Economic Indicators Wal-Mart

Economic Indicators Wal-Mart

Coffinberry, Crockett, Curtis, Mazotas, McGee

University of Phoenix

ECO 360

Janet Hunter

June 22, 2004

Wal-Mart has become the world's number one retailer. Diversification into grocery (Wal-Mart Supercenters and Neighborhood Markets), international operations and membership warehouse clubs (SAM'S Clubs), has created greater opportunities for growth. But unlike some corporations, whose financial growth does not translate into more jobs, Wal-Mart's phenomenal growth has been an engine for making jobs. Wal-Mart has a history of having become a strong investment for Shareholders. The Company made its initial public offering in October of 1970, when selling 200,000 shares for $16.50 per share. If an investor had purchased 100 shares in the initial offering, those shares would have been worth more than $11 million as of January 31, 2004 and the number of shares owned by that investor would have grown to 204,800 thanks to 11 stock splits. From the beginning, Wal-Mart has created tremendous Shareholder value. The Company raised $3.3 million in its initial public-equity offering. As of January 31, 2004, the Company had grown to a market capitalization of nearly $240 billion.

As the largest company in the world, they are held to a very high standard of behavior. The financial performance is an important measure by which they are judged, but it is no longer the only measure. The Company is judged by its accomplishments. Today Wal-Mart is increasingly defined by its actions as an employer, a corporate citizen, and business partner. In addition to Wal-Mart being a great investment, it provides jobs to consumers and is extremely communicative with shoppers.

"We are all working together; that's the secret. And we will lower the cost of living for everyone, not just in America, but we'll give the world an opportunity to see what it is like to save and have a better lifestyle, a better life for all. We're proud of what we've accomplished; and we have just begun." - Sam Walton (1918 - 1992)

Mr. Walton's dream was to give people high value, low prices, and a warm welcome. This dream came true in 1962 with the opening of the first Wal-Mart. In 1987, a turning point came for Wal-Mart, when it opened its first superstore, called Hypermarket USA, modeled on the hypermarkets of Europe. At that time, the average clothing or grocery store in America had 15,000 - 22,000 square feet of space. By contrast, the hypermarkets, now called super centers have 150,000 - 200,000 square feet. The super center was based on the idea of one-stop shopping. In the same store, one could buy groceries, merchandise, and appliances, fast food, and photo development. Wal-Mart took advantage of an advanced inventory system; its bulk purchase of goods, which led to price discounts and a ferocious anti-labor policy keeping wages very low. Today, Wal-Mart Stores, Inc, employs more than 1.2 million associates worldwide. The company has more than 3,000 stores and offices across the United States and more than 1,000 stores internationally. The first thing to note about the U. S. economy is that it is a market economy. In a market economy, individuals are encourage to follow their own self-interest, while market forces of supply and demand are relied on to coordinate those individual pursuits. Businesses, guided by prices in the market, produce goods and services that they believe people want and that will earn a profit for the business. Prices in the market guide businesses in deciding what to produce. Distribution of goods is to each individual according to his or her ability, effort, and property. Reliance on market forces doesn't mean that political, social, and historical forces play no role in coordinating economic decisions. These other forces do influence how the market works. For example, for a market to exist government must allocate and defend private property rights. The concept of private ownership must exist and be accepted by individuals in society.

Inflation Rate -

As stated prior, the forecast for the inflation rate is that it will continue to steadily increase. This will continue to challenge Wal-Mart to compete in its discount market. To combat this challenge there are a few strategies that Wal-Mart can implement. The first is to continuously search for the best quality inventory for the best price. If Wal-Mart continues to carry quality merchandise, the consumer will be willing to pay a little more, if need be. The next strategy is to research and implement more efficient ways to keep overhead costs to a minimum. If Wal-Mart is able to maintain or decrease their overhead costs that will help to increase their bottom line profitability.

Personal Savings Rate -

In the first quarter of 2004, personal saving as a percentage of disposable personal income increased to 1.9 percent. This is an indication that consumers are embracing the idea of purchasing quality merchandise at a reduced rate to help their personal savings.

Poverty -

Poverty, in theory, is something that will always plague people of the United States and its economy. Because Wal-Mart operates in a discount store market, a large portion of its customers can be considered low-income or poverty level. It also employs many low-income people. The main way that Wal-Mart can help the low-income and poverty level individuals is to continue to employ those very types of people. It can continue to expand and grow its business, which adds available jobs into the job market. This combats the poverty level and helps to lower the unemployment rate.

Personal Savings Rate

In the first quarter of 2004, personal saving as a percentage of disposable personal increased to 1.9 percent. This is an indication that consumers are embracing the idea of purchasing quality merchandise at a reduced price to help their personal savings.

Quarterly Financial Report - Retail Trade

With Wal-Mart becoming an international company it has greatly impacted the organization. Today, customers at more than 1,300 units in nine countries prove that Wal-Mart's Every Day Low Price promise is a message clearly understood in any language. The division currently operates stores in the following countries: Argentina, Brazil, Canada, China Germany, Japan, Korea, Mexico, Puerto Rico,