Professional Documents
Culture Documents
- Agenda
1. A Retrospective on its Growth
4. Wal-Marts Response
Global Ambitions
Re-thinking One-Size-Fits-All Approach
Flexible Workforce
Wal-Mart: A Behemoth
1962
1980
1985
Focus of IT Investments:
Applications that directly enhanced its core value proposition EDLP
and increase sales through micromerchandising
Dr. Lakshmi Mohan
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400
Kmart
300
Target
200
Wal-Mart
100
0
2000
2001
2002
Year
15
1999
109
Kmart
Sears
181
148 Wal-Mart
Wal-Mart
87
133
Kmart
Sears
118
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Costs As a % of Sales
15.8%
(19.4% in 1984)
19.0%
22.2%
24.4%
29.4%
33.3%
Circuit City
K-Mart*
Caldor*
Bradlees*
Federated Dept. Stores
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For Example:
Cross-training of employees allows them to function
effectively in more than one department at a time.
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Wal-Mart gives them information at their finger-tips and the freedom to act.
If someone asks me how we manage a $100 billion company, I tell them a store
at a time, and we constantly challenge that unit to make it the best.
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A Model of Frugality
- In Practice
No signs of opulence or ego at the companys headquarters.
Lee Scott, the current CEO, drives a VW beetle and shares a
hotel room. John Menzer, head of Wal-Mart International,
sits in a tiny office on the same floor as his staff.
Executives take out their own rubbish, pay for their coffee
and are told to bring back pens from conferences !
Another penny-saving practice: call vendors collect !
Expenses on a buying trip should not exceed 1% of the cost
of the items purchased.
Dr. Lakshmi Mohan
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Nothing at all profound about any of our principles in fact, theyre all
common sense. Most of them can be found in any number of books or
articles on management theory.
But I think the way we have applied them at Wal-Mart has been
just a little bit different.
Dr. Lakshmi Mohan
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Most Important,
Think One Store At a Time
That sounds easy enough, but its something weve constantly
had to stay on top of. Because our sales and earnings keep going
up doesnt mean that were smarter than everyone else, or that we
can make it happen because were so big. What it means is that
our customers are supporting us. We know what we have to do:
keep lowering our prices, keep improving our service, and keep
making things better for the folks who shop in our stores.
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We let them see all the numbers so they know exactly how they are
doing within the store and within the company. They know their
costs, their markup, their overhead and profit margins. Its a big
responsibility and a big opportunity.
And, we give them incentives to want to win.
Dr. Lakshmi Mohan
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Thats why we at Wal-Mart are fanatics about our managers and buyers getting
off their chairs here in Bentonville, and getting out into those stores. We have
12 airplanes only one of them is a jet, Im proud to say in our hangars out at
the Rogers, Arkansas, airport, and thats why they are there.
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39%
Clorox
23%
Revlon
20%
PJR Tobacco
20%
17%
Dog Food
36%
Disposable diapers
32%
Photographic film
30%
Toothpaste
26%
Pain remedies
21%
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Punctuality of deliveries
Data-documented problems about meeting orders or returns of
defective products by customers
Suppliers not meeting sales targets would face tougher
negotiations in the future from the steely Wal-Mart buyers.
RFID Mandate to Top 100 Suppliers in 2003
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Vendor-Financed Inventory !
How Cross-Docking Works
At Wal-Marts new distribution centers, P&Gs trucks are
unloaded directly to trucks that will head for Wal-Mart Stores.
The toothpaste is never even put on warehouse shelves. Once
a truck is full, it heads to the stores.
Products are put on the shelf within 4 hours, and are usually
sold within 24 hours.
Despite this tight delivery schedule, Wal-Mart has 10 days to
pay P&G.
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Today:
Wal-Mart: Largest Toy Retailer: 25% market share
--- Toys R Us Share: 15% (2003 Sales: $11B)
--- Value Proposition: One better than Toys R Us: Rock-Bottom PRICES
WAL-MART STRENGTHS:
--- Super-efficient supply chain
--- Mass retailer, with a broad diverse array of products
--- Can afford to use toys as a loss-leader (lose money on toy sales) to lure in
customers who then purchase higher-margin goods
- Toys R Us just doesnt have that luxury
Source: Wall Street Journal, August 31, 2004
Dr. Lakshmi Mohan
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2.
3.
4.
Source: www.fastcompany.com
Dr. Lakshmi Mohan
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6.
7.
Source: www.fastcompany.com
Dr. Lakshmi Mohan
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Use of IT
Cost Control
Partnership with Suppliers
Partnership with Employees
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The man is a genius. He realized even at the rudimentary level he was on in 1966,
operating those few stores that he had that he couldnt expand beyond that horizon
unless he had the capability to capture this information on paper so that he could
control his operations, no matter where they might be Gave him the ability to open
many stores, and run them well, and be profitable.
Dr. Lakshmi Mohan
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# of Stores
1
5
13
32
51
78
125
195
276
1,528
Sales (million $)
31
78
168
340
678
1,200
26,000
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Growth of IT in Wal-Mart
1978: Bar Coding & SKU Inventory System
When Jack Shewmaker became our COO in 1978, he worked really hard at
getting me to invest in more and better computer systems, so that we could
track sales and inventories across the company, especially in-store
transactions.
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Value of IT in Wal-Mart
- According to Walton
A few years ago, we built this huge building right next to our offices
around 135,000 sq. ft. just to house the computers, and everyone
at the time told me how much room wed have to grow. I mean it was
really empty in there just 2 or 3 years ago. Well, already its
completely full of computer equipment. And, when I look back, its
no wonder
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Value of IT in Wal-Mart
- According to Walton
We keep a 65-week rolling history of every single item we stock.
I can pick anything, say a little combination TV/VCR like I use
here in my office, and tell you exactly how many of them weve
bought over the last year and a quarter and exactly how many of
them weve sold. Not only overall, but in every region, every
district, every store.
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Sharing of Information
- Key for Win-Win Partnership
We assembled the top ten officers of both the companies in
Bentonville for two days of soul-searching and thinking.
Within three months, we had created a P&G / Wal-Mart team to
build a whole new kind of vendor relationship.
We formed a partnership to conduct our business, with one of
the most important outcomes being that we started sharing
information by computer.
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Then, Eureka !
- Walton Saw the Light
In the very early days of the business, I was so doggoned competitive,
and so determined to do well, that I was blinded to the most basic truth,
really the principle that became the foundation of Wal-Marts success
Back then, I was so obsessed with turning in a profit margin of 6% or
higher; and, no matter how you slice it in the retail business, payroll is
one of the most important parts of overhead. Overhead is one of the
most crucial things you have to fight to maintain your profit margin
That was true then, and its still true today
The larger truth that I failed to see turned out to be another of these
paradoxes like the discounters principle of the less you charge, the
more you will earn
AND, HERE IT IS: The more you share profits with your
associates, whether its in salaries or incentives or bonuses or
stock discounts the more profit will accrue to the company.
Dr. Lakshmi Mohan
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I think it was the first time I realized how little the company was doing for
them. I suggested to him that, unless those people were on board, the
top people might not last long either .
I remember it because he didnt really appreciate my point of view then. Later
on, I knew he was thinking about it, and when he bought it, he really bought it.
We didnt include our associates in the initial, managers-only profit sharing
plan when we took the company public in 1970. There was nobody around
preaching that philosophy in those days
In 1971, we corrected my big error of the year before, and started a profitsharing plan for all the associates
Profit-sharing has been the carrot thats kept Wal-Mart headed forward.
Dr. Lakshmi Mohan
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A PARADOX !
Wal-Mart Retreats from Germany in July 2006
Entered Germany in 1997
Bought two struggling German retail chains
95 stores in 1999
Persisted for 8 years before admitting defeat
Too afraid to tarnish its image
by pulling out of the worlds third largest economy
Fiscal 2006 Sales: $ 2.5 B; Losses: $ 127.5 M
Total International Sales: $ 63 B; Global Sales: $ 312 B
Struggled from the outset against stiff local competition
Closed 10 of the initial 95 stores
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German Discounters
- Proved to be A Real Match for Wal-Mart
Power of Privately-held Discounters Aldi & Lidl
Grown their market share to 40% vs. < 2% for Wal-Mart
Had discovered the efficiency of drab out-of-town store sites
and economies of scale that made their suppliers sweat
Kept costs AND prices low
Underpriced Wal-Mart
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Challenges in Japan
Low-cost format is not established in the market
Will Japanese consumers respond to its efforts to turn
Seiyu, a conventional Japanese department store, into
something closer to its discount store model?
Source: The Financial Times, July 29-30, 2006
Dr. Lakshmi Mohan
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Maturing US Business
- Impacting Wal-Mart Share Price
Sales Growth at Existing Stores Sliding Since the Late 1990s
Source: Wall Street Journal, Sept 7, 2006 & Economic Times, Aug 15, 2006
Dr. Lakshmi Mohan
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Impact of Lawsuits
Sam Walton believed that there were only two types of employees he wouldnt
give a second chance to those who abused people and those who stole
We have 1.5 million employees, including every kind of person known to
man racists, sexists, etc. If someone made a negative racial comment in the
past, instead of dealing with it severely, we might have transferred him.
In todays world, he has to go.
The number of people not doing the right thing is a small %. But it is unfair
when that number is seen as representative of a wider institutional pattern.
Source: Wall Street Journal, Oct 6, 2004
Dr. Lakshmi Mohan
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CEOs Response:
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By offering customers all the same things, you end up under-serving everyone
because you dont have an offering that is specific to that customer segment.
CEO of U.S. stores and architect of the new approach.
Huge shift for a Company that grew on the strength of standardization
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Will It Work ?
Piloted in 39 Stores Roll-out to All U.S. Locations by end-2007
Our surveys indicate that customers had a better shopping
experience.
Affects 1M workers
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