Walmart Expansion Analysis

The Philippines is a country in the Asian region that is considered to have great potential
as an emerging economy. Walmart is considering expanding into this location as part of its
globalization campaign. Therefore, this paper is an analysis and presentation of the data that
Walmart needs to consider to decide whether or not the expansion is favorable or unfavorable. It
includes a summary of economic factors such as Gross Domestic Product, Inflation, and interest
rates. It also considers labor market and unemployment data. Other factors that support the
implementation have been discussed, and data presented through visualizations. The
visualizations have been relied on to make a recommendation as to whether the decision to
expand to Philippines is favorable (Azzam et al., 2013)
Population and demographics
Data from The World Bank shows that the Philippines population as of 2020 was
109,581,085 and had been following an upward trajectory and is expected to have increased (The
World Bank,2022e). The World Bank also places the annual population growth rate at an annual
1.3%, which would place the population at the end of 2022 at approximately 111 million.
Populations are a significant target for businesses since they can target marketing activities,
market segmentation, and labor force availability. A perfect example is China, which has the
world’s largest population and a constant labor supply. Some of the world’s largest brands, such
as Apple, carry out their production activities in China.
Marketing

Data from the world bank shows that the percentage of the population using the internet as of
2020 was 50% (The World Bank, 2022c). Availability and access to the internet is a critical
determinant of digital marketing activities (Kotane et al., 2019)

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50%50%
Internet Penetration

Access tNo Access

This is an important factor because it affects one of its key marketing mediums, online
marketing. For Walmart, online marketing includes marketing activities from Walmart’s social
media pages and its official app. As such, Walmart may need to evaluate other avenues of
marketing owing to the minimal population that has access to the internet. Therefore, Walmart
may evaluate other marketing avenues such as billboards and television. Television marketing
may be a strong marketing avenue because the country has impressive access to electricity.

Philippines’ economic outlook

Implementing a global expansion plan requires organizations to conduct rigorous market
research to confirm the economic and financial implications of such an expansion. The data
required to fulfill such research needs to be current to provide the organization with a reliable
basis that it can use to arrive at decisions.
The key economic metrics that have been considered are inflation rates, unemployment rate,
interest rates, and Gross Domestic product

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Inflation

Inflation is the rate of change in monthly consumer prices. It is the rate at which
commodities prices increase due to different economic factors and how such an increase affects
the cost of living in an economy. This is an important metric because it affects the purchasing
power of individuals. Walmart’s successful expansion into the model depends on the purchasing
power of individuals in an economy. The graph below shows the inflation rate in the Philippines
for the last 15 years. This graph has been used to depict the trend for the last 15 years.

2006200720082009201020112012201320142015201620172018201920202021
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%

Inflation Rates

From the graph above, Philippines inflation has been increasing steadily since 2019

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GDP

The Gross Domestic Product (GDP) measures an economy’s total economic output. This
metric is used to evaluate how an economy has performed. A comparative study of GDP over
time indicates the movement of the GDP over time. It can inform the decision as to whether the
economy is on an upward or downward trajectory. GDP that is adjusted for inflation is called
real GDP. The Asian Development Bank shows that the Filipino economy is expected to grow by
6% in 2021 and 6.3% in 2022.

The table below shows the GDP growth from 1960 until 2020.

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0.00
50,000,000,000.00
100,000,000,000.00
150,000,000,000.00
200,000,000,000.00
250,000,000,000.00
300,000,000,000.00
350,000,000,000.00
400,000,000,000.00

Philippines GDP

The GDP for the 2020 calendar year shows that the GDP for the year 2020 was USD
361.49 billion (The World Bank, 2022b). The trend shows that the country has been on an
upward trajectory and can continue to develop. This trajectory shows that the Philippines has
great potential that could benefit Walmart.

Unemployment rate

This economic metric measures unemployment rates in the population that can be
considered employable. This is an important metric for Walmart’s expansion into the Philippines
because it determines individuals’ financial ability and purchasing power. The International
Labor Organization (ILO) places the Philippines’ unemployment rate at 2.4% of the total
employable population. The employable population was 54.8% as of 2020 (ILO, 2022). The
difference included individuals in the education sector, the prison system, children, the military,
and the elderly.

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Unemployment rates (Employable

population)

Employed
Unemployed

With such a small unemployed population, Walmart will have to offer impressive salaries and
employment packages to recruit highly skilled talent. The total employable population consists
of a 1.1% population of individuals with a less than basic education. Additionally, 26.7% of the
population has advanced education (ILO, 2022). This is more than a quarter of the employable
population. Out of these, women have higher education at 35.1% (ILO, 2022). The average
hourly labor cost per employee is 105.7 pesos, which, when converted to USD at the current rate
on 18 th May 2022, results in approximately USD 2. The average weekly hours worked per
employee is 36 hours. In the United States, the federal minimum wage is USD 7.25 per hour
(Walmart, 2022). Walmart, however, reports that they pay their associates an average hourly rate
of $21 (Walmart, 2022). Going by these projections, Walmart would be in a good financial
position to offer the employees an attractive hourly rate well above the averages in the

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Philippines. Walmart can also offer annual bonus and merit pays to employees as a source of
motivation (Alyafei, 2019)

Interest rates

Interest rates are the rates that banks lend to institutions and individuals.
This is an important metric for Walmart to consider because it determines how easily institutions
access to credit and debt. Lending rates determine how easily individuals and corporates access
to credit and their likelihood of being involved in the enterprise. It is also an essential measure
for Walmart to consider since it may need to take up credit in the Philippines to fulfill its
activities. The graph below shows the Philippines’ average monthly interest rates since 2020.

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5

Interest Rates (Monthly average)

The trend line above shows that the interest rates in the Philippines have been reducing over time
but may have picked an upward trend at the beginning of the 2022 calendar year. The data has
been computed by the Banko Sentral ng Pilipinas (Bureau of the Treasury in the Philippines)

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(BSP, 2022). An upward trend would indicate that Walmart may pay a higher cost of debt if it
increases its activities

Regional analysis

While comparing economic outlines, it is essential to confirm the Philippines’ economy in
relation to the other economies. The countries that neighbor the Philippines are Malaysia,
Indonesia, Vietnam, Taiwan Cambodia, Singapore and others. Data from the Asian Development
Bank shows that the Philippines is among one of the best performing economies in the region.
The image below shows the economic outlook for the region according to Asian Development
Bank (ADB, 2022)

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Industrial support factors

Walmart has to consider some of the factors that support enterprising activities. For
example, the organization must consider access and availability of premium letting space,
electricity, water, access to the transport network, and other infrastructure supporting industrial
activities. These factors are considered critical for the successful implementation of the
expansion activities. The population has access to electricity at a rate of 96% (The world Bank,
2022a). This is essential to Walmart’s merchandising activities because power is one of the most
critical determinants of the location that Walmart uses to fulfill its merchandising activities by
supporting operations.

Financial outlook

One of the critical reasons Walmart would like to implement this plan is to increase its
revenues in non-United States markets, which have been reducing, as shown in the table below.

9000095000100000105000110000115000120000125000
2022
2021
2020
2019
2018
2017102459

122502
121432
122140
119763
118089
Non U.S Revenues (year ended 31st January)

Non U.S Revenues

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The table above shows the non-U.S revenues, which declined drastically in 2022 despite being
on an upward trajectory since the year 2017. Non-U.S revenues sales for the trading year ended
31 st January 2022 were US$ 102 billion (Mergent Online 2022). The expansion into the
Philippines can help Walmart recover lost revenues and increase its profitability in general. The
strategy to expand into the Philippines may be explained as a way to increase Non-United States
revenues. This is an important point for the organization to consider to be globally competitive.

Investing activities

There is a need to evaluate the organization’s investing behavior. The expansion into the
Philippines is considered an investing activity. Besides evaluating the organization’s investing
activities, this section also evaluates Walmart’s financial reserves, which would be ideal to
finance the investment in the expansion in the Philippines. The financial metric considered here
is the retained earnings. Retained earnings affect a firms investment behavior and consequently
its value (Kim & Cheon, 2015)The table below shows the retained earnings for Walmart for the
years ended 31 st January 2018- 31 st January 2022.

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20182019202020212022

76000
78000
80000
82000
84000
86000
88000
90000

Retained Earnings (Millions)

Walmart’s retained earnings as of 31 st December 2022 were 86.9 billion. The analysis
since 2018 shows that the organization has been in a comfortable financial position to invest in
expansion and has retained a considerable part of its earnings that may be required to finance the
expansion into the Philippines. This is also a measure of Walmart’s financial health. It shows that
the company is performing well and is at no risk of finance or operational risk. The expansion
into the Philippines can further be justified as reason to improve its profitability and create more
wealth for shareholders and still have more in its reserves as retained earnings.

Exchange rates

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The exchange rates are an essential consideration for Walmart’s expansion into the

Philippines. If Walmart were to expand into the Philippines, it would have to evaluate the
American and Philippine currency exchange rates. Such an evaluation would require Walmart to
evaluate how both currencies have been exchanging against each other. The Philippines uses the
Peso currency, and the table below shows how it has been exchanged against the US Dollar. As
of 18th May 2022, USD was exchanged at 52 Philippines Pesos (PHP) (Exchange-rates.org,
2022). The trend shows that the Philippine currency has been exchanged at a stable rate since
November 2021. However, with time, the US Dollar has been gaining against the Philippines
Peso, which would be the currency that Walmart used in its operations in the Philippines. If the
current trend continues, Walmart may be losing value for all its transactions and assets that have
been obtained or transacted in the Philippines Peso upon converting into the United States dollar.

Ease of doing business and merchandising

48
48.5
49
49.5
50
50.5
51
51.5
52
52.5
53

USD-PHP Exchange rate trend

USD-PHP Exchange rate

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This section evaluates the ease of doing business index for the Philippines. It evaluates
Walmart’s ease of finding it easy to operate in the Philippines. The research collects data from
the World Bank and evaluates economic factors in the Philippines.
The table shows the organization’s share of the services in the economy according to data from
The World Bank as of 2020.

25%

18%

57%
Employment outlook

Agriculture
Industry
Services

A majority of the employable population is employed in the services sector. This includes
services such as education, healthcare, and banking. 25% of the population is indulged in
agricultural activities. This is essential for Walmart because Walmart deals in selling groceries as
one of its major product offerings. For example, Walmart reports that its merchandise consists of
grocery items, including fresh vegetables and fruits, dairy products, meat, and frozen foods.

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Groceries are an essential part of Walmart’s merchandise, as shown below.

202020212022

0
50
100
150
200
250
300
350
400
450

Walmarts Merchandise Revenues in (USD billions)

GroceriesGeneral merchandiseHealth and wellnessOther

The diagram above shows the distribution of Walmart’s merchandise for the last 3 years.
Groceries represent the largest percentage, and as such, the agricultural activity in the Philippines
will help Walmart achieve its merchandising goals. Additionally, the significant percentage of
the population in the industry section will help the organization fulfill merchandising
requirements in the Philippines. The graph above also shows that the organization has been
increasing its merchandising activities, and as such, expansion into the Philippines may help
Walmart achieve its strategic merchandising goals.

Store layout and space

Walmart may consider setting up its first location in the Philippines capital, Manilla.
Manilla is supported by an infrastructure that could be instrumental in helping Walmart fulfill its
distribution and supply chain activities. One of the standardized aspects of the Philippines
expansion is its store layout which has remained the same in many locations. The image below

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shows the organization’s average space requirements. This section also evaluates the statistics
related to renting and lettable space in the Philippines.

Walmart would require 178,000 square feet to set up a supercenter in Manilla from the
table above. When converted into square meter, it is approximately 17,000 square feet. The table
below shows the average letting rates in Manilla Metropolis.

Makati district has the highest rental rates due to the high traffic in the area and the high
demand for space in that area (Statista, 2022). This shows that Walmart can rent the space at an
average of USD 25.5 per month. With time, Walmart can evaluate modalities of working with its
own space instead of renting.

Recommendation

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This section compiles all the data compiled in the previous sections to recommend
Walmart on whether or not the decision to expand into the Philippines is favorable or
unfavorable. The section also includes a sales projection based on Walmart’s merchandising
activities. The economic climate is favorable. The Philippines recovered from a difficult period
occasioned by the COVID-19 pandemic. From a negative economic growth to a constant 6%, the
country’s economy and the region are expected to continue growing. This is a favorable metric
since it depicts economic strength.
The country has an impressive population which grows at a rate of 1.3% per annum. This
is excellent because it means a large target market for the marketing Walmart to target.
Additionally, the country has a low unemployment rate as only 2.4% of the employable
population is unemployed. The Philippines currency has been fairly stable against the United
States dollar. Walmart should indulge in marketing through both digital and traditional methods.
Assuming that the expansion plan is implemented in 2023, it should increase sales as projected.
In the graph below

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Quarter 1Quarter 2Quarter 3Quarter 4

0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000

Revenues (US $) per store

GroceriesGeneral merchandiseOthers

The average sales for the Non-U. S stores per month are approximately USD 4,000,000
in all categories. If the same trend is replicated in its branch in the Philippines, Walmart can
expect to maintain an average of 230,000,000 Philippine pesos per month. Successful
implementation of the Philippines project could signal the organization to increase open new
stores in the Philippines and establish a consistent loyal and significant market share.

Risks

The country’s economic outlook shows that inflation could be on the rise in the country.
If such a trend continues, it could pose significant risks to the successful implementation of the
expansion plan. When inflation rises, individuals and households prioritize the expenditure on
basic commodities, food, clothing, and shelter, because their purchasing power reduces. This
may negatively affect the organization’s ability to sell other items and its merchandising plan.
Another risk to consider is the currency translation adjustments. The Dollar is superior to the

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Peso, and the Peso has been relatively stable over time, trading against the Dollar. As such, the
currency translation risk is minimal. The organization has to be creative with its marketing
activities to ensure that it is creative in its marketing activities due to the significantly small
percentage of the population with access to the internet.

Conclusion

Walmart’s expansion into the Philippines may be a favorable decision to help the
organization increase its revenues in non-US stores, which took a nosedive in 2021. The
economic climate in the Philippines is favorable considering a commendable Gross Domestic
Product (GDP) trend, available labor force, and the low cost of credit; these conditions are prime
to ensure that the organization fulfills its expansion plan. The Philippines has a population
increasing steadily, supplying the market with a constant supply of labor and market for
Walmart’s products. Walmart should therefore actualize the expansion plan.

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