Wal-mart net sales
As you can see Wal-mart net sales have been greatly increasing over the years, which indicates that the rate at which they are growing is going faster. In item 2 (appendix) statistics are given for the turnover of 5 different companies one of which is currently an acquisition of Wal-Mart. As you can see Asda in the year 1998 had a turnover of 9,223.5 and the year after this had fallen to 6,834.8, this same year Wal-Mart had taken over Asda, the progression that this acquisition is successful is indicated by the fact that in the 2000 the turnover had increased greatly up to 10,144.5.
Wal-Mart is currently the world’s largest retailer, and is in a very good position as they gain massive economies of scale. With this, they still strive to grow and have said (as indicated in item 3 of the appendix) that they want to expand into Europe, due to this, shares in many European retailers had rose. It also mentions that international growth consists of strategic acquisitions, this is how they took over Asda, and it resulted in Asda becoming more successful with turnover increasing. Whilst their growth has been occurring, consumer awareness of Wal-Mart products and services
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Inorganic growth has had many advantages for Walmart. Its allowed the company to expand thus lowering risks e.g. having stores in other countries means that if a country is in recession profit can still be gained from other countries. Inorganic growth can also allow diversification this can also reduce risks. Opening up franchises within Walmart stores attracts more customers. Furthermore, inorganic growth has increased Walmart’s market share, giving them their market share.
Additionally by taking over British company ‘Asda’ they have gained the strengths and skills of this company to complement and add to their own. Walmart have been advantaged when they had acquired Asda, as the company already had knowledge on the local market, and Asda had already established its logistics, so Walmart had a company ready to buy with very little changes to make. Taking over Asda gave Walmart the chance to gain the skills and experience that Asda already had. This inorganic growth has increased Walmarts market share and increased profits.
The disadvantages to inorganic growth is, the problems Walmart has experienced, as the increase of some stores has been easier than others, not only this but the time it has taken has been costly. Control has become a problem for Walmart as more responsibility is placed on managers and supervisors whom they acquire through their businesses. As they delegate their new employees their new roles, it means more responsibility for the employee. Thus indicating as the company continues to grow their reputation could get damaged in the process. If Walmart grows too much it could cause diseconomies of scale. Additionally, when Walmart acquired Asda they had to adapt to their culture.
All in all the advantages out weigh the disadvantages. For Wal-Mart to further their growth, they should implement the following: Wal-Mart competes with giant supermarkets, however consumers don’t always go to the supermarket, but instead their local convenience store. Therefore they should look to franchising their own convenience stores because they have a strong reputation of a market leader. Which in turn means franchisors will look to their name ahead of companies such as Londis, One-stop, or Jacksons.
Wal-Mart has a real competitive advantage within their core business. This gives them the advantage of investing in places with rapid growth. E.g. LEDC’s that are experiencing vast economic growth. Uphold their strong reputation through their constant advertising and willingness to offer a quality of service.
In conclusion Wal-Mart’s successes have come with their ability to acquire businesses fast. They have been successful to the extent that there is nothing stopping them from going forward. The company is a prime example of inorganic growth due to the rapid competitive advantage they gained in the US. Which has been achieved by taking over businesses that require no start-up costs and are successful within their economy. In doing so, it’s meant that they’ve gained total control, giving them the power to make all decisions for what happens to those businesses.