As the largest retailer in the globe, Walmart has continued to diversify its product portfolio. With a customer base of 270 million people per week, Walmart continues to provide stewardship in corporate philanthropy, sustainability, and creation of employment opportunities (Walmart’s Annual Report, 2018). As a growing concern, Walmart has expanded its operations to different countries around the world. This paper seeks to provide an overview of Walmart and its innovative product, Nestle Nesquik Chocolate Flavored Powder. Moreover, the paper will zero in on macroeconomic variables, policies, and Walmart’s performance.
For the first time, Walmart made over $500 billion in sales revenue. In their quest to augment customer experience, the retail company has continued to scale its eCommerce business. To this end, the company’s sales from this platform grew 44 percent (Walmart’s Annual Report, 2018). Notably, Nestle Nesquik Chocolate Flavored Powder is one of the many products that Walmart manufactures. Retailing at $7.38, this product continues to satisfy the utility of its consumers. It is popular with children because it lacks preservatives and additives. Since 2015, Walmart’s average annual sales have exceeded $ 482 billion.
Before undertaking any operations, it is imperative for a company to comprehend the macroeconomic variables in a given country. Uncertainty in trade-activities may have an adverse effect on business investment and confidence. In the same note, an increase in tariffs may affect consumer spending. This section will focus on three macroeconomic variables, which are GDP, inflation, and unemployment.
Population, price, government policies and new technology have an impact on the supply and demand of Nestle Nesquik Chocolate Flavored Powder. As such, the gross domestic product, the rate of unemployment, and inflation may affect people’s ability to purchase the product. Increase in inflation has an adverse effect on consumer’s purchasing power. In addition, a low GDP shows that individuals have lower earnings, thus, their inability to purchase the product. In addition, a high unemployment is an indication that people do not have disposable income to meet their budgets. If all these variables are negative, they will have an impact on the supply and demand of the product.
The United States has focused on providing an average of 200,000 jobs every month. This figure is likely to reduce the rate of unemployment in the country. Job growth was more in the service sector as compared to other industries (Focus Economics, 2018).
According to trends, the rate of unemployment has continued to trickle down with each passing year (Focus Economics, 2018). This trend will have a positive impact on the supply and demand of Nestle Nesquik Chocolate Flavored Powder as individuals will have disposable income to purchase the product.
Macroeconomics Monetary and Fiscal Policy
In 2018, there is a substantial fiscal boost, which enabled the strengthening of the economy growth by about 3 percent (OECD Economic Outlook, 2018). The U.S fiscal policy is expected to loosen significantly over the coming two years. Tax reform and increased expenditure will see an increase in government deficit by roughly 2 percentage points of GDP during the estimation, which will push up the levels of government debt. The effect of tax reforms is immediate; however, increase in spending has not been translated into appropriations. This could lead to a spillage of 2018 appropriations into 2019 fiscal year. The government is expected to actively look for ways of establishing long-term fiscal sustainability by restraining spending and looking for friendlier sources of revenue.
The U.S monetary policy is slowly getting less accommodative. Price inflation has for a while now run below target, which means that there will be modest increase in inflation above mark over the course of forecast. Given the considerable projected fiscal loosening, by the end of 2019 the Federal Reserve is expected to increase interest rates to 3.25 percent (OECD Economic Outlook, 2018). The process of determining interest rates is complicated because of the uncertainty involved in future fiscal stand. There is need for greater spending ceilings to be adopted in 2020 to avoid a scenario where the fiscal impulse will become contractionary while causing delayed policy tightening until there is greater precision. Owing to a prolonged duration of monetary policy accommodation the economy has seen occurrence of a couple of financial risks specifically in the non-financial corporate segment, which has high leverage historically.
Macroeconomic Conditions and Company Performance
In 2016, 2017, and 2018, Walmart’s total revenues were $482 billion, $485 billion, and $500 billion respectively. In the same period, the company’s net income was $ 14 billion, $13 billion, and $9 billion correspondingly. As the company’s revenues increase, the net income is decreasing respectively. From the graph (in excel), both variables have similar effects.
Effect of monetary and fiscal policy on Nestle Nesquik Chocolate Flavored Powder
Although the economy is experiencing a less accommodative monetary policy, the increased economic growth is favorable factor for the retail industry. Since the labor market is still slacking, the government will be looking into increasing the labor force in order to increase productivity (Clark, 2017). With a larger labor force, there is expected to be more people with disposable income (higher living standards) that will be increasing spending on consumer goods such as Nesquik Chocolate Flavored Powder. Fiscal boost will lead to increased investment and tight labor markets, which will see growth in income and consumption. This will also offset some demographic pressures that could slow down employment growth. It is also important to expect higher debt levels and significant budget deficits from the fiscal boost.
The projected increase in interest rates will likely squeeze credit for the manufacturing sector. However, the producer for Nesquik Chocolate Flavored Powder seems to have well established revenue streams and great financial position that may not require additional borrowing. However, it may put competitors at a disadvantage and enhance competitiveness of the commodity. With growth that is being fueled by fiscal policy, there is projected employment growth alongside buoyant asset prices, increased consumer confidence and the outcome of tax reforms are in favor of strong growth in consumption.