Essay About Wal-Mart And Average Ratios

Walmart Finance Case
Q1) Several aspects have been identified that indicates the differences between Sears and Wal-Mart in terms of their retailing strategies:
The way these two companies started up their businesses differ from one another. While Sears originally operated as a catalog business, Wal-Mart began as a single store in a small rural community.

Whereas Sears had four specialty chains, namely home furnishings, hardware, tyres & batteries and auto parts, Wal-Mart did not have such specialty chains.

Sears did not remain as a retailer only and expanded its operational fields into financial services and real estate. Wal-Mart, on the other hand, also operated Sam’s Club membership warehouses and Wal-Mart Supercenters to compete on price.

Sears’ marketing strategy which focused on the target audience of middle-class female shoppers as a result of the re-orientation of product mix in stores was conveyed via the slogan, ‘Come see the softer side of Sears’. On the other hand, Wal-Mart’s marketing idea was to implement a competitive pricing on anything which was explicit in its slogan, ‘Always low prices’.

To enable customers to pay more flexibly over time, Sears provided proprietary credit cards which could only be used in its own stores, whereas Wal-Mart did not have a proprietary credit card and its customers could acquire a MasterCard issued by Chase Manhattan Bank.

Q2) In order to analyze the reason why average of Sears’ ROE is better than Wal-Mart’s for 1997, Du Pont equation is utilized. The average ratios, components of Du Pont analysis, are calculated separately for Sears and Wal-Mart according to the two fiscal years’ data (see Appendix A). From the 1st level Du Pont Decomposition (ROE = ROA×EM), it is understood that even though Wal-Mart is better in terms of asset profitability (ROA), Sears takes advantage of equity profitability (ROE) thanks to its