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Financial Rationale

Let us now analyze this acquisition proposal for Wal-Mart to purchase Lianhua Supermarket Holdings Co. Ltd. , China’s #1 grocery retailer from the financial rationale. Wal-Mart Store, Inc, as earlier stated is very competitive (Porter, 1985). Apart from enjoying a strong market presence, the company’s financial performance has been encouraging over the past years (General Re-New England Asset Management, Inc, 2003). For instance, as at the year ended January 31, 2990, the company posted a net sales of $107. 996 billion representing an increase from the previous $106. 208 billion (Yahoo Finance Inc, 2009), which was a 1. 7% increase.

At the same time, the company’s continuing operations generated $1. 03 per share (Yahoo Finance Inc, 2009). This was inclusive of a net charge of about $ 0. 02 per share pertaining to real estate operations. The company’s net sales were $401. 244 billion which was a 7. 2 % increase from the 2008 fiscal year. What this implies is that the company reported the strongest sales results ever according to the company’s chief executive and president (Yahoo Finance Inc, 2009). Therefore with this kind of sterling financial performance in relation to its competitors, the company is capable of profitably purchasing

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Lianhua Supermarket Holdings Co.

Ltd. , China’s #1 grocery retailer (Porter, 1996, pp. 61-79). Political, Economic, Social, Technological (PEST) Factors One way by which Wal-Mart can be analyzed is through the PEST analysis. The company enjoys a good political environment going by the many international operations it undertakes (Barney & Hesterly, 2008). As an economic factor, the company has also continued to record strong financial performance even against the backdrop of turbulent economic times (General Re-New England Asset Management, Inc, 2003). This means that Wal-Mart has continued to drive consumer prices to lower inflation levels.

One social factor is the fact the company values its human resources. Wal-Mart makes a lot of investments in terms of money and time in training and developing its employees (Hummer, 2006, p. 1). Another social measure is the company itself as a brand with which many customers on the global front would want to associate with (Kotler, 2003). Wal-Mart is a powerful brand which attracts many customers all over the world (Porter, 1985). The other core competence factors for WAL-Mart are the technological factors (Porter, 1996, pp. 61-79).

In this case, the company effectively embraces information technology to support the international logistics systems it operates. The company makes use of information technology to support its procurement procedures and to monitor the way the products are performing country wide (Barney & Hesterly, 2008). Conclusion In conclusion therefore, Wal-Mart makes use of several competitive factors in driving its business operations (Porter, 1996, pp. 61-79). In fact, the company is known as the leading retail business in the world. It is against this backdrop that the evaluation of the proposal to purchase Lianhua Supermarket Holdings Co.

Ltd. , China’s #1 grocery retailer has been carried out. From the above analyses, it can be seen that Wal-Mart is clearly in position to profitably purchase Lianhua Supermarket Holdings Co. Ltd as w ay of expanding its business operations (Barney & Hesterly, 2008). The company is strongly competitive and is bound to continue enjoying a strong return on investment (General Re-New England Asset Management, Inc, 2003). With its impressive resource base, stable financial performance, and impressive PEST factors among others, the company should go ahead and purchase Lianhua Supermarket Holdings Co.Ltd. , China’s #1 grocery retailer.

References

Barney, J. B & Hesterly, W. S. (2008). Strategic Management and Competitive Advantage: Concepts and Cases, 2nd Ed. Upper Saddle River, NJ: Prentice Hall. General Re-New England Asset Management, Inc. (2003). Return on Capital and Competitive Advantage: The Deflationary Effect of the Changing Balance of Commercial Power. Reflections, Issue no. 36. Gordon, B. , Van Gilder, M. , Devries, C. , & Chiado, C. (2007). Wal-Mart Analysis, p. 1. Retrieved March 11, 2009 from http://www. plu. edu/~vangilmd/doc/wal-mart-1. doc. Hummer, R.

(2006). Wal-Mart Stores, Inc (WMT): Competitive and Financial Analysis p. 1. Retrieved March 11, 2009 from http://fisher. osu. edu/fin/courses/sim/rosenfieldreports/wmt-hummer. doc. Klein, B. , Crawford, R. G. , Alchian, A. A. (1978). Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, Journal of Law and Economics 21, pp. 297-326. Kotler, P. (2003). Marketing Management, 11th ed. , New Jersey: Prentice Hall. Pilsbury, S. , & Meaney, A. (2009). Are Horizontal Mergers and Vertical Integration a Problem? Analysis of the Rail Freight Market

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