The title for this paper is - Should Wal-Mart diversify its services to increase revenue?Introduction
Wal-Mart is a retail multinational corporation that has employed over 1.3 million workers as of 2012. This MNC operates in no less than 55 countries (Connor 19). Despite, its huge presence on the global platform, this multinational is facing some financial challenges. The main issue that Wal-Mart is facing is an erratic pattern of cash flows. This challenge can be taken as a chance to increase its revenue. In this retail environment, Wal-Mart is a market leader, and despite its record $ 469 billion in revenue in 2012; it has a chance to improve on these revenue levels (Connor 20). The main idea is spreading its retail business to the online platform. The main issue is to enter the e-commerce business platform and take on Amazon.com as a key competitor. After staring as a book seller, Amazon.com has grown into the largest online store in the world based on sales figures.
In order to collect data on online sales, the methodology will involve secondary research. The main source will be journals and online databases. Primarily, the data to be collected will be that of cash flow and revenues. This data will be collected for a period of not less than five years. This will remove any biases and incorrectness that may result from comparisons over a small time period (Celsi, Money and Samuel 204). There will be an attempt to find out which of these companies utilizes their revenues to improve their cash flows. Since they are in different industries, these financial figures will indicate the dynamics in each industry and give an insight on whether Wal-Mart should diversify its retail business.
Findings
The second data set is the cash flow figures. These figures are shown in table 1.0.
Series 1 represents cash flow figures for Wal-Mart while series 3 represents the cash flow figures for Amazon.com. Year 1 to 4 represent 2009 to 2012. The second data set is the revenue figures for Wal-Mart. Over the past five years, these figures have increased substantially. The statistics for revenues are shown in table 1.1.
Amazon.com does not have the revenue figure for 2013 since its 2013/ 2014 financial year is not over as yet. The graph for this data set is as follows;
Graph 1.1: Revenue figures for Wal-Mart and Amazon.com over the past five years
Series 1 represents the revenue figures for Wal-Mart while series 2 represents revenues for Amazon.com. The numbers 1 to 4 represent the years 2009 to 2012.
Analysis of findings
The findings of this research indicate that Wal-Mart has been recording an erratic pattern in its cash flows. From the year 2009 to 2011, this multinational corporation recorded a continuous reduction in its net cash flows. 2011 had the lowest figure at $ 5.7 billion (Brien). As the graph 1.0 indicates, this pattern is unpredictable and stochastic. Despite the increase in 2012 cash flows to 7.33 B, there is uncertainty with regard to the direction that these figures will take in the future (Brien). The only impressive note for Wal-Mart is that its cash flows are above those of Amazon.com.
Based on the revenue figures, there is a clear contrast in the performance of these two retailers. Wal-Mart recorded revenue that was more than five times that of Amazon.com in each of the years under review. However, the gap between these two corporations is narrow when it comes to net cash flows. This implies that Wal-Mart has a challenge in that its high revenues don’t translate into high net cash flows. Therefore, these figures and the gap that both of these companies have recorded indicates that there are differences in these two industries. The nature of Wal-Mart business is that it is a retailer of physical goods. On the other hand, Amazon.com is an online retailer. Its cash flows have been increasing continuously since 2009.
The recommendation for this study is that Wal-Mart should diversify into the online retailing business. It should adopt some of the successful tactics that have been employed by Amazon.com. For instance, this MNC should apply the concept of lockers (Connor 21). Online shoppers should order and pay for their items online and also pick them in stores. This platform will improve the revenues and cash flows of Wal-Mart and hence it should diversifyConclusion
Works Cited
Arends, Brett. Annual Financials for Amazon.com Inc. 16 Septermber 2013. 9 January 2014.
Brien, Elizabeth. Annual Financials for Wal-Mart Stores Inc. 15 July 2013. 9 January 2014.
Celsi, Mary Wolfinbarger, Arthur H. Money and Philip Samuel. Essentials of Business Research Methods. New York: M.E. Sharpe Publishers, 2011.
Connor, Clare O. "Wal-Mart Vs. Amazon: World's Biggest E-Commerce Battle Could Boil Down To Vegetables." Forbes Magazine (2013): 19-23.
