Question

How might Wal-Mart (or another large company) take advantage of each of the following: Do not merely provide a definition. Provide a specific example of each

a. Capacity option

b. Growth option

c. Investment timing option

d. Abandonment option

e. Decision-tree analysis

Answer 1

1. Capacity Option

Capacity Options and planning measure to ensure capacity to be calibrated to match current demand.

A. Human resources capacity planning

Hiring and Layoff.

Walmart ensures each employee posses the desired knowledge and skills set necessary for daily operations.

Wal-Mart has good designs that promote engagement between various parties within an organisation, such as sales staff and customers. The organisation is in a position to improve improvements due to the simplification of the operation.

Walmart Inc.'s inventory management is one of the major contributors to the performance of the global retail sector. In view of the mammoth scale of the organisation, effective and productive inventory management is of vital importance in terms of operational efficiency. Walmart is known for its state-of-the-art technical applications for the inventory management aspect of its operations.

2. Growth option

For the current FY

walmart estimates that e-commerce revenues are projected to rise by 30%. The company also expects overall revenue growth of about 3%, excluding any effects from currency fluctuations. The corporation also plans to make approximately $11 billion in capital expenditure, with an emphasis on resale remodelling, "customer projects," e-commerce, technology and supply chain development.

Walmart Updated its growth plans for the current fiscal year and offered details of its global expansion plans. The strategic strategy presented today focuses on the capital efficiency model of the Company to boost free cash flow and to provide better returns for Wal-Mart Stores U.S. and the Company. The strategy helps Wal-Mart to better serve its customers and to continue to boost revenue. Wal-Mart describes free cash flow as net cash generated by operating activities, less capital expenditure.

3. Investment timing option

Wal-Mart continues to accelerate its spending in its foreign operating segment over the next two fiscal years. New store expansion remains part of the Wal-Mart Stores U.S. strategy and more focus will be put on relocating and expanding existing discount stores to supermarkets at the same time. Wal-Mart Stores U.S. capital expenditure cuts will be offset by raises at Wal-Mart International, resulting in global expenditures from $14 billion to $15 billion in each of the next two years.

Investments are providing improved returns in Wal-Mart International and unit growth will continue to cover a wide range of formats

4. Abandonment option

Abandonment provision is a clause in an investment contract that allows the parties the right to withdraw from the contract before maturity. It provides value by providing the parties with the right to terminate the commitment if circumstances change that would make the investment unprofitable.

Abandonment of few of projects in retail and food segment in developing countries like India, walmart could preserve the capital for future growth and expansion opportunities.

5. Decision tree analysis

Helps in representation of various alternative solutions that are available to solve a problem.

Walmart uses decision tree analysis to analyse the online and offline store sales volume and inventory turnover forecasts.

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