Wal-Mart Stores

By Team 2 Ashish Goel (200) Shweta Sridhar Bhavya Kakkar Nikhil Nair Nitin Jaggi 191 Aaditi Garg Puneet Agrawal (167)

 Wal-Mart is an American multinational retail corporation that runs chains of large discount department stores and warehouse stores. The company is the world's largest corporation according to the Fortune Global 500 list in 2013, the biggest private employer in the world with over two million employees, and is the largest retailer in the world. Each week, more than 245 million customers and members visit 11,000 stores under 69 banners in 27 countries and e-commerce websites in 10 countries. With fiscal year 2013 sales of approximately $466 billion, Walmart employs 2.2 million associates worldwide. Always Low Price Always Save Money, Live Better Vision Statement Companies vision is to provide good quality and services to customers while remaining the market leader and striving daily to be the most admired company

 In 1945 Sam Walton opened the first Ben Franklin franchise in Newport Arkansas and operated them with his wife, Helen and brother, Bud. "Walton's Five and Dime." These were small chains that were very successful. In November of 1962 WalMart was opened. Wasnt until mid 1970s that Wal-Mart began to grow.
April 19, 2006

1st IPO in 1970. Robson Walton named chairman of the board in 1992 President and CEO in 2000H.Lee Scott Vice President- Laura Philips

1) Threat of New Entrants-Low Entry barriers are relatively high, as Wal-Mart has an outstanding distribution systems, locations, brand name, and financial capital to fend off competitors.Wal-mart often has an absolute cost advantage over other competitors. 2) The Bargaining Power of Buyers: Low pressure The individual buyer has little to no pressure on Wal-Mart. Consumer could shop at a competitor who offers comparable products at comparable prices, but the convenience is lost. 3) Bargaining Power of Suppliers: Low to Medium pressure Since Wal-Mart holds so much of the market share, they offer a lot of business to manufacturers and wholesalers.61000 suppliers from more than 70 countries.Walmart heavily influences its suppliers.More than 28% of revlon and del monte foods revenue comes from Walmart.

4) Competitive Rivalry Within the Industry-Medium Currently, there are three main incumbent companies that exist in the same market as Wal-Mart: CostCo Kroger Target Sears K Mart Tesco of Britain Carrefour of France.

5) Substitute Products: Low to Medium When it comes to this market, there are not many substitutes that offer convenience and low pricing. Online shopping proves another alternative because it is so different and the customer can gain price advantages because the company does not necessarily have to have a brick and mortar store, passing the savings onto the consumer.

Low Wages Discrimination Child Labor Union Busting Environment Pollution Expensive HealthCare Monoply

Due to negative PR Walmarts stock Price has dipped 27% in 7 years whereas competitors like Costcos stock price increased 20% and that of Targets 70%. Key competitors are growing 2 to five times of walmarts growth

WalMart Stores

Sams Club

Wal-Mart International

 Wal-Mart Stores 3 Retail store formats in all 50 of the United States. 2257 Supercentres(line of food products) 1074 Discount Stores(General Merchandise) 112 Neighbourhood Markets (for Grocery products)

 Sams Club 579 clubs exceptional value on brand name merchandise at members only prices for both business and personal use.

Sams Club

Retail Warehouse format

Samsclub.com

 2760 stores in various formats, under diverse brand names. 13 foreign countries and territories. 37.4% - share of companys international revenue from UK, 23.6 % from Mexico. One of the challenges for each segment is determining the appropriate product offerings for each location.

A wide assortment of good quality merchandise The lowest possible prices Guaranteed satisfaction with what you buy Friendly Knowledgeable service Convenient hours Free Parking A Pleasant shopping experience

Neighbourhood Market 29,000 Items per store. 120000 items in each discount store 142000 items in each Supercentre 1 Million SKUs offered by Walmart.com

Sams clubs- Electronics, furniture, jewellery, office products, health care, business, personal and financial services. Caters heavily to customers with little or no access to banking services, often described as the Unbanked.

History of leadership succession at Wal-Mart

Year 1962 1984 1988 1992 2000 President Sam Walton David Glass David Glass David Glass H.Lee Scott CEO Sam Walton Sam Walton David Glass David Glass H.Lee Scott Chairman Sam Walton Sam Walton Sam Walton Rob Walton Rob Walton

Wal-Mart has a 14 member active, high-calibre, and powerful board that has been instrumental in encouraging the company to more quickly address critical issues.

 4.1 Billion outstanding shares42% held by insiders and beneficial owners. 37% held by Institutional investors and mutual funds. 1.7 billion shares owned by the Walton family. 2.4 million shares put together owned by CEO and the director. In total, as many as 312,423 shareholders held common stock in Wal-Mart in 2007.

1997

2007

Assets

$39 billion

$151 billion

Revenues

$100 billion

$345 billion

Net Income

$3 billion

$11.7 billion

Total Shareholder Equity

$17.2 billion

$61.8 billion

Source: Wal-mart

Sales by Region Total Sales of $345 billion in 2007,domestic U.S. revenues totaled nearly $268 billion, (77.6 %) while international revenues were $77 billion,22.4 % sales. Domestic sales growth has averaged 8 .7% versus average international growth of 17.8 %.

Sales by Segment Wal-Mart Stores brought in 65.6 percent of all sales in 2007, down from 75.1 percent of sales in 1997. Average annual sales per warehouse were $73 million for Sams Club versus $135 million for Costco in fiscal 2006.

Wal-Mart's online business estimated $135 million in sales in 2002, JCPenney.com had sales of $324 million and Amazon.com reached sales greater than $3 billion in the same year.

Market Leadership
Wal-Mart is the dominant retailer in the South and small-town markets, while Costco is the leader in California and Washington.
According to ACNielsen, in United States Wal-Mart controls: Dry grocery-20%, Non-food grocery-29%, Health and Beauty aids-30%, General merchandise-45%,and Toy segment-45%. However, Target, Kroger, and Family Dollar Stores are all growing revenue faster than Wal-Mart.

Financial Ratios

 Wal-Mart's 5.87 percent operating margin and 3.23 percent net margin. Target enjoys higher margins, closer to those of JCPenney , while Costco has lower margins, closer to those of Dollar General and Kroger. In Supercenters, groceries serve a larger role of driving store traffic and drawing customers toward higher margin products. From a management effectiveness standpoint, Wal-Mart is creating a return on equity that is higher than Target's and much higher than Costco's and a return on assets that is nearly identical to Target's and higher than Costco's.

 Wal-Mart increased company sales(not including Sam's Club fees) by 8.3 percent in the first quarter to $85.3 billion. Overall operating income Increased 7.9 percent yearover-year with nearly 53.1 percent of the change coming from Wal-Mart's international operations. Wal-Mart's April same-store sales decrease was the worst ever recorded in 28 years of tracking. Much of the April decline was blamed on the apparel business, which constitutes 10 percent of Wal-Mart's sales.

1318 general merchandise stores 182 super target stores Online business ( target.com) upscale discounter that provides high quality, on trend merchandise at attractive prices in clean, spacious and guest friendly stores

 one of the nations largest retailers 2468 supermarket and multidepartment stores under two dozen banners:
Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smiths, Frys, Frys Marketplace, Dillons, QFC, City Market

 Sears holdings (Kmart and Sears) US Tesco Britain

Emphasizes convenience Looking to expand to the West Coast of the USA

Carrefour France
Second largest retailer after Walmart Fouses on hypermarkets

Amazon Niche Competitors: Safeway, Best Buy, Circuit City, Home Depot, Ace hardware, Lowes,Kohls, Barnes & Noble etc.

 Global procurement services team has 1600 members in 23 countries Buy merchandise from suppliers in more than 70 countries (including 61,000 suppliers in USA) Walmart not only dictates delivery schedules and inventory levels but also heavily influences product specifications Many suppliers choose between designing the product their way or tha Walmart way

 175 m people each week Shopper profile (Exhibit 17) Even though after recently hiring well known PR experts in hopes of creating a more positive image, 2-8 percent of customers have ceased shopping at the chain because of negative press Struggle with bad press and lawsuits

 Basic retail industry forces Customers have many alternatives for product but few for shopping experience New potential market entrants with similar scale would have difficulty competing in any substantial volume on price across wide array of merchandise Large incumbents have also built economies of scale that would be difficult for a start up to replicate

 Government
Poster company on political issues related to trade, health care, environment, worker pay and general anti corporate sentiment Breaking antitrust laws by using power to micromanage market Handling of hazardous waste Walmarts political action committees contributions to candidates are being returned as sign of protest Governments in Inglewood, California, Cedar Mill, Oregon, Vancouver have rejected Walmarts extension plans.

 Legal
Class action lawsuits common Savaglio v. Walmart stores: plaintiffs allege they werent provided meal and rest breaks in accordance with California law Dukes v. Walmart Stores: alleged to have engaged in a pattern and practice of discriminating against women in promotons, pay, training, and job assignments.

Global
Trade barriers coming down Bilateral and multilateral free trade agreements shape the market

 Technology
Development of Radio Frequency Identification (RFID) unabated growth of e commerce Increasing pervasiveness of broadband Internet Access in most developed countries

Demographics
Americans getting older Country becoming more diverse Distance between have and have nots is growing Bifurcation in income distribution

 Generic core strategy Cost Leadership(but some strategies go beyond cost approaches) The corporate plan on 5 pillars-

Broadening our appeal to our customers

Improving operations and efficiency

Making Wal-Mart an even better place to work Contributing to our communities

Driving global growth

 2 key strategies to overcome external issues affecting the company including environment and community impact issues.

Sustainability efforts
Localized charitable giving to help portray it as a responsible corporate citizen.

 Sustainability goals Sold 100 million compact fluorescent bulbs by 2008. Reduce packaging by 5% by 2013. Bought fish from certified fisheries Sold more organic and environmentally friendly products. Make company facilities and trucks more energy efficient.

 The Wal-Mart foundation in 2006 gave more than $415 million cash and in kind merchandise to 100000 organizations worldwide. Largest corporate cash contributor in America. Gave most of the money at the local level where it can have the greatest impact. Beefed up pro-community, pro-sustainability, prohealth care information on its website. Television ads and its annual report.

 A 30 minute television show airing on Lifetime and USA networks. Gives Wal-Mart a chance to showcase its incredible associates and the variety of ways they give back to their communities.

Stresses its benefits to suppliers and communities, commitment to providing affordable healthcare and competitive wages for its associates.

 Highly efficient and innovative SCM operation. Combines tough, low cost procurement tactics, leading edge information systems and Rocketscience logistics. Retail link a computerized system in which suppliers plan, execute and analyse their businesses Electronic data interchange, lowering expenses and increasing productivity.

 Internet based Transportation link system(to help them move goods). Store-bound shipments travel by the companys 7000 trucks, one of the largest fleets in the world. Satellite based tracking system technology is being installed in the companys entire fleet of over-the-road trailer. Legendary Inventory management capability driven by advanced Texlon barcode system, enabling suppliers to use pull production. Barcodes to be eventually replaced by RFID. SCM intended to provide value for Customers, associates and shareholders.

 Customers the prime focus since Jan 2007. 4$ Generic prescription program( Opening price point strategy). Provide retail space to service providers such as nail salons, hair salons, coffee shops, McDonalds, etc.

Realigned merchandising around 5 key power categories Entertainment, grocery, health and wellness, apparel, and home.

Grocery Bakery Produce Deli Frozen Food Apparel Housewares Entertainment Electronics Tire & Lube Express Automotive School Supplies

Pharmacy Health & Beauty Vision Center Jewelry Lawn and garden Portrait studio Photo Lab Hardware Furniture Sporting Goods Toys and Games Office products

 3 strategies to move Wal-Mart toward a more customerfocussed position. 1. Mimicking Targets upscale, fashion forward appeal FAILED 2. Localising selections based on store neighbourhood demographics WANING 3. Appealing to the three universal types of low price seeking customers who currently shop at Wal-Mart Now guides merchandising and marketing decisions
Brand Aspirational Price Sensitive affluents Value price shoppers

 Focussed on 3 areas Reinvigorating the brand by broadening products and services Improving inventory management and other performance measures Optimizing the In-club experience.

 To Prioritize where the greatest growth and greatest returns exist. Majors America primarily, UK, Japan, China and India over the long term focussed portfolio execution.

Global Leverage or taking full advantage of their world-wide assets, including formats, information systems , etc.
Improved execution in all phases of customer service, differentiation with competitors and development of new channels and formats Motto -Offering working families the things they need at the prices they can afford

 Not been able to convince the American consumers that is should be a destination for Casual fashion. Wal-Mart will need to struggle against the urge to centralize operations and eliminate decision making from the front lines where managers have face to face contact with customers. Sluggishness of same store sales relative to Wal-Marts competitors. Difficulty of expanding in the domestic market, whether because of community opposition or geographic saturation.

QUESTION 1 How can Wal-Mart Stores and Sams Club increase same-store sales?

 Maintaining the strength of the provided services or items to be sold in each location between these 2 stores Program expansion for each segment regarding to their product or services to be sold to customers (product/services variety) Implementing the proposed strategies: Reinvigorating the brand by broadening product and services Improve inventory management and other performance measure Optimize the in-club experience

Question 2 How should the company capture share of middle- and upper-income wallets?

 Sell inferior goods for which demand increases when income falls . Provide substantial services and appropriate products for each location Always take initiatives in order to satisfy customers and Creates value for customers by putting customer first and having customer focused strategies. Have a Highly efficient and innovative supply chain management operation.

Question 3 Should Wal-Mart Stores fully retreat from fashionforward merchandising and marketing . Will its neighborhood-store-localization strategy increase sales enough to offset the associated cost? What should it do to make its new 3-types-of-customers segmentation strategy work?

 No, they should make it slowly to see the response from the customers. So, they only have to retreat partially. Neighborhood store localization will increase sales and should be enough to offset the associated costs since they have Launched 6 different types of customized stores store of the community that Reflect the individual needs of each neighborhood in different demographics.

 In order to make the customer segmentation strategy work they should: Have more of a neighborhood feel to it. Provide better quality items. Develop unique, innovative product and provide distinguished brand. Reduce the product on shelves and widen the aisles. Have More UPC scanners in the store.

QUESTION 4 Should company spin off Sams Club? If not, what should it do to compete more effectively against Costco?

 In desperate times, spinning off Sams Club can be considered as a good idea to give Wal-Mart the room to breath as Wal-Mart already has stores in U.S and fast-growing international operations . Due to the stock price soared for the last few years under the leadership of Lee Scott , spinning off Sams Club can help to increase stock price a little bit plus allow WalMart to focus more on its other fast-growing marketing segmentation.

QUESTION 5

ls Wal-Mart expanding the right kind of new stores at the right pace and in the right places? How and where should the company continue to grow internationally? Should Asda buy J.
Sainsbury?

ls Wal-Mart expanding the right kind of new stores at the right pace and in the right places?

Yes, because Wal- Marts internationals U.K. based Asda subsidiary brings in the largest share of the companys international revenue, at 37.4 percent. Then, Wal- Mart de Mexico provides the next largest share, at 23.6 percent of Wal- Mart International sales. Unfortunately, Wal- Mart face difficulties to obtain the scale and results that targeted such as in Germany and South Korea due to providing inappropriate products for that location.

It is also targeting big markets like India and China which will provide of millions of customer

How and where should the company continue to grow internationally?

Prioritize where the greatest growth and greatest return exist include the America primarily, followed by U.K. and Japan, as well as China and India over the long term. It should take full advantages for their worldwide assets including formats, Information System, purchasing organizations, category expertise etc

Should Asda buy J. Sainsbury?

Yes, because as the second largest in U.K., Asda should acquiring the third- largest U.K. retailer, the J. Sainsbury to better compete with U.K. leader- Tesco.

 Pursuing two key strategy to overcome external issues affecting the company, including environmental and community-impact issues, among others. Strategies include sustainability efforts and localized charitable which giving show it as being a responsible corporate citizen and a good neighbor. Launched its global environment sustainability initiative in 2004.

 Wal-Mart has shown pro-community, pro-sustainability and pro-health information on its website, television ads, and annual report.

Stresses its benefit to suppliers and communities, as well as its commitment in providing affordable health care and competitive wages for its associates.

 We say NO Diversify products, merchandising and marketing strategy based on their strength as one of the top ten global retailer - Large scale of operations, powerful retail brand, pricing advantage, efficient logistic system Overcome weaknesses - Continuous product recall, community relations
problems, environmental issues

Opportunities - IT development, opportunities in developing countries such as Asia Effectively manage threats - Intense competition, foreign currency fluctuation,
recession, expansion issues

STRENGTH
Large scale of operations Powerful retail brand Pricing advantage Efficient logistic system

WEAKNESSES
Continuous product recall Community relations problems Environmental issues

OPPORTUNITIES
Opportunities in developing countries such as countries in Asia

THREATS
Intense competition Foreign currency fluctuation Recession Expansion issues

Question 8 Should Rob Walton replace Lee Scott? If so, when and with whom?

Michael T. Duke

 Given his previous role as head of international operations, Duke is likely to expand Wal-Mart's presence in Russia and China to offset slowing growth at home. Risk taker and strategic thinker
Duke is more of people person rather than Lee Scott and this might actually help to overcome issues concerning employee-employer relationship

 Company should be proactive. It should not take 7 year to change decision Success may not last long until your employees are not happy with you About efficient supply chain and use of IT Financial management is as important as supply chain management Every country has its own culture and style and one countrys method can not guarantee success in another