Wal-Mart Financial Statement Analysis
The Paul Merage School of Business at UC Irvine | Financial Statement Analysis & Reporting: Earnings Quality and Asset Analysis | Company - WALMART |
Kian BolooriHee Jun ChungDaejune Min |
1. Qualitative Analysis for the environment and the company (1) INDUSTRY ANALYSIS
Walmart is in the discount retailer industry. This industry started in the 1950s, grew in the 1960s, and matured in the 1970s. With exception to a moderate growth period in the 1990s, the industry had remained stagnant since the 1970s. Today, three major players in the industry are Walmart, Target and Costco. The state of the discount retail industry is best understood through the Porter’s Five Forces analysis.
* Competition: HIGH
Competition among discount retailers resembles that of an oligopoly in that Costco, Target and Walmart hold a vast majority of the market share. In past decades, competition among the firms was minimized because they each targeted a different market segment. For example, Target focused on higher end neighborhoods while Walmart focused on rural locations. However, as the firms began to grow, they had to expand beyond their original targeted segments. As such, the firms started competing in the same locations, which intensified competition. This condition remains a dominant issue in the discount retail industry.
* Barrier to New Entrants: MEDIUM-HIGH
Unlike other industries, the discount retailer industry does not require a particular set of technical knowledge for new entrants. However, the major players in the market have established strong procurement and distribution networks that prevent new entrants from easily establishing their own. As such, new entrants would find it difficult to establish procurement and distribution networks while keeping costs competitive with those of Walmart, Costco and Target.
* Bargaining Power of Buyers: LOW--MEDIUM
Buyers have different levels of power depending on their location. In rural
Kian BolooriHee Jun ChungDaejune Min |
1. Qualitative Analysis for the environment and the company (1) INDUSTRY ANALYSIS
Walmart is in the discount retailer industry. This industry started in the 1950s, grew in the 1960s, and matured in the 1970s. With exception to a moderate growth period in the 1990s, the industry had remained stagnant since the 1970s. Today, three major players in the industry are Walmart, Target and Costco. The state of the discount retail industry is best understood through the Porter’s Five Forces analysis.
* Competition: HIGH
Competition among discount retailers resembles that of an oligopoly in that Costco, Target and Walmart hold a vast majority of the market share. In past decades, competition among the firms was minimized because they each targeted a different market segment. For example, Target focused on higher end neighborhoods while Walmart focused on rural locations. However, as the firms began to grow, they had to expand beyond their original targeted segments. As such, the firms started competing in the same locations, which intensified competition. This condition remains a dominant issue in the discount retail industry.
* Barrier to New Entrants: MEDIUM-HIGH
Unlike other industries, the discount retailer industry does not require a particular set of technical knowledge for new entrants. However, the major players in the market have established strong procurement and distribution networks that prevent new entrants from easily establishing their own. As such, new entrants would find it difficult to establish procurement and distribution networks while keeping costs competitive with those of Walmart, Costco and Target.
* Bargaining Power of Buyers: LOW--MEDIUM
Buyers have different levels of power depending on their location. In rural