Financial Initiatives That Wal Mart\'s

¶ … financial initiatives that Wal Mart's management has proposed in its message to shareholders and customer: the continued focus on the return on investment (ROI). One should first of all point out that this is more of a message addressed to the company's future investors, current shareholders and associates rather than to the customer: while the return on investment also means higher volumes of sales, potentially encouraged by good customer policies, it is largely concentrated on maximizing the commercial and financial efficiency of the company and increasing profitability.

One of the key areas that the management has underscored in its quest to increase the focus on the ROI was the investment in technology, a trend which is expected to continue in the next period of time. Investment in technology has several important impacts for the organization's ROI, including maintaining an important lead in that area and, especially, creating the appropriate premises for an increased efficiency in terms of inventory or retail management, as well as the management of the supply chain in the company.

In discussing the ROI, the management is keen to emphasize that the current economic performance of the company is significant, especially given the current economic crisis. On the other hand, this needs to be analyzed from a certain perspective: the current economic crisis has not affected the basic purchases of food, especially cheap food, targeting those categories of consumers with low revenues. From this perspective, Wal Mart remains extremely well positioned, encouraging this category of consumers to continue purchasing at the same levels as before basic products at lower prices. This is one of the reasons the ROI is likely to remains partially unaffected by the crisis.

These considerations become clearer if one studies the figures that are presented in the Wal Mart annual report. In 2009, ROI was 19.3%, a very small decrease from the 19.6% in 2008, showing how well Wal Mart continued to efficiently operate its assets. The explanation of the reasonably stable values of the ROI was that the operating income increased in 2009 from 2008 by the similar amount as in the period from 2007 to 2008, consolidating the view according to which the company was relatively not affected by the economic crisis.

At the same time, the operating income also grew faster than the net sales, which shows the efficiency of current management in dealing with cost management and level of expenses. This trend was especially clear on the U.S. market, mainly because the international market also needs to take into consideration additional variables, such as, notably, the foreign exchange fluctuations.