Strategic Initiative Paper
FIN370 – Edward Hastings
Week Three – June 15th 2011
Walmart’s annual report is a comprehensive look at the company's activities throughout the preceding year. Walmart’s annual reports are intended to give shareholders and others, who are financially affiliated, information about the company's activities and financial performance. Also within such a comprehensive report would be plans to attack certain strategic agendas in reference to the company’s long term outlook. Identifying the long-term strategic planning initiative of Walmart will be the focus of this paper. The reader should be able to recognize the strategic initiative within the reading and distinguish how the initiative will have an effect on cost as well as sales. Many times risks are associated with strategic planning. A brief look into the risks associated with Walmart’s long-term planning will also be evaluated.
Wal-Mart is a leader in providing goods and services at lower costs than competitors. The store started with a cost leadership initiative for running the business, and it has worked for the company for years. Wal-Mart has taken this initiative and maximized the plan where no one can directly compete. Wal-Mart analyzes the market and decides what the company can do to continue to thrive and beat out competitors, beating competitors by an aggressive price point is how the company addresses this.
Cost leadership defined by Zanebooks as a strategy that a company uses that provides low costs while concentrating on the cost advantages of all other sources, which requires a balance with cost and quality. Wal-Mart’s success is contributed to no other company able to provide the cost leadership initiative on the same scale. The company uses unrelenting tactics to bring low cost to the costumers. Using cost leadership successfully requires industry originality and is usually too costly for others businesses to copy, allowing Wal-Mart to stand alone without serious competition.
A major criticism of Wal-Mart is the squeezing of the suppliers for the lowest cost and the savings passed to the consumer. The company ethics were questioned on how they deal with their suppliers and the employees for the franchise to continue to retain the title of leader in the cost leader initiative. Wal-Mart has created loyal customers just for the one stop shop concept. Those customers are important if Wal-Mart cannot maintain the position it currently holds regarding the company’s cost leadership initiative.
Effects of Initiative
Walmart has become one of America’s most successful companies due to their cost leadership approach in business, aggressive advertising, and fiscal diligence. Walmart continues to be a success with earnings exceeding 400 billion dollars net profit in 2010. Walmart has financial planning or due diligence to analyze when considering expanding or making any decisions that will affect the company’s future cost or sales. “The authors state that WMT gained more than 400 billion dollars in annual revenue and has low-cost leadership as it reduces the prices of consumer goods, but not in increasing profitability. They note that WMT's per-share earnings are projected at 7%-8% annual growth and higher payout ratios (Peters & Hottovy, 2011)”. Walmart continues to use the cost leadership approach allowing their customers access to low prices to live better. The idea is the average to low income American can have access to the goods at the lowest price. Sales at Walmart have increased during this so called recession and the resistance to raise prices on their products by pinching the vendors has empowered Walmart even more. Being a cost leadership company Walmart keeps over head down and one way to cut overhead is to only have part time employees or restrict their...