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Business Lessons: Walmart's Acquisition of Jet.com

With a value of $230 billion during 2015, Walmart remains one of the world’s largest retailers. In terms of online competition, however, Walmart has struggled to keep up with Amazon, which posted a net worth of $250 billion in the same time period. To narrow the gap with their formidable online competition, Walmart has purchased a total of 15 different startups over the last five years in the hopes of obtaining the talent and technology required to reach a growing percentage of consumers who prefer to do business over the internet.

The recent acquisition of Jet.com, for the price of $3.3 billion, may prove to be their most important decision yet, as Jet’s founder and CEO Mark Lore will now serve as vice-president of the Walmart Corporation and will be in charge of improving the Walmart.com website. This lesson could become one for the records for online MBA students studying big business.

Business Lessons: Walmart's Acquisition of Jet.com
Image via Flickr by Mike Mozart

Talent May Be the Key

Lore may prove to be the key player that helps shift a greater percentage of the online market towards Walmart, as part of the acquisition involves the human talent that helped make Jet a highly successful online retailer. Lore will be responsible for all aspects of the Walmart website; while Jet and Walmart intend to maintain independent brand names for the time being, Lore’s ability to attract online buyers, millennials in particular, could narrow the gap between Walmart and Amazon.

Significant Incentives to Retain Lore’s Talent

As part of Jet’s acquisition, Lore has agreed to accept approximately $300 million in Walmart shares over a five-year period, provided he remains a part of the Walmart executive team for the duration of that time. Clearly, Walmart’s CEO Doug McMillon intended to provide Lore with a number of incentives to remain with the company for the foreseeable future and has crafted the purchase agreement to encourage a long-term partnership.

A Temporary Decline in Stock Value Anticipated

Walmart has posted an anticipated $0.05 per share decline in stock value for the year 2017 as a result of the costs of acquisition and the temporary operating losses associated with the transaction. Considering the giant scale on which Walmart operates, these business expenses are considered low-risk and stock prices are expected to quickly climb once Walmart and Jet have truly united forces with their talent and technology.

A Business Lesson for Leaders of the Future

Business leaders of tomorrow likely recognize the importance of a strong online presence in nearly every industry today. Walmart’s acquisition of Jet provides a large-scale example of this fact, as the company has gone to great lengths to compete with the world’s largest online retailer, Amazon.

Individuals interested in advancing their business career without having to commute to a traditional campus may be interested in University of Maryland’s online MBA degree program. In as little as 21 months, you can earn your degree and develop skills that will help you succeed in the ever-evolving world of business leadership.

Sources

http://fortune.com/2016/09/20/walmart-acquisition-jetcom/

http://news.walmart.com/2016/09/19/walmart-completes-acquisition-of-jetcom-inc

http://www.recode.net/2016/9/19/12979008/walmart-jet-acquisition-closed

http://money.cnn.com/2015/07/24/investing/amazon-worth-more-than-walmart/

http://corporate.walmart.com/_news_/news-archive/2014/10/15/walmart-will-accelerate-investments-in-e-commerce-and-moderate-global-square-footage-growth

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