Firm, Industry, and Environment

A. Description of firm and its management

B. Discussion of competitive environment (Porters 5 forces)

C. Economic climate and outlook

D. Other factors, e.g. governmental regulations, labor relations, litigation

3 companies to analyze (a main company to analyze and 2 others to use as a means of comparison).

Chevron is main company. AndConoco Phhilips, Exxon Mobil are competitor companies.

Example is attached.

This should be 5~6 pages.

A. Description of firm and its management Wal-Mart Wal-Mart is the top retail store in the U.S. and world's third largest public corporation that operates 24 hours each day. The firm's headquarter is located in Bentonville, Arkansas, where founder started it all. It is founded on July 2, 1962 by Sam Walton, and it is firstly opened in Rogers, Arkansas financed 95% by Sam Walton. The founder of Wal-Mart, Sam Walton's strategy was simple which are The Lowest Prices Anytime and Anywhere. Starting from a small discount retail shop in Rogers, Arkansas, Wal-Mart became one of the best retailers in the U.S. as well as international with more than 10,900 retail units under 69 banners in 27 countries. Through dramatic innovation, its employ 2.2 million associates around the world, and surprisingly, 1.3 million in the U.S. only (Walmart, 2013). Wal-Mart stated we earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices while fostering a culture that rewards and embraces mutual respect, integrity and diversity (Walmart 10-K, 2012). \"Saving people money so they can live better which is their mission statement helps consumers to save money and live better. They make consumers confident at anytime and anywhere through their mobile devices and online services. Each week, approximately 245 million of customers and members visit the retail stores and websites from 10 countries. In order to fulfill their own mission, Wal-Mart has developed some unique, principles, rules, processes and procedures, for example, three basic beliefs & values. Three basic beliefs which are SERVICE to our customers, RESPECT for the individual and striving for EXCELLENCE have created unique work culture and made high satisfaction from customers (Walmart, 2013). Although the world's top discount store is Wal-Mart, there are several discount chains that share the largest portion of the U.S. Market. The top competitors to Wal-Mart are Target and Costco. However, Wal-Mart gains its edge by being the only company/store that operates 24 hours a day and 7 days a week. They also differ from Costco, in that, no membership is needed. The final piece to Wal-Mart's market domination formula is the sheer saturation. They have more retail facilities than both of the main competitors. Target Target Corporation was incorporated in Minnesota in 1902 by George Draper Dayton. The founder decided Minneapolis offers the strongest opportunities for growth, so he purchased land and formed the Dayton Dry Goods, which is known as Target Corporation today (Target, 2013). The firm operates as three reportable segments which are U.S. Retail, U.S. Credit Card and Canadian. Including all of its U.S. merchandising operations, they offer essentials and fashionable merchandise at discounted prices. The firm's mission is, \"to make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences by consistently fulfilling our Expect More. Pay Less. brand promise.\" To fulfill their mission, the business designed to enable guests to purchase products seamlesslyin stores, online and through the mobile device at discounted prices with good quality (Target, 2013). Target differentiated itself from other retail store with the low prices of products. By demonstrating visionary leadership, the company's store chain became one of the nation's largest discount store chains. There are 1,778 stores in 49 states with square feet of 237,847 (in thousands), and plans to open 124 stores in Canada in 2013 with 3,963 thousand square feet. Since Target is the largest discount chain, they employ approximately 361,000 full-time, part-time and seasonal employees called as \"team members.\" Its corporate headquarters buildings are located in Minneapolis and Minnesota as well as Canadian headquarters is in Mississauga and Ontario (Target 10-K, 2012). Costco Costco Wholesale Corporation and its subsidiaries began operations in 1983 in Seattle, Washington founded by James Sinegal and Jeffrey H. Brotman. It is headquartered in Issaquah, Washington. Costco is the seventh largest retailer in the world and the largest membership-only warehouse club in the U.S. The firm engaged in the operation of membership warehouses in the U.S. and Puerto Rico, Canada, the U.K., Mexico, Japan, Australia, and through majority-owned subsidiaries in Taiwan and Korea. They operate a total of 608 membership warehouses worldwide, and the warehouses contain approximately 86.9 million square feet of operating floor space: 63.7 million in the U.S.; 11.2 million in Canada; and 12 million in other international areas. The number of full-time employees is 96,000 and 78,000 for part-time in 2012 approximately (Costco 10-K, 2012). Costco's strategy is to provide their members with high quality merchandise at lower prices. They have direct buying relationships with producers of national merchandise, and they never obtain a portion of merchandise from any supplier. The products which cannot found in warehouses are able to get from its online businesses. B. Competitive Environment The most common one-stop-shops in the United States would be Wal-Mart, Super Target, and Costco. These stores make shopping much easier when you can purchase everything at one store. It definitely makes it more convenient for the on-the-go consumer. The only hard thing to decide is which store to go to. These three stores make shopping very competitive with having sales and special offers on certain items. Wal-Mart is the largest department store in the United States and its constantly growing by stores and customers. Wal-Mart makes sure their customers come first. WalMart aims to make the shopping experience as easy as possible. Not only can you buy groceries, household items, clothes, and beauty supplies you can also service your car in their Tire and Lube Express. You can also purchase gas for your vehicle as well. Wal-Mart Supercenters are one of the only places that you can literally one-stop-shop. In March of 2012, there were over three thousand Wal-Mart Supercenters across the United States. That number has only gone up since March of 2012. Also every major city or town has a Wal-Mart. One way that Wal-Mart shows to be a competitor is by price matching. If customer brings a competitor's ad into the store, Wal-Mart will price match that store. They want to be number one with customers. Wal-Mart does not even require the customer to bring the ad with them; they will stand by their word and match the price. There are some limitations to the price match but for the most part it is a painless process for the customer. Price matching has become so popular with their customers. It helps save the customer from having to clip a coupon and keep up with it. Another way Wal-Mart shows to be a competitor is by keeping their store open 24 hours a day. WalMart is never closed unless it is a major holiday. They want to make sure they are always open for their customer needs. Whether it is right after work for some of the working population of at midnight for the night owls, they will make sure to take care of your needs. Wal-Mart provides tough competition against their competitors. Wal-Mart will definitely put up a fight when it comes to winning over a customer with their low prices. Wal-Mart has been very successful at keeping the lowest prices around. If you go into a Wal-Mart, not only are you going to get good quality products but you're also going to be the best price available. Not only does Wal-Mart compete with their prices they also compete with their departments within the store. While shopping at Wal-Mart you are able to purchase certain types of guns. None of its competitors do this. You can also purchase items at a low price without having to pay for a membership. Once you step into the store you have access to anything you want. To shop at Costco you must pay a yearly membership for their prices. You can also buy gas at a discount price without having to have a special store card. Wal-Mart has many added benefits to shopping with them. Some of the Wal-Mart stores have a Subway or McDonald's eatery inside the store. It comes in handy for when you want to grab something quick to eat and shop at the same time. Some of the Wal-Mart stores have a hair and nail salon located inside as well. These are just some ways that Wal-Mart makes it easier for their customers to shop in one location. Despite Wal-Mart's lead in the market of one-stop-shopping many competitors are trying to become what Wal-Mart is. Super Target and Costco are great competitors within this industry. They definitely keep Wal-Mart on their toes with thinking of new ideas on how to save consumers money. Super Target and Costco could very easily become what Wal-Mart has made them into. Super Target and Costco could very well take over as the main one-stop-shop in the coming years. C. Economic Climate and Outlook Wal-Mart has for many years been everyone's 'go to store, for essentially all wants and needs. From produce, bakeries, vision, hair salons, movie rentals, hunting and sports equipment, cosmetics, and even a car tire and lube department, Wal-Mart would seem to be someone's first and only choice for all consumer necessities. They are deeply committed to saving people money so they can live better. Initially they gain customer's trust by providing quality merchandise and services at everyday low prices, \"EDLP\" (WalMart Stores Inc., 2012). Even though they set the lowest prices, all over the U.S. consumer spending has been struggling. At Wal-Mart, there has been a decline in grocery sales, sporting goods, and the entertainment department such as toys. On the other hand, Wal-Mart's clothing items with necessities like socks have done extremely well. From 2012 to 2013, its return on investments (ROI) has declined, primarily due to the effect of acquisitions and the fluxes within the currency exchange rate. In contrast, their operating income, net sales, and total revenues are increasing, but haven't been as steep as previous years. Wal-Mart's annual earnings per share have dropped from $5.10 to $5.30 from a previous issue of $5.20 to $5.40 (Wal-Mart Stores Inc., 2012). As of lately, they have had disappointing earnings and have aided with pulling stocks down, although, there has been a growth in the retail square with expanding globally in e-commerce. Since Wal-Mart is not a monopoly it has many competitors. A major strength of Wal-Mart is that it caters to low-income shoppers and is very good at price matching with other stores like Target and Costco. For the most part, the year predictions are fairly stable, but earnings have yet fallen below expectations. In a New York Times article, Wal-Mart's CFO states, \"there's a general reluctance of customers to spend on discretionary items right now\" (NY Times 2013). With many people living paycheck to paycheck, luxury spending has decreased. The economy has risen since the 2008 recession; however, people are still quite frugal with their expenditures. The future outlook for retailers as a whole is a bit challenging, due to customers spending more guardedly. As we all know, competition is prevalent at all levels of society and economics. For instance, in today's one stop shops, such as Wal-Mart, Super Target, and Costco, competition is very wide spread. This rivalry among these stores is what keeps firms determined to outperform the opposition. Wal-Mart is the world's largest retailer and is known to have pretty much anything an average person would demand; nevertheless, a buyer remains powerless in such retail stores. As a principle competitor of Wal-Mart, Target too has fallen short compared to previous years. Battling a variety of factors, Target's shares have dropped 1.2 percent (Target Corp, 2012). However, as the second largest discount retailer, Target has big plans for the future. Even with an immobile economy, their strategy seems to be stronger than that of Wal-Mart. By providing a better shopping experience, with cleaner stores, Target is to say the least targeting its opposition Wal-Mart at many levels. Wal-Mart may face impediments to their expansion in the U.S. including conversions of discount stores into supercenters and opening other store formats, which may adversely affect their financial performance (Wal-Mart Stores Inc., 2013). Costco, on the flip side, has more of a promising outlook, as it is the biggest and most successful warehouse club retailer. Their stock price has risen by about 20 percent and it is booming in the online retail market. They believe the most important factor contributing to their profitability increase is sales growth, particularly comparable sales growth (Costco Wholesale Corp/New 2012). Another huge contribution to their up and coming is the fact that they have discounted gas prices for the value aware customer, giving growth to the membership base. Is Wal-Mart's outlook becoming darker with a weak economy? Some would argue that it is due to less consumer spending and an increase in payroll taxes. This effect would be across the board, not just for Wal-Mart, but Target and Costco alike. For example, if WalMart's shares have been dropping in price, then there is a direct correlation to people spending less money shopping. Even if job markets are improving, people aren't necessarily earning higher wages. Overall, without an improved housing market, lower gas prices, and less cautious consumer spending, the future of the retail industry isn't as promising as once before. D. Market Risks and Other Factors Every company (public or private), in every market faces outside forces that may affect their projected financial outlook. Whether the impact is negative or positive, determines if the company will exceed their expectations or not. Publicly traded companies have to disclose potential risks that may have negative effects on their financial outlook. These risks are described in section 7A of the company's annual 10K reports. In reviewing Wal-Mart, Target, and Costco, it is evident that some common risks exist but the way a company views itself comes to the forefront when looking at what they determine to be risks. Costco and Wal-Mart both list Interest Rate changes as their top risk and they also consider changes in the Foreign Currency exchange as their second highest risk. Risks associated to increased inventory costs are common among all three companies. Target and Wal-Mart further list their risks associated to changes in income tax rates and that is where the common risks end and the company's views begin to shine through. Costco only lists three risk factors that could reduce their expected earnings in the upcoming year. Wal-Mart expands the risks to include critical accounting errors associated to inaccurate estimates, and impairment of assets. Wal-Mart also sites their on-going FCPA (Federal Corrupt Practices Act) investigation as a major risk factor. This investigation is centered on the allegations that Wal-Mart bribed Mexican officials in order to obtain the proper permits needed implement their aggressive growth strategy. However Target tends to focus on the risks associated to its customers, both internal and external. Target believes that positive differentiation from other retailers and maintaining a positive perception as their top risk factors. Target goes on to mention ten more factors regarding risk factors that could have a negative impact on the financial forecasts, including proper management of their growing work force, failure to address product safety concerns, weather conditions and failure to protect the personal information of guests and employees. As stated above, all companies have to consider risk factors that could impact their financial state. Some companies seem too more confident. Other companies seem to see their competitive market as a whole to be an extenuating risk that could be detrimental to future earnings