Retail Industry, Health Wal-Mart, and National Economic Trends: Wal-Mart - Case Study Example

Wal-Mart Wal-Mart's humble beginnings started out in the 1940's as a variety store franchise In Bentonville, Arkansas. Wal-Mart's founder, Sam Walton Ben Franklin stores were a chain of variety stores owned by Butler Brothers, a regional retailer. Among, included in the Butler Brothers franchises included variety stores such as the Ben Franklins and a chain of department stores known as the Federated Stores. (Wal-Mart) On October 31, 1969 Wal-Mart was established as a corporation under the name Wal-Mart Stores, Inc. Very soon after in 1970, this was followed by the opening of Wal-Mart's business headquarters in Bentonville, Arkansas and the opening Wal-Mart's very first distribution center. (Wal-Mart) Currently, Wal-Mart operates worldwide through the Wal-Mart Stores, Sam's Club franchises, and International. Wal-Mart offers everything starting from necessities such as food, clothing, health, beauty and household items, cleaning products, electronics and others. Wal-Mart currently operates almost 4,000 stores in the U.S., and more than 2,700 stores outside the United States. Wal-Mart's thrust has always been to offer the widest variety of items available at very low prices. Financial Health Wal-Mart trades under the stock symbol WMT at the New York Stock Exchange. As of 05-17-2007 04:32 PM CT, Wal-Mart stocks are priced at $47.11. (Morning Star) Wal-Mart's current P/E or Price Earnings ratio is at 17.1. Analysts at Forbes are expecting a slight dip in earnings as the year ends. (Forbes) Wal-Mart has been an attractive target for lawsuits for so long. The company's policy about this has been to admit their fault and settle the claim, otherwise take the matter to court. This practice of Wal-Mart's has proven effective in keeping the number of lawsuits piling at bay. (Willing) The company has been growing at a remarkable pace. Wal-Mart is not content with its present stature to the effect of building and opening hundreds of new stores each year to further boost its supremacy of the United States retail industry. Wal-Mart is looking to further expansion efforts in the future. Industry experts are concerned however, at the rate that Wal-Mart is expanding. At the rate that it is expanding, the older stores are not getting much attention as the newer ones. Patrons who seek are seeking a change and a more modern feel would flock to the nearest "new" competitor. Retail Industry Health The recent years have seen ups and downs in Wal-Mart's performance. These fluctuations are caused my many factors such as world oil prices, globalization, and others. Similar companies such as Target and Costco are also performing well although Wal-Mart remains dominant in this category. National Economic Trends The United States stock market is currently a bear market and said to be on its third leg. (The Market Oracle) When interest rates are on the rise, stock markets are expected to crash. When inflation rate is high, stock prices may decrease, in like manner, stock prices may become overpriced if inflation rate falls. World oil prices are another important factor in determining the prices of stock and the performance of a nation's economy. The skyrocketing of the prices of oil in the world market would cause prices of stocks all around the globe to plummet. The reason for this is almost all industries are dependent on oil for their operations. The United States is also very concerned about the trade deficit with China. China is fast becoming a world leader with the onset of globalization. In terms of prices, most of China's commodities and the labor market offer very competitive prices as compared to the prices of other countries. The past decade has seen the entry of more and more products and services from China. More industries are shifting or outsourcing labor services to China because of the cost-efficiency. The United States feels that the fact that China refuses to raise the value of its currency gives China an unfair advantage when it comes to trade. With more buying power in exchange for China's Yuan, more countries are attracted to doing trade with China. The U.S. dollar has long been the hedge of most world economies against inflation. With the sleeping giant awake, a big change in the world markets is expected. With China's edge as a powerful force in world trade, there is now the fear that if the Chinese currency would depreciate, the Chinese would easily switch to euros or other currencies for hedging. This is indeed a big threat to the once formidable United States dollar. This would create a ripple effect around the globe and may cause chaotic economic conditions. (Fedynsky) International Trends With the spread of globalization, more and more industry players from foreign countries are bound to come in and possibly dominate the local United States market. The United States economy is particularly concerned about the threat of China. One thing Wal-Mart can do to prevent the overshadowing of China is to continue to carry locally produced items that are of high-quality but are offered at affordable prices instead of going for lower end products from China and passing them off as of better quality. Recommendation I would highly recommend investing in Wal-Mart stocks. Wal-Mart is a formidable force in the retail industry. As such, the company has the influence to command significant changes in almost every aspect of business that would affect market forces. The company's highly acclaimed stature worldwide is one of the guarantees that future investors can truly bank on. Wal-Mart has been touted as the prime example for growth stocks for some time. Having Wal-Mart stocks in a diversified portfolio will be one of the wisest moves an investor can make. Wal-Mart is one of the companies that operate on a very large scale. Investing in holding companies of gigantic proportions with reasonably priced stock offerings is always a wise choice. Wal-Mart stocks offer the investor an opportunity to earn at good price. This feature makes Wal-Mart stocks an easy favorite among stock investors. Even as an investment option, Wal-Mart stays true to its promise of offering the best value for money. As for other alternative options, taking Wal-Mart's lead, I would also recommend investing in McDonald's and Mattel stocks. Works Cited Fedynsky, Peter. April 13,2006. No Easy Solution to US Trade Imbalance with China. May 17, 2007. http://www.voanews.com/english/archive/2006-04/2006-04-13-voa8.cfm Forbes. 17 May 2007. Wal-Mart Stores, Incorporated (NYSE: WMT) | Ratios and Returns. 17 May 2007. http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsptkr=WMT. Wal-Mart. 1 April 2007. The Wal-Mart Timeline. 17 May 2007. Market Oracle. 5 February 2007. US Recession in 2007 - Third Leg of the Bear Market likely. 17 May 2007. http://www.marketoracle.co.uk/Article307.html Morning Star. 17 May 2007. Wal-Mart Stores WMT 17 May 2007. http://quote.morningstar.com/Quote/Quote.aspxticker=WMT Willing, Richard. 13 August, 2001. Lawsuits a volume business at Wal-Mart. 17 May, 2007. http://www.usatoday.com/news/nation/2001/08/14/walmart-usat.htm Read More