In the last couple of years, a number of major changes took place in the global hemisphere. Countries, earlier committed to tight governmental control of their economies, have redirected their political concepts and initiated drastic reforms in order to facilitate trade. The world has arrived in the global market place, at least in some terms. Not least because of new technologies like the Internet that is about to mark the beginning of a new era of international business relations.
The challenges an entity faces by forming a strategy to participate in 21st century’s global economy, that is, to be competitive at a worldwide stage, are intriguing to discuss and shall be the objective of this paper. Both authors share the opinion that the world’s largest retail chain at present, the Wal-Mart Stores, will be a very interesting company to examine, since Wal-Mart already took a few steps, i. e. countries, towards its global appearance. To begin with, let us take a closer look at this famous company’s profile.
he Adolescence of Wal-Mart: The company was founded in 1962 as a single Discount Store in Rogers, Arkansas, by a visionary and by the time legendary man named Sam Walton. Since then the chain had been growing at an unrivaled rate, starting with 9 stores and total sales of $ 1. 4 million, now about to finish the fiscal year 1998 with total sales of US $118 billion and 2,136 stores. The company consists of discount stores, SAM’s Wholesale Club (introduced in 1983, Midwest City, OK), Wal-Mart Supercenters (1988, Washington, MO) and deep discount warehouse outlets (Bud’s Discount City).
Having written a unique success story in the history of retail industry, thanks to the rousing leadership of Sam Walton, the company internationally came off the ground by opening its first store abroad in Mexico City in 1991. Since then Wal-Mart has extended its international presence to Puerto Rico (1992), Canada (1994), China (1996), Brazil (1995), Argentina (1995), South Korea (1996) and Germany (1998) (Wal-Mart History). Today Wal-Mart operates more than 600 stores in international arena with a revenue of $7. 5 billion .
The major merchandise lines include house wares, consumer electronics, sporting goods, lawn and garden items, health and beauty aids, apparel, home fashions, paint, bed and bath goods, hardware, automotive repair and maintenance items, toys and games, and grocery . The company is one of the major job generators in America, it has created more than 825,000 jobs and also supports thousands of U. S. manufacturing jobs, especially by its ongoing “America First”-Campaign . Channel of Distribution: Wal-Mart has got over 3,300 company owned truck that carries its shipment from suppliers to warehouses and stores.
Approximately 83% of the company’s Discount Stores and Supercenters’ purchases were shipped from its 51 distribution centers and rests of them are shipped directly from suppliers to its stores. Each distribution center serves the distribution needs of approximately 80-100 stores, depending on the size of the center. The size of these distribution centers varies from 600,000 – 1,700,000 square feet. Equity ratio expresses the relationship of assets, which are finance by shareholder’s funds. We observe that it has decreased and is mainly due to investments made overseas in relation to increase in shareholder’ funds.
Debt Equity ratio, which shows the proportion of liabilities, financed by assets and we observe that it is less than one but on the increasing trend. The increase came because of considerable increase in total assets in 1998 because of acquisitions. Debt to equity ratio shows the proportion of debt financed by shareholders fund. It is well over critical level of one and is still on increasing trend, which may not be a good sign for a firm but with Wal-Mart resources and economic muscles, they are still in very good position to cope with it.