level of saturation and an average to low risk score of 62%. It is a
highly unorganised retail market with a 10 year growth from 10% to 42% in food, grocery & general
merchandise predicted from 2004 to 2015.
The analysis concludes that projected growth in the Indian retail market and the changing social
demographic outweighs the uncertainty of the countries politics and reliability issues of developing
infrastructure. Entry into this burgeoning sector should be large to best leverage the competitive advantage
of Walmart. To mitigate the risks associated with India’s infrastructure Walmart should closely monitor
supply-chain network efficiency and phase its entry focusing firstly on urban areas.
Table 1 - Macro-environmental PESTEL Analysis
PESTEL Analysis
Political Influences
1. Publicly stable democratic political system. 2. High levels of regional corruption. 3. Coalition government leads to increased bureaucracy and delayed political decision-‐
making. 4. Economic reform agenda targeting high FDI, increased privatization, and deregulation. 5. Good trade relationships with established economies and bordering countries. 6. Policies focus on making India more self-‐reliant with a strong industrial base. 7. High scrutiny of foreign investment can be expected with objection to organizations
reliant on imports such as Walmart.
Economic
1. High growth forecast for India. 2. Service sector (including retail) is largest contributor to India’s economic growth
although 97% is disorganized. 3. Inflation and unemployment relatively high. 4. Complex tax regime. 5. Crowded retail industry.
Social
1. Burgeoning middle class matches Walmart’s target market. 2. Middle class growth linked to urban areas. 3. Increased consumerism is attractive however there are high levels of diversity in
regions of India may undermine generic product offerings. 4. Large population means abundance of human capital. 5. Protective attitude to local retailers particularly in grocery.
Technological 1. IT infrastructure improving but not standardized across the country (Walmart rely on a
high standard of IT infrastructure to maximise supply chain efficiency). 2. General infrastructure underdeveloped.
Environmental 1. Limited retail space in major cities and urban areas. 2. Power supply cannot meet demand leading to outages.
Legal 1. Retail and some service industries are market regulated. 2. Business restrictions on FDI and joint ventures have to meet onerous laws. 3. Differing interpretation of laws in difference regions and provinces.
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Porter’s Five Forces Analysis
The analysis in Figure 1 has considered the organised retail industry in India. It concludes that recognising
the current state of the industry, adopting a supply chain control strategy will significantly impact the
influences of power within the industry. Reducing the power of competition and positioning the JV as an
industry leader as the industry grows and becomes more organised.
Figure 1 - Porter's Five Forces Industry Environmental Analysis
Suppliers
Low threat
-‐ Strategically working with local suppliers and improving infrastructure, educacon and creacng consistency in supply and demand for supply will significantly reduce the threat from supplier power.
-‐ Due to Govt intervencon and corrupcon, supplier control will be essencal and need to be successful early . It has the potencal to be a high threat to the JV
New Entrants Medium threat -‐ The predicted growth and size of the Indian market has high appeal for foreign investment. -‐ Lack of infrastructure, industry fragmentacon, Government corrupcon and legislacon makes it a difficult marketplace for foreign companies to enter. -‐ Combined JV experience may provide an entry barrier for new compectors, parccularly foreign. -‐ Local compeccon from small to medium scale and will be a bafle for market share.
SubsZtutes Low threat -‐ Walmarts one stop EDLP shop makes it difficult to compete with. -‐ Strong supplier control and industry leader will create difficulty for consistence in subsctute quality.
Buyers Low to Medium threat -‐ Strong supply chain control with EDLP leaves lifle buyer power. -‐ Unorganised market, low demand control from buyers. -‐ JV as price leasers will reduce buyer's power
Industry Rivalry Medium threat -‐ High compeccon for marketshare -‐ Defragmented, unorganised market -‐ Controlling supply chain and buyers power could lead to a compeccve edge
Page 8 of 16
ORGANISATION ANALYSIS
Strategy
High on Walmart’s corporate strategic agenda is the pursuit of new markets in the retail sector. At the
generic level Walmart pursues a deliberate strategy of providing Every Day Low Prices (ELDP) by procuring
high quality products at the lowest possible prices. This is achieved primarily by leveraging its bargaining
power as the world’s no.1 retailer to aggressively negotiate and procure goods directly from manufacturers
(avoiding costly intermediaries), and shifting of their manufacturing base to take advantage of cheaper
labour. Furthermore, Walmart leverages its efficient supply chain and logistics methodology, which enables
cheap, fast and effective transportation of goods direct from manufacturers to their stores.
The product markets that Walmart seeks include general merchandise, food items and drug
(pharmaceutical) sales, as currently sold through its extensive network of discount stores. In addition,
Walmart has set up a number of supercentres, which sell everything that its discount stores sell, plus meat
and poultry, baked goods, dairy products and garden produce.
To increase the chances of successful entry into the Indian market, strategic planning at Walmart should
take into account the needs of key stakeholders and expectation of outside interests.
Key Stakeholders
Vendors: Walmart is often the largest customer to most of its suppliers and manufacturers. Consequently,
vendors place significant value on retaining Walmart as a client, as evidenced by their endeavours to supply
goods to Walmart at lower prices by shifting their manufacturing bases to China and other developing
countries.
Customers: Walmart’s customers value the ability to purchase consumables at low prices, and expect that
goods purchased are safe for use/consumption, and that they were procured ethically.
Shareholders: Shareholders expect maximum return on their investment in Walmart stock. This includes the
expectation that sales revenues and profits will continue to grow to enable returns to be maximised.
Employees & Unions: Employees of Walmart expect to receive remuneration, benefits and treatment that
are in line with industry, market and legislative expectations. Walmart has attracted global condemnation
from workers, unions, investors, small businesses, political and religious leaders in relation to the way it
treats its workers.
Indian Government: The Indian Government does not want Walmart’s entry into India to upset its balance
of trade. It would prefer Walmart to utilise Indian domestic production rather than importing massively from
China, which may damage Indian manufacturing industries. The Indian Government also regulates Foreign
Direct Investment (FDI) for single brand product retailing to a maximum 51% ownership (Ministry of
Commerce & Industry 2006).
Outside Interests
Other Businesses: In India, small traders dominate the retail landscape. In the U.S., Walmart has a history
of driving small retailers out of business when opening a store in those communities. In India small business
Page 9 of 16
owners have staged numerous anti-Walmart protests in response to the threat that Walmart’s entry may
eventually undermine them and drive them into insolvency (New York Times 2007). Additionally, they have
political influence on the Indian government and continue to lobby against the entry of corporate behemoths
such as Walmart into their market.
Performance
Financial Performance
Walmart was able to increase sales revenues over the 5-year period from $204 billion (USD) in 2002 to $312
billion in 2006 (Appendix 1). Walmart has achieved a consistently healthy trend of financial performance over
the last 5 years, with almost every key financial indicator trending positively. To put Walmart’s performance
into perspective, in 2006 Walmart made over US $108 billion more in net sales than it did in 2002, and its
subsequent net profit has almost doubled to $11.2 billion (Walmart 2006).
Walmart’s ROE has continually strengthened from 19.4% in 2002 to 22.6% in 2006, meaning that the money
invested by shareholders is making consistently healthy returns. The fact that ROA has been remained
relatively flat, deviating little from the 9% average over the 5 years suggests that despite its growing asset
folio, Walmart has been successful at keeping its relative rate of return steady. A slight but gradual decline in
sales growth is noted, dipping to 9.54% per annum in 2006 from 12.55% in 2003. This is likely due to the fact
that sales growth tends to slow as companies grow and markets mature.
A gearing ratio of under 0.5 each of the 5 years observed suggests Walmart has taken a manageable level
of long-term debt with little financial risk. Similarly, the debt to equity of 1.6 (short term debt) also indicates a
low level of financial risk. Walmart’s capital structure is sound.
Operating cash inflows appear to be growing year on year and importantly, cash outflows are growing
proportionately, which means that Walmart is a financially sound company, which exercises prudent, cost
control and responsible leveraging to achieve consistent growth. Sales revenues and cash flows are healthy,
which in turn deliver ongoing profitability and consistent returns to shareholders.
Internal Current Performance
Walmart’s expense to sales measure has remained for the 5-year period at close to the 77% mark, indicating
that it has a stable cost structure. Whilst this figure can appear deceptively high at first glance, it is a typical
efficiency ratio for businesses with large and stable cash flows such as Walmart. Whilst it’s a good level of
efficiency for a company of its size, there is always room for improvement in this area.
Interestingly, Walmart’s asset turnover ratio appeared low in 2002 at 2.5, and continued a slight but steadily
decline to a 2006 level of 2.26. This can be attributed to Walmart’s increasing capital investment in local and
global expansion efforts and is likely to improve once growth investment slows. The Net Profit to Sales ratio
which indicates percentage of sales dollars left after all operating expenses has also seen steady and
consistent growth year on year, starting at 5.1% in 2002 to 5.56% in 2006. A similar story is noted for the
profit after tax to sales ratio, which finished the 2006-year at 3.59%. The internal current performance
analysis indicates that whilst already operationally efficient, Walmart continues to make efficiency
improvements year on year and trends in the right direction.
Page 10 of 16
Internal Long Term Development
According to the 2006 Annual Report (Walmart 2006), Walmart is planning to construct 20-30 new stores,
280 new supercentres (relocations accounting for approximately 160 of those), 20 new Neighbourhood
Markets, 40 new Sam’s Clubs in the USA. On the international front, Walmart is planning to open 220 new
stores (with relocations accounting for 35 of those). As the US market becomes increasingly more saturated,
there may be value in Walmart further exploring the idea of diverting capital investment into international expansion efforts, which may offer greater growth potential. Walmart’s intention is to continue international
acquisitions where strategic value can be added.
Marketing
As the globe’s largest employer of over two million, Walmart is open to scrutiny and is often targeted for
bullying in the market place. Recognising this, a policy of sustainability in operational processes and good
vendor relationship management allows Walmart to maintain integrity in the political and business arena.
Consistent delivery of its EDLP promise maintains customer satisfaction and consumer confidence.
Recognising the success of acting global and looking local in international markets, the Bharti Walmart JV is
of strategic advantage. A local business face with a global back end encourages localised customer
satisfaction.
Capabilities
The combined capabilities of the Bharti-Walmart joint venture have distinct advantages to increasing market
share in a short timeframe – something that is critical being able to best leverage Walmart’s purchasing
power and supply chain efficiency. As a local operator Bharti bring local knowledge. This joint venture is
Bharti’s first entry into the part of the retail sector and as such questions remain over whether the local
knowledge is specific enough to the target market of food, groceries and general merchandise. As an
organisation Bharti provide knowledge of the local retail market and supply markets. Bharti also provides
knowledge of IT infrastructure through its cell-phone business.
Walmart uses its purchasing power to be a price leader and gain market share through competitors having to
reduce profit margins to match Walmart’s product offerings. Walmart will have to open many stores to
maintain their purchasing power and cost structure. This will enable them to reduce operating cycles and
inventory turnover. Walmart’s model as an ELDP retailer and a large scale importer may meet with political
displeasure as it threatens smaller local operators and contradicts the government policy of self-reliance.
SWOT Analysis
The analysis in Figure 2 has been conducted of the Bharti/Walmart JV and its strengths, weaknesses,
opportunities and threats for Walmart. It concludes that there are a variety of opportunities that enable
Wlamart to access India’s growth potential.
Page 11 of 16
Figure 2 - SWOT Analysis
Strengths: The JV proposal leverages Bharti’s local knowledge, infrastructure and standing as one of India's
leading business groups with interests in telecom, agri-business, insurance and IT retail. It also leverages
Walmart’s expertise as the world’s leading retailer, renowned for its efficiency and expertise in logistics,
supply chain management and sourcing. Combined the JV has significant buying power notwithstanding
investment capacity.
Weaknesses: The JV will have cultural differences between Bharti and Walmart at an operational level
which could trigger inefficiencies and for trust to erode particularly given high levels of corruption. In addition
Walmart may have problems deriving profit share. Bharti’s lack of experience and knowledge in owning and
operating retail stores is of concern to the JV which could in turn erode Walmart’s brand and reputation.
Opportunities: The JV has numerous opportunities from its respective strengths particularly through
leveraging Bharti relationships with the Indian government. With astute investment in local producers
Walmart can grow its own supplier network and support India manufacturing in the process. Localized
branding of the outlets will see Walmart forgo brand equity in lieu for substantial success across India whilst
still maintaining Walmart culture through a back-door entry strategy. The growing middle class indicates that
a commitment to corporate social responsibility will create inclusive relationships with the Indian consumer.
Threats: Walmart involvement as a foreign company will initially be resisted by the Indian government and
given the JV business model employs a global convergence strategy conforming to Indian Government
policy will be problematic. A threat to Walmart is Bharti’s control of the JV however the JV business model
may be sufficiently ‘ironclad’ that it overcomes and dissipates the threat. Given Walmart’s extensive supplier
network buying imported manufactured goods and produce will be problematic for the Indian government
reliant upon self-sufficiency. Overcrowding of the retail sector and deficiency of IT coverage and antiquated
transport infrastructure is a significant distribution concern notwithstanding a lack of ample retail space in an
already overcrowded area. Given that the rollout of retail outlets is to be exponential this will be a sizable
impediment facing the JV.
Page 12 of 16
HIGH-‐LEVEL OPTION ANALYSIS
Option One
As per the case study Bharti and Walmart’s intention is the opening of hundreds of Walmart branded stores
across India over 5 years. As part of the 50:50 Bharti Walmart JV, Bharti own and operate the retail outlets
whilst allowing a back-end entry for Walmart into one of the largest world markets for Walmart to exploit their
expertise in logistics, supply chain management and sourcing and where Bharti also leverages Walmart
expertise in outlet operations.
This option requires Walmart to maintain itself as a price leader within the Indian market through developing
and working with local vendors and utilizing its past expertise in large-scale distribution and vendor control.
Being a price leader allows the JV to deliver on the EDLP customer satisfaction, whilst marketing with a local
brand identity. In a developing market that is unorganised, this strategy should encourage a loyal market
share that is hard for competitors to penetrate.
Option Two
A Business-to-Business wholesale business strategy of mega outlets rather than opening hundreds of stores
where mega outlets are located at regional distribution points will require considerably less outlets and
facilitate the logistics of infrastructure distribution in line with Indian government localization policy rather
than global convergence by developing and buying from SMEs ultimately introducing SMEs to the global
markets. This more cooperative network strategy means that the Bharti Walmart JV supplies to thousands
of SMEs from its regional distribution points and indirectly reaches out to far greater ‘ma n pa’ buyers. The
opportunities expressed in the SWOT analysis better leveraged by thus strategy and the simplified industry
environment analysis in Figure 3 shows considerably minimised competitive forces making this option viable.
Suppliers Low Threat
New Entrants Medium Threat
Subsctutes Low Threat
Buyer Power Medium
Industry Rivalry Low Threat
Page 13 of 16
CONCLUSION
The analysis indicates that Walmart is a highly profitable and established global retail business. Its financial
strength and ongoing high global demand for its ELDP products ensure that it is well positioned for further
growth into new markets.
Whilst India’s burgeoning economic growth and growing middle class makes it an attractive entry target,
Walmart should heed the lessons of the previous failed entries into Germany and Korea due to lack of local
market knowledge to avoid further failure.
India’s existing foreign investment restrictions and significant social opposition driven by threat to small
retailers by proposed establishment of Bharti-Walmart stores strongly suggests that Walmart needs to adapt
its approach. As option 2 suggests, developing a hub to spoke wholesale B2B JV strategy will require less
capital investment and will enable the conversion of ‘ma n pa’ stores from opponents into customers, as
EDLP goods flow from the warehouses to the hundreds of thousands of small retailers across the Indian
nation. Retailers will benefit from the lower prices, and Walmart will benefit from achieving high volume scale
sales of its products.
RECOMMENDATIONS
To leverage Walmart’s strengths and mitigate the uncertainty in a full-scale localisation strategy into India
this report recommends that Walmart amend its entry model into India to a business-to-business wholesaler.
Further this report recommends the following elements of this strategy be implemented to successfully enter
the growing Indian retail market:
§ Focus on supply chain control. Educating suppliers, building and developing the infrastructure and
support for suppliers to meet the JV's demands. Being first to market in organizing and developing
the supplier's market will create huge buying power advantage and make it difficult for competitors to
enter.
§ Recognizing the opportunities in the unorganized yet developing market. Similar to supplier market,
it is an unorganized, non-loyal and uneducated consumer market, with huge growth potential.
Supporting this market and capturing its loyalty through EDLP and consistency again will make it
hard for significant foreign competitors to gain market share.
§ Global back-end entry into India recognises the importance of remaining a local identity through the
Bharti JV whilst implementing systems and infrastructure of global efficiency and strategy to support
the JV. § The partnering and development of SMEs to grow their businesses to the point of being competitive
in the global market place will appease the Indian government in its quest of self-sufficiency,
localisation and competitive advantage.
Page 14 of 16
REFERENCES
Bhatnagar, P 2006, Walmart's dilemma in India, CNN-Money, viewed 21 December 2012,
<http://money.cnn.com/2006/03/23/news/companies/walmart_india/index.htm>
De Wit, B & Meyer, R 2010, Strategy: Process, content, context, 4th ed., South-Western Cenage Learning
UK.
Ghosh, A & Siddhartha, P, Walmart in India, case 19, pp. 910-915.
Hubbard, G, Analysing a case, Cases in Strategic Management, pp. xi-xix.
Levitt, T 1983, ‘The Globalisation of Markets’, Harvard Business Review May.
Ministry of Commerce & Tourism 2006, Foreign direct investment policy: April 2006, Government of India,
India, viewed 20th December 2012, <http://www.orissa.gov.in/industries/pdf/fdi_policy_2006.pdf>
Porter, ME 2008, ‘The five competitive forces that shape strategy’, Harvard Business Review, January, pp.
1-19.
Slape, M, Walmart’s head of international business development
<http://www.guardian.co.uk/business/2010/jan/12/walmart-companies-to-shape-the-decade>
The New York Times 2007, Indians protest Walmart's wholesale entry, The New York Times Company, New
York, viewed 19th December 2012, <http://www.nytimes.com/2007/08/09/business/worldbusiness/09iht-
walmart.4.7061818.html>
Walmart 2004, 2004 annual report, Walmart, USA, viewed 27th December 2012, <http://media.corporate-ir.net/media_files/irol/11/112761/ARs/annualreport_2004.pdf>. Walmart 2006, 2006 annual report, Walmart, USA, viewed 27th December 2012, <http://media.corporate-ir.net/media_files/irol/11/112761/ARs/2006_annual_report.pdf>.
Page 15 of 16
APPENDIX 1 – Walmart 5-‐Year Financial Performance Statistics
In Millions except for ratio data
Overall Performance
Year 2002 2003 2004 2005 2006
Net Sales $204,011 $229,616 $256,329 $285,222 $312,427
Cost of Sales $159,067 $178,299 $198,747 $219,793 $240,391
Net Profit $6,592 $7,955 $9,054 $10,267 $11,231
Earnings Per Share $1.47 $1.79 $2.07 $2.41 $2.68
Long Term Debt $15,676 $16,597 $17,102 $20,087 $26,429
Return on Equity (%) 19.40% 20.90% 21.30% 22.60% 22.50%
Return on Total Assets (%) 8.4% 9.2% 9.2% 9.3% 8.9%
Sales Growth (%) n/a 12.55% 11.63% 11.27% 9.54%
Total Assets $81,549 $92,900 $105,405 $120,154 $138,187
Shareholder's funds $35,192 $39,461 $43,623 $49,396 $53,171
Total Liabilities $48,349 $55,347 $61,289 $70,758 $85,016
Profitability
Net Profit/Sales (%) 5.10% 5.39% 5.54% 5.65% 5.56%
Profit After Tax/Sales (%) 3.23% 3.46% 3.53% 3.60% 3.59%
Expense/Sales (%) 77.97% 77.65% 77.54% 77.06% 76.94%
Asset Utilisation
Asset Turnover (times) 2.50 2.47 2.43 2.37 2.26
Capital Structure
Page 16 of 16
Gearing Ratio 0.45 0.42 0.39 0.41 0.50
Debt-Equity Ratio 1.37 1.40 1.40 1.43 1.60
Cash Flow
Operating Cash Flow $10,519 $13,005 $15,996 $15,044 $17,633
Cash Outflows $7,223 $9,839 $8,312 $12,351 $14,183
Cash at Beginning of Year $2,054 $2,161 $2,758 $5,199 $5,488
Sources: Walmart (2004), (2006).