The companies that we considered are: Apple Inc, Hewlett Packard, Nokia, and Wal-Mart. Before settling on these five, we had examined dozens but we settled on them after going through them carefully.
Wal-Mart
Wal-Mart is an American multinational corporation that runs discount and warehouse stores. It is the largest public corporation by revenue in the world (Soderquist 26). It is also the largest grocery retailer in US and runs Sam’s club retail warehouse in North America. It operates under 55 different names in the 15 countries it operates. It is listed in Dow Jones industrial average. Its current stock price (9th march) stands at 52.63 dollars (Daily finance). The company’s stock symbol is WMT. The corporation is headquartered in Bentonville, Arkansas in the US. The current CEO of Wal-Mart is Mike Duke. He was appointed on February 1, 2008. Our interest in the company was drawn by reports that it is acquiring a South African retailer, Massmart. According to the projections by McKinsey, Africa will experience high growth in the next 30 years. Africa then will be the next growth frontier and the decision to set foothold in the continent is a good strategic decision.
In the past twenty years, Wal-Mart has grown to be the leading retailer in United States. Wal-Mart has been able to achieve that feat by good customer care, keeping prices low and efficient supply chain management (Soderquist 30). As the company becomes a behemoth in the retail industry, the problem has been how it could maintain its dominance in the market in the face of competition from competitors who are increasingly employing similar tactics that paved way for its dominance. Saturated domestic market and its inability to be profitable globally are some of the strategic factors underlying its problem. Starting the year 1994, its sales rates began to fall from double digits to single digit signaling saturation of domestic market (Soderquist 33). To grow revenue, expand its scope, and sustain its leadership, it started to expand operations to foreign markets. Mexico was its first destination in its global expansion. It later entered Canada, Puerto Rico, Argentina, Brazil, Japan, Korea, China and Germany. Since going global, it has succeeded more in some markets than others incurring huge losses in Germany leading to eventual withdrawal from that market altogether. There are opportunities for growth in México despite the many years Wal-Mart has operated there.
Apple Inc
Apple Inc was previously known as Apple Computer Inc. it is one of the well known companies that is into computer software, PCs and consumer electronics. The company has traditionally been known for producing Macintosh computers. Recently, its trademark brands have been the iPod, iPhone and ipad. The company has been able to come up with novel products with sleek design and catchy advertising making it one of the most admired companies in the US and the world (OGrady 101). By the end of last year, the company had a total of 46,600 employees and around 3000 employees. It is listed in New York stock exchange and its stock price as at 9th march 2011 was 352.40 dollars (Daily finance). The company’s stock symbol is AAPL. Its headquarters is at Apple Campus, Infinite Loop, and Cupertino, California in the US. The current chair and CEO is Steve Jobs is on medical leave and Tim Cook is the acting CEO. Recently, the company launched ipad 2.
Considering that the product is one of its flagship products, it market position can only strengthen. Undeniably, Apple is now the market leader in the Smartphone market. Its strengthening positioning has made Nokia to form partnership with Microsoft Corporation. Therefore, considering factors such as earning per share and the company’s reputation for innovation, apple remains one of the most interesting companies in consumer electronics and pc industry.
Apple Inc was started in 1976 by Steve Wozniak, Steve jobs and Ronald Wayne (OGrady 110). The company first product was entirely hand built by Steve Wozniak. Through daring creativity, the company was able to come up with products that customers wanted but it went into moribund after the board sacked Steve Jobs as CEO. However, after Jobs became the CEO again, the company has rediscovered its winning ways by introducing to the market some really novel products.
William Hewlett and David Packard
Hewlett-Packard, commonly known as HP, is a multinational company with its headquarters in Palo Alto, California. It is an IT company that deals manufacturing computing, software, data storage and others. Major product lines include pcs, imaging products enterprise services and others. In 2007, the company’s revenue hit the 100 billion mark making the first IT Company to have revenues exceed 100 billion (Malone 12). It is a market leader in the world in inkjet and other printers market. It is second in provision of IT services. Over the years, the company has made significant and valuable acquisitions such as Compaq which have bolstered its position (Malone). The company is listed in New York stock exchange and it was trading at 42.05 at 10th march 2011 (Daily finance). The current CEO is leo Apotheker, he was appointed to the position following the resignation of Mark Hurd on august 6 2010.
Bill Hewlett and Dave Packard founded HP in 1939 with a capital investment of only US$ 538 (Malone 15). The company went public in 1957. Some of the corporation’s first successful product was the precision audio oscillator. In the initial years of the company, it was more interested in manufacturing electronic test equipments. This changed in the 1960s after it started to develop semiconductors for its consumption. HP entered computer market in 1966 and its success has been fabulous. The founders of the company developed a unique culture that continues to this day and is known as the HP way. That is part of the reason for the corporation’s success. From the year 2000, the company’s position as an important player in IT has been gaining traction. With its operation in almost every country in the world and especially in the emerging markets, HP will only grow stronger.
Nokia
Nokia is the world largest manufacturer of mobile phones. Its market share is estimated to stand as 30 per cent down from 35 per cent. It produces GSM, CDMA and UMTS devices (Haikio 68). It also offers internet services through its ovi platform. It produces telecommunication equipments through a subsidiary on top of navigation services it offers through Navteq. It has over 120,000 employees worldwide with annual revenues of over 42 billion Euros. The company is headquartered in Keilaniemi, Espoo in Finland. The corporation is listed in New York exchange. On 10th march, it was trading at 8.06 (Daily finance). Its stock symbol is NOK. The CEO is Stehen Elop.
Nokia was founded in 1898 as a company that dealt with rubber works. Nokia acquired a bankrupt company in 1912 that dealt with cables. In 1922, the company became a conglomerate and Nokia corporation in 1967 (Haikio 70). Over the years, the company produced many products ranging from paper products to some of the most complicated electronic equipments. Its electronic department was set up in 1960. In 1990, Nokia decided to abandon consumer electronics in favor of telecommunications (Haikio 72). It has been a key player in mobile phones market and it is credited with introducing smart phones in the market.
Recently, the company has been losing its edge to new players specifically Apple Inc. Although the company was the first to introduce smart phone, apple has repackaged and redesigned smart phones grabbing market leadership in that lucrative smart phone business from Nokia. However, Nokia remains a formidable player with a market share of 30 per cent. To combat the threat from apple and Google, it recently formed a partnership with Microsoft to use the latter OS for its mobile devises. Therefore, as a group, we felt the company is on the right track.
Eric Schmidt, Sergey Brin and Larry Page (left to right)
Google is an American public corporation, whose primary business is investment in internet search, advertising technologies and cloud computing. The company gets its revenues mainly through advertising. Its stock symbol is GOOG. On 12th march 2011, its stock was trading at 576.71 dollars in NYSE (yahoo finance). The headquarters of Google are at 1600 Amphitheatre Parkway, Mountain View, California. Eric Schmidt is the current chief executive.
Google was founded by two engineering students, Larry Page and Sergey Brin, in late 90s. It was offered to the public in 2004. Its mission statement is, "to organize the world's information and make it universally accessible and useful"(Google company). The company runs and operates millions of data servers around the world to handle billions of requests it gets daily. Apart from offering internet search, it now offers email service and social networking tools. It has also developed Google chrome, picasa, and Google Talk. Android, a mobile operating system, is one of its recent products which is highly popular. Notably, the popularity of android as a choice OS for handset makers has made Nokia abandon is mobile phone operating system in favor of windows operating system. YouTube, Orkut and Blogger are sites that are owned by Google.
Its web search engine, Google Search, is the corporation’s most popular service. It has a market share of close to 70% in the US according to ComScore. Despite the products and services the company offers, Google is basically an advertising company. 99 per cent of its revenue comes from advertising. Google has come up with innovative online adverting with mixed results. One of the technologies it uses is called DoubleClick. Another one is Google Analytics. Both allow targeted advertisements and tracking of website use by visitors.
The reason why we examined this company is because we feel that its potential is enormous. The number of internet users is increasing exponentially meaning that in the near future, online advertising will me the main advertising medium. Again, the company has foothold in some of the world biggest and fastest growing economies such as china, India and Brazil. Also, the company has demonstrated a knack for coming up with products and services that add value to their customers Google experience and hence makes them more popular.
Memo
The key to successful investment is diversification as it reduces risk. But making the choice of which companies to invest in on not always easy, there is the usual research and experience in the market that goes in selecting the best stock. Our work was precisely to select two companies with the greatest promise of growth to invest it. In order to do this, we sifted through dozens of companies and finally settled on Wal-Mart and apple Inc.
Our choice of those two companies was not arbitrary. We considered the companies earning per share and dividend yield for the past ten years. We also developed a scenario where we could project the future cash flows, subtracting outstanding long term debts. Another important analysis that we did was the calculation of the company’s intrinsic value and enterprise value. In all this, Wal-Mart and apple come out tops. We also considered the people leading the corporations, the majority owners, and the top news the company has made in the last few years. Particularly, we were interested in the company’s future prospects. We were impressed with apple’s commitment to innovation and Wal-Mart expansion to virgin territories which will be the frontiers of growth in the next few years. Apple Inc has for instance released the second version of its wonder product, Ipad. Wal-Mart on its part is planning to enter the African market. According to management consultants, Mckinsey & Company, by 2030 Africa will have a half a billion people with discretionally income, a figure which is higher than the current figure for china. We felt that Wal-Mart has made a good strategic move that will give it first mover advantage.
Consequently, we decided that the 1 million dollars should be invested in Wal-Mart and apple inc. deciding on the actual figure for the investment was a bit tough but it was decided that $ 600,000 should go to Wal-Mart and the rest to Apple. This decision was informed by the realization that PC and Smartphone industry is very competitive and it’s easy for a company to lose its competitive advantage. On the other hand, Wal-Mart is in an industry where though competitive, the player who is more established continues to thrive. Wal-Mart presented stability and steady growth.
Works cited
Google company. Corporate information. 12 March. 2011. <http://www.google.com/corporate/>
Google Inc. Yahoo Finance. 12 march. 2011 <http://finance.yahoo.com/q?s=GOOG>
WAL MART STORES INC. Daily Finance.10 march.
2011<http://www.dailyfinance.com/quotes/wal-mart-stores-inc/wmt/nys>
Apple Inc. Daily Finance. 10 March. 2011<http://www.dailyfinance.com/quotes/apple-inc/aapl/nas
Hewlett-Packard. Daily Finance. 10 March. 2011<http://www.dailyfinance.com/quotes/hewlett-packard-company/hpq/nys>
Nokia. Daily Finance. 10 March. 2011<http://finance.yahoo.com/q?s=NOK>
Malone, Michael. Bill & Dave: how Hewlett and Packard built the world's greatest company.
New York: Penguin 2007
Haikio, Martti. Nokia: the inside story. New York: Pearson Education 2002.
OGrady, Jason. How Apple Inc. Changed The World. Boston: Jaico Publishing House, 2009
Soderquist, Don. The Wal-Mart way: the inside story of the success of the world's largest company. London: Thomas Nelson Inc, 2005
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