The Role of Technology in International Business
A Case Study of Walmart
Abstract:
Globalization has helped businesses in their global expansion and has given these companies economies of scale and cost reduction opportunities. It has also supported companies in recruiting the best and most affordable talent, innovation, and improvement of quality. For the management of this risk and achieving the required level of coordination among the wide range of operations, Information technology has played a pivotal role. This research will follow to yield information on the adaptation of the Information technology in international business of Wal-Mart Stores Inc and how it changed its operations. Wal-Mart is one of the largest companies of the world regarding revenue as per the Fortune List of 500 companies. The maintenance of the top leadership position means that the company needs to have innovative ways of keeping its stores ahead of the others. Technology is one of the ways to maintain this competitive advantage in the international market. This study shows how technology has been used by Wal-Mart for this purpose.
Introduction:
Thanks to Globalization, over the last fifty years, companies have gained a considerable contribution from the international markets by working at multinational organizations. These companies’ contributions in the revenue from the international business is evident from this fact; the share of the US international profits rose from 5% to 25% in 2000 from the 1960s (Whitaker, Ekman, & Thompson, 2017). This dramatic increase has been more prominent in the past ten years. The trend is expected to grow, and thanks to globalization, cost reduction, and the expansion would yield more profits. Globalization has aided the companies in global expansion and has provided these companies with economies of scale and cost reduction opportunities. It has also helped companies in recruiting of best and affordable talent, innovation, and improvement of quality.
However, these opportunities are accompanied by risks as well. A higher level of complexity, unfamiliarity, variability, and uncertainty is evident in these companies. Companies for entry into foreign markets need to face location differences and local adoption costs while facing difficulties in the transfer of products and raw materials from one place to another creating more costs and managerial complexities. The maintenance of the flow of products, information, and administration of the firm as a global network with all its subsidiaries pose challenges to the Executives. For the management of this risk and achieving the required level of coordination among the wide range of operations, Information technology has played a vital role. Even with all the recognition given to the Information technology for aiding and enabling the globalization of operations for companies, the study of any specific company and its adaptation of the Information technology and how it changed its future could not be found. It is the reason this research will yield information on the adaptation of the Information technology in international business of Wal-Mart Stores Inc and how it changed its operations.
Research Question:
- Has technology played an important role in the development and expansion of Wal-Mart?
Research Objectives:
- What networking strategies are used in Wal-Mart
- What IT programmed is used in Wal-Mart
- How advantageous have Wal-Mart’s IT strategies been to their success
History of International Business
International business is defined as the business or transactions of trade which occurs beyond borders for the fulfillment of the company, individuals and nations economic objectives. The companies can enter into the international business via several modes (Czinkota, Ronkainen, & Moffett, 2000). It includes using exports, imports, the licensing method, and foreign direct investment method, franchising method, and management contracts. Even though it has become very normal to buy products from international companies through different mediums, it was not always the case. Even though it was less pronounced in earlier times, it was still present in some forms. From the trade routes of the Phoenicians, Mediterranean, Mesopotamians, and Greeks, business beyond broader have been present.
The colonization activities further aided it in growth. The industrial revolution was by far the most important event which stimulated the flow of goods, capital, and information between the countries. The industrial revolution and its inventions further helped in the growth of the international business. Manufacturers have been pushing for seeking gains from the foreign markets, and mass production was realized. Europe and United States were capitalizing on this revolution in full swing. It was the time when Multinational Corporations emerged (Ajami & Goddard, 2006). Until the 1960s, the multinational companies were referred to as the arbitrageurs of capital. It meant that these were the mediums of moving capital from countries with lower returns to the ones which yield higher returns (Jones, 2005; Jones, 1996).
Looking at the pioneers of the international business, one would be ignorant not to consider the great brains of Muris Wilkes and Alan Turing, who were the ones that laid the foundations on which everything present today exists. Henry Ford is credited for inventing the idea of the assembly line which not only reduced costs but also improved output and productivity. The adapters like Henry Ford expanded an already present idea to widen it and convert in mass production. This created changes in urbanization, transport systems, factories.
If we look at the pioneers of the international business, we would find Barbe Nicole, the grand dame of champagne, Henry Ford, Carlos Ghosn, Mavin Bower the owner of McKinsey, Richard Branson the owner of the Virgin Group, Mo Ibrahim, Ratan Tata, Lee Byung-chull, Alfred Nobel Taiichi Ohno and Eiji Toyoda. In the 20th century not very much like the 19th century, the changes which revolutionized the industry were brought by the ones who found better ways of doing this production than by investing tools. Taiichi Ohno put forward the idea of lean manufacturing, which was implemented in Toyota. The world is currently on the edge of another industrial revolution. The revolution in the industry, which is more connected, network-based, in which data and capital flows from the production process to the customer service and then vice versa. Mass customization is the way forward when anyone can have anything from any part of the world (Hollinger, 2015).
There are several factors which have led to the growth in international business. The development of the technology and its expansion is one factor which has aided in the growth of the international business. From the beginning of the telegraph in 1837 to telephone at 1877 to airplane development in 1903 and wireless in 1895 and television development in 1926 and the invention of the fueled rocket in the next year and coaxial cable in next three years and finally the disruptive technology of computer in 1946 led to the growth in the international business. It has helped from electronic communication and air transportation to digital information processing. All the innovative technological advancement has led the international business to grow without limitations. The opportunities provided to the companies with the help of the liberty offered by technology are uncountable (Katsioloudes & Hadjidakis, 2007).
Other than this, liberalization of the borders is another factor which has aided in the international business. The support shown by the government by easing the barriers of doing business is another factor in this growth. The NAFTA, European Union, ASEAN, and other economic blocs have the similar of reducing restrictions and increasing cooperation in trade and cross-border movement. Furthermore, the development of the supporting operations like the Mailing, banking institutions helps in the facilitation of the international business.
History of Information Technology
The history of Information technology is very long and tiring. It took around half a century to arrive at the present state. It is important to find the key events which shaped the history of information technology and laid the foundation for what currently exists. First, the industry was born when the giant calculators were developed who could manipulate and process numbers digitally and was used to digitize other transnational activities of trade. The use of calculators in airline reservations started from this foundation. Until the 1980s, the technology was revolving around the relationship of the computer and person. The introduction of the PC did not change this relationship dependence. PC unleashed several opportunities for productivity applications and contributed to the enterprise data growth and digitization of the home-based and leisure activities. The main leap of technology can be contributed to the time when these computers were connected to the each other and LAN was introduced as Ethernet expanding to WANs.
The development of the computer networks provided the breakthrough which initiated the process of digitization of the entire process exponentially increasing the amount of data stored, created and consumed. This networking of computers led to getting value out of this process through the use of data mining. It unleashed the new horizon of competition by making horizontal players, emphasizing on the information technology component. The Microsoft for operating systems, Cisco for networking, Oracle for databases, Intel for semiconductors, and EMC for storage and Dell for PCs focused on best of the breed IT components. The next stage of the revolution came when the World Wide Web was introduced for the leap in the amount of data created and computers connected in a network. It led to the development of applications which were able to digitize any activity of our lives. It also gave access to the sharing of the information to anyone on the Internet. The internet became the tool which connected a computer network to all parts of the globe, connecting millions of the computers on the network. It led to the emergence of the new players in the industry which made the data analysis as being the core competitive strength of the business. The information technology is now on the verge of taking another leap into cloud computing, which would change the way data was gathered, stored and distributed (Press, 2013).
The use of technology in business has been sudden from the historical perspective. Business traditionally took place slowly, and the lack of tools allowed the business transactions to take days and even months in the case of international transactions. All organizations in the various sectors of the economy from government to no profit, to industries are now fundamentally dependent on the information technology and systems. The industries like media, telecommunications, entertainment, financial services, and gaming in which the products are digitized, the existence is solely dependent on information technology and its effective implementation. The use of technology now becomes an expected way of doing business as some business solely exists on the internet only. The social media and the mobile devices have further propelled the demand for speedy access to information. New products and services are constantly emerging because of the increasing pervasiveness of connected smart devices and all kinds of things. New business models and operational efficiencies are emerging as well (Ward & Peppard, 2016).
No industry is now safe from the possibility of disruption. Many companies identified in the Next Billion Dollar startup list have problems in tackling of food delivery, shopping, auto sales, lending and are mostly stationed in the Silicon Valley, New York, Germany, and London. These startups are surely going to be disrupting some industries resulting in the creation of new markets. E-Commerce has surely shown us the death of Brick and mortar stores. Companies like Beepi, Raise and Thumbtack are offering new innovative takes on the e-commerce, introducing modernized concepts in place of the traditional shopping experience. Teespring is another company which is providing a social platform to the sellers to advertise their campaign and sells what apparels they want directly to their buyers with no upfront costs. It has revolutionized the brick and mortar marketplace. Food delivery is another industry which is witnessing major disruption via technology. Companies like Grub Hub, DoorDash, Reserve, and food replacements companies like Soylent has all-inclusive menus. This industry is sure to revolutionize the way everyone delivered food. Other than this, Fintechs and Banks unbundling is a threat for the Wall Street while the open source origins of mobile operating systems are going to push the bars for software industry (Forbes, 2015).
Literature Review
Positive reviews
With all the anxiety and uncertainty regarding the headlines that are seen today, the world today is a much better place. The emerging markets have been successful in the eradication of the billions of people from below the poverty line. The developed world is now enjoying better medicines, mobility, and connectivity as compared to the other world which could not have been imaginable 20 years before (Reeves & Harnoss, 2017).
Information technology has enabled the companies to not only generate revenues from foreign operations; it has put forward new areas of value chain coordination, value chain configuration, and local responsiveness. The information systems have helped in the facilitation of the knowledge flow via knowledge management systems. The use of the Information systems has aided multinational companies in raising the speed, frequency and volume of the sorting, creation, extracting and exchanging of the data throughout the firm and its subsidiaries around the world. The value chain configuration includes the way the companies are building their capacity for performing the activities of value chain globally and spreading out these activities across the geographic areas. The firm can take help from the information technology to centralize the administrative control, coordination, and control of resources, and measurement of performance.
Another study analyzing the relationship of international trade and technological innovation has found the relation as positive in the case of the countries with technological leaders (Márquez-Ramos & Martínez-Zarzoso, 2010). The transformative technology has created opportunities for the workforce to move beyond the confinement of their offices. The digitally connected world is now better performing in shops, cafes, at home and on vacations (Joyce, Fisher, Guszcza, & Hogan, 2018).
Negative reviews
Another major drawback of the use of technology in business is that the digitization is reducing the jobs for people. It has been critiqued by many analysts that the impressive, innovative advances in the technology are responsible for the sluggish employment rate growth in the last 15 years. With the rising adaptation of new technology in manufacturing, retail and clerical work, the financial services, law, medicine, and education is showing how it is consuming the jobs (Rotman, 2013).
Social media is one of the mediums provided by the information technology which has given the opportunity of running an online business and reaching the vastly spread customers and target market in no time and building relationships with them. Specifically targeted ad campaigns are run on social media as based on the segmented audience. All this can have a positive effect on the business. However, it can be reciprocal as well. For example, it is shown that only one in the five companies has a policy that is followed on the social media activities for marketing. Unplanned marketing activities can be harmful to the business. Furthermore, the Return on Investment for these mediums and platforms is very hard to measure. The employees have now become the brand ambassador of the company on their social media platforms. The social platform has given liberty to the sharing of information which gives little authority and control to the companies on their data. Social media is that one medium which has shown that any mistake made in this medium is not easily rectifiable. Negative customer reviews about the product or company can be very crucial and can threaten the brand image and reputation of the company.
Another important feature which is often disregarded about technology is that it is often free of cost. However, this is in the case. Like for instance, Social media may seem like free, however, it costs time. Time is the most valuable resource for any company, and social media tends to be very time consuming with all the content. Furthermore, this all content has increased the crowdedness of the information is increasing with more irrelevant information.
With the proliferation of the technology enabling the individuals to bypass the limitations of time and space, one would consider it as beneficial for the understanding of the peoples’ cultures around the globe, maintain relationships and communicate more effectively with social adaptation. However, technological advances have caused a distraction in social advances, and people have become increasingly isolated. It is much critiqued as the society has been found to be unaware of the social norms which should accompany these technology advancements. The time is ripe for society to redefine acceptable behaviors regarding digital and virtual interactions (Human Kinetics, 2010).
Technology is found to be a double-edged source which is at the same time while bringing people together from across the globe is isolating them in technology where co-workers are not communicating with each other but are busy on the computers. It organizes information; however, it is useless without the familiarity with the information. The information analysis can only be beneficial if the company business model and the interpretation are meaningful. At the same time when the technology is saving money, it is also increasing the costs of remaining competitive. On one hand, when the technology is enhancing the customer data, it is also raising privacy concerns. It is destroying jobs while speeding things up for the business (Gartenstein, 2018).
Studies have shown how the actual use of the information and communication technologies affects on the market performance in terms of the business to business international marketing activities. The lack of significant associations between the ICT use and the satisfaction of the ICT shows the limitation of ICT in business to business marketing (Moen, Madsen, & Aspelund, 2008). Another area which has seen the limitation of technology is the social exchange relationships. Study has found that business relationships with more use of technology has declined the need of personal meetings however its effect on the need for personal meetings has not been positive (Lindh, Dahlin, & Hadjikhani, 2008).
Articles of International Business and IT
The effect of the technology on the global economic structure and international business is creating affluent transformations in the way nations; companies are organizing production and trading goods, investing capital and developing new processes and products. With the use of sophisticated technology, instant communication is now not a problem for global enterprises. The sectors as diverse as communications and construction are getting revolutionized by the technology advancement. The long-standing positions of the employment and productivity have altered in this course. All this has created interdependence between the nations and its companies (Ekman, Whitaker, & Thompson, 2017; Foss & Andersen, 2005). The dynamics of the innovative technology are showing that the comparative advantage is not going to remain competitive for long (Kim, Park, & Prescott, 2003). Transnational mergers and shared agreements for productions are sought after more because of this reason. Technology has become that one thing which is being harnessed by both developing and developed countries. The assessment of the papers published in this area and its evaluation has shown that four sets of relationships between the technology and entities occur. Firstly, the human level is the main area of change in which the invisible contract of adaptation of the change is present. The example is of manufacturing company and its employees in which the technology adopted by the company has to be adopted by the employees and customers as well. It has been termed as the evolution of the integration between human relations and technology. Organizations which pursue only one objective are more likely to be on the survival mode than the ones who prefer the broader range of issues on technology, organizational and human optimization (Lamba & Malhotra, 2009).
The second interaction level is institutional in which the private enterprises are instruments in the countries in the development and technology usage while the governments are playing a role as well. These companies are tasked for understanding the need of the market and making all necessary technological products for the market. Research has shown that the breadth of the technological applications is expanding and the scale of the time for change is becoming shorter. Governments are playing a central role in the national level of the technological issues. The technology has now become the topic of discussion for the politicians as well, and the impact of the technology is widely known now. Following from this, the international perspective is to maintain the per capita growth and improve the world growth, with the use of the technological advancements (Stever & H.Muroyama, 1988).
The relation of International Business and Information Technology
Business is not adapting to technology because the companies are looking for a better option, this has become more of a survival thing. Companies lagging are no longer the main competitor in the industry. Technological advancements from smart phones to the latest software, to tablets, media applications, and social networking sites, businesses are needed to accommodate it to communicate around the world with the employees, and customers. It is also needed to evaluate the performance, promote their products, and increase their sales. It all factors play an important role in the international business. Information technology has largely caused the sharing of information through the PDAs, laptops, smart phones and other devices in the workplace. It has allowed companies to instantly share the new product updates to release new modifications and communicate with the colleagues, shareholders, investors, competitors, and customers. The speed of sharing has become an important aspect as well.
Now companies are required to maintain a minimal level of online presence at least for remaining competitive in the international business community. Social media sites like Twitter, Facebook, LinkedIn and other forums are allowing companies to stay ahead by remaining updated on their competitors, information sharing with customer’s promotional campaigns and response and feedback from the consumers. It shows how information technology helps in providing reliable networking, advertising, marketing, and research and development opportunities for international business activities.
International business also poses more competition along with the opportunities that it provides. The speed of communication as provided by technology helps the companies to stay ahead of their competitors. The companies also have the opportunity of looking for reduced labor costs and the better working environment regarding the economic and security conditions of the countries. Remote location working has also been made possible only because of this reason as the companies can now work from remote areas of Tokyo to work for New York firm.
List of 10 huge International Businesses in New York (by the highest Market Value)
| Company | Market Value (Billions) |
| Berkershire Hathaway | $ 491.90 |
| JP Morgan Chase | $ 387.70 |
| Bank of America | $ 313.50 |
| Visa | $ 295.10 |
| Intel | $ 254.80 |
| Wal-Mart | $ 246.20 |
| Cisco Systems | $ 237.20 |
| Home Depot | $ 219.40 |
| Pfizer | $ 207.70 |
| MasterCard | $ 201.90 |
(Statista, 2018)
Walmart (Case study of a company)
Introduction: Walmart
The analysis of the role of Information technology in international business is well discussed in this report by this stage. The following from this point, the aim is to evaluate the discussion regarding the case study of a multinational company. Wal-Mart Company has been selected to evaluate the role of information technology in the international business perspective.
What started as a small discount store with the idea of selling more for less grew into the largest retailer of the world in the last fifty years. Walmart on a weekly basis serves 265 million customers and has millions of visitors visit its 11,200 stores in the 27 countries under 55 banners and via ten websites of e-commerce. The company has generated over $500.3 billion in revenue in 2018 while it employed over 2.2 million of the associates globally. The company has been a market leader in the field of corporate philanthropy, sustainability, and employment opportunity. The company is committed to providing value to its customers and its communities around the globe (Walmart, 2018).
History (About Walmart)
Since 1962, when the first store of the Wal-Mart was opened in Arkansas, the company has shown its commitment to changing the lives of their customers. The business has been the result of the leadership, and vision of Same Walton along with all the generations which have been associated with the communities and customers for reducing their expenses and living a better life. The company was started on the foundation of the low pricing anytime and anywhere. This low pricing strategy has led the company to remain competitive. By 1967 the company had owned 24 stores, and it has about $12.7 million in sales. By 1969, the company was incorporated as Wal-Mart Inc. By 1970 the company was led to the national level, and its stock traded at $16.50 per share for the first time. The company established the Wal-Mart Foundation in 1979 and the Walton Family Foundation in 1980 while it reaches $1 billion in sales that were a record at that time. In 1983, the company replaced its cash registers with the point of sale systems which enabled faster and more accurate checkouts. In 1987, the satellite system which was the largest owned by any private company was linked to the company operation via video, voice and data communication. In 1991, the company went global by opening its store in Mexico City by a joint venture with the Mexican Retail Company. The aim was to grow internationally as well. The company founder died in 1992, and then in the next year, it celebrates its $1 billion sales week. The company then expands in Canada by purchasing 122 stores of Woolco, and in China, it opened its first store as well. In 1997, the company had its $100 billion in sales. The company acquires Asda to enter in the UK. And in 2005 it enters the list of Fortune 500 companies. The company from here on shows its commitment to sustainability and creates goals of zero waste and use only renewable energy for its products. In 2007, the company established its Site to Store service via which the consumers can buy online and have their delivery picked on the stores. The company enters in Chile in 2009 with the acquisition of D&S, and it has its first $400 billion in sales. The year 2010 is marked as the one in which the company commits to saving the customers in the retail environment by using technology and associates. The initiative was fueled by people-led and technology empowered strategy. The company celebrates its s 50 years in 2012 and enters in South Africa and India. The company acquired the e-commerce business in China of Yihaodian in 2015. The company develops its culinary and innovation center for the testing of innovative products in 2016. Wal-Mart Pay is also introduced in the same year. Jet.com is also acquired, and Hayneedle is also included in this merger. The company in 2016 allies with the largest e-commerce company of China JD.com covering offline and online retail. In 2017, the company acquired ModCloth, Parcel, Moosejaw, Bonobos, and ShoeBuy.com. The company has launched Store N08 which is an incubator of technology focused on commerce and the transformation of the retail sector (Walmart Inc, 2018).
Technology and Walmart
Wal-Mart is one of the largest companies of the world regarding revenue as it nets on about $485 billion as per the Fortune List of 500 companies. The maintenance of the top leadership position means that the company needs to have innovative ways for keeping its stores ahead of the others. The company in 2016 took giant steps in the mobile payments world by their Wal-Mart Pay application. This application was built to make the transactions more easy and fast. The Wal-Mart pay is one of the latest examples which the company has used for the competitive strength of the retail industry. The company has been transforming its business by making the experience seamless through an online connection, stores and mobile for its 140 customers who are visiting its websites or stores weekly. However, it was not always like this, the company operated without any POS system before 1983. It used cash registers before that. The company used voice, data and video communication through the use of private satellite in 1987.
The application from its inception has been used for about 45% of the payment as followed by the rollout while 88% of the transactions of the company is comparing from its repetitive customers. The company is now looking for other ways as well to leverage its position in the digital technology for empowering its stores, employees and its customers through a seamless shopping experience. The Scan & Go and the Self Serve checkout technology are also not a new thing in the retail segment. Several supermarkets have adopted the technology around the globe. After some initial resistance from the consumers, it has been evident that customer now prefers to make the shopping experience more personalized and fast by checking out themselves. The facility of checking out them was given to scan their items as they are taking them out from the shelves not requiring the check out to be crowded with lines. It is more feasible for the consumers who are more likely to visit the stores in day to day basis and are on the go. The service has previously used a device which was given to the customer while entering in the market that the customer used for the scanning of the items while shopping. However, the company has topped another notch on it and made it more seamless by allowing their customers to use their own Smartphone for this purpose.
Wal-Mart is a traditional brick and mortar store which is known for its competitive selection and prices. The success of the company has emerged from a different type of convincing. The company has a lot of stores The American all live within about 15-minute drives to a Wal-Mart store. The company has created an online business as well apart from this. For competing with the disruption brought by Amazon and its e-commerce business, the company has pushed its limits to cope with the technological advancements. It has long proved that it has broken the mold and it is an innovator. The company has turned to technology for competing with Amazon. Wal-Mart has long converted into a technology company for remaining relevant in the market. Moreover, the company is considered to have leap-frogged ahead of the big e-commerce retailers with its bold vision. The company has expanded from the traditional brick and mortar store by adding online shopping experience, online voice shopping, frictionless checkout, and two-day free shipping and more. The company also has filed for a patent for the technology of the facial recognition, and the technology has also gone beyond the frequent shoppers. The company can use the facial recognition for the determining of the customers feel about their shopping experience. It is handy as the company would be able to recognize what services are making the customers frustrated and they would be able to recognize it even before the complaint is made. The company is moving aggressively to win over the millennia, and for this reason, the company is using advanced technology like facial recognition. Using this technology can help the company convincing the younger generation to be conceived that the company is an innovator. However, at the end of the day, it is all about the customer experience. All the new technology is meaningless if it is not aligned with the needs of the customers (Hyken, 2017).
Another important technology, which the Wal-Mart has recently introduced, is that of Smart Life. The new way of managing the demonstrations and queries for technology related items is assisted through this service. The Smart Life is a large tablet computer which is built on the top of the counter. This technology helps the demonstrator to show any of the products of the store in detail to the customer. This demonstration is super innovative as the consumers can use it and the threat of damaging the demo product is not evident as well.
The dependence of Wal-Mart on technology can be seen from the example of the contaminated romaine lettuce. When the company found that the country is witnessing sick people by eating contaminated romaine lettuce, it gets rid of all its stock. However, it is not the case now. The company does not now need to get rid of all its stock because of some contaminated levees. The company has developed a system for identifying the leafy batches which are contaminated from those which are not. The pilot project was run for two years, and the company announced that it would be using the blockchain technology for the tracking of every bag of spinach and its head of the lettuce. It is the same blockchain technology which is used for the Bitcoin.
The company is expecting its suppliers to input the required detailed information of the food in the blockchain database and then the company would use it for identifying the leaves from each other in case it is required. The database system has been developed by IBM, and after its development, the company, competitors are also thinking of exploring the same area(Corkery & Popper, 2018).
Other than this, the company has also integrated its stores with the online stores. The stores now have a kiosk at the end of aisles to help the customers who could not get what they wanted as the product was out of stock. The kiosks would prove access to the online store where the customer can order that product at that spot (Manu, 2016). Furthermore, the company is also introducing its next-generation kiosks at the meat and cheeses order stations and deli counters to make it more convenient for the customers. The customer would not queue up and wait for their orders. They can make the selection at the kiosk and produce tickets which will show time for collection. The customer can then continue shopping until the time and then pop back to the deli for collecting their order (Miami, 2018).
Financial Comparison: Walmart
The revenue of the company has increased in the last ten years, showing its strong sales and capability of growth. Similarly, the company gross margin has increased as well, showing that it has not indulged in the high cost of production to increase its revenues.
The company earnings per share are lower comparatively, but this is more because of the higher equity floating in the market. The payout ratio of the company has increased, showing that the company has been paying more of its earnings to the investors.
The free cash flow is the measure which shows the true profitability of the company. The Free Cash Flow has increased gradually to a very stable position in ten years, showing the correct direction of the company regarding its strategic choices and effective decision making.
The return on Assets shows how well the company has utilized its assets to earn returns. The Return on Asset peaked during 2011 and 2013 however, it shows that the returns are declining in 2018; it is more because of the high acquisitions made in 2017 and 2018 causing the value of the assets to increase.
The return on the invested capital also shows a similar situation of higher assets from acquired companies causing the lowered value of returns. These assets will be utilized in the coming years, and the coming year’s returns would be better reflected off it.
The investor turnover ratio is used for analyzing if the company turnover of inventory in the sales is taking more time or less time than the old days. The company inventory turnover has increased, showing that the company has reduced its efficiency of converting inventory into sales in the lower period. It can also be reflective of the high investor value which has been acquired from the acquired companies.
Overall, it is evident that the company’s financial position has improved with the use of technology. One cannot say that the financial condition, lowered in the years is attributed to the technology costs as it is not imaginable if the company would have even existed if it was not for its technology like other companies who lagged considering the technological advancement as just another necessity and not as a competitive strength for survival in the retail industry. The maintenance of the market leader position means that the company needs to have innovative ways of keeping its stores ahead of the others. Looking at the financial strengthening of the company, one could say that it has fought successfully with the disruptive technology of e-commerce and would certainly continue to do so.
Conclusion
Globalization has brought many opportunities for businesses around the globe, the risks and challenges accompany it as well. With the evolution of technology, the globalization was fueled to grow, and international business has leaped to the age in which one person would not think twice before ordering a product on Smartphone which is brought from one part of the world and delivered at its doorstep at another part of the world. The Wall-mart effect is the term which is often used for referring to the cost reduction strategies of the company to transfer it’s in the form of everyday low prices to their customers. The company, when threatened by Amazon, moved faster and is now again in the leads with the big giants. The company is leveraging digital technology in several ways. The company is establishing leadership in the online retail segment through aggressive expansion, acquisitions, Shipping Pass and Online Fulfillment Centers. The adaptation of Polaris is one such strategy as well. The company is using technology for the enhancement of the in-store experience as well. It is also using technology to improve its stockroom and store efficiency as well. The company is also developing organizational expertise in the field of digital innovation. The financial condition of the company, its billions in revenues, its expansion plans are reflective of its right strategy and prospects to be positive.
Recommendations
For dealing with e-commerce giants like Amazon, Wal-Mart rightly differentiates itself by doing things out of the box and succeeding through the synergy of online and in-store experience. The company should follow the current plan of aggressive acquisitions and expansion in the emerging markets and should continue introducing innovative solutions for better service of in-store shopping experience for the customers. Analysts have shown that this strategy of Wal-Mart to acquire the local successful e-commerce ventures is a good strategy to battle out Amazon. The acquisition of Flipkart in India, where Amazon has 60% of the e-commerce market would steadily show results and challenge Amazon in the emerging markets as well. Furthermore, the use of technology to better elevate its position would do well to gain a competitive edge in a market where Amazon is the prime leader.
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