Walmart: A Strategic Management Case study Financial Perspective

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Wal-Mart’s primary competition in US includes department stores of the likes of Target and Kmart. Costco offers competition to Sam Club format of Wal-Mart. In niche small markets, dollar stores are offering strong competition to Wal-Mart.
Kroger competes with Neighbor market and supercenters of Wal-Mart especially on the grocery product line. Target competes with Discount stores and supercenter shopping formats of Wal-Mart with Target commanding a small premium on prices as it follows fashion trend. Market segment of Target is the high-income customers leading to higher margin realization. ($ 50,000 of target vs. EDLP strategy of Wal-Mart by leveraging purchasing scale has pushed down prices compared to other retailers.
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The same trend is displayed in its operating income also(Walmart Analysis. (2008).)
Operating profit/ Sales: Wal-Mart has shown high growth in operating profit/ sales ratio majorly owning to its innovative supply chain cutting down operating expenses.
Operating expense/Sales:
Distribution cost/Sales: Wal-Mart maintains lowest distribution cost/ sales of 1.7% while their distribution cost of their competitors namely Kmart and Sears was 3.5% and 5% of the cost of sales.
Inventory turnover (Net sales/ Inventory): Wal-Mart had reasonably high inventory turnover ratio of 11.5 which is significantly higher than their competitors namely Target Co, Amazon.com and Sears which had inventory turnover of 8.7, 6.2, and 4.7 respectively. However Kroger was the industry leader in inventory turnover attributed to their focus on highly perishable food items.

Gross Margin (Total Revenue-COGS/ Total Revenue): Wal-Mart has attained 24.74% gross margin compared with competitor average of 17%. This shows that Wal-Mart is able to achieve significant scale economics and translate some of its benefit to the customers(Walmart's Keys to Successful Supply Chain Management. (2013).)
Asset Utilization (Total sales/ Total assets): Wal-Mart has attained an asset utilization of 2.4 which is significantly higher than the industry average

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