Walmart
Content
Content ............................................................................................................................................... 1
Introduction ........................................................................................................................................ 2
Facts................................................................................................................................................................. 2
Mission statement........................................................................................................................................... 3
Criticism ........................................................................................................................................................... 3
History Timeline .................................................................................................................................. 4
Competitors and Suppliers................................................................................................................... 5
Competitors around the world........................................................................................................................ 5
Suppliers .......................................................................................................................................................... 5
Competitors’ situation and their reactions ..................................................................................................... 5
Suppliers’ situation and their reactions .......................................................................................................... 6
Globalisation ....................................................................................................................................... 7
Mergers & Acquisitions ....................................................................................................................... 9
Financing expansion ........................................................................................................................................ 9
Mergers & Acquisitions Strategy ..................................................................................................................... 9
Economic influences...................................................................................................................................... 11
Apendices: How Walmart elaborate a merger strategy ............................................................................... 11
Dividend Policy ..................................................................................................................................12
Facts............................................................................................................................................................... 12
Chart-Development ....................................................................................................................................... 12
Shareholders - Dividends............................................................................................................................... 13
Financial Calender ......................................................................................................................................... 13
Annual Analyst & Investor Meeting .............................................................................................................. 15
Financial Risk Management ................................................................................................................16
3 Types of Exposure....................................................................................................................................... 16
Risk Management Strategies ......................................................................................................................... 17
Conclusion .........................................................................................................................................18
Reference List ....................................................................................................................................19
1
Walmart
Introduction, Facts
Introduction
In this paper we want to introduce Walmart as a company. For this purpose we have divided our report
into four main parts. After presenting some hard fact of the world’s largest retailer, we will discuss
Walmart’s effect on suppliers and competitors to get an understanding of Walmart’s dominance in the
market. In the second part we focus on how Walmart handles globalization, mergers and acquisition to
show how the company grew in the last 40 years. Thirdly, we look at its dividends to get more information
about the Walmart’s management policy. And finally, we describe the corporation’s financial risk
management, as a global player like Walmart has to handle a lot of risks.
Facts (adapted from Walmart 2001)
Corporate Organisation: Incorporated
Type: Public (NYSE: WMT)
Founded: 1962
Founder: Sam Walton
ISIN: US9311421039
Headquarters: Bentonville, Arkansas, USA
CEO and President: H. Lee Scott
Chairman: S. Robson Walton
Walmart is a retail chain and sells groceries, family apparel, automotive products, health and beauty aids,
home furnishings, electronics, hardware toys, sporting goods, lawn and garden items, pet supplies,
jewellery and house wares (Walmart 2001).
Wal-Mart Stores Division U.S., Wal-Mart Discount Stores, Wal-Mart Supercenters, Wal-Mart
Neighborhood Markets, Sam’s Club, Walmart.com and Walmart International are all subsidiaries of
Walmart Stores, Inc. (Walmart 2001). According Fortune 500 from 2008, Walmart is the world's largest
public corporations in terms of revenue (Cable News Network 2008).
2
Walmart
Mission Statement
Walmart’s mission is: “Saving people money so they can live better” (Walmart 2001). This statement
demonstrates that the main idea of the founder Sam Walton is still alive.
Company values
Respect for the Individual
Service to their Customers
Striving for Excellence
Although the employees may
It is important to them to offer
have different backgrounds,
Walmart always wants
its products at the lowest prices
every worker is special and
develop and advance.
with the best customer service.
should be treated well.
to
e.g.:
friendly
atmosphere,
e.g.: open communications,
e.g.: continuous improvement,
pleasant shopping experience,
people development, humility,
dissatisfaction with the status
low prices, the 10-foot rule,
listening, …
quo, failure allowance, …
quality, …
(Adapted from Walmart 2001)
Criticism
Walmart is often criticized because of its remarkable position in the market. A lot of other shops close to
Walmart had to close. The firm is often compared to a Monopoly. Furthermore a lot of employees think
they are not well treated and went to court and mostly they won. The most cases dealt with
discrimination against women and African-Americans (Greenwald 2005).
3
Walmart
History Timeline
The following dates are adapted from Walmart 2001:
1962: Sam Walton (*1918; † 1992) opened the first discount store in Rogers, Ark.
1967: There were 24 Walmart stores in Arkansas ringing up $12.6 million in sales.
1969: The company officially incorporated as Wal-Mart Stores Inc. on October 31.
1970: Walmart employed 1,500 associates working in 38 stores, with sales of $44.2 million.
Wal-Mart started selling shares as a publicly-held company.
1971: Walmart had its first 100 percent split.
1975: The company made its first acquisition. (16 Mohr-Value stores in Michigan and Illinois)
1984: The company achieved a pre-tax profit of 8 percent for the previous fiscal year.
1991: Walmart’s first shop abroad opened in Mexico City.
1992: Sam Walton died. His son S. Robson Walton became new CEO.
1994: Walmart international operated 123 stores in Canada and 86 in Mexico
1995: Wal-Mart replaced Woolworth on the Dow Jones Industrial Average.
1999: Walmart was the largest private employer in the world, with 1,140,000 associates.
2000: H. Lee Scott Jr. was appointed as the third CEO.
2005: Walmart introduced a new commitment to establish environmental sustainability.
2008: Wal-Mart employs more than 1.6 million workers and serves more than 138
million weekly customers in Argentina, Brazil, Canada, China, Costa Rica, El Salvador,
Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, South Korea,
the United Kingdom, the United States.
Sam Walton
Robson Walton
(NVC College 2008)
(Brava Corporation 2008)
H. Lee Scott Jr.
(Clinton Global Initiative 2008)
4
Walmart
Competitors and Suppliers
Competitors around the world
In the industry of general merchandising, Walmart's primary competition includes companies such as
Target, Kmart, Sears Holding, Macy’s, J.C. Penney, Kohl’s and Carrefour. Several smaller retailers, primarily
dollar stores, such as Family Dollar and Dollar General, have been able to find a niche market and
compete successfully against Walmart for home consumer sales (Global Fortune 500 2008).
Walmart also had to face fierce competition in some foreign markets; for example, in Germany it
remained "a secondary player" behind Aldi and in the UK Wal-Mart continues to do well, where its ASDA
subsidiary is the second largest chain after Tesco (Fishman 2006).
Suppliers
According to Walmart’s official homepage the company attach great importance to guarantee supplier
diversity. They emphasize that they partner with thousands of enterprises in every merchandise category
that range from one person shops to multi-national corporations. Some of these sell products in just a few
stores, others supply nationwide (Walmart 2001).
Competitors’ situation and their reactions
To survive in the same market as Walmart is actually an achievement; yet some, such as Kmart and
Target, have done so successfully for years. These big retailers were founded around the same time as
Walmart.
However, they are only up to this challenge due to the fact that “location patterns of the major chain
retailers are jointly determined” (Basker 2007). They simply follow another strategy than Walmart, who
only opens stores in small and middle-sized towns, avoiding the stiff competition of the biggest retailer
worldwide. Of course large retail chains in big cities have also to struggle with Walmart’s enormous power
and market share, but as a result of different location strategies there is no real confrontation in the daily
fight for every single customer.
Therefore you can conclude that Walmart is a threat for every other retail store, which is located in the
surrounding area, where a new Walmart branch opens its doors. How the small, local, but mostly
incumbent retail stores react to this magnate will be explained hereinafter.
5
Retails who offer the same goods as Walmart usually suffer and have to close down their businesses in no
time due to the fact that they have simply no chance to compete against a tycoon, who has the ability to
sell all products at the lowest price possible. Walmart is nearly a monopolist setting the price in the
industry. Other companies are often only bystander, who can’t match what Wal-Mart offers its
customers. They often have to recognize that buying their own stock at Walmart is cheaper than buying it
wholesale. (Fishman 2006).
The secret of small retail shops who manage to exist beside such a fast growing and mighty company is to
stand out with unique design, fashion, quality, professional advice or better service. But they do not
compete on the basis of price (Fishman 2006).
In general all competitors of Walmart must always be aware that this company simply loves competition
and constantly improving. The founder, Sam Walton, made a smart strategic decision a long time ago:
“We decided that instead of avoiding our competitors, or waiting for them to come to us, we would meet
them head-on” (Walton S. 1993).
Suppliers’ situation and their reactions
Walmart has a clear policy for suppliers: On basic products that don't change, the price Walmart will pay,
and will charge shoppers, must drop year after year (Fishman 2003). Therefore suppliers must constantly
reduce their prices and are forced to look for cheaper global sources and production conditions in the Far
East (Smith and Young 2004).
By now, it is accepted wisdom that Walmart makes the companies which with it does business more
efficient and focused, leaner and faster. Wal-Mart itself is known for continuous improvement in its ability
to handle, move, and track merchandise. It expects the same of its suppliers. Walmart is also renowned
for forcing its suppliers to redesign everything from their packaging to their computer systems and quite
straightforwardly telling them what it will pay for their goods (Fishman 2003).
But why are suppliers willing to endure such bad conditions?
In 2001, the Journal of Retailing published a paper titled “Retailer Power and Supplier Welfare: The Case
of Walmart. This article answers a big question: Does being a supplier to Walmart help your business or
hurt it? The conclusion is: It’s hard to be a supplier of such a dominant company, but it is even worse to
have no relationship with Walmart, as the corporation place larger orders than the rest of the retailing
industry (Fishman 2006). Therefore several hundred of Walmart’s major suppliers have permanent offices
near Walmart’s headquarters in Bentonville, Arkansas, to facilitate and boost the relationship with their
biggest money source (Basker 2007).
6
Walmart
Globalisation
According to the different Walmart’s annual reports, the firm began his international strategy in 1991, by
opening his first store in Mexico. Four years later, Walmart had opened 276 international stores in Porto
Rico, Hong Kong, Argentina and Brazil. Moreover, in 1998, Walmart settled in China and South Korea.
Finally, the company entered the Japan market by acquiring 53% of Seiyu Japanese retail chain in 2006.
Today Walmart owns 3.125 international stores and is located in 14 different countries all around the
world: Mexico, Brazil, Argentina, Puerto Rico, UK, Canada, China, Nicaragua, Japan, Honduras, Guatemala,
El Salvador, Costa Rica and the US.
According to the following chart, Walmart‘s strategy permitted to generate 22.3 % of its net sales in the
International Segment
(Walmart 2008, Annual Report p. 12)
Walmart came to China in 1996, in order to increase their shares on a dynamic marketplace and extend
their significant network. The first Supercenter and SAM'S CLUB was opened in Shenzhen. Today, there
are 203 units in more than 55 Chinese’s cities (Supermarketnews 2008).
It took 10 years for Walmart to become China's number one importer and sixth largest trading partner,
before Germany and Britain. (United Food and Commercial Workers Union 2005)
Yet, regarding with the application of domestic business models in their international expansion strategy,
the company have to face new issues:
7
First, according to a recent survey, (refer to the figure 2) the firm seems to have a partial integration of its
markets (ChangeThis 2008). Indeed, it’s seems that there is an impact on geographic distance. Only the
closest geographically countries are profitable. Two of the profitable countries, Canada and Mexico, share
a common land border with the United States, and are part of the regional Free Trade Agreement
(NAFTA).
(Change This 2008)
Furthermore, in 2006, the firm announced its removal from Germany with a loss of $1 billion and agreed
to sell its 85 stores to its local rival Metro (Robinson 2006). The newspaper article besides mentioned that
Walmart had conflicts with local labour and trade laws and with syndicated employees. According to
Walmart’s annual report, the firm had to relocate from Germany and South Korea only due to sustained
losses.
The following factors may explain why there are difficulties with globalization: difference in language,
values, human resources or the lack of trust and political hostility.
Undoubtedly, Walmart engages its worldwide strategies of price cutting, innovation, and capacity
expansion. Yet without considering the European post-integrated culture, which differs from the
American’s market. This omission cost a lot of funds to the company.
8
Walmart
Mergers & Acquisitions
To get an understanding for Walmart’s merger and acquisition strategies, it is worth to recall, fist of all,
the past. In the 1970s there was the beginning of significant growth for the company. In 1977, Walmart
made its first acquisition, with the Hutcheson Shoe Company, introducing the Walmart pharmacy, the
auto service centre and its jewellery divisions. Then, in 1981, the company made its second significant
acquisition with 92 Kuhn’s Big K stores. Four years later, after those important acquisitions, net sells
increased from $478,800 to $1.643,199! Today Walmart owns more than 7,262 stores (Walmart 2008)
and sells more groceries than any company in the world (Fishman 2006).
Financing expansion
Through an analysis of different annuals reports, the company primarily financed expansion with
operating cash flow. In 2000, the firm planned capital expenditures for approximate $4.9 billion, using
essentially cash flows to finance these operations.
The company also provided for cash needs through short-term borrowing by credit lines. Moreover, in
1996, the company sells $750 million of public debt utilizing shelf registration statements to provide for
other cash needs.
Therefore, in 2002, the Company announced that it had “anticipated generating sufficient operating cash
flow to fund all capital expenditures and accordingly, does not plan to finance future capital expenditures
with debt” (Walmart 2008). However, the Company may desire to obtain long-term financing for other
uses of cash or for strategic reasons.
Mergers & Acquisitions Strategy
Different categories of mergers & acquisition can be used: Horizontal, vertical or conglomerate depending
on the size and market. This strategy allows the company to:

To increase its position
In 1995, according to Walmart 1996 annual report, the company executed a horizontal purchase in
acquiring 122 Woolcos’ stores in Canada for approximately $ 352 million. Only three years after this
acquisition, Walmart had become Canada’s highest volume discount retailer and showed
exceptionally promising figures in their Annual Report.
9

Enter into new markets
In 1999, Walmart took its first steps into South Korea by acquiring a majority interest in four units in
the Korea Makro company. In addition, in November 2006, Walmart expanded again its family tree in
India by announcing the joint venture with Bharti Entreprise, in order to open new stores (Fishman
2006).

Increase sales and profits
According to Walmart’s Annual Report 2003, the increase in international sales and operating
income in 2002 seems primarily to be the result of:

improved operating results and

international expansion strategy.
The acquisition of the ASDA Group plc had a positive effect on sales. In comparison, between 2000
and 2002, sales increases from $7.2 billion to $15.3 billion.

Reduce price and benefit from scale economies
As Walmart faces high competition, the company need to reduce costs to be able to maintain its lowprice-strategy. China offers low-cost production and an incredibly dynamic market. Therefore, more
than 70 percent of the goods sold at Walmart are made in China (China Business Weekly 2004).

Facing competitors expansion
Over the past 40 years, the Carrefour group has grown to become one of the world’s leading
distribution groups. It is the world’s second-largest retailer and the largest in Europe. Therefore,
Walmart’s strategic plan includes increasing its expansions, in order to become even more
competitive and powerful. So Walmart have proceeds with a $1 billion acquisition for a local chain
called Trust-Mart in 2008 to increase its market share and deepen a gap between those two
companies (Chaney 2008).
On the basis of this information we can conclude that Walmart use mergers and acquisitions as a
tool to expand their operations and increasing their profit, skills, technology or power.
10
Economic influences
The present economy is in a very bad state and it is now difficult for firms to make lots of profits. Markets
are riskier and unstable. Therefore, it seems interesting to focus on how Walmart will react through this
conjuncture.
Tthe company anticipates a growth in sales and in its market share for 2009. Moreover Walmart’s
managers believe that they could see extraordinary opportunities in the global retail landscape created by
the disruption of financial markets (Birchall 2008).
Nonetheless, in Walmart latest statement the firm seems to have changed its strategy for the next two
years. Walmart will continue to focus on supercenter growth, but in fewer numbers than in recent years.
Tom Schoewe, executive vice president and chief financial officer for Walmart Stores, Inc., explained that
“by instituting its capital efficiency model, Walmart was far better prepared for current economic
conditions … and therefore we will now continue to prioritize projects that make the most efficient use of
capital and drive higher returns” (Wal-Mart Capital Expenditure Forecast 2008).
The new strategy seems to be focusing on mature markets in order to prevent any risk and improve
return on investment.
In general we can say that the vast majority of Walmart’s acquisitions have been beneficial to the
company, as these have improved sales and reduced costs.
Appendices: How Walmart elaborate a merger strategy
The benefits of a merger can generate scale economies, obtain synergy, and help entering new markets.
Cifra, S.A. de C.V. (Cifra) and Walmart Stores, Inc (Walmart Annual Report 2000)
First, it was only a joint venture with the Mexican retail company and in September 1997 it was changed
to an effective merger.
The Company received voting shares of Cifra, equalling approximately 33.5% of the outstanding voting
shares, in exchange for the Company’s joint venture interests, which had a net book value of $644 million.
The Company then acquired 593,100,000 shares of Cifra, for approximately $1.2 billion. Finally the
transaction has been accounted like a purchase. Walmart planed to amortize the merger within 40 years.
So Walmart holds a majority of the outstanding voting shares of Cifra and the merger have been included
in the Company’s results.
11
Walmart
Dividend Policy
Facts
Walmart Inc. is an American public corporation which was incorporated on October 31, 1969. In 1970
Walmart emitted 300,000 shares at a price of $16.50 per share. On October 1, 1970 Walmart Stores Inc.
started trading stock as a publicly-held company (Walmart 2001).
In May 1971, the first stock split took place at a market price of $47. Since that there have been 10 further
splits. All the stock splits are two for one (2/1). The last stock split was in March 1999 (Walmart 2001).
Chart-Development
This chart shows the development of the shares from August 25, 1972 to October 1, 2008.
(Yahoo Inc. 2008)
The following graph shows the development of the share price in the last year from October 29, 2007 to
October 28, 2008. For the most part the drift is upwards although the share price fell dramatically in the
first half of October 2008 from over $60 per share to $53. But then it increases again to $55.
In the last year it reached a peak on September 11. On that date the amount of one share was about
$63,85. From October 2007 till October 2008 the share price was between $ 42.50 and $63.85.
12
(Yahoo Inc. 2008)
In a time of global economic uncertainty where there are high unemployment rates, inflated food prices,
high energy prices and healthcare costs it is much harder to present a positive development. People,
especially in America, became scared. A lot of them had exceeded their credit card limit and therefore the
credit card turnover dropped September 2008. Most even have to plan their expenditures for basic
grocery shopping because money is scarce. Also the poor trend on the stock market has had a negative
influence on the Walmart shares. It has tried to counteract this trend and therefore prices on toys were
reduced to motivate the customers to do their Christmas shopping at Walmart. The corporation has a big
advantage. Nowadays people try to save money and therefore prefer discount stores like Walmart.
(Raiffeisen Club 2008)
Shareholders - Dividends
Walmart’s Annual shareholder meetings take always place on the first Friday in June. (Walmart 2001) On
March 21, 2008 there were 303,823 holders on record of Walmart’s common stock (Walmart 2008).
The dividends are paid quarterly. The first cash dividend was $0.05 per share (in March 1974). The latest
dividend was payable on September 2, 2008. Every shareholder received $0.2375 per share. The next
dividend, $0.2375, will be paid on January 2, 2009. This will be the fourth dividend paid for the FY 2009
(Walmart 2001). The fiscal year always begins February 1 and ends January 31. This year is the FY 2009.
13
(Walmart 2008, Annual Report p. 52)
In the FY 2008 the earnings per share were $2.92 which were increased to $3.16 per share in the FY 2009.
Furthermore Walmart was able to give a record return back to the shareholders of more than $11 billion
in share repurchases and dividends (Walmart 2008). This was possible because the investments rose and
so Walmart had more money for the shareholders.
(Walmart 2008, Annual Report p. 52)
Unfortunately the graph does not show the 2nd and the 3rd quarter of FY 2009 since the annual meeting
took place in June 2008.
Walmart has always paid dividends, even when they made huge investments in the past. But in 1999,
Walmart invested a lot on the international market and there their dividends decreased to $ 0.05 from $
0.0775 which was the quarterly dividend in 1998. (Walmart 2008) Because of its strong position and size
Walmart has no problem sourcing money externally and is therefore always able to pay out dividends.
Financial Calendar
Walmart presents its earnings information quarterly. The latest figures were released on August 14, 2008
and dealt with the 2nd Quarter FY 2009. Despite the negative effect from the hurricanes and the bad
economic environment, Walmart U.S. increased their net sales by 4.8 % in September 2008 in comparison
with September 2007(Walmart 2008).
14
Annual Analyst & Investor Meeting
The information for the following part is from the slides of the 15th Annual Analyst & Investor Meeting.
From the 3rd Quarter of the FY 2008 till the 2nd Quarter of FY 2009 the operating income growth was $1.9
billion. Meanwhile the S&P Retailing Index was -$ 4.6 billion. In the last four quarters the operating cash
flow growth was $5.2 billion while the S&P Retailing Index indicates $1.3 billion.
Both operating figures point out the strong position of Walmart. The company’s aim is strong financial
results, working capital strategy resulting in a strong cash flow position and to continue to have access to
short-term credit markets and remain in a strong cash position (Walmart 2008).
Free Cash Flow is very important for Walmart. In autumn 2006 returns and growth were balanced. The
firm boosted their core business to make it more productive and created a new capital allocation mindset.
In spring 2007, it slowed supercentre growth and reduced capital spending. In autumn 2007 Walmart
continued with its capital efficiency model. The policy led to an increase in free cash flow. This efficiency
model is helping the company although the economic conditions are bad. Walmart focuses on projects
which have an efficient use of capital and drive higher returns (Walmart 2008).
The free cash flow enables Walmart to spend more money on dividends, acquisitions and share
repurchases. The following chart visualizes the decrease in capital expenditure and the increase in
operating cash flow.
(Walmart 2008, p. 39)
Walmart is going to make smart investments for the future. It has three main investing strategies. First
the company tries to strengthen the core business through remodeling. Secondly, it will invest abroad in
order to grow on the international markets and last but not least to invest in technology and innovations
to benefit customers and its own business(Walmart 2008, p. 24).
15
Walmart
Financial Risk Management
Depending on the size, nature and complexity of the corporation, Walmart has to consider numerous
risks, uncertainties and other factors, domestically and internationally, including the effects of the current
economic crisis, geopolitical conditions and events, inflation, consumer confidence, spending patterns
and debt levels, unemployment rate, competitive pressures, tax rates, trade restrictions etc. (Walmart
2008).
However as a multinational company with subsidiaries around the world Walmart is especially exposed to
foreign exchange risk because currency rates change over time. Due to the fact that these fluctuations
can have a negative impact on the company’s cash flows and investment opportunities, we will identify
the 3 types of currency risk Walmart has to face before focusing on internal and external risk
management strategies for Walmart.
3 Types of Exposure
Transaction Exposure
… occurs when you send money over a currency frontier. As Walmart has customers and suppliers around
the world, contracting in another currency is inevitable. This exposure arises simply because the company
buys items from one country in one currency and sells them later in another country for a different
currency. Therefore, hedging against exchange-rate changes is very important for Walmart to avoid losses
on such transactions.
Translation Exposure
… is defined as “the exposure of a multinational’s consolidated financial accounts to exchange rate
fluctuations” (Pike and Neale 2006, p. 598). According to Walmart’s Annual report 2008 all foreign
subsidiaries translate their assets and liabilities into USD at year-end. So if the balance sheet rate differs
adversely from the start-year rate, exchange losses and gains will affect Balance Sheet values and the
Profit and Loss Account.
Economic Exposure
… is also known as “long-term cash flow or operating exposure” (Pike and Neale 2006, p. 599). Walmart
has to face these risks, above all, in South America, as this type of exposure is often driven by political
factors.
16
The strategies Walmart use
According to Walmart’s Annual Report 2008 the company uses “derivative financial instruments for
hedging and non-trading purposes to manage its exposure to interest and foreign exchange rates”.
Walmart bring this alternative external hedging strategy, which generally includes forwards, futures,
options and swaps, into action as follows:
“The company routinely enters into forward currency exchange contracts in the regular course of
business to reduce its risk against foreign currency fluctuations on cross-border purchases of inventory.
These contracts are generally for durations of six months or less” (Walmart 2008).
Moreover the company holds cross currency swaps which hedge the foreign currency risk of debt
denominated in currencies other than the local currency (Walmart 2008).
It’s a fact that some big companies even exploit their position as a multinational to operate its currency
dealing activity as a separate profit centre (Pike and Neale 2006). In the case of Walmart we know nothing
about speculation transactions.
The strategies we could recommend in addition
In these times, forward options, where the bank books the deal at the most unfavourable future rate, are
even more recommendable than forward contracts, as the risk of bank failure is a significant threat on
account of the financial crisis. Therefore, it is simply worth it to play safe and pay more for securing
certainty and flexibility.
However, every company should first consider which internal strategies could be used to hedge its risks as
this approach is cheaper and no third party is needed.
An excellent possibility for Walmart to save costs is multi-lateral netting, “where the head office and its
foreign subsidiaries net off intra-organizational currency flows at the end of each period” (Pike and Neale
2006, p. 614) because so they only have to pay one final transaction and not with every change in
currency.
Walmart could also do leading & lagging “to speed up or delay payments when a change in the value of a
currency is expected” (Pike and Neale 2006, p. 615). This strategy is, above all, easy with subsidiaries,
because Walmart have a good relationship with them. However, as this multinational occupies such a
strong market position in the retail sector it even does not need to worry about losing the good-will of its
suppliers, when they are acting in their own best interest. The suppliers are simply glad to have such a
financially strong business partner.
Another internal risk management strategy Walmart can use is invoicing, as big firms like multinationals
have the advantage of being the stronger party in negotiations. So if the customers currency is weakened,
Walmart simply make out the invoice in US dollars and shifts the risk to its trading partner.
17
Walmart
Conclusion
In general we believe that Walmart has highly predictable future prospects.
Walmart has been steadily growing since its opening in 1962 and now the biggest retailer worldwide is
times larger than its nearest competitors. The company’s competitive advantage with respect to
information, logistics, sourcing and distribution makes it virtually certain that Walmart will remain the
dominant discount and food retailer in the United States in the next years. Moreover there is a decent
chance of extending that dominance to many areas outside of North America.
However we think that in continental European countries Walmart’s mission does not match with the
local cultures, like their failure in Germany demonstrate. The reason is a different working attitude and
the importance of unions in Middle Europe. Therefore Walmart should consider carefully where they
expand to and with which companies it is advisable to merge.
Walmart’s dividend policy is very traditional. It has always paid the dividends constantly. In spite of the
financial crisis we don’t expect a change in this matter and therefore Walmart’s shareholders will not
have to forego dividends.
18
Walmart
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