Business Model Analysis of Wal Mart and Sears
While both companies belong to the retail industry (where sales of products and services are the source of business), Sears and Wal-Mart have very different business models.
Making an analysis of the profitability of the shareholder can be seen that although both companies have similar returns, the source of this return is different.
As shown in the table above, both companies have returns on capital near 20%, although the source of profitability differs among them. In the case of Sears the main source of value creation is the rotation of the assets of the estate. This high turnover can be explained largely by its funding through debt, ...view middle of the document...
In fact, during the period 1995 to 1997 shows a shift in Sears in the distribution of their premises, with a growth of the smaller premises (Home Stores) and a reduction of the largest local (Full Line Stores and Auto Stores) . The Home Stores showed a growth of 8% over the total number of premises, about 5% of the total area and 6% over total sales area. For their part, the Auto Stores and Full Line Stores showed a decrease of 6% over the total number of local, 4% of the total area and 5% on total sales area. This shift suggests a possible change in its strategy mix of premises to a larger number of local small to increase participation and geographic change the mix of products (looking for penetration and targeting). But this change increased the amount of closure of premises, probably because of a bad identification of the locations and / or products offered, and an inefficiency in terms of sales per square foot, as befits a local strategy less concentrated. This can be seen in increasing the percentage of closed premises on the premises of a total of 3%, and the reduction in sales per square foot to $ 5 .-, the previous period.
This credit policy coupled with the change in the mix of its products, reducing their operational costs and increasing their income from securitization of its receivables, it gave Sears in 1997 contribution margins high (35%) but Sales volumes lower in relation to the size of its stores (compared with previous periods and with Wal-Mart).
Wal-Mart for its part, is basing its strategy of retail stores in 3 formats: Discount Stores, Super Center and Sam's Club. In 1997 participation in square meters by type of store was 61%, 21% and 18% respectively. Its business model is based on sustained growth in the quantity and size of premises, offering a wide range of products at highly competitive prices (contribution margin of 21% in 1997), and the flexibility of different means of payment for its customers, not incorporated into their business risks and profits of the credit market.
During the analysis period 1995 to 1997, Wal-Mart also presented a shift in the distribution of their premises, but with considerable growth for larger premises (Center Super Stores). The Discount Stores (smaller local) showed a decrease of 2% over the total number of premises. For their part, the Super Center stores showed a growth of 134% and Sam's Club 2% of the total of their respective premises. This shift suggests a possible change in its strategy mix of premises to a larger number of local large to increase efficiency in sales. This can be seen in increasing sales per square foot of U.S. $ 22 .-, during the period in question.
Wal-Mart defines its slogan "Always Low Prices", which is a true reflection of its pricing strategy. Therefore generates high volume sales with growth rates above 12% in 1997 and 1998.
Analysis of State Results
In 1997 retail sales at Sears fell 1%, unlike those of Wal-Mart rose the same percentage....