Decision uncertainty in applied business research and statistics

QNT/561 - APPLIED Business RESEARCH & STATISTICS Assignments 3. Individual Assignment: A Decision Uncertainty. Read Week 3 Student Road Map scenario complete assignment. I work law enforcement, legal area.

Applied business research and statistics

Wal-Mart, the retail monolith of the United States, ended fiscal year 2010 on profits, but the stability of the profits was not primarily attributed to organizational improvements and strategic endeavors, but mostly to a general climate in which people focus on the lowest price -- Wal-Mart's core principle. As the economy revives however -- or at least shows the first signs of overcoming the recession -- easy and quick gains are no longer sustainable.

In this context, a decision would have to be made regarding the future strategic direction of the firm. In other words, the company has to decide on the best course of action to develop and implement in order to sustain its gains and to ensure stability of its profits.

In order to better assess the financial health of the organization, several statistics should be observed, namely those of the most important financial ratios, as well as the company's financial highlights as they are revealed in the firm's financial statements. These are given below:

Wal-Mart's balance sheet:

Source: Money Central MSN, 2011

Wal-Mart's income statement:

Source: Money Central MSN, 2011

Wal-Mart financial ratios

Ratio

Company

Industry average

Sales

2.60

4.10

Net income

7.30

10.50

Gross margin

24.70

25.00

Current ratio

0.9

1.10

Return on capital

13.8

12.8

Income / employee

7,450

9,088

Inventory turnover

7.90

7.50

Source: Money Central MSN, 2011

The uncertainty in the situation is represented by the reaction the public would have in the face of a reviving economy. In other words, Wal-Mart has faced the crisis with increasing sales and this is even more so impressive as most economic agents were registering decreases and loses, or were even forced to declare bankruptcy. Wal-Mart however proved best able to serve a growing need -- namely that of commodities at the lowest possible retail prices. Today nevertheless, the search for the lowest price is undetermined as the populations purchasing powers commence to increase. In 2010 for instance, the income per capita at the global level has increased from $10,400 to $11, 100 (Central Intelligence Agency, 2011). This specifically indicates that the customers have an increased buying power and they might decide to move away from Wal-Mart in search for higher quality items.

Wal-Mart is often recognized as a source of low cost products, but also low quality. The organization is often blamed for several decisions in their protection of the lowest price. In this order of ideas, the company has been accused of underpaying its staff members, asking them to put in longer hours, not offering medical insurance, but also importing cheap products in unsafe and unsanitary conditions (Wal-Mart Watch, 2011).

Given the revival of the economy and Wal-Mart's reputation, the company's future success depends on two variables. On the one hand, there is the behavior of customers in the aftermath of the crisis. In other words, would they continue to focus on an economic life style and purchase from Wal-Mart or would they return to their pre-crisis spending habits and prefer higher quality retailers? The probability of turning to higher quality is fairly increased especially when Wal-Mart enjoys a relatively poor reputation.

The second variable is constituted by the means in which the company would be able to adjust to the direction taken by the customers. Otherwise put, the variable with the highest level of uncertainty is represented by the customer reactions. The means to responding to this uncertainty is constituted by becoming flexible and quickly responding to new customer needs and wants.

As the economy is expected to revive then, a question is being posed relative to the decisions Wal-Mart should implement as future strategic directions. The statistics previously mentioned reveal several areas in which the retailer is underperforming in comparison to the industry. In this order of ideas, regardless of the element of uncertainty, it is recommended that Wal-Mart focused on the improvement of its operations and the enlargement of their focus from the lowest retail price, to a wider array of elements which sit at the basis of stakeholder satisfaction. In this order of ideas, several actions are recommended for Wal-Mart in order to increase its chances of addressing the uncertainty. The following lines reveal both the recommended actions as well as the expected discrete outcomes:

Placing an incremental focus on the quality of the products. This strategic effort would create higher levels of customer satisfaction.

Placing an incremental focus on the diversity of the products in the meaning that both low cost as well as higher cost and higher quality products should be sold. This would ensure that a wider array of customers can purchase their desired products, as Wal-Mart would be able to serve vast needs and wants, for all levels of purchase powers.