Walmart market entry strategy

Executive SummaryIn today’s business world many multi-national corporations are focused on expanding their business internationally. This is due to the fact that around the world, there has been much uncertainty with regards to economic and financial conditions which warrants diversification amongst a corporations business practices.

If a corporation focuses and practices its business in a single country they are subject to much volatility with profits on a yearly basis and are extremely sensitive to risk. In order to limit this risk sensitivity these companies have set out to expand among different regions in the world, making sure that if one section of their business fails or sees a sharp decline in revenue they will be able to continue forward. T

hese corporations are making sure they are positioned to recuperate in a timely matter in order to remain competitive and not lose a significant market share within their industry. One specific region in the world that multi-national corporations have viewed as opportunistic is Latin America.

Much of Latin America is unsaturated with high populations making it very appealing to large multi-national corporations such as Walmart. After doing much research we have concluded that although Latin America has been considered an emerging market for some time; it still has an under-penetrated formal retail market, particularly in the food retail segment. Our study consists of three country profiles which Walmart has yet to penetrate within Latin America. These countries are Paraguay, Uruguay and Peru.

There are pros and cons when entering any country and after a close analysis of each, Peru is the best fit for Walmart. Conducting international business in Peru from the standpoint of a manager working at Walmart has considerable advantages and favorable conditions in its economy, relations with the United States, natural resources, incorporation and construction, and national corporate and family values. With a large presence in Chile and Brazil, Walmart’s entry into Peru can allow them to be an unmatched force in the retail sector of the entire continent of South America. Strong relations between the United States and Peru have made considerable change to the ways in which a foreign business would enter the Peruvian markets.

Fighting for a mutual cause, the United States has continued its war on drugs by entering Peru and providing resources to abolish illegal coca production. This relationship led to the United States-Peru Trade Promotion Agreement that eliminated trade tariffs, removed barriers of entry by US services, provided a stable framework of legalities for investors, and increased the protection of intellectual property, workers rights, and the environment, all of which, encourage US foreign investment in Peru.

Through analyzing many factors listed in this paper the coastal region, namely the densely populated capital Lima and major inland cities would seem to be the best point of market entry for a US company such as Walmart to expand. Its economic growth and monetary stability will give investors peace of mind, and the United States good relations with Peru will only attract more business with its diplomats so intertwined creating a safeguard against any radical government change.

Peru’s retail industry includes three major supermarket chains, Cencosud, Supermercados Peruanos and Tottus, who have a total of 152 stores nationwide. Since 2010, 25 new stores have opened throughout the country. Increasing income amongst people residing in Peru has boosted consumption and supermarket sales. These three chains comprise the whole market for the supermarket industry with Cencosud having 45percent, Supermercados Peruanos with 34 percent and Tottus with 21 percent market shares respectively.

The low penetration levels in Latin America have been mentioned but to get a better idea it is important to highlight Peru’s food retail potential do to its lower penetration level which is 30 percent in the capital Lima and 15 percent in the rest of Peru. Our strategy consists of Walmart acquiring Tottus hypermarkets. This move is justified by Walmarts already established and flourishing business in Latin America and the fact that Tottus has been the best performing chain in the past few years. Tottus is compatible with Walmart as it was voted the best place to work in Peru in 2011.

Also, the chain energetically launched the “Cheaper Impossible” campaign that’s has positioned them as the best price on the market much like Walmart is viewed to be. The second part of our strategy will be too buy a 50 percent share in the Peruvian owned Supermercados Peruanos. This move makes sense because Peru is open to foreign investment, especially with a financially stable and well run multinational corporation like Walmart. In Peru, the law for joint ventures such as this one leaves for much flexibility for the parties involved.

The law allows for the parties to mutually agree on all major decisions which should not pose a problem because of the great relations between the United States and Peru which were previously stated. These moves will allow Walmart to solely own a 38 percent market share within Peru but have an interest of 55 percent due to the joint venture with Supermercados Peruanos. These percentages should not cause fear of unfair business practices to the government of Peru and will provide for a firm start in Walmart’s expansion into the country.

Walmart Company ProfileBusiness Description:Walmart Stores, Inc. is a company that operates retail stores in various formats worldwide (“Yahoo! Finance”). The primary, and first, retail store that Walmart Stores, Inc. focuses on is Walmart. This is a company that has been around for the past 50 years and has based their business model on a concept of always having competitive, low prices. Wal-Mart’s mission statement is basic and to the point with it essentially being “We save people money so they can live better” (FAQs). As of September 13, 2012, Walmart operated approximately 10,130 retail units in 27 countries (“Yahoo! Finance”) and there are no signs showing that they will be slowing down any time soon.

Sam Walton:

Image Source: “Sam Walton”If it weren’t for a man named Sam Walton the world would be without Walmart stores today. The Walmart of today evolved from Walton’s goals for great value and great customer service (“Sam Walton”). The idea of everyday low prices was one that Walton firmly believed in and made the number one priority of his stores.

Walton first got experience in the world of retail at the age of 27 after he completed his military service and eventually worked his way to owning his own variety store. The first store that Walton opened on his own was call Walton’s 5&10. This store had early success and led Walton to want to create even greater opportunity and value to his customers and in order to do this he opened his first Walmart at the age of 44 (“Sam Walton”).

The success of Walmart surpassed what Walton had ever expected and allowed him to consistently expand his business. He knew that the low prices played into the success of the Walmart stores but also to the associates of the stores that he considered more like partners than employees. When President George H. W. Bush awarded Walton with the Presidential Medal of Freedom, Walton described the backbone behind Walmart,

“If we work together we’ll lower the cost of living for everyone…we’ll give the world and opportunity to see what it’s like to save and have a better life” (“Sam Walton”). Unfortunately shortly after Sam Walton gave this speech that perfectly described Walmart he passed away but because of what he built and the legacy he left behind he will live on for as long as Walmart exists. Walmart stores of today are still focused on expanding, serving customers, and doing business in a way that honors Sam Walton (“Sam Walton”).

History:Walmart was started in the early 1960s by Sam Walton, a man who believed the way to run a successful store was to offer “The Lowest Prices Anytime, Anywhere”. On July 2, 1962 Sam Walton opened his first Walmart store in Rogers, Arkansas and by 1967 he had already expanded to 24 stores and was making $12.7 million in sales (“Walmart”). It is evident from the quick increase in stores in the first five years of business that Sam Walton intended Walmart to be a business that stressed to importance of consistent expansion. This desire for expansion continued throughout the 1970s. Walmartfirst became a publicly traded company in 1970 and sold for an initial price of $16.50 a share. In 1971 Walmart opened its first distribution center and by the next year sales had reach $78 million among its 51 stores (“Walmart).

Image Source: “Walmart”During the 1980s Walmart continued to expand by opening more stores and creating new stores under the Walmart Company brand. One sign that expansion was beneficial for Walton and the Walmart brand was the fact that, with 276 Walmart stores, the company managed to reach $1 billion in annual sales faster than any other company at that time. During the 1980s Walmart first introduced Sam’s Wholesale Club stores and Walmart Supercenters. All of the expansion and smart business decisions of Sam Walton led Walmart to being the United States number-one retailer by 1990 (“Walmart”).

The 1990s saw Walmart first expanding into the global market and continuing to do so. Through a joint venture with Cifra, a Mexican retail company, Walmart company opened a Sam’s Club in Mexico City. In the year after Sam Walton passed away, 1993, Walmart had its first $1 billion sales week and in 1997 had its first $100 billion sales week. Throughout the rest of the 1990s Walmart expanded into Canada, China, and the United Kingdom. These expansions were primarily done by acquiring already established stores in these various countries (“Walmart”).

As Walmart entered the 2000s there was no sign of slowing down in sight. At the start of the new millennium Walmart employed more than 1.1 associates in 3,989 stores and clubs worldwide. This number of associates continued to expand throughout the 2000s as Walmart entered the Japanese market, Chile, and India. By 2009 Walmart was exceeding $400 billion in annual sales and by 2011 Walmart surpassed 10,000 retail units around the world. As of this year Walmart has had 50 years of successful business with more than 2.2 million associates worldwide that has its foundation in an always low price business plan and a method of consistent expansion (“Walmart”).

Major Products and Services:The main focus of Walmart Stores Inc. are retail stores, restaurants, discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, apparel stores, Sam’s Clubs, and neighborhood markets, as well as walmart.com and samsclub.com (“Yahoo! Finance). Anyone who has ever shopped at a Walmart location knows that the variety of options that is offered is seemingly endless.

Image Source: Walmart.comThe company’s stores offer various food items such as meat, produce, dairy and frozen foods, as well as health and beauty items, baby products, household items, pet supplies, electronics, toys, photo processing services, and apparel for every member of the family. In addition to the variety of products that Walmart offers under name brands there are also many private-label items under the Members Mark, Artisan Fresh, Daily Chef, and Simply Right brands (“Yahoo! Finance).

Overview of Financial and Operational Indicators:Key Statistics: (All numbers in USD)Valuation Measures|Market Cap (intraday)| 239.99B|Enterprise Value (Dec 4, 2012)| 291.09B|Trailing P/E (ttm, intraday)| 14.68|Forward P/E (fye Jan 31, 2014)| 13.26|PEG Ratio (5 year expected)| 1.57|Price/Sales (ttm)| 0.52|Price/Book| 3.28|Enterprise Value/Revenue (ttm)| 0.63|Enterprise Value/EBITDA (ttm)| 8.09|(Table from Yahoo! Finance)

Financial Highlights| |Fiscal Year|Fiscal Year Ends:| Jan 30|Most Recent Quarter (mrq)| Oct 31, 2012|Profitability|Profit Margin (ttm)| 3.57%|

Operating Margin (ttm)| 5.94%|Management Effectiveness|Return on Assets (ttm)| 8.61%|Return on Equity (ttm)| 22.96%|Income Statement|Revenue (ttm)| 464.41B|Revenue Per Share (ttm)| 136.83|Qtrly Revenue Growth (yoy)| 3.40%|Gross Profit (ttm)| 111.82B|EBITDA (ttm)| 35.99B|Net Income Avl. to Common (ttm)| 16.59B|Diluted EPS (ttm)| 4.86|Qtrly Earnings Growth (yoy)| 9.00%|Balance Sheet|Total Cash (mrq)| 8.64B|Total Cash Per Share| 2.57|Total Debt (mrq)| 57.46B|Total Debt/Equity| 72.65|Current Ratio (mrq)| 0.83|Book Value Per Share (mrq)| 21.97|Cash Flow Statement|Operating Cash Flow (ttm)| 27.25B|Levered Free Cash Flow (ttm)| 14.37B|(Table from Yahoo! Finance)Abbreviation guide: mrq=Most Recent Quarter, ttm=Trailing Twelve Months, yoy=Year Over Year, lfy=Last Fiscal Year, fye=Fiscal Year EndingThe numbers above are meant as more of a snapshot of how Walmart is currently doing. The numbers will be further evaluated in the following sections.

Key Financial Performance Indicators:Cash Flow: (All numbers in USD)Period Ending| Jan 30, 2012| Jan 30, 2011| Jan 30, 2010| Net Income| 15,699,000| 16,389,000| 14,370,000|Operating Activities, Cash Flows Provided by or Used In| | | |Depreciation| 8,130,000| 7,641,000| 7,157,000|Adjustments to Net Income| 1,117,000| (383,000)| (425,000)| Changes in Accounts Receivable| (796,000)| (733,000)| (297,000)| Changes in Liabilities| 2,746,000| 2,243,000| 2,400,000| Changes in Inventories| (3,727,000)| (3,025,000)| 2,213,000| Changes in Other Operating Activities| 398,000| 1,087,000| 318,000| Total Cash Flow From Operating Activities| 24,255,000| 23,643,000| 26,249,000| Investing Activities, Cash Flows Provided By or Used In| | | | Capital Expenditures| (13,510,000)| (12,699,000)| (12,184,000)| Investments| (3,548,000)| (202,000)| -|

Other Cash flows From Investing Activities| 449,000| 708,000| 564,000| Total Cash Flows From Investing Activities| (16,609,000)| (12,193,000)| (11,620,000)| Financing Activities, Cash Flows Provided By or Used In| | | | Dividends Paid| (5,048,000)| (4,437,000)| (4,217,000)|

Sales Purchase of Stock| (6,298,000)| (14,776,000)| (7,712,000)| Net Borrowings| 3,130,000| 7,456,000| (1,186,000)|Other Cash Flows from Financing Activities| (242,000)| (271,000)| (396,000)| Total Cash Flows from Financing Activities| (8,458,000)| (12,028,000)| (14,191,000)| Effect of Exchange Rate Changes| (33,000)| 66,000| 194,000| Change In Cash and Cash Equivalents| (845,000)| (512,000)| 632,000| (Table from Yahoo! Finance)

The cash flow data for Walmart is a good chart to look at in determining the financial performance of the company. Based on this we can see that Walmart has made less in net income this year than in the previous year so it would be important to do the research before any new business ventures to determine what the reason is behind this. The operations segment gives us a sense of whether or not the current business model is making money and we can see that it is in fact making money. The total cash flow from operating has increased over the last year showing that the business model has become increasingly successful over the last year.

As far as investing goes this table shows us that Walmart has been investingan increasing amount over the last year. This amount has increased steadily over the past three years. This number is a positive thing because it shows that Walmart is dedicating itself to making internal investments and expanding the business further.

This cash flow statement tells us that Walmart is currently buying stock back considering their “Sales Purchase of Stocks” is a negative number and because of this reason it shows that Walmart is actually losing money for the past few years from stocks.

Revenue and Operating Profit:Income Statement: (All numbers in USD)Period Ending| Jan 30, 2012| Jan 30, 2011| Jan 30, 2010| Total Revenue| 446,950,000| 421,849,000| 408,085,000|Cost of Revenue| 335,127,000| 314,946,000| 304,106,000| Gross Profit| 111,823,000| 106,903,000| 103,979,000|Operating Expenses| | | |Research Development| -| -| -|Selling General and Administrative| 85,265,000| 81,361,000| 79,977,000| Non Recurring| -| -| -|Others| -| -| -|Total Operating Expenses| -| -| -|Operating Income or Loss| 26,558,000| 25,542,000| 24,002,000| Income from Continuing Operations| | | |Total Other Income/Expenses Net| 162,000| 201,000| 181,000| Earnings Before Interest and Taxes| 26,720,000| 25,743,000| 24,183,000| Interest Expenses| 2,322,000| 2,205,000| 2,065,000|

Income Before Tax| 24,398,000| 23,538,000| 22,118,000|Income Tax Expense| 7,944,000| 7,579,000| 7,156,000|Minority Interest| (688,000)| (604,000)| (513,000)|Net Income From Continuing Ops| 16,454,000| 15,959,000| 14,962,000| Non-recurring Events| | | |Discontinued Operations| (67,000)| 1,034,000| (79,000)| Extraordinary Items| -| -| -|

Effect of Accounting Changes| -| -| -|Other Items| -| -| -|Net Income| 15,699,000| 16,389,000| 14,370,000|Preferred Stock and Other Adjustments| -| -| -|Net Income Applicable to Common Shares| 15,699,000| 16,389,000| 14,370,000| (Table from Yahoo! Finance) The income statement is another important financial worksheet to look at particularly when looking to evaluate a company’s revenue and operating profit. The three main things that are important to look at particularly for Walmart are the gross profit, operating profit, and net income.

The gross profit in the past year has increased which means that Walmart was able to sell more or were able to cut the cost of selling. Based on the numbers listed about it seems that both revenue and cost of revenue and cost of revenue had increased but the difference between them (gross profit) managed to be higher than in the previous years which is a positive thing for Walmart.

The operating profit tells us the profit once we take into account operating expenses. This number has also increase over the past few years. Ultimately, the most important number that we are able to get from this particular chart is the net income because this is the number that tells us the profit we have made once deducting interest expenses and taxed from the operating income. While the increase in gross profit and operating profit has increased over the last year the net income has decreased by close to 1 million..

In order to determine why this is it is necessary to evaluate the income statement to find the areas that Walmart has control over and make changes to those areas. Some of the areas that would be smart to look into are the interest expense, income tax expense, minority interest, and discontinued operations.

Asset and Liabilities:Balance Sheet: (All numbers in USD)Period Ending| Jan 31, 2012| Jan 31, 2011| Jan 31, 2010| Assets| | | |Current Assets| | | |

Cash and Cash Equivalents| 6,550,000| 7,395,000| 7,907,000| Short Term Investments| -| -| -|Net Receivables| 5,937,000| 5,089,000| 4,144,000|Inventory| 40,714,000| 36,437,000| 32,713,000|Other Current Assets| 1,774,000| 3,091,000| 3,268,000|Total Current Assets| 54,975,000| 52,012,000| 48,032,000| Long Term Investments| -| -| -|Property Plant and Equipment| 112,324,000| 107,878,000| 102,307,000| Goodwill| 20,651,000| 16,763,000| 16,126,000|Intangible Assets| -| -| -|Accumulated Authorization| -| -| -|Other Assets| 5,456,000| 4,129,000| 3,942,000|Deferred Long Term Asset Charges| -| -| -|Total Assets| 193,406,000| 180,782,000| 170,407,000|Liabilities| | | |Current Liabilities| | | |Accounts Payable| 55,926,000| 52,534,000| 50,532,000|Short/Current Long Term Debt| 6,348,000| 6,022,000| 4,919,000| Other Current Liabilities| 26,000| 47,000| 92,000|Total Current Liabilities| 62,300,000| 58,603,000| 55,543,000| Long Term Debt| 47,079,000| 43,842,000| 36,401,000|Other Liabilities| -| -| -|Deferred Long Term Liability Charges| 7,862,000| 6,682,000| 5,508,000| Minority Interest| 4,446,000| 2,705,000| 2,180,000|Negative Goodwill| -| -| -|Total Liabilities| 121,687,000| 111,832,000| 99,632,000| Stockholders’ Equity| | | |Misc Stocks Options Warrants| 404,000| 408,000| 307,000| Redeemable Preferred Stock| -| -| -|Preferred Stock| -| -| -|Common Stock| 342,000| 352,000| 378,000|Retained Earnings| 68,691,000| 63,967,000| 66,357,000|Treasury Stock| -| -| -|Capital Surplus| 3,692,000| 3,577,000| 3,803,000|Other Stockholder Equity| (1,410,000)| 646,000| (70,000)| TotalStockholder Equity| 71,315,000| 68,542,000| 70,468,000| Net Tangible Assets| 50,664,000| 54,779,000| 54,342,000| (Table from Yahoo! Finance)

The final important table to look at for any company is the balance sheet. The balance sheet can tell us if the assets is equal to the liability plus stockholders’ equity. In the case of Walmart for the past year this equation does not balance out which means that the numbers should be reevaluated to determine where that difference lies.

Another think that we can derive from the balance sheet it the debt-to-asset ratio which can tell us how risky Walmart is. In order to do this we need to use the equation: Debt ratio=Total LiabilityTotal Assets

Debt ratio=121,687,000193,406,000Debt ratio=0.629Debt ratio=63%This percentage is fairly high which shows that Walmart is a risky company. This simply means that there is greater risk associate with operations and there is not a significant number of assets to cover the liabilities that the company has.

Competitive Benchmarking:Direct Competitor Comparison|| Walmart| Costco| Target| Industry|Market Cap| 239.99B| 45.23B| 40.54B| 9.48B|Employees| 2,000,000| 96,000| 365,000| 29.64K|Qrtly Rev Growth| 0.03| 0.14| 0.03| 0.07|Revenue| 464.41B| 99.14B| 71.68B| 9.33B|Gross Margin| 0.25| .012| 0.30| 0.30|EBITDA| 35.99B| 3.67B| 7.41B| 1.03B|Operating Margin| 0.06| 0.03| 0.07| 0.06|Net Income| 16.59B| 1.71B| 3.02B| N/A|EPS| 4.86| 3.89| 4.51| 2.62|P/E| 14.68| 26.87| 13.81| 23.21|PEG (5 year expected)| 1.57| 1.82| 1.20| 1.29|

P/S| 0.52| 0.45| 0.57| 0.96|(Table from Yahoo! Finance)When people initially think of a competitor for Walmart most people would assume that Target would be the primary competitor. However when comparing the actual numbers associated with the competitive comparison it is easy to see that Walmart’s main competitor is, in fact, Costco Wholesale Corporation.

Regardless of the competitor that is compared it is evident that Walmart surpasses each one by a significant portion for each category. The total values of the issued shares of Walmart is nearly six times that value for both Costco and Target and over 25 times that of the industry average. Looking at the number of employees alone it is safe to assume that the number of stores that Walmart has far exceeds that of its competitors.

Other factors that show that Walmart is superior in many aspects to its competitors is the revenue. People often associate the amount of money that a company earns to how successful that company is and Walmart makes a significant amount more than their competitors; 365.27B more than Costco and 392.73B more than Target. Another factor that people, particularly investors, look at when judging how successful a business has been is the earnings per share (EPS) which is also higher for Walmart than it is for its competitors.

This difference is not as severe as some of the other factors but if it comes down to someone decided to invest in Walmart or in Target that 0.35 difference in EPS may be enough to make that decision. The last major factor that shows that Walmart is often better, financially, than its competitors is the net income. The net income for Walmart is 16.59B which is nearly six times that of Target ad nearly ten times that of Costco.

These vast differences in factors for Walmart versus their competitors can be attributed to various things. One thing that likely plays into these high amounts of profits is the fact that Walmart Stores, Inc. is not just Walmart Stores. Walmart earns revenue from the Walmart Stores, supercenters, walmart.com and Sam’s Wholesale Clubs. There are over 10,000 of these stores in countries all over the world.

Target Corporation is currently only Target stores and target.com and they have not yet developed as many stores in as many countries. Costco Wholesale Corporation also does not have the development yet that Walmart has had as it is also only the Costco stores.

Of course the number of Walmart stores and other stores under the Walmart Stores, Inc. brand is not the only factor that plays into Walmart’s success. Walmart is very smart in the way that it does business in that they offer what many customers want which is low cost items. In order to achieve their consistently low prices they keep their inventory process very efficient through a disintermediation inventory system.

While Walmart does surpass its competitors in many aspects there are some other, also important, categories that Walmart’s competitors are currently succeeding in. Costco currently has a higher quarterly revenue growth than that of Walmart, which has a quarterly revenue growth below even that of the industry average. One likely cause for this is that Costco is still in its expansion stage whereas Walmart already has a global presence and is no longer expanding at such an extensive rate. Target surpasses Walmart on two important margins: the gross margin and the operating margin. Gross margin measures the company’s total sales revenue (“Gross Margin”) and operating margin measures a company’s pricing strategy and operating efficiency (“Operating Margin”).

These are two important factors because it tells stock holders and investors how efficiently and effectively the company is running each quarter. Currently the areas that Costco and Target are exceeding Walmart are not at severe differences so there is likely no need to worry but it is always important for Walmart executives to look at the things that its competitors are doing and look at the numbers to ensure that Walmart stays the leading competitor.

Efficiency:One of the things that Walmart is well known for doing better than almost any other company on the market is controlling every aspect of inventory. They understand that in order to have full control over your costs you need to have full control over as many aspects of obtaining products as possible. In order to establish the most efficient distribution process Walmart utilizes a method of disintermediation. What disintermediation emphasizes is the removal of intermediaries from distribution channels, which if carried to the ultimate meaning of the term would result in the total elimination ofmiddlemen from the channel (Rosenbloom). The easiest example of disintermediation is online shopping. When an item is purchased online from a company website, such as Walmart.com, there is need to have that item in stock in a store but can instead go directly from warehouse to customer. The intermediaries involved in distribution channels, such as wholesalers, are eliminated through disintermediation (Rosenbloom).

Walmart.com

The reason that Walmart is able to do this is that they put the pressure on the suppliers on the items to ensure that the inventory that Walmart has in its warehouse is the correct amount. For most stores this burden would be on the retailer but Walmart shifts that. The company receives favorable pricing from and systematic integration with most of its suppliers which is a large part of Walmart’s crucial low-cost advantage. The company generally requires suppliers to tire in to its own inventory management system and to deliver goods in the manner and timing Walmart dictates, leading to impressive inventory turns. Another key thing about

Walmart’s efficient distribution process is the sheer size of this network. Each of the 42 Regional Distribution Center is over 1 million square feet and serves between 75 and 100 stores within a 250-mile radius (“Distribution/Transportation”). The size of the distribution centers and their distance to the stores they serve is important because it allows Walmart to cut costs. By having everything that they need in one location and by saving on fuel costs Walmart cuts shipping costs and is able to transfer that savings to the end customer.

SWOT Analysis:Strengths- A market leader with unprecedented scale gives a competitive advantage.- Low cost leadership enabling Walmart to offer products at low price points.- Internationalization strategy — a strong foundation for growth as the US market matures.| Weaknesses- Big box retailing format led to low penetration into urban areas.- Litigations affect labor relations adversely- Target’s superior merchandising capabilities to appeal more to the customers as the US economy revives| Opportunities- Outperformance of the retail sectors in the emerging markets- Concentration on grocery andfood will benefit as eating at home, health, and wellness trends continue to emerge- Growth in internet retailing to serve larger market| Threats- Two million employees increases exposure to increasing wages and high healthcare costs- Volatility in commodity prices and cost inflation will pressurize margins- Increasing resistance to expansion from local organizations and authorities.| Table Source: “Data Monitor”

Strengths:A market leader with unprecedented scale gives a competitive advantage. As the numbers above show, Walmart is the largest retailer in the world. There are some competitors that have developed in the market that Walmart is in but none of these competitors is comparable in the scale of operations or physical size. This competitive advantage expands worldwide as international operations contribute to one fourth and one half of the size of Walmart’s income, stores, and number of employees. The main advantage that Walmart has in this realm is that they are able to duplicate the best practices each time they expand (“Data Monitor”).

The fact that Walmart is so large and such a strong force in the global market has enabled them to have further competitive advantages. This has led to favorable terms on everything from products on its shelves to store leases and distribution agreements. The size of Walmart stores means that Walmart offers a wide range of products that can easily be shifted in each store to meet demand and allow Walmart to benefit from increased sales. This level of flexibility and clout in the market will enable Walmart to hold its market position and possibly strengthen their various competitive advantages (“Data Monitor”).

Low cost leadership enabling Walmart to offer products at low price points. Walmart is known for having low prices and is alwa