Walmart's strategic financial planning and organizational initiatives

Wal-Mart's Strategic And Financial Planning:

Since its inception about 50 years ago, Wal-Mart has continued to remarkable growth as a firm that focuses on providing customers with a wide range of merchandise at great prices. In its initial years, the company only operated in one store that has contributed to changes in the way retail works. Currently, the firm operates over 10,000 retail units within 69 distinct banners in 27 countries across the globe. The organization consists of over 2 million hard-working employees and associates who serve approximately 200 million customers and members across the globe on a weekly basis. The success, growth, and profitability of the firm can be attributed to the various strategic plans it has adopted from time to time, which have had significant impacts on its financial planning.

Wal-Mart's Strategic Planning Initiative:

While Wal-Mart has experienced decline in earnings multiple because of decreasing earnings and revenues per share growth in the past decade, the firm has been capable of maintaining cash flow generating ability. However, the organization's cash flow from operations has increased by approximately 9% every year with a corresponding increase in free cash flow by 19.1% annually. The growth in the firm's cash flow can mainly be attributed to ability of enhancing efficiency with an increase in its return on equity to 25% in 2011 from 20% about 10 years ago.

As part of its efforts towards revitalizing the growth of its cash flow and profits, Wal-Mart is currently pursuing three strategic initiatives that have positive impacts on price-to-earnings. These three major strategic planning initiatives for Wal-Mart are its entrance into e-commerce sector, acquisition of critical mass in its global segment, and its capture of more domestic market share (Daris, 2012). While e-commerce is expected to provide the firm with better returns on investments, the critical mass in global segment is geared towards contributing to meaningful expansion of its profit margin and return on invested capital.

As discussed in its 2012 annual report, Wal-Mart has also targeted re-invigorating its customer-focused culture as one of the core strategic planning initiatives that is crucial to its future business initiatives. The customer-focused culture is the bedrock of the organization's future as evident in its tremendous efforts towards understanding existing and new customers and serving them in new ways. Through its Global Customer Insights Group, Wal-Mart is developing top-level analytics to discover customer trends in order to sustain marketing and merchandising decision-making within the business ("Walmart 2012 Annual Report," 2012).

Since they recognize the value of getting closer to its customers, the leadership team or store-level management of Wal-Mart is largely involved in home visits. This not only enables the firm to get closer to its customers but it also enables them to talk to them, listen to them, and obtain increased understanding of their needs. The insight received from these customers act as the foundation with which the next generation Wal-Mart stores will be developed.

Impact of the Initiative on Wal-Mart's Financial Planning:

The strategic planning initiatives of Wal-Mart have a significant impact on the firm's financial planning in order to be successful. The impact on financial planning originates from Wal-Mart's focus on understanding the needs of customers and designing measures that are geared towards making them to return to its stores. The need to understand customer needs is not only for the purpose of improving the firm's profitability but it's also aimed at enhancing the competitiveness of Wal-Mart, particularly with the growth of rivals like Target.

In order to achieve its goal of re-invigorating customer-focused culture as the core business initiative, the company's financial planning must involve the expansion of the current store and opening new ones based on the expectations of these customers. This is also accompanied by efforts to change the locations of stores that have low performance. Wal-Mart also needs to offer a broader assortment of merchandise as it works with suppliers to provide new innovative products. Actually, the firm is working closely with its suppliers to provide a wider mix of products after it recently received some negative feedback. This contributed to its withdrawal of some less profitable items from its stores and attempts to enhance the product assortment available to customers ("Walmart U.S. Growth Strategy," n.d.).

The major effect of the initiative on the firm's financial planning is that its moderations require a large amount of capital. While the initiative tends to be highly effective on an overall basis, it may not offer short-term profits, which needs to be considered in the company's financial planning. The other effect of the strategic planning initiative on the firm's financial planning is the need for a strong pricing leadership and strategy that continues to resonate with customers. As customers' needs are taken into consideration, Wal-Mart needs to adopt pricing strategies that helps it to be the market leader while maintaining a huge customer base. Therefore, the initiative has a financial effect on the prices of the company's products and its overall sales.

Impact of the Initiative on Costs and Sales:

As previously mentioned, the customer-focused culture is a strategic initiative with huge impacts on Wal-Mart's costs and sales because of its effect on the organization's financial planning. The major effect of the initiative on costs is that the firm will determine its pricing strategy for products based on the needs of customers and focus on maintenance of profitability in the market. As it listens to customers, Wal-Mart will adopt prices or costs of products that are reasonable with customers and promote sustainability of the business.

On the other hand, re-invigorating customer-focused culture will enable Wal-Mart to increase its overall and net sales. According to its 2012 annual report, the company has enhanced its performance through aligning its strategy with the needs of today's customers and more efficient operations. This focus on customers has in turn enabled it to achieve positive comparable store sales within this financial year. While it has reported an increase in customer traffic in the fourth quarter for fiscal 2012, its net sales have grown to surpass $264 billion, a 1.5% increase. This has been accompanied by the growth in operating income to $20.4 billion, which is a 2.2% increase from the previous fiscal year. Therefore, an increased focus on customers has a high-quality effect on the net sales of Wal-Mart because it increases the firm's customer traffic.