Health of a Family Business Wal-Mart Stores Inc - Example

Consultant Report on the Health of a Family Business Family Business Wal-Mart Stores Inc. Executive SummaryFamily businesses are viewed as conventional method of directing businesses within both the public and private sectors. It is the most neglected form of ownership around the world since few are aware of the ownership form; they only have the knowledge regarding the company. It is observed that there are millions of companies that have underpinned economies worldwide to a great extent. Majority of the companies in S&P 500 index are family owned business. Family owned business refers to that business where family members own substantial share in the business. They also possess the right to influence any important decisions that are taken for the betterment of future of the business. Wal-Mart Stores Inc is regarded as one of the most successful family owned business in the world. It has met the demand of the customers by providing them their exact need at a reasonable and lower price. This has helped the company to discover more markets and encouraged it to penetrate them in search of new customer group. Sam Walton, the owner and founder of Wal-Mart has taken unshakable strategies that are directed towards charging prices according to the market and purchasing power of the same. The report highlights few relevant elements of the Business Model Canvas with respect to the operation of Wal-Mart and analyses the elements in brief. The financial review indicates the financial position of the company and lastly the marketing review highlights the value of the brands. The recommendations are put forwards which goes as per the conclusion. Table of Contents Executive Summary 2 Introduction 4 Key Elements of Business Model Canvas of Wal-Mart 5 Financial Review 10 Organizational Structure and Role 15 Marketing Review 16 Conclusion 17 Recommendations 17 17 References list 18 Introduction From the entrepreneurial beginning still establishment of considerable big businesses, the entrepreneurs encounter a lot of challenges which are both beneficial and threat for them. The challenges help the business to improve its performances. Family owned business has encountered many situations which have given them the strength to build up more powerful business. In a family business, many generations gains the authority of the business. However, it is often observed that the generations that follow the founder may consist of incompetent successors who are not capable of running the company properly. When there is an increase of family shareholders (generation by generation), the ownership of the business is often taken for granted since the commitment towards the business fades as younger generation takes the responsibility. This is the general picture of the health of family owned businesses worldwide. Nevertheless, the famous family owned business, Wal-Mart Stores Inc is reviewed in this report in order to get the clear picture of the marketing and organisational structure of the company. A review of Business Model Canvas gives emphasis on the elements which are significant in the company. Wal-Mart Stores Inc is regarded as the world’s best-positioned and healthiest retailer which runs a large number of discount departmental stores and warehouses. It is one of the most successful family businesses in the world founded by one of the family members of the richest family in the world, the Walton Family. Sam Walton is the main founder of the company; however the company is controlled by the whole Walton family, who own about 50% share in the company (Wal-Mart Stores, Inc., 2014a). Wal-Mart was founded in 1962 by Sam Walton and was registered under New York Stock Exchange in 1972. The Walton family owns a total profit of $150 billion from the business of Wal-Mart. The founder has aimed at increasing it business by expanding its boundary to other countries. The founder has initially formulated an unshakable strategy: “The Lowest Prices Anytime, Anywhere” (Wal-Mart Stores, Inc., 2014a). The following are the main vents of the company: Year Event July, 1962 First Wal-Mart stores in Rogers, Ark. 1967 Walton family owned 24 stores in Ark 1972 Stores expanded to 71 1980 276 stores and 21,000 employees 1992 1928 stores and clubs employing 371000 associates 1994 Wal-Mart entered Canada 1996 Wal-Mart entered China 1999 Wal-Mart entered UK by acquiring ASDA. 2000 Wal-Mart entered Japan 2009 Wal-Mart entered Chile 2010 Fist store in India as Bharti Wal-Mart (Wal-Mart Stores, Inc., 2014a) The table above underlines the expansion of the company since its foundation in 1962. It is observed that the company has expanded rapidly by entering new market and targeting various sections of people belonging to various communities around the world. One thing is evident from the table is that Walton family has achieved success in quite few a year’s time. Starting from the days of entrepreneurship business to the world’ largest retail chain, the company has encountered a number of challenges and the Walton family has overcome by employing unique strategies. Key Elements of Business Model Canvas of Wal-Mart The key elements of business model canvas are represented in a visual chart which describes the value proposition, customers, infrastructure, and finance of a firm. The description of these elements in this consultant report will help to understand the activities of the firm and its financial condition. The 9 kept elements that are relevant for the family owned business of Wal-Mart are described below: Customer Segment: In order to create an effective business model, the target customers are to be identified by the company in the first place. The customers can be divided into various segments based on their demands and requirements. Wal-Mart targets a diversified customer segment which consists of customers with varied needs and characteristics. It aims at meeting the needs of low income group also since the founder had started the company with an unshakable strategy “The Lowest Prices Anytime, Anywhere” (Wal-Mart Stores, Inc., 2014a). Wal-Mart has identified that the average range of household income is from $30,000 to $60,000. Thus, it aims at hammering this section of fashion conscious customers with low priced stocks which consists of undergarments and tee-shirts as well as other essential requirements of the households. Thus, Wal-Mart targets the lower income earners along with the higher income group (Bickle, 2013). The company has acknowledged the fact that low income group of the economy has struggled a lot due the rise in food prices. They are even reluctant to do holiday shopping since they are left with negligible savings after meeting the basic requirements of the whole month. Wal-Mart has catered the need of these customers by providing them good quality food products at reasonable rate which has enabled then to save some money at the end of the month (Kollewe, 2012). The shoppers of Wal-Mart are interested with the value and quality of the products and do not think about brands. For this particular segment of customers the Wal-Mart stores arrange for a number of discounts which helps them to choose the right products at affordable and reasonable rates. The company also targets the sophisticated segment of the society. The particular segment of customer seeks for the best brand and do not think about the cost of the product. For them brand reveals their status. Value proposition: It seeks to solve the problems encountered by the customers and satisfy their needs in order to retain them. The value proposition reveals the combination of certain important elements such as benefits, features and offers. This value proposition can form a part of competitive advantage of a company since it distinguishes itself from others. Wal-Mart aims at selling its fresh fruits and vegetables at 10% discount to its customers. The company has also helped the poorer section of the society for providing the product at a much lower price. For instance, Wal-Mart has identified that greater part of United States (US) does not have the purchasing power to buy expensive products and thus they stick to the local retail shops. In order to attract these customers the company has started Supplemental Nutrition Assistance Program (SNAP). The benefits of the programs are such that a family of four is given a discount of $36 a month on purchase of any product. The benefits are amended as per the Recovery Act 2009. It was identified that because of this programs about 48 million of Americans were benefitted and about 80% of the Americans come to Wal-Mart for enjoying the shopping experience and get their necessary products at reduced price (Heller, 2014). The shoppers of Wal-Mart are generally affected by the fluctuations in gas price and small increase in tax. It has been noticed that the Americans feels that an addition of $ 20 is a burden to their daily expenditure and thus tries to avoid unnecessary payments for the products (WordPress, 2013). Thus, they look for lower priced products for their daily use. The budgets of these residents are limited despite the recovering of the economy (Statistic Brain, 2014). Wal-Mart is the only company who has been affected by the reduction in benefits of SNAP. About $4 billion SNAP benefits were volatilised it accounted for the money which was once spent in building the stores of Wal-Mart. However, the benefits gave new hope for the customers to get products at a much reduced price (WordPress, 2013; Garofalo, 2012). Channels: Wal-Mart has relentlessly performed well in its business and the success factors are its well established supply chain and logistic system. The company has concentrated in improving its operations by lowering the cost and enhancing the service quality to the customers. However, the main driving factor for the company is the costs pertaining to supply chain and how the company manages it efficiently. Many experts have referred Wal-Mart as the supply chain driven company which has self owned stores all over the world. The company follows a leading philosophy of creating an excellent distribution system, logistics, technology and transportation. Technological development is very important for the company since advanced technology is needed for development of the processes of the company (Samuel, 2011; Wal-Mart Stores, Inc., 2014b). In 2008, the company had introduced services like Supply Risk Monitoring (SRM). It is an important foundation for the supplier community of Wal-Mart. Wal-Mart created an agreement with Strategic Forecasting, Inc. (Stratfor) for assessing the security risk for the countries in which it is operating forming the part of global supply chain. Stratfor is regarded as the private intelligence company which provides services it customers pertaining to identifying risks in the supply chain infrastructure within a country. The risk is identified within the supply chain of a company by employing unique analytical methodologies. The countries are assessed based on the types of risk it is encountering such as insurrection, terrorism, political, crime, environment problems and natural disasters. The assessment also includes various factors pertaining to supply chain infrastructure. The assessment of Stratfor will assist Wal-Mart in producing quantifiable measures for mitigating the actual risk for safe guarding the supply chain of the country. The evaluation of the risk also determines right measures for supply chain security. It gives warning pertaining to the emerging threats and prevents disruption during the delivery of goods to the major markets worldwide (Troy, 2013). Customer Relationship: The greeting is the main method used by Wal-Mart for showing respect and gratitude to their customers that they have visited its stores. A message of appreciation is given through the greetings which highlights how the company values its customers. The greetings at the front door assisting the customer with shopping cart and biding a good bye with “Thank You” gives an excellent shopping experience to the customers. It is observed that in every Wal-Mart stores senior citizens, dressed in blue vest, expresses warm greeting to every guest who enter or exit the stores. The relationship marketing of Wal-Mart has 4 key components: Marketing has to be personalized. Personalization can be created through sending mails and phone calls. The smile at the store door and a hand shake add up to the personalisation process of Wal-Mart (Campbell, 2009). The relationship marketing should be targeted towards a cluster of people. It invests money for maintaining valuable relationship with the existing and new customers. Wal-Mart establishes strong long term relationships with these customers and converts them into loyal shoppers. These loyal customers add value to the company and in return Wal-Mart receives higher return (Ahlstrom and Bruton, 2009). Relationship marketing has to be reasonable and meaningful. The message of the company has to connect with the customers emotionally so as to establish an everlasting relationship. If the greeters at Wal-Mart do not say Hello to its customers by looking directly in their eyes the greeting has no impact in long run (Adler, 2010). Relationship marketing has to be interactive. It has been observed that the employees at Wal-Mart stores know the name of the frequent shoppers. It reflects that how much the company values their customers and comforts them with services and special offers that enable them to buy products at a reduced price. It is very important to make relationship marketing very interactive since feedback is vital for ensuring improvement in the process (Adler, 2010). Financial Review The financial review of the company is based on the current strategies undertaken by the company. The financial review identifies the financial condition of Wal-Mart and it helps to understand whether the company is in a stable position or not. The table below highlights the key elements of the income statement of Wal-Mart: Figure 1: Income statement of Wal-Mart 2011-2013 (Source: Wal-Mart Stores, Inc., 2014c) From the above figure it is evident that the company has concentrated in increasing the sales of the company by employing different strategies like targeting customers with different price options. The cost of sales has increased but it has balanced the total revenue generated by the company. The debt of Wal-Mart has reduced in 2013 from 2012 which reflected the fact that it has lowered the borrowing. This element identifies the fact that the company is stable enough to be invested in since it is earning increased revenue and the net income is also increasing. Figure 2: Balance Sheet of Wal-Mart 2012-2013 (Source: Wal-Mart Stores, Inc., 2014c) From the above table it is evident that the company has concentrated in increasing its current assets by focusing on cash and cash equivalents. However, the inventories of the company are observed to have increased over the years from 2012 and 2013 but it has not affected the working capital since there have been constant sales throughout the period. Thus, it can be inferred that the company has not only increased its sales but also concentrated in maintaining the balance between the working capital and operation so that the customers do not have to encounter stock out. It is observed that the company has increased borrowing and payables it signals for increased liabilities but Wal-Mart has confidently maintained an asset base which can cope up with the liabilities. The total equity has increased over the period from 2012 to 2013 which indicates the fact there has been increased number of investors which are attracted by the escalating profit margin of the company. Therefore, it can be inferred that Wal-Mart had performed well during the period and has remained profitable for the year. Figure 3: Profitability Ratio (Source: Morningstar, Inc., 2014) From the above table it is evident that the profitability condition of Wal-Mart increased for few years and then decrease. This results from fluctuation in amount of sales over the years from 2005 to 2014. The profitability condition of the condition is not stable during the period and this signifies that Wal-Mart should work on its strategies in order to support the revenues and expense. Figure 4: Future payment (Source: Wal-Mart Stores, Inc., 2014c) The table given above portrays the future cash payments of the company. The payments are observed to decrease from 2014 to 2018 which reflects the fact that the company cut down its borrowings to support the financial base. Organizational Structure and Role Figure 5: Organisational chart of Wal-Mart (Source: Wal-Mart Stores, Inc., 2014c) The figure given above elaborates the organisational structure of the company. There are three levels in the organisation chart, namely, in-store hourly workers, in-store managers and above-store managers. The in-store hourly workers are responsible for communicating with the customers at stores and thus they represent the company culture as a whole. The in-store looks after the operation of the stores and helps the in-store hourly workers to present their work efficiently. Lastly, the above-store mangers comprise the management of the company. They are the main decision makers of the company and they are responsible for formulating strategies that will help the company in establishing a strong system. Marketing Review In contemporary world, competition is key driving stone for all the organisations worldwide. There is tough combat between the brands and thus the consumers have to choose among a numerous brands. Therefore, it becomes difficult for an organisation to satisfy the exact need of the consumers since there are so many organisations in the market. Wal-Mart has provided its customers the daily use products at a lower price. The company purchases raw materials from the suppliers at a lower price which allows Wal-Mart to keep lower cost of production. The brand offers its customers with quality products along with right quantity. Conclusion From the above discussions, it can be concluded that Wal-Mart is a success family business headed by Sam Walton and his family. The whole family has contributed positively towards the success of the organisation by supporting its operation, finance and production process. The company is observed to be a profitable one for the inventors since it has concentrated in generating increased profit over the years. Recommendations Family business is observed all over the world which has contributed to the economy to a great extent. Wal-Mart sets an example for a successful family business and Walton family is regarded as one of the richest family in the world. Thus, it can be recommended that family business should focus on the strategies greatly since they are the main drivers of the business. References list Adler, M., 2010. A study of marketing and online marketing tools which improve online success. Munich: GRIN Verlag. Ahlstrom, D. and Bruton, G. D., 2009. International management: strategy and culture in the emerging world. Connecticut: Cengage Learning. Bickle, M., 2013. Best Buy, Target And Walmart Shoppers Demonstrate Three Common Attributes This Holiday Season. [online] Available at: < http://www.forbes.com/sites/prospernow/2013/11/21/best-buy-target-and-walmart-shoppers-demonstrate-three-common-attributes-this-holiday-season/ > [Accessed 1 May 2014]. Campbell, D., 2009. International joint ventures. AH Alphen AanDen Rijn: Kluwer Law International. Garofalo, P., 2012. Walmart Heirs Have As Much Wealth As Bottom 40 Percent Of Americans Combined. [online] Available: < http://thinkprogress.org/economy/2012/07/17/534591/walmart-heirs-wealth-combined/ > [Accessed 1 May 2014]. Heller, L., 2014. Walmart Just Revealed How Poor U.S. Shoppers Are. [online] Available at: < http://www.forbes.com/sites/lauraheller/2014/03/28/walmart-just-revealed-how-poor-u-s-shoppers-are/ > [Accessed 1 May 2014]. Kollewe, J., 2012. Famous Family Businesses - Who Owns What?. [online] Available: < http://money.aol.co.uk/2012/03/02/famous-family-businesses-who-owns-what/ > [Accessed 1 May 2014]. Morningstar, Inc., 2014. Wal-Mart Stores Inc- Key Ratios.  [online] Available at: < http://financials.morningstar.com/ratios/r.html?t=WMT®ion=usa&culture=en-US&ownerCountry=USA > [Accessed 1 May 2014]. Samuel, S., 2011. Walmart US: Developing A Path Towards Multi-Channel Retailing. [online] Available at: < http://www.igd.com/our-expertise/Retail/retail-outlook/4615/Walmart-US-developing-a-path-towards-brmulti-channel-retailing/ > [Accessed 1 May 2014]. 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