Within the last five decades, Wal-Mart has been selling its goods at relatively low prices and their low costs have not only defined the business model of this company, but also its unique personality. Wal-Mart is a forty five year old insular company that originated in the Ozarks backwoods that has since then grown to dominate the retailing arena. In spite of its dominant characteristic, Wal-Mart's growth formula has become stagnant for the last one and a half years. In the year 2006, its segment in the US eked out a 1.9 percent profit in same-store sales and this was the worst performance ever recorded in the history of this company. Unfortunately, this year has also commenced on a bad note for this company. As such, Wal-Mart's biggest competitors such as Safeway, Costco, Target and Walgreens are now growing at a faster rate than itself (Anthony, 2007).
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It is increasingly appearing as if Wal-Mart, the largest American corporation, has driven itself into a terrible mistake that seems to have no immediate answer. At the moment, its growth rate is much slower than the entire economic growth of the US, despite the fact that it has been in existence for the last forty five years. The Wal-Mart crisis is worsened by the fact that it is the dominant company in the retail market of America. According to a study carried out by ACNielsen, Wal-Mart controls twenty percent of the dry grocery market in the US, twenty nine percent of non-food groceries, thirty percent of beauty and health products and forty five percent of the sales from general products (Anthony, 2007).
According to Lee Scott, Wal-Mart's chief executive officer, Wal-Mart has managed to heighten the total revenues of America by seven point two percent during the last fiscal year, and the company seeks to carry on with this spirit in the coming five years. However, Wall Street does not concur with Scott's claims which it terms as bullshit because it is quite clear that Wal-Mart's shares are trading at very low prices as compared to the previous years.
The decline in Wal-Mart's organic growth rate can be attributed to the aging of its outlets because it is relatively clear that the rates of same-store sales are expected to decline as the stores mature up (Anthony, 2007). At the same time, Even though Wal-Mart keeps on relying on store building to cover up for its declining same-store sales, the elemental economics of expansion have turned up against the company because of several reasons. One of the probable reasons is that the company is setting up most of its new stores close to the existing ones and the result is that it builds up competition against itself.
It is important to note that this company has discovered new ways of reducing its costs through avoiding the involvement of middlemen in their operations. The company has also continued with so much effort to publicize its green initiatives, but it needs to do much more than that in order to overcome its crisis.
For this company to sail back to its track, it needs to draw up a strategic plan of giving back to its shareholders the company's returns. The company is also supposed to focus on stocking ordinary items such as non-fat milk and trendy clothes which seem to be going out of stock in its major outlets. It should aim at attracting the middle income shoppers who form a very big part of the market without isolating its low-income customers.
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