Changing Business Practices to Reflect New Market Realities

Bigger and better don’t always go together.

Chart-1 Source: Yahoo Finance WMT Key Statistics vs. S&P500 as of Feb 21, 2016

by Chia-Li Chien, CFP®, PMP® Feb. 23, 2016

Take a look at Wal-Mart’s 5-year stock price and compare Wal-Mart’s arc to that of the S&P 500 [1 and Chart-1]. You might say, “so, its not doing so hot, right …?” Well, you and I probably have Wal-Mart stocks in a retirement plan like a 401(k) or 403(b). The top three mutual fund holders of Wal-Mart stocks are 1) Vanguard Total Stock Market Index; 2) Dodge & Cox Stock; and 3) Vanguard 500 Index Investment. Because Wal-Mart might just impact your overall retirement dream, chances are you are not happy to learn that its stock price is sliding downward.

There is plenty of news about how changes are already underway at Wal-Mart. For example, the company is closing 60 underperforming stores in Brazil [2] and paying employees better [3], etc. The reality is the world is changing, and giant ships like Wal-Mart will require a lot of effort just to make tiny moves in the right direction. To stay up with the changing world is hard, especially—and paradoxically—if your sheer size and bulk makes you number one in that world.


Earlier this year, because of rival Uber, one of the largest taxi companies in San Francisco filed for bankruptcy [4]. I hate to see any company resort to bankruptcy. But, as a frequent traveler, I love the convenience of Uber, plus Uber is cheaper than traditional taxis. I have gotten so accustomed to using Uber that I assume and expect Uber on every trip. My early February business trip to London was a great example. At the Heathrow Airport, the police officer directed me to designated parking level 1 for Uber pickup. I was in a shared ride with two other unrelated American business travelers. After arriving at my hotel, I took Uber for sightseeing at the Hampton Court Palace. I also took Uber to and from my client’s office.

However, it was disappointing to learn that there was no Uber in Berlin on my same business trip. This was a huge challenge for me--I don’t speak German, and the taxi driver knew no English. Apparently, however, the taxi company in the Berlin area has its own App like Uber’s. I downloaded that and was able to get a taxi to downtown Berlin from my hotel.

This Taxi App looks like Uber’s but is NOT Uber’s. The taxi driver started the meter running as soon as I got in the cab. At my destination, he was waiting for me to pay through the Taxi App. We both used broken English to get the transaction through. It took about 3 minutes for the screen to tell me “slide to the right to pay for the taxi fare.” Okay; I did that, then it took another 3 minutes to ask me to add a tip. In contrast with the precision of Uber, I really had a traditional taxi ride—just with a new way to order and pay the driver through an App.

Although the Berlin Taxi App is not user-friendly, I must congratulate the Berlin Taxi company for taking actions to prevent a disastrous bankruptcy like that of its San Francisco cohort.

Your business requires your attention on a regular basis to review business performance as well as market conditions. You can create small innovations like the Berlin Taxi App to keep business moving forward, or you can simply wait until rivals like Uber swallow your market share. 

Let’s return to the Wal-Mart example. Take a look at Wal-Mart’s revenue growth rate over the past ten years compared to the U.S. inflation rate. [Chart-2] It’s obvious that Wal-Mart still keeps pace with inflation as far as revenue growth. And yet, you can see a significant slowdown during 2014 and 2015.

There is much pressure on Wal-Mart from investors and eCommerce rivals such as Amazon. Wal-Mart is working as quickly as possible to make changes within its own giant operation.

Chart-2 Source: WMT Growth % from Morningstar and inflation from http://www.usinflationcalculator.com

Like the Berlin Taxi Company, Wal-Mart’s recent changes are not perfect, but the company is keeping pace with market demand for now. But as we see in Chart-2, the signs of struggle are everywhere if you know what to look for.

With the right sets of financial forecasting and market benchmark charts along with regular review and actions for change, I expect your business not only can keep up with market condition momentum, but also can prevent rivals from swallowing your market share.

When was the last time you reviewed your sets of charts? What have you done to keep the momentum going?

We can help your business; schedule an appointment with us!

 

Schedule an appointment with Chia-Li Chien today!

Chia-Li Chien, CFP®, PMP®; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward. Chia-Li is an Instructor & CFP® Program Director at Ball State University and Adjunct Faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Schedule your appointment today!

 

 

References:

1 WMT Key Statistics | Wal-Mart Stores, Inc. Common St Stock - Yahoo! Finance. (n.d.). Retrieved Feb 21, 2016, from http://finance.yahoo.com/echarts?s=WMT+Interactive#{%22range%22:%2210y%22,%22allowChartStacking%22:true}

2 TeleSUR / sh-CD-mk. (2016, January 15). Wal-Mart Closes 60 Stores Across Brazil. Retrieved February 21, 2016, from http://www.telesurtv.net/english/news/Wal-Mart-Closes-60-Stores-Across-Brazil-20160115-0001.html

3 McIntyre, D. A. (2016, February 21). Walmart $1 Minimum Wage Increase Costs It $2.7 Billion. Retrieved February 21, 2016, from http://247wallst.com/retail/2016/02/21/walmart-1-minimum-wage-increase-costs-it-2-7-billion/

4 Alba, D. (2016, January 25). San Francisco's Biggest Cab Company Files for Bankruptcy. Retrieved February 21, 2016, from http://www.wired.com/2016/01/san-franciscos-biggest-cab-company-files-for-bankruptcy/

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