Introduction
Wal-Mart is the largest retail chain store in the USA. It consists of three segments – Wal-Mart US, International, and Sam’s Club. Wal-Mart has more than 4,100 stores and clubs in the U.S., and nearly 7,300 units worldwide. “Wal-Mart Stores, Inc. operates Wal-Mart discount stores, supercenters, Neighborhood Markets and Sam’s Club locations in the United States. The company also operates in Argentina, Brazil, Canada, Chile, China, Costa Rica, El Salvador, Guatemala, Honduras, India, Japan, Mexico, Nicaragua, Puerto Rico, and the United Kingdom.” (Investors frequently asked questions, 2009).
Current Project
Repairs, renovations, and shop expansion schemes.
Identify the current project
Conversion of discount stores into supermarkets, relocating to shop space having larger floor areas; repairs and renovation of existing stores in the United States.
Sources of funding
Free flow– Net cash provided by operating activities of continuing operations
(Wal-Mart 2009 Annual Report: Annual Shareholders Meeting Materials
PDF Format: P.19: (Annual shareholders’ meeting, 2009).
Why should it be appropriate?
The expenditure on business or business expenses should be gained from the income generated from the business. It is seen that $11648 Million represents the free cash flow from which business expenses could be made. When funds are available internally without interest demands, it would be injudicious to effect loans for purpose of non-capital expenditures.
Long term Project
Opening up new units and shops in various countries of the world.
Identify the current project
Building large new stores in destinations like India, Dubai, Kuwait City, Argentina where there are people with large disposable incomes and high standard of living. India for one has a burgeoning, well-educated middle-class population that is keen on the kind of food it consumes. With the opening up of the Indian economy and a stable government at the Federal level, it would not be long before the Indian economy becomes strong and well-positioned in the world polity.
Sources of funding
A large-scale business expansion operation of this kind needs to envisage a consortium of institutional lenders and financial agencies, preferably in the countries and cities where Wall-Mart wishes to set up shops. This would not only attract local capital but would also ensure that revenues in these outlets are adequate to meet overhead costs and retain a margin. The main aspect would be the licenses from local governments needed to start and continue business in international destinations and also the need for local managers to oversee such business units successfully and efficiently. Cultural differences are major factors and need to be given due weightage, especially since India has a wide diaspora, or melting pots, of people of different religions, castes, and languages. Although fundamental differences may exist, the needs of trade must be realized in these countries, which offer immense potential to the kinds of goods and services that Wal-Mart professes.
Wal-Mart’s mission statement has been to help people save money so that they could lead better lives.” It is humbling to know that millions of customers around the world, some of whom are new to our stores and clubs, turn to us for this very purpose.” (Letter from Rob Walton, chairman of the board, (n.d)).
Why should it be appropriate?
Financial risks of this kind must be shared with the ultimate beneficiaries in this kind of food retail trade. This is also the principal reason why funds should be sought from the countries where such business is established. It would also provide a local touch to the business which is necessary for the business to prosper and grow in the future. These kinds of loans would be secured and collateral provided by the company’s bankers in the US and so the lenders have no cause for worry.
Conclusions
It is seen that in the case of Wal-Mart the debt-equity needs to be well balanced and this could be achieved by providing due weightage for cost benefits of each project, after considering plan outlays and other relevant factors.
References
- Annual shareholders’ meeting. (2009). Wal-Mart.
- Investors frequently asked questions: Operations: In which countries does Wal-Mart operate? (2009). Wal-Mart.
- Letter from Rob Walton, chairman of the board. (n.d). Wal-Mart.