Macroeconomic and Industry Analysis
The report has been prepared to measure the industry evaluation, economical evaluation and company valuation of Walmart Inc. It takes the concern of all the related factors of the Walmart Inc to measure the performance and the investment position of the company.
Macro economical and industry analysis of US market and retail industry of United states in as follows:
The United State’s economy is among the largest developed mixed economy. The industry is second largest economy in terms of purchasing power parity (PPE) and it is top economy in terms of highly developed mixed economy. The economy performance o the company is rapidly enhancing. However, it has been measured that the trade tension of US with china could impact on the industry performance at a huge level.
The economical data of the company express that the overall performance of the company has been improved from last year and it has positively impacted on the overall performance of the company. The US economical impact has been measured on the US retail industry to evaluate the impact of the economy on the industry. The report of US retail industry explains that the retail industry has enjoyed a great range of increment in the retail industry (NRF, 2018). The balance (2018) explains that the US retail industry has generated around $ 11.4 trillion in past year which contributes around 5.9% in the total economy of the company. It explains that the retail industry is among the top industry of the US economy and thus, the changes into the economical position directly make an impact on the retail industry of the company.
The retail industry of US has been evaluated and the reports about the retail industry explains that the currently industry is on maturity stage but the firms and the industry are making huge efforts to manage the growth stage of the company and for that various innovations have been done in the retail industry. These innovative changes would impact on the company’s performance positively. It explains that the performance of the retail industry would be improved more. The trading economics (2018) explains that the retail sales in US market has been improved by 4.6%. The growth rate has been lowered but still the performance of the industry is quite better.
Figure 1: US retail industry
Porter’s 5 forces study has been conducted on the US retail industry to measure the external performance of the industry and its impact on Walmart Inc. The porter’s 5 forces model is as follows:
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Porter’s five forces model: |
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Competitive Rivalry |
The competitive rivalry is quite higher in the retail industry. The main factors behind higher competition rivalry is:
Walmart has faced the great competition in the market. However, the current performance of the company is quite better. |
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Bargaining power of buyers |
The bargaining power of buyers is quite higher in the retail industry. Due to the huge populations, they can manipulate the prices. Some of the threats of the company are as follows:
Walmart has faced the great impact due to bargaining power of buyers in the market. However, the current performance of the company is quite better. |
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Bargaining power of suppliers |
The bargaining power of suppliers is quite higher in the retail industry. Due to the great number of firms, they can manipulate the raw material prices. Some of the threats of the company are as follows:
Walmart has faced the great impact due to bargaining power of suppliers in the market. However, the current performance of the company is quite better. |
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Threat of substitution |
The threat from substitution is also higher in the retail industry. Due to the great number of firms and diverse products, the substitutions effect is higher.
Walmart has faced the great impact due to substitute products (Brynjolfsson, Yu, and Mohammad, 2013). |
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Threat of new entrants |
The threat from new entrant is also higher in the retail industry. Due to the:
Walmart has faced lower threat from the new entrants as it already leader in the market. |
The ratio analysis study has been conducted on the Walmart Inc to measure the performance of the company. On the basis of the ratio analysis on Walmart Inc, the profitability position, liquidity level, leverage and efficiency position of the company has been evaluated on the basis of the competitors of the company. On the basis of the study, it has been found that the profitability position of the company has been reduced from last 5 years. However, the profitability level of the company is higher than the competitor Amazon plc (Morningstar, 2018).
In addition, the asset efficiency ratios of the company have been reduced from last 5 years and explain about better working capital management of the company. However, the efficiency level of the company is still required to be enhanced than the competitor Amazon plc.
Lastly, the liquidity and leverage ratio of the company has been measured to identify the overall performance of the company and it has been measured that the few changes have been done by the company in overall financial performance of the company and the performance of the company is quite better in the industry.
The DuPont evaluation on the company explains that the liquidity position of the company has improved the overall performance and the position of the company.
On the basis of the above evaluation and study, it has been recognized that the stock must be purchased by the investors of the company of Walmart Inc. The stock of the company is undervalued now. If the investors would buy it now than huge return would be got by the company.
References
Brynjolfsson, Erik, Yu Jeffrey Hu, and Mohammad S. Rahman. “Competing in the age of omnichannel retailing.” MIT Sloan Management Review 54.4 (2013): 23.
Focus Economics. “Retail industry”. (Online). Accessed on 3rd June 2018. 2018. <https://www.focus-economics.com/countries/united-states>
Morningstar. “Amazon plc”. (Online). Accessed on 3rd June 2018. 2018. <https://financials.morningstar.com/ratios/r.html?t=AMZN®ion=usa&culture=en-US>
NRF. “Retail industry”. (Online). Accessed on 3rd June 2018. 2018. <https://nrf.com/sites/default/files/Documents/The%20Economic%20Impact%20of%20the%20US%20Retail%20Industry%20REV.pdf>
Shockley, Jeff, and Tobin Turner. “Linking inventory efficiency, productivity and responsiveness to retail firm outperformance: empirical insights from US retailing segments.” Production Planning & Control 26.5 (2015): 393-406.
The balance. “Retail industry”. (Online). Accessed on 3rd June 2018. 2018. <https://www.thebalance.com/what-is-retailing-why-it-s-important-to-the-economy-3305718>
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