Wal-Marts case study

Presented By Adil Ahmad Kamal Khwaja Fahad Liaqat

Strategic Management Lahore School of Economics

Presented to Ms. Saba Rana October 23rd, 2013

General Overview Wal-Mart

Wal-Mart is a public company, active in the retailing industry. It was founded by Sam Walton and his brother J.L. (Bud) Walton in 1965, with the opening of the first Wal-Mart store in Rogers, Arkansas. Nowadays, Wal-Mart owns 8,500 stores worldwide, employing more than 2million employees and headquartered in Bentonville, Arkansas, United States. Since 2009, Mike Duke is CEO of the company. Wal-Mart runs different chains, which have different main target groups. The divisions of Wal-Mart are separated into891 Wal-Mart discount stores, 2,612 discount centers, 602Sams Clubs and 153 neighborhood markets. The discount stores, neighborhood markets and superstores are mainly targeting the broad customer base, whereby mostly low- and middle-income customers make the majority of all customers. These three divisions are mainly differentiating through size of the store, size of the city where the store is resident and the number of employees. The discount stores are mostly sized between 50,000 and 100,000 square feet, employing 220 employees in average, while the superstores have 186,000 square feet in average and employ between 200 and 550workers. The neighborhood markets have usually round about 40,000 square feet and employ between 80and 100 people. In addition to these three divisions, the Sams Club division is a membership-only business and has more than 45 million registered members. It mainly offers groceries and general merchandises in large quantities. One can say that the Sams Club segment found a niche market, because it is often used by owners of small sized businesses. However, also non-members and private customers that want to try out the offers can join the club by buying one-day memberships or paying surcharges as a percentage of the price of the purchase. In 2009, Wal-Mart reported $404 billion of revenue and a net income of $13.6 billion. Since 2002 (except for 2006) Wal-Mart was ranked number one on the Fortune 500 list (an annual list published by Fortune magazine that ranks the top 500 U.S. corporations with the highest gross revenue). Outside the U.S.-market, Wal-Mart is active in 14 countries, including 4,200 stores and 600,000 employees. Especially the Mexican and Canadian market (1,200, respectively 318 brands) are important markets for Wal-Mart. Wal-Marts Vision and Mission Statement The vision- and mission statements of a company should provide different benefits. A vision statement should answer the question What do we want to become? and should remind every employee of the company about the overall goal of the company. In this respect, the vision is also an important tool to remind the managers what they want to achieve and in which

direction they want the company to go to. A mission statement defines the organization's purpose and primary objectives and should answer the question What is our business? Wal-Mart does not have an official mission- or vision statement. In spite of this, on their homepage, Wal-Mart names the Purpose of their business, which was created by the founder of the company, Sam Walton. This statement can be regarded as being similar to an actual mission statement: If we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life. In addition the statement Saving People Money So They Can Live Better can be found on the homepage, which is kind of the short version of the previous statement and, at the same time, serves as one of their main advertisement slogans. Although one could argue that these statements could also be the vision statement of the company it gives more an overall idea of the companys business instead of defining what the company wants to become, even though it does not specifically answer the question What is our business?, which is, according to Fred R David, the main question that needs to be answered by the different components of a mission statement. In 2002, when the former Public Relations Coordinator of Wal-Mart, Kim Ellis, was asked how a mission statement of Wal-Mart could be like, he stated that it would probably be To provide quality products at an everyday low price and with extended customer servicealways. All three statements (the two from the homepage of Wal-Mart and the one of Kim Ellis) point at Wal-Mart offering high quality products for low prices in order to make life of their customers more enjoyable. This is very similar to their main advertisement slogans but not to an elaborated mission statement, wherefore one has to say that both statements are not broad in scope or inspiring; they do not reveal that the firm is environmentally responsible or is enduring. In addition, they do not imply the 9 essential components of a mission statement, established by Fred R.David, which are: Customers Who are the firms customers? Products or services What are the firms major products or services? Markets Geographically, where does the firm compete? Technology Is the firm technologically current? Concern for survival growth and profitability Is the firm committed to growth and financial soundness? Philosophy What are the basic beliefs, values, aspirations, and ethical priorities of the firm? Self-concept

What is the firms distinctive competence or major advantage? Concern for public image Is the firm responsive to social, community, and environmental concerns? Concern for employees Are employees a valuable asset of the firm? The actual mission statement, obviously, does not state one of these nine aspects, wherefore Wal-Mart should think about creating an official mission (and vision) statement, which meets the requirements of an appropriate mission- or vision statement. Proposed Vision A proposed vision statement for Wal-Mart, which answers the question What do we want to become? and reminds every employee of the company about the overall goal of the company could be: Our commitment is to become the leader in the retailing branch all around the world, which makes the life of every customer more enjoyable by offering products with the highest quality standards for the lowest price possible in combination with the best and most supportive service available. Proposed mission statement The proposed mission statement for Wal-Mart should define the organization's purpose, primary objectives and also answer the question What is our business? In addition it should stick to the previously mentioned nine elements of an appropriate mission statement, established by Fred R. David. Bearing this in mind, the proposed mission statement could be as following: 1. Our customers - We feel to have the obligation to satisfy our customers all around the world. 2. Our products - All products, in every store, no matter where it is located, maintain the same quality standards to ensure that our customers get highest quality available. 3. Our markets - The world is our market and we will put all of our effort into staying the world market leader in the retail business. 4. Our Technology - The nature of our business makes it indispensable to operate with the most current technology available to increase the speed of our daily operations and to ensure that our customers receive the best service available. 5. Our concern for financial soundness A constantly ongoing strives for increasing growth- and profit rates is the catalyzer of all our employee. In addition it gives an assurance to the shareholders that it is of highest importance to us to put all efforts into our business.

6. Our philosophy - It is our basic belief that every individual deserves respect and a fair treatment. 7. Our concept - Offering high-quality products for the lowest price possible enables us to obtain a predominant position in the retail business. 8. Our community involvement - The highest concern of our foundations and charitable partners is to be a role model in supporting all kinds of social, community and environmental projects through personal engagement and donations. 9. Our employees - Every employee is a member of the Wal-Mart family and the most valuable asset of the firm, no matter what kind of origin, race, gender, age or religious affiliation. Competitive advantage Wal-Marts competitive advantage is linked to their success which is attributed to their culture. Wal-Mart gains a competitive advantage through offering low prices (cost advantage), especially in food distribution compared to Super Kmart and super Target, their main competitors. Furthermore, they have the advantages of offering the best value (for low cost products), the great selection of quality merchandise and the genuine, high standard customer service. Additionally, Wal-Mart operates in 50 counties within the United States and in 14 international countries. In the US their discount stores amounted a number of 891 and supercenters a number of 2612. Internationally they are represented by 762 discount stores and 1064 supermarkets. These numbers show that Wal-Mart has a competitive advantage through their discounted offers due to their widely spread presence of divisions (discount stores, supercenters, Neighborhood, Sams Clubs). This gives the main overall advantage of strategic global positioning where people will associate the name with the major advantages mentioned above. Wal-Mart invests a lot in information technology which brings them to the advantage of being leader; in logistics, distribution, and inventory control (having installed a computer network in 1970 which connected all Wal-Mart stores and distribution centers). Furthermore they installed bar-code reader in all distribution centers by the late 1980s which reduce the labor costs. In the year 1990 Wal-Mart then introduced Retail Link software which connects again its stores and distribution centers but this time with its suppliers to get deliveries even more quickly Additionally, Wal-Mart operates the world-largest private satellite communication system. Around the year2005 Wal-Mart integrate Radio Frequency Identification which is a technology in which each individual item receives a tag that can be read by a radio signal, thus facilitating tracking shipments, inventory and sales. To conclude, the size and the high efficiency level result on the one hand from the lower cost Wal-Mart offers compared to their competitors but alternatively, its expansion could have enabled Wal-Mart to take advantage of economies of scale, reducing its costs in contrast to the competitors. The better technology allowed Wal-Mart to grow and this grow has lowered it costs through economies of scale.

Objectives and Strategies One of the objectives set out for 2010 was a growing operating income at a faster rate than net sales. In addition, the opening of 715-785 new units worldwide, including 140 supercentres, 25 neighborhood markets and500-600 Sams Clubs was a quite ambitious goal. However, the opening of new stores will help Wal-Mart to increase its market share, especially in mid-sized towns. General Long term objectives of Wal-Mart are permanent growth by expansion in the United States and internationally as well as continual adaptation to the market conditions and the strategies of competitors. Furthermore, the opening of new stores in external markets should bring forward Wal-Marts effort of expanding their international store quantity and increasing their international brand awareness. Widespread name recognition and customer satisfaction shall be linked to the Wal-Mart brand. The main strategy of Wal-Mart is to use discount retailing and offering all products for the lowest prices possible in combination with the best quality available for this price. The stated purpose of Wal-Marts pricing policy is to meet or beat. On the one side, this cost leadership strategy mostly creates satisfied customers, because they only have to pay low prices for their products, and, on the other side, local competitors often cannot keep up with the low prices of Wal-Mart. Every Wal-Mart store is expected from management to compete against its local competitors (which are often smaller local stores) until the Wal-Mart store has gained significant control over the respective market. In practice this often means, that either the Wal-Mart store or the other competing store(s) win over customers standing, while the other one often has to be shut down. However, in most cases, Wal-Mart is very successful with this strategy. To push on their international expansion, Wal-Mart often makes use of corporate takeovers of a national retailer to get into the specific markets. After the respective companies have been bought, Wal-Mart reconstructs them into Wal-Mart stores. Even though this aggressive strategy is often successful (for example in the Canadian market) the company experienced setbacks in some other markets. Industry Analysis Wal-Mart has many internal and external factors that are key to being successful. The three important opportunities effecting Wal-Mart are to increase online sales, open new stores/supercenters and offer a wider variety of items. Without opening new stores, Wal-Mart stands to lose market share. Increased demand for lower prices and product variety has driven consumers to internet shopping. Wal-Mart needs to focus on marketing to these customers in order to retain business from consumers not visiting retail stores. Wal-Mart also needs to focus on converting regular stores to supercenters to provide more product variety. Some threats that Wal-Mart faces: fierce competition from competitors. Increases in raw material prices pose a threat to Wal-Mart as products rise in price if raw materials increase. Wal-Mart faces the threat of government intervention in trade. This could affect the relationship with suppliers and cause

higher prices if tariffs are imposed. Depressed economies have caused lower consumer spending. With less spending, consumers are substituting brand name products with cheaper products. The external factor evaluation for Wal-Mart shows that strategists need to focus on many of the opportunities that could increase sales and need to be aware and manage external threats. There are also internal factors that help executives make the best decisions about projects. First, the income and sales figures increasing is a central factor. Without increased revenues, the company will not have funding to expand or convert outlets into superstores. The strong global supply chain that Wal-Mart has is also vital; without these relationships Wal-Mart would not be able to provide low priced products. Limited access to international markets is a weakness that Wal-Mart faces because currently most of the market share is centered in the US. Another weakness is high turnover rate of employees which causes gaps in customer service and loss of customers. High inventory levels cause large amounts of cash to be tied up, which prevents expansion. Therefore, Wal-Mart has many strengths and weaknesses that can help strategists plan for current and future business ventures. Competitive Analysis The Porter Five Forces model indicates several areas of high level concern. Rivalry among competing firms, potential for substitute products, and bargaining power of consumers are all high. Entry of new competitors is an area of lesser concern due to high barriers entering the industry. Suppliers are a midlevel concern due to competition and risk when dealing with suppliers abroad. Upon studying the competitive profile matrix, Wal-Mart has the highest weighted score when compared to competitors. Wal-Mart leads the way in the most important factors, including advertising and global expansion. Target is a large competitor that should be followed closely. In product quality, Target appears to be the highest, but Wal-Mart has the best score in market share (See Appendix 3). Boston Consulting Group (BCG) Matrix Usually, the BCG is used to determine what products of the business take priority over others, based on their product life-cycle. Our BCG will be adapted and deal with Wal-Marts divisions instead of with its product lines. Roughly, the following divisions exist -Wal-Mart Stores U.S. -Sams Club -Wal-Mart International Two variables are of importance and influence the result. These are business growth rate and market share. The retail business makes sales worth $3trillion per year and Wal-Marts market share in this is 11.3% as of 2009. When comparing the net sales by operating segment for the year 2009, the following things become obvious:

Wal-Mart U.S.s market share of Wal-Marts overall sales was 63.7%, with an increase of 6.8% compared to the previous year. Wal-Mart International market share of Wal-Marts overall sales was 24.6%, with an increase of 9.1% compared to the previous year. Sams Club market share of Wal-Marts overall sales was 11.7%, with an increase of 5.6% compared to the previous year. Internal-External (IE) Matrix The IE matrix analyzes the strategic position of an organization. It uses the total weighted scores of the EFE- and IFE matrix as inputs. The total weighted scores of the EFE matrix are shown on the Y-axis, the total weighted scores of the IFE matrix are shown on the X-axis. A score of 1.01.99 on the X-axis represents a weak internal position, while 2.0-2.99 is considered to be average and 3.0 -4.0 represents a strong internal position. Similar to this, a score of 1.0-1.99 on the Yaxis is a low score, 2.0-2.99 medium and 3.0-4.0 is a high score. Depending on the outcome of this analysis, the result will be a positioning in one of the three main regions: If the division falls into cell 9, 8 or 6 the prescription would be harvest or divest. Most appropriate strategies for this case would be retrenchment or divestiture. If the division falls into the cells 7, 5 or 3, the prescription would be Hold and maintain, where market penetration or product development would be fitting strategies. In our case, the outcome of the EFE was a total weighted score of 2.62 and the outcome of the IFE was a total weighted score 2.51. Therefore Wal-Mart falls into cell 1. All divisions that fall into cell 4, 2 and 1 have the prescription Grow and build. Because of this, also the fitting prescription for Wal-Mart is Grow and build, which means that backward-, forward- or horizontal integration as well as market penetration, market development and product development are appropriate strategies. Grand Strategy Matrix The Grand strategy matrix is an additional tool for the formulation of alternative strategies. Depending on market growth rate and the businesses competitive position, a company will be positioned in one of the four strategic quadrants. In the case of Wal-Mart, the Grand Strategy Matrix identifies that the company is situated in quadrant I. When having in mind the Competitive Profile Matrix, Wal-Mart has a strong competitive position and scored with 3.25 in total. This score is relatively high and shows that Wal-Mart has a strong competitive position. Wal-Marts market growth rate in 2009, with 11.3%, can also be considered to be a rapid growth rate. For these reasons the company can be positioned in the first quadrant of the matrix. In this respect, the following alternative strategies are feasible: -market development -product development -backward integration -market penetration -forward integration

-horizontal integration SWOT & QSPM Analysis Wal-Mart represents powerful retail brand as noted in the SWOT Analysis in Appendix Five. Their strong brand presence, customer loyalty, and drive to expand globally can help the company to grow. Because Wal-Mart is trying to obtain an international presence, the focus on improving their internal weaknesses so that opportunities do not bypass them is vital. To do this, increasing the online presence should offset their high inventory. Wal-Mart could penetrate the international market with their discount retail chain. Wal-Mart can take advantage of their strengths in order to reduce the impact of external threats. The company could use their brand image and low prices to market to different segments of consumers. They could look at backward integration to get even lower prices on goods for its customers. As a part of the WT strategy, they could look into products that are being made in the U.S. to provide more jobs to Americans and to avoid unethical labor laws abroad. Lastly, they could offer those living in small towns better jobs and benefits in order to gain their approval of entering their community with new retail outlets. According to the QSPM analysis, Wal-Mart should focus on backward integration in order to better control their suppliers. By doing so, Wal-Mart could reduce the cost of producing goods to consumers. Consumers will get more for their money as reduced manufacturing costs reflect prices in stores. Also, Wal-Mart can use backward integration in order to build relationships with suppliers who manufacture higher quality goods. Consumers today want low prices, but also want quality products that will last. Strategy Recommendation For Wal-Mart to maintain its title as a retail leader, it must constantly develop and implement new strategies to address present and future obstacles. CNN Money recently stated that WalMarts, chief rival Target has been beating Wal-Marts prices on some groceries and household products (Kavilanz, 2011). This intense competition illustrates the need for Wal-Mart to develop alternative strategies, in areas of integration, intensity, and diversification. Integration strategies allow Wal-Mart to gain capable suppliers, acquire mergers and acquisitions, and remain competitive amongst their rivals. Wal-Mart should consider both backward integration and a horizontal integration. A backward integration allows Wal-Mart to increase control of the firms suppliers. This benefits the organization by reducing costs, increasing quality, and gaining greater control of suppliers. Horizontal integration allows WalMart to benefit from mergers and acquisitions. Wal-Mart can benefit from intensive strategies through the use of market penetration, market development, and product development. Wal-Mart has an edge over its competitors through market penetration by running marketing ads and offering discounts or rollbacks. Market development can benefit Wal-Mart through entrance into emerging markets. Lastly, Wal-Mart

can focus its effort in product development to increase the quality of its products. Next, WalMart should consider related and unrelated diversification to continue its mission to be a onestop-shop for customers. These approaches allow Wal-Mart to remain competitive by offering a wider variety of products, brands, and services. A greater variety of options available in one location offers convenience to customers and increases revenues. Strategy selection must be based on the incorporation of several factors. The financial analysis gives a picture that Wal-Mart should better position itself to address financial obligations and work to increase sales. This is supported by the fact that, Wal-Mart has struggled with seven straight quarters of sales declines in its stores. (Kavilanz, 2011) Thus, when determining a strategy, the organization must consider its financial flexibility and the effects it faces in sales from the economic recession. Wal-Mart can benefit from opportunities such as increasing online shopping, opening new stores and supercenters, and offering a wide variety of products. Therefore, Wal-Mart should focus on further expansion of its online shopping and greater entrance into new markets. Wal-Marts products can be enhanced through greater availability with online shopping. The website currently offers over, 1,000,000 products, plus easy-to-use music downloads, and one hour photo service. (Wal-Mart, 2011) Wal-Mart must utilize strategies of horizontal and backward integration, market development, and product development. The objective is to offer a variety of low priced consumer goods to global markets, both in store and online, and reduce dependence on only a few markets areas. Conclusion While developing a strategic plan to address Wal-Marts objectives for the future, several factors must be considered. These include financial constraints, growing competition, economic downturn, and growing threats of government interventions in trade. Despite this, the organization must work to seize opportunities in the areas of online shopping, new global stores and supercenters, and offering an increased variety of products online. Therefore, collaboration of the two strategies of backward integration and related diversification of products must be used. The related diversification strategy allows Wal-Mart to provide more services and products on their website which increases on-line sales. Similarly, backward integration, allows WalMart to develop stronger relationships with suppliers in an effort to reduce costs.

Appendix One

External Factor Evaluation Matrix for Wal-Mart Key External Factors Opportunities 1. Increase online shopping 2. Economic conditions cause greater demand for low priced products 3. Increased use of mobile/social marketing to increase purchasing by consumers 4. Growth plan to open new supercenters in US & abroad 5. Conversion of regular stores into Supercenters 6. Wide variety of products available to consumers 7. Decline in consumer loyalty to one store for needs based purchases Threats 8. Increased competition from online retailers 9. Product substitution 10. Economic Downtown-lower consumer spending 11. Raw material increases can cause product price increases 12. Government regulations on trade/importing 13. Political problems in foreign governments 14. Currency Fluctuation 15. Consumer opposition to opening new stores in small towns Total Weight Rating Weighted Score .3 .14 .10 .40 .24 .3 .10

.10 .07 .05 .10 .08 .10 .05

3 2 2 4 3 3 2

.07 .05 .07 .07 .04 .04 .04 .07

4 2 2 3 2 2 2 1

.28 .10 .14 .21 .08 .08 .08 .07

1.0

2.62

Appendix Two

Internal Factor Evaluation Matrix for Wal-Mart Key Internal Factors Strengths 1. Powerful Retail Brand 2. Diverse Workforce 3. Competitive Benefits Package 4. Provide thousands with first job/skills training each year 5. 75% of store managers were promoted from within 6. Sales and Net Income increased over past 10 years 7. Strong buyback program for stock with over 1 million shares being purchased back each year 8. Strong Global Supply Chain Weaknesses 9. High levels of inventory 10. Sell products manufactured in countries with unethical labor laws 11. Strong consumer dislike for putting smaller community retailers out of business 12. Many part time staff not receiving benefits 13. Standardized approach for each country 14. Sensitive to government trade regulations 15. Limited access to international markets 16. High employee turnover rates Total Weight Rating Weighted Score .32 .15 .20 .09 .15 .40 .28

.08 .05 .05 .03 .05 .10 .07

4 3 4 3 3 4 4

.09

.36

.07 .04 .05 .04 .04 .06 .09 .09 1.0

1 2 1 2 1 1 1 1

.07 .08 .05 .08 .04 .06 .09 .09 2.51

Appendix Three

Wal-Marts Competitive Profile Matrix (CPM) Wal-Mart K-Mart Critical Success Factors Advertising Product Quality Price Competitivene ss Management Financial Position Customer Loyalty Global Expansion Inventory Systems Market Share Customer Service TOTAL Target

Weigh Ratin Weighte Ratin Weighte Ratin Weighte t g d Score g d Score g d Score 0.20 0.10 0.10 4 2 1 0.80 0.20 0.10 3 4 1 0.60 0.40 0.10 2 3 1 0.40 0.30 0.10

0.50 0.10 0.10 0.10 0.10 0.05 0.10 1.00

3 4 4 4 3 4 3

0.15 0.40 0.40 0.40 0.30 0.20 0.30 3.25

4 3 3 1 3 3 4

0.20 0.30 0.30 0.10 0.30 0.15 0.40 2.85

3 2 1 2 3 2 3

0.15 0.20 0.10 0.20 0.30 0.10 0.30 2.15

Appendix four:

Space matrix
External Strategic Internal Strategic Position Position FINANCIAL (FS) ENVIRONMENTAL (ES) +6 best, +1 worst -1 Best, -6 Worst

(+6) Net Sales (-1) Technology Y (+3) Current Ratio (-2) Demand Increase (+6) Revenues (-5) Barriers to entry (+5) Net Income (-6) Competitive pressure (+6) Comparative store sales (-3) Antitrust Issues Increase Avg. = -3.4 Avg. = 5.2 COMPETITIVE (CA) -1 best, -6 worst INDUSTRY (IS) +6 best, +1 worst

(-1) Costumers loyalty X (-1) Brand value (-2) Product Quality (-1) Human resource management (-1) Inventory Control System Avg. = -1.2

(+5) Growth potential (+5) Profit potential (+5) Developments in technology (+6) Consolidation (+2) Easy to entry Avg. = 4.6

Y= 5.2 + (-3.4) = 1.8 X= -1.2 + (4.6) = 3.4

Appendix Five

SWOT Matrix
Strengths 1.Powerful Retail Brand 2. Diverse Workforce Weaknesses 1. High levels of inventory 2. Sell products manufactured in countries w/ unethical labor laws 3. Putting smaller retailers out of business 4. Standardized approach 5. Sensitive to government trade regulations 6. Limited access to int'l Markets 7. High employee Turn over rate WO Strategies 1. Increase online presence to offset high inventory 2. Open new stores globally

3. Competitive Benefit Package 4. Provides thousands of jobs and skills training 5. 75% of store managers promoted from within 6. Sales & Net Income increased over past 10 yrs. 7. Strong global supply chain

Opportunities 1. Increase online shopping

SO Strategies 1. Mergers and acquisitions

2. Demand for low price products 3. Increased use of social marketing to reach consumers 4. Growth plan for supercenters in U.S. and abroad 5. Conversion of regular stores into supercenters 6. Wide variety of products 7. Decline in consumer loyalty to one store for necessities Threats 1. Increased competition from Online retailers 2. Product substitution 3. Economic downturn-lower Consumer spending 4. Raw material increase can Cause product price increase 5. Political problems in foreign Governments 6. Currency fluctuation 7. Opposition of new stores in small Towns

2. Use social media to increase brand image and loyalty 3. Use benefit package to facilitate growth in market

ST Strategies 1. Use brand and "rollback" to bring in customers 2. Use backward integration to reduce costs 3. Supply jobs to small towns to gain loyalty to brand

WT Strategies 1. Manufacture more in the U.S. 2. Create a more sound market globally

Appendix Six

Porter Five Forces Model

Potential entry of new competitors: We should always be on the lookout for new companies entering the market. Barriers to this industry are low due to many on-line stores that can reach out to a very broad audience. Some on-line grocery stores deliver directly to peoples homes which can be a potential threat to Wal-Mart.

Bargaining power of suppliers: Wal-Mart should be working hand in hand with their suppliers in an effort to benefit both Wal-Mart and the supplier. Wal-Mart can shop around for suppliers who meet their standards, but this may not be easy to come by especially since they need many different suppliers due to their wide variety of merchandising.

Potential development of substitute products: Although Wal-Mart has cheaper products, we can easily have items substituted by other stores; therefore, potential threat of substitutes is relatively high. Wal-Mart offers name brand clothing in our stores for less than other retail stores. In contrast, many retail stores are now offering rewards to shop. Consumers may just substitute Wal-Marts prices to get the rewards from other stores.

Rivalry among competing firms

Bargaining power of consumers: This is very high because of the current state of the economy. Consumers are shopping around more in hopes to find the same items for less. Consumers can easily compare item pricing online or from their phone. This can hurt store loyalty but the consumer wants the best prices available to them.

Appendix seven

Boston Consulting Group (BCG) Matrix

Appendix eight

Internal-External (IE) Matrix

Appendix nine

Grand Strategy Matrix

Appendix ten

Financial Ratios 2010 Fiscal Year

Ratios Quick Ratio Current Ratio Current Liabilities to Net Worth Total Liabilities to Net Worth Fixed Assets to Net Worth Collection Period Days Sales to Inventory Ratio Assets to Sales Ratio Sales to Net Working Capital Accounts Payable to Sales Ratio Return on Sales Ratio Return on Assets Ratio Return on Net Worth Ratio (Forbes.com, 2010) Wal-Mart .2 .9 31.2% 59.9% 82.5% 4 Days 11.62 42.8% 64.00 7.9% 4.0% 9.4% 24.8% Industry .7 2.9 34.9% 53.7% 26.1% 4.8 Days 5.1 45.2% 5.1 4.9% 2.2% 5.3% 9.3%

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