Majid Shams Nosrati Wal Mart Stores 2009

STRAT T TEGIC MAN EMEN C NAGE NT
In ndividu Ass ual signmen nt

Wal-M Mart Store es-2009
Lecturer L r:
DR. D MAS B BAMBANG BAROT G TO
Majid S M Shams Nosrati MR1012 M 295
Table of Contents
1.0VISION AND MISSION ................................................................................................................... 3
1.1 VISION EVALUATION .............................................................................................................................. 3 1.2 MISSION EVALUATION ............................................................................................................................ 3 1.3 OTHER COMPETITORS MISSION ANALYSIS ............................................................................................... 4 1.4 CONCLUSION ......................................................................................................................................... 4
2.0EXTERNAL ANALYSIS .................................................................................................................. 5

2.1 PEST ANALYSIS .................................................................................................................................... 5 2.1.1 Economical Forces .............................................................................................................................. 5 2.1.2 Social, Culture, Demographic Environnent Forces ........................................................................... 5 2.1.3 Political, governmental and legal Forces ........................................................................................... 5 2.1.4 Technological Forces .......................................................................................................................... 5 2.2 ENVIRONMENT ANALYSIS SUMMARY ....................................................................................................... 6
3.0COMPETITIVE ANALYSIS ............................................................................................................ 6

3.1 COMPETITIVE FORCES ............................................................................................................................ 6
4.0INDUSTRY ANALYSIS .................................................................................................................... 8

4.1 DESCRIPTION OF INDUSTRY ..................................................................................................................... 8 4.2 PORTERS FIVE FORCES .......................................................................................................................... 9 4.2.1 Competitive pressure among Rivalry .................................................................................................. 9 4.2.2 Competitive Pressure associated with New Entrant ......................................................................... 11 4.2.3 Competitive Pressure from the Substitute Products ......................................................................... 11 4.2.4 Competitive Pressure from the Suppliers Bargaining Power ......................................................... 12 4.2.5 Competitive Pressure from Buyers Bargaining Power ................................................................... 12
5.0CONCLUSION OF THE INDUSTRY ANALYSIS .......................................................................... 12 6.0KEY SUCCESS FACTORS OF THE INDUSTRY .......................................................................... 13 7.0OPPORTUNITIES AND THREATS ............................................................................................... 13
7.1 LIST OF OPPORTUNITIES AND THREATS ................................................................................................... 13 7.1.1 opportunities ...................................................................................................................................... 13 7.1.2 Threats ............................................................................................................................................... 14
8.0EXTERNAL FACTOR EVALUATION (EFE) MATRIX ................................................................ 15 9.0COMPETITIVE PROFILE MATRIX (CPM) ................................................................................. 17 10.0 INTERNAL ENVIRONMENT ................................................................................................... 18
10.1 CULTURAL FACTORS ............................................................................................................................ 18 10.2 MANAGEMENT FUNCTIONS ................................................................................................................... 18 10.2.1 Planning ............................................................................................................................................. 18 10.2.2 Organizing ......................................................................................................................................... 20 10.2.3 Motivating .......................................................................................................................................... 20 10.2.4 Staffing ............................................................................................................................................... 21
10.2.5
controlling .......................................................................................................................................... 22
11.0 MARKETING STRATEGY ....................................................................................................... 23

11.1 CUSTOMER ANALYSIS .......................................................................................................................... 23 11.2 PROMOTION PROGRAMS........................................................................................................................ 23 11.3 PRODUCT AND SERVICE PLANNING......................................................................................................... 24 11.4 PRICING .............................................................................................................................................. 24 11.5 DISTRIBUTION ..................................................................................................................................... 26 11.6 MARKETING RESEARCH ........................................................................................................................ 27
12.0 FINANCIAL ANALYSIS ........................................................................................................... 28

12.1 RATIO ANALYSIS ................................................................................................................................. 28
13.0 PRODUCTION AND OPERATION ........................................................................................... 30

13.1 PROCESS ............................................................................................................................................. 30 13.2 CAPACITY ........................................................................................................................................... 30 13.3 INVENTORY ......................................................................................................................................... 31 13.4 WORKFORCE ....................................................................................................................................... 31 13.5 QUALITY ............................................................................................................................................ 32
14.0 RESEARCH AND DEVELOPMENT ......................................................................................... 32 15.0 MANAGEMENT INFORMATION SYSTEMS .......................................................................... 32 16.0 VALUE CHAIN ANALYSIS (VCA) ........................................................................................... 33
16.1 MAIN ACTIVITY .................................................................................................................................... 33 16.2 SUPPORTING ACTIVITY ........................................................................................................................ 34 16.3 SUPPLIER COSTS ................................................................................................................................ 36 16.4 PRODUCTION COSTS ............................................................................................................................. 37 16.5 DISTRIBUTION COSTS ........................................................................................................................... 37 16.6 SALES AND MARKETING COSTS ............................................................................................................. 37 16.7 CUSTOMER SERVICE COSTS ................................................................................................................... 38 16.8 MANAGEMENT COSTS .......................................................................................................................... 38
17.0 STRENGTHS AND WEAKNESSES .......................................................................................... 39

17.1 LIST OF STRENGHS AND WEAKNESSES ..................................................................................................... 39 17.1.1 Strengths ............................................................................................................................................ 39 17.1.2 Weaknesses ........................................................................................................................................ 46 17.2 INTERNAL FACTOR EVALUATION (IFE) MATRIX......................................................................................... 47
18.0 OBJECTIVES AND STRATEGIES ........................................................................................... 49

18.1 LONG-TERM OBJECTIVES ...................................................................................................................... 49 18.1.1 Strategic Long-term Objectives ......................................................................................................... 49 18.1.2 Financial Long-term Objectives........................................................................................................ 50
18.2 OBJECTIVES ......................................................................................................................................... 50 18.2.1 Strategic Objectives ........................................................................................................................... 50 18.2.2 Financial Objectives .......................................................................................................................... 53 18.3 CORPORATE LEVEL STRATEGIES ............................................................................................................ 53 18.4 BUSINESS LEVEL STRATEGIES ............................................................................................................... 55 18.5 THE COMPANYS EXISTING STRATEGIES ................................................................................................. 56
19.0 SWOT ........................................................................................................................................ 57

19.1 SWOT MATRIX ................................................................................................................................... 57 19.2 LIST OF ALTERNATIVE STRATEGIES....................................................................................................... 61 19.3 SWOT ANALYSIS DIAGRAM ................................................................................................................. 62 19.4 CONVERTING INTO STRATEGIC TERMS .................................................................................................. 63 19.4.1 Corporate Level Strategies ................................................................................................................ 63 19.4.2 Business Level Strategies .................................................................................................................. 63
20.0 SPACE ....................................................................................................................................... 65

CONCLUSION: ............................................................................................................................................... 66 20.1 CONCLUSION ...................................................................................................................................... 66
21.0 BCG MATRIX ............................................................................................................................ 67 22.0 IE MATRIX ................................................................................................................................ 67 23.0 GRAND STRATEGY MATRIX .................................................................................................. 68 24.0 QSPM (QUANTITATIVE STRATEGIC PLANNING MATRIX) .................................................. 69
24.1 SELECTING STRATEGIES ...................................................................................................................... 69 24.2 CONCLUSION ...................................................................................................................................... 70 24.3 QSPM ............................................................................................................................................... 70
25.0 MANAGEMENT AND OPERATION ISSUES ........................................................................... 73

25.1 COMPARING NEW STRATEGY WITH EXISTING ONES ............................................................................... 73 25.2 OBJECTIVES ....................................................................................................................................... 74 25.3 MANAGEMENT ISSUES ......................................................................................................................... 78 25.4 PRODUCTION AND OPERATION .............................................................................................................. 79 25.5 RESEARCH AND DEVELOPMENT ............................................................................................................ 80 25.6 MANAGEMENT INFORMATION SYSTEMS.................................................................................................. 80 25.7 VALUE CHAIN ANALYSIS (VCA)............................................................................................................. 81
26.0 FINANCE AND MARKETING ISSUES ..................................................................................... 82

26.1 MARKETING ISSUES ............................................................................................................................. 82 26.2 PRODUCTS/ SERVICES POSITIONING ..................................................................................................... 83 26.3 FINANCE ............................................................................................................................................. 84 26.4 FIGURE OF ALL EXISTING AND NEW STRATEGIES ................................................................................... 90
1.0 1.1
VISION AND MISSION VISION EVALUATION Vision Statement Wal-Mart case lacks vision statement.
1.2
MISSION EVALUATION In the case, it is written that there is no formal mission statement but according to Kim Ellis, Public Relations Coordinator, if the company is supposed to have a formal mission statement, there would be as follows: To provide quality products at an everyday low price and with extended customer service ... always
Characteristics of Mission Statement Broad in scope Inspiring Less than 250 words Identify the utility of a firms products Reveal that the firm is socially responsible Reveal that the firm is environmentally responsible Includes most of the 9 components in mission statement Customers Products/ Services Markets Technology Concern for survival, growth, profitability
Direct Statement
15 words quality products ... always Lacks majority of components (7 items out of 9 items are missed) extended customer service To provide quality products
WalMart Stores2009 (Majid Shams Nosrati)
Philosophy Self-concept Concern for public image Concern for employees
Reconciliatory Enduring 1.3 1.4 OTHER COMPETITORS MISSION ANALYSIS
No Mission statement is written for other competitors. CONCLUSION Data is not available for all competitors mission and vision statement. However, for Wal-Mart, there are three issues for mission and vision statement: 1. There is no vision statement for the company, even as informal or indirect. 2. Mission statement of the company is not announced formally and in public (it is only indicated as a reply to the question via Public Relation Coordinator) 3. Although mission statement of the company is not precise and complete and it seems that the company did not try to make a structured mission statement, the good point about the mission statement of Wal-Mart is that it is very brief and concise. This criterion makes the mission acceptable and suitable.
2.0 2.1
EXTERNAL ANALYSIS PEST ANALYSIS
2.1.1 ECONOMICAL FORCES Case Issues In 2008-2009, a recession happened in the economy (p.293) 2.1.2 SOCIAL, CULTURE, DEMOGRAPHIC ENVIRONNENT FORCES Case Issues Environmentalists in Vermont say the rural character of the state is endangered by "sprawl-mart development." (p.293) Kmart, have operated in Vermont for years, so some residents are mystified by the current controversy. (p.293) 2.1.3 POLITICAL, GOVERNMENTAL AND LEGAL FORCES Case Issues The U.S. Chamber of Commerce has actively fought against legislation of providing health insurance to all employees for several years. (p.293) 2.1.4 TECHNOLOGICAL FORCES Case Issues The Internet has interesting aspects and will definitely serve a growing market throughout the 21st century. (p.303) Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303) Findings Opportunities Threats Findings Opportunities Threats Findings Opportunities Threats Findings Opportunities Threats
2.2 No. 1 2 3 4 3.0 3.1 Forces Major
ENVIRONMENT ANALYSIS SUMMARY Environnemental Analysis Economical Forces Social, Cultural, Demographic, and Environmental Forces Political, Governmental, and Legal Forces Technological Forces Total COMPETITIVE ANALYSIS COMPETITIVE FORCES Case Issues Opportunities Threats Opportunity 0 1 0 0 1 Threat 1 1 1 0 3
competitors Competitors Strength
The case lacks enough information about the competitors. Only in some sentences and in one section it is mentioned about Target as the main competitor, Kmart as second and Costco as Wal-Mart Sams Club competitor (306). However, I suppose to have these three competitors as main competitors. Kmart, have operated in Vermont for years (p.293) Target has now become a fierce competitor of Wal-Mart (p.306) Target is ranked second among discount retailers (p.306) Target has sales of nearly $65 billion with 366,000 employees (p.306) Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306) Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306)
Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) Costco competes with the Sam's Club segment (p.306) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) Competitors Weaknesses During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306)
No. 1 2 3
Competitors Target Kmart Costco Total
Opportunity 0 2 0 2
Threat 5 3 4 12
4.0 4.1
INDUSTRY ANALYSIS DESCRIPTION OF INDUSTRY Competitors Target Description (case issue) Target is ranked second among discount retailers (p.306) Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306) NA Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) NA Market share Share price
Industry Retailing Industry
Kmart
NA NA NA NA NA NA NA NA
NA NA NA NA NA NA NA NA
Costco
Financial Status
Target Kmart Costco
Target has sales of nearly $65 billion with 366,000 employees (p.306) Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) Costco finished the year at just over $72 billion while the Sam's Club division of WalMart brought in over $44 billion in net sales (p.306)
WalMart Stores2009 (Majid Sha W ams Nosrati)
Conclusion: C Based on the des B scription of the industry, althou Wal-Mart, h been growin by leaps and bounds and rolling over large competitors fo more ugh has ng d e or th a decade (p han p.293), the comp petition in the in ndustry is very i intense as there are lots of threats more than o opportunities for the company. r
The T figure above shows the com e mpetitors positi in the indus according to two criteria. I did not include Wal-Mart in th figure, althou the ion stry o e he ugh companys posit tion is very imp portant in this in ndustry. The rea ason for this is th in industry a hat analysis, I considered to evalua only the com ate mpetitors not n the case com mpany in order t differentiate i from CPM. to it 4.2 4 PORTERS FIVE FORCES 4.2.1 COMPE 4 ETITIVE PRES SSURE AMON RIVALRY NG Company C Case Issu ues Ta arget has now b become a fierce competitor of W Wal-Mart (p p.306) Ta arget is ranked second among d discount retailer rs (p p.306) Ta arget has sales o nearly $65 bi of illion with 366,0 000 Op pportunities Threats Com mpetitive Force e Strong Moderate Weak
Target
employees (p.306) Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306) Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) Kmart, have operated in Vermont for years (p.293) Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) Costco competes with the Sam's Club segment (p.306) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) In July 2009, Wal-Mart broke ranks with most other large corporations by announcing support for legislation that would require employers to provide health
Kmart
Costco
Wal-Mart
10
insurance to employees (p.293) During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 (p.301) the company has gained market share more quickly than planned (p.301) The company's broad assortments and everyday low prices are very compelling (p.301) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) According to the Chronicle of Philanthropy, the WalMart Foundation is the largest corporate cash contributor in America (p.305)
4.2.2 COMPETITIVE PRESSURE ASSOCIATED WITH NEW ENTRANT Case Issues Opportunities Threats Competitive Force Strong NA Moderate Weak
4.2.3 COMPETITIVE PRESSURE FROM THE SUBSTITUTE PRODUCTS Case Issues Opportunities Threats Competitive Force Strong Moderate Weak
11
Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306)
4.2.4 COMPETITIVE PRESSURE FROM THE SUPPLIERS BARGAINING POWER Case Issues NA Opportunities Threats Competitive Force Strong Moderate Weak -
4.2.5 COMPETITIVE PRESSURE FROM BUYERS BARGAINING POWER Case Issues NA 5.0 No 1 2 3 4 5 Competitive pressure among rivalry Competitive pressure associated with new entrant Competitive pressure from the substitute products Competitive pressure from suppliers bargaining power Competitive pressure from buyers bargaining power Total Sum CONCLUSION OF THE INDUSTRY ANALYSIS Key Variables Strong 10 0 1 0 0 11 Competitive Force Moderate 11 0 0 0 0 11 Weak 2 0 0 0 0 2 Opportunities Threats Competitive Force Strong Moderate Weak -
Conclusion: Table above depicts that the most competitive pressure is on the moderate and strong levels for the company. Therefore it can be concluded that the industry is not attractive for both new entrants and existing rivals.
12
6.0
KEY SUCCESS FACTORS OF THE INDUSTRY Case Issues Target is ranked second among discount retailers (p.306) Kmart follows Target in third place among discount retailers (p.306) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) Target has sales of nearly $65 billion (p.306) Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) Target had 1,681 domestic Target stores including 239 Super Targets (p.306) During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306)
Key success factors Market Share
Financial Position
Number of Stores
Conclusion: In my point of view, in retailing industry, market share, financial position and number of stores are key success factors of the industry for all competitors. 7.0 7.1 OPPORTUNITIES AND THREATS LIST OF OPPORTUNITIES AND THREATS
Before writing down the opportunities and threats, I want to mention that the overlapped items are not omitted but have been highlighted through adding the phrase overlapped item in brackets. As an example in the table below, item number 2 and 4 are overlapped. Consequently, I have added the phrase to the end of both items. At the end for selecting the EFE items, I selected number 2 in order to avoid duplication. 7.1.1 OPPORTUNITIES No. 1 2 3 4 5
Items
Kmart, have operated in Vermont for years, so some residents are mystified by the current controversy. Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) [Overlapped Item] During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) [Overlapped Item] Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) [Overlapped Item] During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) [Overlapped Item]
13
6 7 8 9 10 11 12 13 14 15
In July 2009, Wal-Mart broke ranks with most other large corporations by announcing support for legislation that would require employers to provide health insurance to employees (p.293) During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 (p.301) the company has gained market share more quickly than planned (p.301) The company's broad assortments and everyday low prices are very compelling (p.301) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) According to the Chronicle of Philanthropy, the Wal-Mart Foundation is the largest corporate cash contributor in America (p.305) The Internet has interesting aspects and will definitely serve a growing market throughout the 21st century. (p.303)
7.1.2 THREATS No. 1 2 3 4 5 6 7 8 9 10 11 12 13
Items
In 2008-2009, a recession happened in the economy (p.293) Environmentalists in Vermont say the rural character of the state is endangered by "sprawl-mart development." (p.293) Kmart, have operated in Vermont for years (p.293) [Overlapped Item] Target has now become a fierce competitor of Wal-Mart (p.306) [Overlapped Item] Target is ranked second among discount retailers (p.306) [Overlapped Item] Target has sales of nearly $65 billion with 366,000 employees (p.306) [Overlapped Item] Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306) [Overlapped Item] Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) [Overlapped Item] Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) [Overlapped Item] Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) [Overlapped Item] Costco competes with the Sam's Club segment (p.306) [Overlapped Item] Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) [Overlapped Item] Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) [Overlapped Item]
14
14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 8.0
Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) [Overlapped Item] Target has now become a fierce competitor of Wal-Mart (p.306) [Overlapped Item] Target is ranked second among discount retailers (p.306) [Overlapped Item] Target has sales of nearly $65 billion with 366,000 employees (p.306) [Overlapped Item] Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306) [Overlapped Item] Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) [Overlapped Item] Kmart, have operated in Vermont for years (p.293) [Overlapped Item] Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) [Overlapped Item] Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) [Overlapped Item] Costco competes with the Sam's Club segment (p.306) [Overlapped Item] Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) [Overlapped Item] Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) [Overlapped Item] Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) [Overlapped Item] Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) [Overlapped Item] The U.S. Chamber of Commerce has actively fought against legislation of providing health insurance to all employees for several years. (p.293) Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303) EXTERNAL FACTOR EVALUATION (EFE) MATRIX
According to the book (p.112), total items selected for EFE (both opportunities and threats) should be between 15-20 items. Therefore, I have selected 18 items that seemed more important than other items. No 1 Opportunities During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) Weight
0.08
Rating
4
Weighted Score
0.32
15
2 3 4 5 6 7 8
Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) The company's broad assortments and everyday low prices are very compelling (p.301) Wal-Mart has gained market share more quickly than planned (p.301) Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. With an information systems staff of 1,200 and system links with about 5,000 manufacturers, WalMart leads the industry in information technology. (p.302) Threats In 2008-2009, a recession happened in the economy (p.293) Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) Target has now become a fierce competitor of Wal-Mart (p.306) Target is ranked second among discount retailers (p.306) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) Kmart, have operated in Vermont for years (p.293)
0.06 0.05 0.05 0.07 0.08 0.07 0.06
3 3 4 4 4 4 4
0.18 0.15 0.2 0.28 0.32 0.28 0.24
No 1 2 3 4 5 6 7 8
Weight
0.06 0.04 0.04 0.05 0.06 0.05 0.05 0.04
Rating
3 2 2 2 2 1 1 2
Weighted Score
0.18 0.08 0.08 0.1 0.12 0.05 0.05 0.08
16
9 10
Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to TOTAL
0.05 0.04
2 3
0.1 0.12
1.00
2.93
Conclusion: Total weighted score of 2.93 shows that Wal-Mart is doing well as its score is above industry average (2.50). Besides, it depicts that Wal-Mart is capable of acquiring and using opportunities and avoiding threats. 9.0 COMPETITIVE PROFILE MATRIX (CPM) Weight 0.28
4 1.12 3 0.84 1 0.28 2 0.56
CRITICAL SUCCESS FACTORS Market Share Financial Position
Wal-Mart Rating Score
Target Rating Score
Kmart Rating Score
Costco Rating Score
0.34
3 1.02 1.52 3.66 3 3 1.02 1.14 3 2 3 0.68 1.14 2.1 3 3 1.02 1.14 2.72
Number of Stores TOTAL:
0.38
4
1.00
Conclusion: According to the results of CPM matrix, Wal-Mart is the first among major competitors and has the highest point (3.66). Target is its fierce competitor and its point is nearer in comparison to other competitors.
17
10.0 10.1
INTERNAL ENVIRONMENT CULTURAL FACTORS Wal-Mart You'll feel at home in any department of any store ... that's our culture (p.293) The Wal-Mart culture is based on three basic beliefs or Sam Walton: 1) respect for the individual, 2) service to our customers and 3) strive for excellence (p.293) Store policies forbid employees from dating other employees without the prior approval of the executive committee (p.304) According to CEO Mike Duke, "Sustainability is an important part of our culture (p.305) Target NA NA Kmart NA NA Costco NA NA Strength Weakness
NA NA
NA NA
NA NA
10.2
MANAGEMENT FUNCTIONS
10.2.1 PLANNING Wal-Mart In May 2009, Wal-Mart began revamping the electronics departments in its 3,500 U.S. stores to make them much more interactive and roomier (p.293) The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) Wal-Mart desires to level the playing field with its rival firms because it already provides health insurance to all its employees (p.293) In 2003, Wal-Mart grouped its smaller discount stores, such as the one in Bennington, Vermont, into a new Hometown USA Target NA Kmart NA Costco NA Strength Weakness
NA NA NA
NA NA NA
NA NA NA
NA
NA
NA
18
program (p.298) The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298) Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) Wal-Mart is working hard to expand its food distribution capabilities. Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store (p.301) Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town." (p.301) In 2009, Wal-Mart pledged to double its use of solar energy in California (p.305) in February 2009, Wal-Mart Foundation announced it will donate $5.7 million for the creation of green jobs in the United States (p.305) Opening of several new stores in the near future in Mexico is planned (p.302) In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302) In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302) . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303)
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA
NA
NA
NA
NA
NA
19
10.2.2 ORGANIZING Wal-Mart Exhibit 4 shows Wal-Mart's organizational chart. It is wellstructured. (p.299) Wal-Mart has strongly opposed unions in its stores. They argue that the company is structured so that employees derive the most benefit and best conditions by working directly with Wal-Mart, as opposed to through a union (p.302) Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303) Executives spend one week each year in hourly jobs in various stores. (p.303) Women are rarely found in management positions (p.303) Walmart.com will have a separate management team and board of directors (p.303) Promotions have recently been made so there are now women in senior officer positions. (p.304) 10.2.3 MOTIVATING Wal-Mart The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303) Employees who do better than average get rewarded with raises, bonuses, and personal recognition. (p.303) All employees (referred to as "associates") have a stake in the Target NA Kmart NA Costco NA Strength Weakness Target NA NA Kmart NA NA Costco NA NA Strength Weakness
NA
NA
NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA NA
NA NA
NA NA
20
financial performance of the company. (p.303) Wal-Mart encourages employee stock purchases. During fiscal 2008, participants could contribute up to 50 percent of their pretax earnings, but not more than statutory limits. (p.303) Promotions have recently been made so there are now women in senior officer positions. (p.304) Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities (p.305) A mentoring program encompassing more than 750 women and minority managers (p.305) A women's leadership group, in partnership with Herman Miller and ServiceMaster, to develop opportunities for high-potential female managers (p.305) Store internships during the summer for college students between their junior and senior years, with 70 percent of them for women or minorities. (p.305) Expansion of its business with minority- and women-owned companies by more than 25 percent in 2008 (p.305) Creation of a Hispanic scholarship fund for Hispanic high school students (p.305) 10.2.4 STAFFING Wal-Mart Wal-Mart already provides health insurance to all its employees (p.293) Wal-Mart has strongly opposed unions in its stores. (p.302) Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303) Wal-Mart management takes pride in the ongoing development
NA
NA
NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA
NA
NA
NA NA
NA NA
NA NA
Target NA NA NA
Kmart NA NA NA
Costco NA NA NA
Strength
Weakness
NA
NA
NA
21
of its people. (p.303) If employment with the company is terminated because of retirement, death, or permanent disability, the company contribution is fully vested (meaning the entire amount is nonforfeitable). If termination of employment occurs for any other reason, the amount that is non-forfeitable depends on the number of years of service with the company. (p.303) Wal-Mart is an Equal Employment Opportunity/Affirmative Action (EEO/AA) employer . (p.304) 10.2.5 CONTROLLING Wal-Mart This back-haul rate averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302) Extensive advertising is not needed for Supercenters and this represents an enormous saving over the competition(p.301) As Supercenters move more into food distribution, they gain a major cost advantage over Super Kmart and Super Target. (p.301) In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302) The company avoids spending money on consultants and marketing experts. (p.306)
NA
NA
NA
NA
NA
NA
Target NA NA NA
Kmart NA NA NA
Costco NA NA NA
Strength
Weakness
NA
NA
NA
NA
NA
NA
22
11.0 11.1
MARKETING STRATEGY CUSTOMER ANALYSIS Wal-Mart Wal-Mart de Mexico is strengthened by strong customer support (p.302) Supercenters provide mart carts and are all one-story buildings, making the stores handicapped accessible (p.301) They are usually equipped with a customer service desk and scanning registers to provide more efficient checkout procedures. (p.301) Target NA NA NA Kmart NA NA NA Costco NA NA NA Strength Weakness
11.2
PROMOTION PROGRAMS Wal-Mart Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306) Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306) Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306) In addition to Discover Card, Sam's have also recently started accepting MasterCards for payments. The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy Target NA NA NA NA Kmart NA NA NA NA Costco NA NA NA NA Strength Weakness
NA NA
NA NA
NA NA
23
discounts. (p.301) Supercenters provide mart carts Walmart.com provides easy access 24/7/365 to more than a million products (p.303) 11.3 PRODUCT AND SERVICE PLANNING Wal-Mart The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298) Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) Wal-Mart now carries more sophisticated electronics products such as Research in Motion Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu-ray disc players (p.293) 11.4 PRICING Wal-Mart Three independent pharmacies in Conway, Arkansas, filed a
NA NA
NA NA
NA NA
Target NA NA NA NA NA
Kmart NA NA NA NA NA
Costco NA NA NA NA NA
Strength
Weakness
NA NA
NA NA
NA NA
Target NA
Kmart NA
Costco NA
Strength
Weakness
24
suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304) Wal-Mart argued that it priced products below cost not to harm competitors but to meet or beat rivals' prices (p.304) Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304) The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304) It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) The stated purpose of Wal-Mart's pricing policy is to meet or beat" the retail prices contemporaneously charged by competitors for highly competitive, price-sensitive merchandise; to maintain "low-price leadership" in the local marketplace; and to "attract a disproportionate number of customers into a store to increase traffic." (p.304) The store's pricing practices with regard to specific articles did not violate the Arkansas Unfair Practices Act section prohibiting vendors from selling at or below their cost (p.304) Whether you walk into a Wal-Mart store in your hometown or one across the country while you're on vacation, you can always be assured you're getting low prices and genuine customer service that you've come to expect from us (p.293) The company's broad assortments and everyday low prices are very compelling (p.293)
NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
25
11.5
DISTRIBUTION Wal-Mart Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301) Wal-Mart has distribution centers nationwide. Some of them are grocery distribution centers and also a small number are import distribution centers. (p.302) Wal-Mart's distribution operations are highly automated. (p.302) A typical Wal-Mart Discount Store has more than 70,000 standard items in stock (p.302) Supercenters carry more than 20,000 additional grocery items , including perishables (p.302) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302) Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302) After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302) Wal-Mart laid claim to having stores in all 50 states (p.293) Wal-Mart, Inc. currently operates domestically 891 Wal-Mart discount stores, 2,612 Supercenters, 602 Sam's Clubs, and 153 Target NA Kmart NA Costco NA Strength Weakness
NA
NA
NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA
NA
NA
NA
NA
NA
NA As of February 2, 2009, Target had 1,681 domestic Target stores including 239 Super Targets
NA NA
NA NA
(total number
26
Neighborhood Markets. (p.298)
(p.306)
At the end of fiscal 2009, Wal-Mart had a total of 602 domestic Sam's Clubs in operation. (p.301)
Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan. (p.306)
NA
NA
For fiscal 2009, the company had 318 Wal-Mart brands in Canada, 1,197 in Mexico, and 56 in Puerto Rico (p.302) The company operated over 3,600 Wal-Mart brand stores internationally (p.302) Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303) 11.6 MARKETING RESEARCH Wal-Mart The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298)
NA
NA
NA
of WalMar stores exceeds Target) (total number of WalMar stores exceeds Costco)
NA NA
NA NA
NA NA
Target NA NA
Kmart NA NA
Costco NA NA
Strength
Weakness
27
12.0 12.1
FINANCIAL ANALYSIS RATIO ANALYSIS Ratio Analysis Ratios Wal-Mart 2007 Liquidity Ratio Leverage Ratio Current Ratio Quick Ratio Debt to total asset ratio Debt to Equity ratio Long term debt to equity ratio Times interest earned ratio Inventory turnover Fixed assets turnover Total asset turnover Accounts receivable turnover NA NA NA NA NA 2008 0.82 0.21 1.13% 2.83% 30% 2009 0.88 0.26 1.16% 2.90% 31% Target Kmart Costco 2007 2008 2009 2007 2008 2009 2007 2008 2009 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 12.40 NA NA NA NA 11.23 10.64 3.99 2.28 NA 10.99 11.62 4.32 2.45 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA S W
Activity Ratio
28
Average collection period Profitability Gross profit Ratio margin Operating profit margin Net profit margin Return on Total Assets (ROA) Return on Stockholders Equity (ROE) Earnings per share Price earnings ratio Growth Ratios Sales
NA 0.234 0.055 0.032 NA NA 0.234 0.053 0.034 0.078 NA 0.236 0.052 0.033 0.081 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 0.198 0.205 NA NA NA NA NA NA NA NA NA
NA NA NA
3.204 NA 8.5% 12.82% NA NA
3.414 NA 7.1% 5.25% NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
NA NA NA NA NA NA
Net Income Earnings Per Share Dividends Per Share
NA NA NA
29
13.0 13.1
PRODUCTION AND OPERATION PROCESS Wal-Mart Associates use handheld computers that are linked by radiofrequency network to area stores for distribution (p.302) To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder (p.302) Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker (p.302) Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302) With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology (p.302) Walmart.com provides easy access 24/7/365 to more than a million products (p.303) Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303) Target NA NA Kmart NA NA Costco NA NA Strength Weakness
NA NA NA
NA NA NA
NA NA NA
NA NA
NA NA
NA NA
13.2
CAPACITY Wal-Mart Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store, whereas food has tended to build slowly (p.301) Wal-Mart likes to locate Supercenters near the strongest food Target NA Kmart NA Costco NA Strength Weakness
NA
NA
NA
30
retailers so their facilities will "either get better or be run out of town (p.301) The one-stop convenience aspect of the stores has such broad appeal that it is drawing a larger customer audience on a regular basis. (p.301) 13.3 INVENTORY Wal-Mart Sam's Clubs usually offer over 3,500 items, which are used most often by the consumers they serve. (p.301) In Sams Clubs, because the number of items is limited to around 2,000 for the wholesale part of the business and between 1,000 and 1,500 for personal and individual use, it is very important for the items to be appropriate for the location. (p.301) In Sams Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301) Neighborhood Markets provide about 28,000 items to customers (p.302) 13.4 WORKFORCE Wal-Mart Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303)
NA
NA
NA
Target NA NA
Kmart NA NA
Costco NA NA
Strength
Weakness
NA
NA
NA
NA
NA
NA
Target NA
Kmart NA
Costco NA
Strength
Weakness
31
The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303) 13.5 QUALITY Wal-Mart Wal-Mart expanded into the international markets so that customers everywhere will associate their name with low cost, best value, greatest selection of quality merchandise and highest standards of customer service (p.302) Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.302) The merchandise is carefully selected to ensure quality and must be made in the United States. (p.299) 'To provide quality products at an everyday low price and with extended customer service ... always (p.293) 14.0 RESEARCH AND DEVELOPMENT Wal-Mart NA 15.0 MANAGEMENT INFORMATION SYSTEMS Wal-Mart NA
NA
NA
NA
Target NA
Kmart NA
Costco NA
Strength
Weakness
NA NA NA
NA NA NA
NA NA NA
Target NA
Kmart NA
Costco NA
Strength -
Weakness -
Target NA
Kmart NA
Costco NA
Strength -
Weakness -
32
16.0 16.1
VALUE CHAIN ANALYSIS (VCA) MAIN ACTIVITY Company Wal-Mart Target Kmart Costco Strength Weakness
Activity Purchase Merchandise from Manufacturers With an information systems staff of 1,200 and system links with about 5,000 manufacturers, WalMart leads the industry in information technology. (p.302) Associates use handheld computers that are linked by radio-frequency network to area stores. (p.302) To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder. (p.302) Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker. (p.302) Distribution to Stores Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution (p.302) Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302) Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed. (p.302) Currently, the limitation is distribution , and WalMart is working hard to expand its food distribution capabilities (p.301) Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. (p.306) NA NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA NA
NA
NA
NA
NA
NA
NA
Marketing the Products
33
Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306) Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306) Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306) Walmart.com provides easy access 24/7/365 to more than a million products (p.303) Selling the Products Wal-Mart's Supercenters combine groceries with general merchandise, giving customers one-stop shopping (p.301) NA
NA NA NA
NA NA NA
NA NA NA
NA NA
NA NA
NA NA
After-sales Service 16.2 SUPPORTING ACTIVITY
NA
NA
NA -
Wal-Mart Company Activity We have an exceptionally strong management team, able to execute our strategy, perform every single day, and deliver results." (p.298) The company was able to attract a top retail management talent in Jeanne Jackson as the CEO of Walmart.com (p.303) Walmart.com will have a separate management team and board of directors (p.303)
Target
Kmart
Costco Strength Weakness
NA
NA
NA
Management
NA
NA
NA
NA
NA
NA
34
Wal-Mart managers stay current with new developments and needed changes (p.303) It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) Promotions have recently been made so there are now women in senior officer positions (p.304) decisions are made based on the intuitive judgments of managers and employees (p.306) The Walton family and management (as insiders) own nearly 44 percent of Wal-Mart stock. These holdings are worth nearly $28 billion today. (p.303) Wal-Mart's sales rose from $374.3 billion in fiscal year 2008 to $401.2 billion in 2009 while net income rose from $12.7 billion to $13.4 billion. (p.293)
NA NA
NA NA
NA NA
NA NA NA
NA NA NA
NA NA NA
Target has sales of nearly $65
Kmart has sales of $17 billion (p.306)
Costco finished the year at just over $72 billion (p.306)
(Wal-Marts sales is higher than all competitors)
Financial When it initially went public, 100 shares of Wal-Mart stock would have cost $1,650. Now, those 100 shares are worth over $6 million (p.298) Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298)
billion (p.306) NA
NA
NA
NA
NA
NA
35
Sams is a $46.8 billion business that is starting to grow again (p.301)
NA
NA
Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 The fact that the International segment has grown to nearly $100 billion in sales shows the potential of this market (p.302) 16.3 SUPPLIER COSTS Wal-Mart With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) Wal-Mart owns a fleet of truck-tractors that they frequently pick up merchandise from manufacturers on the way back to the distribution center. (p.302) Target NA
NA NA
NA NA
Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) NA NA
(Totally Sams business is highly profitable but by comparing to Costco, it is highly below Costcos sales)
Kmart NA
Costco NA
Strength
Weakness
NA
NA
NA
36
16.4
PRODUCTION COSTS Wal-Mart NA Target NA Kmart NA Costco NA Strength Weakness -
16.5
DISTRIBUTION COSTS Wal-Mart Target NA NA NA Kmart NA NA NA Costco NA NA NA Strength Weakness
Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301) Wal-Mart's distribution operations are highly automated. (p.302) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302) Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302) After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302) Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303) 16.6 SALES AND MARKETING COSTS Wal-Mart Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299)
NA NA
NA NA
NA NA
NA
NA
NA
Target NA
Kmart NA
Costco NA
Strength
Weakness
37
Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306) Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306) Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306) The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy discounts. (p.301) Walmart.com provides easy access 24/7/365 to more than a million products (p.303) 16.7 CUSTOMER SERVICE COSTS Wal-Mart NA
NA NA NA NA
NA NA NA NA
NA NA NA NA
NA
NA
NA
NA
NA
NA
Target NA
Kmart NA
Costco NA
Strength -
Weakness -
16.8
MANAGEMENT COSTS Wal-Mart Target NA Kmart NA Costco NA Strength Weakness
Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304)
38
17.0 17.1
STRENGTHS AND WEAKNESSES LIST OF STRENGHS AND WEAKNESSES
Same as opportunities and threats, in the list of strengths and weaknesses, overlapped items are not omitted but have been highlighted through adding the phrase overlapped item in brackets. 17.1.1 STRENGTHS No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Items You'll feel at home in any department of any store ... that's our culture (p.293) The Wal-Mart culture is based on three basic beliefs or Sam Walton: 1) respect for the individual, 2) service to our customers and 3) strive for excellence (p.293) According to CEO Mike Duke, "Sustainability is an important part of our culture (p.305) In May 2009, Wal-Mart began revamping the electronics departments in its 3,500 U.S. stores to make them much more interactive and roomier (p.293) The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) [Overlapped Item] In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) [Overlapped Item] Wal-Mart desires to level the playing field with its rival firms because it already provides health insurance to all its employees (p.293) In 2003, Wal-Mart grouped its smaller discount stores, such as the one in Bennington, Vermont, into a new Hometown USA program (p.298) The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298) [Overlapped Item] Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) [Overlapped Item] Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) [Overlapped Item] Wal-Mart is working hard to expand its food distribution capabilities. Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store (p.301) [Overlapped Item] Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town." (p.301) [Overlapped Item] In 2009, Wal-Mart pledged to double its use of solar energy in California (p.305)
39
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
in February 2009, Wal-Mart Foundation announced it will donate $5.7 million for the creation of green jobs in the United States (p.305) Opening of several new stores in the near future in Mexico is planned (p.302) In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302) In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302) [Overlapped Item] . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) [Overlapped Item] Exhibit 4 shows Wal-Mart's organizational chart. It is well-structured. (p.299) Wal-Mart has strongly opposed unions in its stores. They argue that the company is structured so that employees derive the most benefit and best conditions by working directly with Wal-Mart, as opposed to through a union (p.302) Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303) [Overlapped Item] Executives spend one week each year in hourly jobs in various stores. (p.303) Walmart.com will have a separate management team and board of directors (p.303) [Overlapped Item] Promotions have recently been made so there are now women in senior officer positions. (p.304) [Overlapped Item] The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303) [Overlapped Item] Employees who do better than average get rewarded with raises, bonuses, and personal recognition. (p.303) All employees (referred to as "associates") have a stake in the financial performance of the company. (p.303) Wal-Mart encourages employee stock purchases. During fiscal 2008, participants could contribute up to 50 percent of their pretax earnings, but not more than statutory limits. (p.303) Promotions have recently been made so there are now women in senior officer positions. (p.304) [Overlapped Item] Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities (p.305) A mentoring program encompassing more than 750 women and minority managers (p.305) A women's leadership group, in partnership with Herman Miller and ServiceMaster, to develop opportunities for high-potential female managers (p.305) Store internships during the summer for college students between their junior and senior years, with 70 percent of them for women or minorities. (p.305) Expansion of its business with minority- and women-owned companies by more than 25 percent in 2008 (p.305) Creation of a Hispanic scholarship fund for Hispanic high school students (p.305)
40
38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59
Wal-Mart already provides health insurance to all its employees (p.293) Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303) [Overlapped Item] Wal-Mart management takes pride in the ongoing development of its people. (p.303) If employment with the company is terminated because of retirement, death, or permanent disability, the company contribution is fully vested (meaning the entire amount is non-forfeitable). If termination of employment occurs for any other reason, the amount that is non-forfeitable depends on the number of years of service with the company. (p.303) Wal-Mart is an Equal Employment Opportunity/Affirmative Action (EEO/AA) employer . (p.304) This back-haul rate averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302) Extensive advertising is not needed for Supercenters and this represents an enormous saving over the competition(p.301) As Supercenters move more into food distribution, they gain a major cost advantage over Super Kmart and Super Target. (p.301) In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302) [Overlapped Item] The company avoids spending money on consultants and marketing experts. (p.306) Wal-Mart de Mexico is strengthened by strong customer support (p.302) Supercenters provide mart carts and are all one-story buildings, making the stores handicapped accessible (p.301) They are usually equipped with a customer service desk and scanning registers to provide more efficient checkout procedures. (p.301) Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. [Overlapped Item] Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306) [Overlapped Item] Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306) [Overlapped Item] Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306) [Overlapped Item] In addition to Discover Card, Sam's have also recently started accepting MasterCards for payments. The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy discounts. (p.301) [Overlapped Item] Supercenters provide mart carts (p.301) Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item] The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) [Overlapped Item]
41
60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79
In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) [Overlapped Item] The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298) [Overlapped Item] Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) [Overlapped Item] Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) [Overlapped Item] In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) [Overlapped Item] Wal-Mart now carries more sophisticated electronics products such as Research in Motion Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu-ray disc players (p.293) Wal-Mart argued that it priced products below cost not to harm competitors but to meet or beat rivals' prices (p.304) It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) [Overlapped Item] The stated purpose of Wal-Mart's pricing policy is to meet or beat" the retail prices contemporaneously charged by competitors for highly competitive, price-sensitive merchandise; to maintain "low-price leadership" in the local marketplace; and to "attract a disproportionate number of customers into a store to increase traffic." (p.304) The store's pricing practices with regard to specific articles did not violate the Arkansas Unfair Practices Act section prohibiting vendors from selling at or below their cost (p.304) Whether you walk into a Wal-Mart store in your hometown or one across the country while you're on vacation, you can always be assured you're getting low prices and genuine customer service that you've come to expect from us (p.293) The company's broad assortments and everyday low prices are very compelling (p.293) Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.293) [Overlapped Item] Wal-Mart has distribution centers nationwide. Some of them are grocery distribution centers and also a small number are import distribution centers. (p.302) Wal-Mart's distribution operations are highly automated. (p.302) [Overlapped Item] A typical Wal-Mart Discount Store has more than 70,000 standard items in stock (p.302) Supercenters carry more than 20,000 additional grocery items , including perishables (p.302) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302) [Overlapped Item] Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302) [Overlapped Item] After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302) [Overlapped Item]
42
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104
Wal-Mart laid claim to having stores in all 50 states (p.293) Wal-Mart, Inc. currently operates domestically 891 Wal-Mart discount stores, 2,612 Supercenters, 602 Sam's Clubs, and 153 Neighborhood Markets. (p.298) At the end of fiscal 2009, Wal-Mart had a total of 602 domestic Sam's Clubs in operation. (p.301) For fiscal 2009, the company had 318 Wal-Mart brands in Canada, 1,197 in Mexico, and 56 in Puerto Rico (p.302) The company operated over 3,600 Wal-Mart brand stores internationally (p.302) Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303) [Overlapped Item] The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) [Overlapped Item] The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298) [Overlapped Item] Higher Current Ratio Higher Quick Ratio Higher Times interest earned ratio Higher Inventory turnover Higher Fixed assets turnover Higher Total asset turnover Higher Gross profit margin Higher Net profit margin Higher Return on Total Assets (ROA) Higher Return on Stockholders Equity (ROE) Higher Earnings per share Associates use handheld computers that are linked by radio-frequency network to area stores for distribution (p.302) [Overlapped Item] To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder (p.302) [Overlapped Item] Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker (p.302) [Overlapped Item] Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302) [Overlapped Item] With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology (p.302) [Overlapped Item] Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item]
43
105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124
Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303) [Overlapped Item] Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store, whereas food has tended to build slowly (p.301) [Overlapped Item] Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town (p.301) [Overlapped Item] The one-stop convenience aspect of the stores has such broad appeal that it is drawing a larger customer audience on a regular basis. (p.301) Sam's Clubs usually offer over 3,500 items, which are used most often by the consumers they serve. (p.301) In Sams Clubs, because the number of items is limited to around 2,000 for the wholesale part of the business and between 1,000 and 1,500 for personal and individual use, it is very important for the items to be appropriate for the location. (p.301) Neighborhood Markets provide about 28,000 items to customers (p.302) Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303) [Overlapped Item] The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303) [Overlapped Item] Wal-Mart expanded into the international markets so that customers everywhere will associate their name with low cost, best value, greatest selection of quality merchandise and highest standards of customer service (p.302) Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.302) [Overlapped Item] The merchandise is carefully selected to ensure quality and must be made in the United States. (p.299) 'To provide quality products at an everyday low price and with extended customer service ... always (p.293) With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) [Overlapped Item] Associates use handheld computers that are linked by radio-frequency network to area stores. (p.302) [Overlapped Item] To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder. (p.302) [Overlapped Item] Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker. (p.302) [Overlapped Item] Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution (p.302) [Overlapped Item] Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302) [Overlapped Item] Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed. (p.302)
44
125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146
[Overlapped Item] Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. (p.306) [Overlapped Item] Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306) [Overlapped Item] Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306) [Overlapped Item] Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306) [Overlapped Item] Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item] Wal-Mart's Supercenters combine groceries with general merchandise, giving customers one-stop shopping (p.301) We have an exceptionally strong management team, able to execute our strategy, perform every single day, and deliver results." (p.298) The company was able to attract a top retail management talent in Jeanne Jackson as the CEO of Walmart.com (p.303) Walmart.com will have a separate management team and board of directors (p.303) [Overlapped Item] Wal-Mart managers stay current with new developments and needed changes (p.303) It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) [Overlapped Item] Promotions have recently been made so there are now women in senior officer positions (p.304) [Overlapped Item] decisions are made based on the intuitive judgments of managers and employees (p.306) The Walton family and management (as insiders) own nearly 44 percent of Wal-Mart stock. These holdings are worth nearly $28 billion today. (p.303) Wal-Mart's sales rose from $374.3 billion in fiscal year 2008 to $401.2 billion in 2009 while net income rose from $12.7 billion to $13.4 billion. (p.293) When it initially went public, 100 shares of Wal-Mart stock would have cost $1,650. Now, those 100 shares are worth over $6 million (p.298) Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 The fact that the International segment has grown to nearly $100 billion in sales shows the potential of this market (p.302) With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) [Overlapped Item] Wal-Mart owns a fleet of truck-tractors that they frequently pick up merchandise from manufacturers on the way back to the distribution center. (p.302) [Overlapped Item] Wal-Mart's distribution operations are highly automated. (p.302) [Overlapped Item]
45
147 148 149 150 151 152 153 154 155 156 157
Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302) [Overlapped Item] Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302) [Overlapped Item] After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302) [Overlapped Item] Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303) [Overlapped Item] Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) [Overlapped Item] Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. [Overlapped Item] Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306) [Overlapped Item] Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306) [Overlapped Item] Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306) [Overlapped Item] The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy discounts. (p.301) [Overlapped Item] Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item]
17.1.2 WEAKNESSES No. 1 2 3 4 5 6 Items Store policies forbid employees from dating other employees without the prior approval of the executive committee (p.304) Women are rarely found in management positions (p.303) Wal-Mart has strongly opposed unions in its stores. (p.302) Three independent pharmacies in Conway, Arkansas, filed a suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304) Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304) The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304)
46
7 8 9 10 11 12 13 14 15 16 17 18 17.2
Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301) [Overlapped Item] Higher Debt to total asset ratio Higher Debt to Equity ratio Higher Long term debt to equity ratio Lower Operating profit margin Lower Sales Lower Net Income In Sams Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301) Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301) [Overlapped Item] Having lower sales in comparison to Costco: Sams is a $46.8 billion business that is starting to grow again (p.301) Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301) [Overlapped Item] Increase in expense in comparison to previous years: Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304) INTERNAL FACTOR EVALUATION (IFE) MATRIX
According to the book (p.154), total items selected for IFE (both strengths and weaknesses) should be between 10-20 items. Therefore, I have selected 19 items that seemed more important than other items. No 1 2 3 4 Strengths Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) Weight Rating Weighted Score
0.12 0.15 0.15 0.12
0.04 0.05 0.05 0.04
3 3 3 3
47
5 6 7 8 9 10
Opening of several new stores in the near future in Mexico is planned In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302) In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302) . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 Higher Return on Total Assets (ROA)
0.07 0.08 0.07 0.06 0.09 0.07
4 4 4 3 4 4
0.28 0.32 0.28 0.18 0.36 0.28
No 1 2 3 4 5 6 7 8
Weaknesses Having lower sales in comparison to Costco: Sams is a $46.8 billion business that is starting to grow again (p.301) Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301) Increase in expense in comparison to previous years: Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304) Lower Net Income Lower Sales Three independent pharmacies in Conway, Arkansas, filed a suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304) Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304) The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304)
Weight
0.06 0.03 0.05 0.06 0.06 0.04 0.04 0.02
Rating
2 2 2 2 1 1 1 1
Weighted Score
0.12 0.06 0.1 0.12 0.06 0.04 0.04 0.04
48
In Sams Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301) Total:
0.02 1
2.82
Conclusion: In IFE matrix, weighted scored of the company is 2.82 which is above the industry average (2.50). It shows that the company has strong internal strengths to compete with its major competitors which are Costco and Target and it seems it is able to reduce its weaknesses.
18.0
18.1
OBJECTIVES AND STRATEGIES

LONG-TERM OBJECTIVES
18.1.1 STRATEGIC LONG-TERM OBJECTIVES Type of Objective

1. Businessexpansion
Strategic Long-term Objectives Case Facts

a. ThecompanywantsallthebusinessthatCircuitCity'sfailureleftandalsowantsBest BuyandAmazon'sbusiness.(p.293) a. WalMartdesirestoleveltheplayingfieldwithitsrivalfirmsbecauseitalreadyprovides healthinsurancetoallitsemployees.(p.293) b. WalMarthasinstitutedseveralinitiativestoincreasetherecruitmentandpromotionof womenandminorities(p.305)
Achieved/ Not achieved Not achieved
2. Increasingemployee benefits
Not achieved
3. Acceleratingdistribution system 4. Focusingonfoodretailing
a. WalMartisworkinghardtoexpanditsfooddistributioncapabilities. (p.301) a. WalMartlikestolocateSupercentersnearthestrongestfoodretailerssotheirfacilities will"eithergetbetterorberunoutoftown."(p.301) a. WalMartdeMexicoisstrengthenedbystrongcustomersupport,andtheopeningof
Not achieved Not achieved
5. Marketdevelopment
Not achieved
49
severalnewstoresinthenearfutureisplanned. (p.302) b. InMay2009,companyindicateditwillobservetheperformanceofthesepilotstoresin Chinaanddeterminewhethertoexpandthisidea.(p.302) c. WalMartlooksatInternetretailingasanotherstorewithpossibility,butwithoutwalls. (p.302) 6. Attainingsustainability a. Itsinitiative,"Sustainability360,"isacompanywideefforttotakesustainabilitybeyond Achieved WalMart'sdirectfootprinttoencompassWalMart'sassociates,suppliers,communities andcustomers.(p.305) a. "WalMart'senvironmentalgoalsaretobesupplied100percentbyrenewableenergy; tocreatezerowaste;andtosellproductsthatsustainourresourcesandthe environment."(p.305)
7. Socialresponsibility
Not achieved
18.1.2 FINANCIAL LONG-TERM OBJECTIVES Type of Objective 18.2

OBJECTIVES
Financial Long-term Objectives Case Facts NA
Achieved/ Not achieved
18.2.1 STRATEGIC OBJECTIVES Type of Objective

1. Renewingthestores
Strategic Objectives Case Facts

a. InMay2009,WalMartbeganrevampingtheelectronicsdepartmentsinits3,500U.S. storestomakethemmuchmoreinteractiveandroomier.(p.293)
Achieved/ Not achieved Achieved
50
2. Increasingproduct variability
a. WalMartnowcarriesmoresophisticatedelectronicsproductssuchasResearchin MotionLtd.'sBlackberrysmartphones,PalmInc.'sPresmallphone,andBluraydisc players.(p.293) b. InJune2009,WalMartbegansellingDellInc.'snewStudioOne19touchscreen computers.(p.293) c. WalMarthasalsodevelopednewapparellines,suchastheKathieLeecareer sportswearanddresscollection,BasicEquipmentsportswear,andMcKidschildren's clothing.(p.299)
Achieved
3. Increasingcustomer satisfactionthrough improvingservicequality
a. In2003,WalMartgroupeditssmallerdiscountstores,suchastheoneinBennington, Vermont,intoanewHometownUSAprogram.Thisstrategyallowsthecompanytogive specialattentiontocustomersinsmallermarketsinruralAmerica(p.298) b. HometownUSAconsistsofthestoresarelessthan50,000squarefeetandareunder oneregionalmanager.Theideaistoenablethesestorestodeveloplocallyandwitha differentmixfromthelargeprototypes.(p.298) c. WalMarthasinstalledpointofsalebarcodescanninginallofitsstores. (p.302) d. ThisWalMart.comventuresdistinctpurposeistoprovideconsumerswithaconvenient andrewardingonlineshoppingexperience.(p.303)
Achieved
4. Marketingtheproduct
a. WalMarthasbegunmarketinglimitedlinesofmerchandiseunderthebrandname Sam'sChoice.(p.299) a. However,thecompanyhasgainedmarketsharemorequicklythanplanned.(p.301) a. InDecember2008,althoughknownforitsmegastores,WalMartlaunchedapilot programinChinaandenteredtheconveniencestoremarketunderthename"Smart
Achieved
5. Marketshare 6. Openingsmallstoresin China
Achieved Achieved
51
Choice"orHuiXuaninChinese. (p.302) 7. Developingnewservices a. WalMartisdevelopingnewservicessuchasmusicdownloadsand1hourphotos. (p.303) a. ItisWalMart'spolicythatitsstoremanagersmonitortheretailpriceschargedby competitorsintheirrespectivemarketareasandlowerpricesforhighlycompetitive merchandisewithoutregardtothecostofindividualitems.(p.304) b. ThestatedpurposeofWalMart'spricingpolicyistomeetorbeat"theretailprices contemporaneouslychargedbycompetitorsforhighlycompetitive,pricesensitive merchandise;tomaintain"lowpriceleadership"inthelocalmarketplace;andto "attractadisproportionatenumberofcustomersintoastoretoincreasetraffic."(p.304) c. Thecompany'sbroadassortmentsandeverydaylowpricesareverycompelling; extensiveadvertisingisnotneeded.(p.301) 9. Socialresponsibility a. In2009,WalMartpledgedtodoubleitsuseofsolarenergyinCalifornia.(p.305) b. Inaddition,inFebruary2009,WalMartFoundationannounceditwilldonate$5.7 millionforthecreationofgreenjobsintheUnitedStates.(p.305) 10. Costcontrol a. Supercentersmovemoreintofooddistribution,theygainamajorcostadvantageover SuperKmartandSuperTarget.(p.301) b. Indeliveringgoodstostores:Thisbackhaulrateaveragesover60percentandisyet anotherwayWalMartcutscosts.(p.302) c. Thecompanyavoidsspendingmoneyonconsultantsandmarketingexperts.Instead, decisionsaremadebasedontheintuitivejudgmentsofmanagersandemployeesand ontheassessmentofstrategiesofotherretailchains.(p.306)
Not achieved
8. Lowertheretailingprices
Achieved
Achieved
Achieved
52
18.2.2 FINANCIAL OBJECTIVES Type of Objective

1. Increasingthesalesofall stores 2. Increasingthesalesof specificstores
Financial Objectives Case Facts

a. WalMart'ssalesrosefrom$374.3billioninfiscalyear2008to$401.2billionin2009 whilenetincomerosefrom$12.7billionto$13.4billion.(p.293) a. Internationalsalesaccountedforapproximately24.6percentoftotalcompanysalesin fiscal2009.(p.293) b. MostofWalMart's$405.6billioninfiscal2009salescamefromWalMartstoresand Supercenters.(p.293) c. SalesfortheWalMart'sSam'sClubssegmentincreasedby5.6percentinfiscal2009, comparedtofiscal2008.(p.301)
Achieved/ Not achieved Achieved
Achieved
3. Higherearningpershare
a. Whenitinitiallywentpublic,100sharesofWalMartstockwouldhavecost$1,650. Now,those100sharesareworthover$6million.(p.298)
Achieved
18.3
CORPORATE LEVEL STRATEGIES
Since I could not put all of the strategies that are used above in corporate or business level strategies (strategies like increasing employee benefits), so I put those strategies that could be categorized under these two level strategies. Corporate Level Strategies No. A Case Facts 1. ThecompanywantsallthebusinessthatCircuitCity'sfailureleftandalsowantsBest BuyandAmazon'sbusiness.(p.293) 2. Itsinitiative,"Sustainability360,"isacompanywideefforttotakesustainability beyondWalMart'sdirectfootprinttoencompassWalMart'sassociates,suppliers, communitiesandcustomers.(p.305) Type of Strategy Market Penetration Successful/Unsuccessful Successful
53
3. "WalMart'senvironmentalgoalsaretobesupplied100percentbyrenewableenergy; tocreatezerowaste;andtosellproductsthatsustainourresourcesandthe environment."(p.305) 4. However,thecompanyhasgainedmarketsharemorequicklythanplanned.(p.301) 5. In2009,WalMartpledgedtodoubleitsuseofsolarenergyinCalifornia.(p.305) 6. Inaddition,inFebruary2009,WalMartFoundationannounceditwilldonate$5.7 millionforthecreationofgreenjobsintheUnitedStates.(p.305) 7. WalMartdesirestoleveltheplayingfieldwithitsrivalfirmsbecauseitalready provideshealthinsurancetoallitsemployees.(p.293) 8. WalMarthasinstitutedseveralinitiativestoincreasetherecruitmentandpromotion ofwomenandminorities(p.305) 1. WalMartlikestolocateSupercentersnearthestrongestfoodretailerssotheir facilitieswill"eithergetbetterorberunoutoftown."(p.301) 2. WalMartisworkinghardtoexpanditsfooddistributioncapabilities.(p.301)
3. InMay2009,WalMartbeganrevampingtheelectronicsdepartmentsinits3,500U.S.stores tomakethemmuchmoreinteractiveandroomier.(p.293) 4. WalMartnowcarriesmoresophisticatedelectronicsproductssuchasResearchinMotion Ltd.'sBlackberrysmartphones,PalmInc.'sPresmallphone,andBluraydiscplayers.(p.293) 5. InJune2009,WalMartbegansellingDellInc.'snewStudioOne19touchscreencomputers. (p.293) 6. WalMarthasalsodevelopednewapparellines,suchastheKathieLeecareersportswearand dresscollection,BasicEquipmentsportswear,andMcKidschildren'sclothing.(p.299) 7. In2003,WalMartgroupeditssmallerdiscountstores,suchastheoneinBennington, Vermont,intoanewHometownUSAprogram.Thisstrategyallowsthecompanytogivespecial attentiontocustomersinsmallermarketsinruralAmerica(p.298)
Product Development (Service Development)
Successful
54
8. HometownUSAconsistsofthestoresarelessthan50,000squarefeetandareunderone regionalmanager.Theideaistoenablethesestorestodeveloplocallyandwithadifferentmix fromthelargeprototypes.(p.298) 9. WalMarthasinstalledpointofsalebarcodescanninginallofitsstores. (p.302) 10. ThisWalMart.comventuresdistinctpurposeistoprovideconsumerswithaconvenientand rewardingonlineshoppingexperience.(p.303) 11. WalMarthasbegunmarketinglimitedlinesofmerchandiseunderthebrandnameSam's Choice.(p.299) 12. WalMartisdevelopingnewservicessuchasmusicdownloadsand1hourphotos.(p.303)
1. WalMartdeMexicoisstrengthenedbystrongcustomersupport,andtheopeningofseveral newstoresinthenearfutureisplanned.(p.302) 2. InMay2009,companyindicateditwillobservetheperformanceofthesepilotstoresinChina anddeterminewhethertoexpandthisidea.(p.302) 3. WalMartlooksatInternetretailingasanotherstorewithpossibility,butwithoutwalls.(p.302) 4. InDecember2008,althoughknownforitsmegastores,WalMartlaunchedapilotprogramin Chinaandenteredtheconveniencestoremarketunderthename"SmartChoice"orHuiXuan inChinese.(p.302)
Market Development
Successful
18.4 No.
BUSINESS LEVEL STRATEGIES Business Level Strategies Case Facts Type of Strategy Successful/Unsuccessful
55
1. ItisW WalMart'spolicyt thatitsstoremanagersmonitort theretailpricesc chargedbycomp petitors inthei irrespectivemar rketareasandlow werpricesforhig ghlycompetitive emerchandisewi ithout regard dtothecostofin ndividualitems.(p.304) 2. ThestatedpurposeofWalMart'spricingpolicyistom meetorbeat"the eretailprices contem mporaneouslych hargedbycompe etitorsforhighlycompetitive,pric cesensitive merch handise;tomaint tain"lowpricele eadership"inthelocalmarketplac ce;andto"attrac cta dispro oportionatenumb berofcustomers sintoastoretoincreasetraffic." (p.304) 3. Theco ompany'sbroada assortmentsandeverydaylowpr ricesareverycom mpelling;extensi ive advert tisingisnotneed ded.(p.301)
Cost L Leadership (Type 1) e
Successful
18.5 1
THE COM MPANYS EXIST TING STRATEGI IES
56
19.0
19.1
SWOT
SWOT MATRIX
Items selected in SWOT are all those items which are used in IFE and EFE.
Strengths
1 Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299)
Weaknesses
1 Having lower sales in comparison to Costco: Sams is a $46.8 billion business that is starting to grow again (p.301) 2 Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301) 3 Increase in expense in comparison to previous years: Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304) 4 Lower Net Income
2 The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293)
3 In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293)
4 Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) 5 Opening of several new stores in the near future in Mexico is planned 6 In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302)
5 Lower Sales 6 Three independent pharmacies in Conway, Arkansas, filed a suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304) 7 Chancery Court Judge David L. Reynolds on October 11, 1996, found
7 In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea.
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(p.302)
8 . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) 9 Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008
Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304) 8 The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304) 9 In Sams Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301)
10 Higher Return on Total Assets (ROA)
Opportunities
1 During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) 2 Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) 3 During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) 4 The company's broad assortments and everyday low prices are very compelling (p.301)
SO Strategies
1 Keep introducing new products and services in order to keep the market share high (S1,S3,S4,S8,O5) 2 Continue opening stores in Mexico and China (S5,S6,S7,O2,O3) 3 Acquiring other competitors (walmart.com competitors) to gain more market share (S2,O1,O5) 4 Keep the ROA high through using the latest technologies (S10,O7,O8)
WO Strategies
1 Keep the prices low in order to gain higher sales (W1,W5,O4,O6) 2 Try to avoid predatory pricing and as an alternative to use compelling pricing (W7,W8,O4) 3 Using latest technologies in order to facilitate distribution system (W2,O7)
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5 Wal-Mart has gained market share more quickly than planned (p.301) 6 Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from WalMart stores and Supercenters. (p.298) 7 Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. 8 With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302)
5 Keep the prices low in order to keep sales high (S9,O4,O6)
Threats
1 In 2008-2009, a recession happened in the economy (p.293) 2 Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) 3 Target has now become a fierce competitor of Wal-Mart (p.306)
ST Strategies
1 Keep the sales high in the economic recession (S9,T1) 2 Keep the sales high to beat the competitors out of market (S9,T2,T3,T4) 3 Keep introducing new products and services for Sams clubs in order to overcome Costco (S1,T5,T6, T10)
WT Strategies
1 Increase sales in order to avoid the effects of economic recession on the company (W1,W5,T1) 2 Decrease the expenses to overcome Costco in sales increase (W2,T5,T6,T10) 3 Increase net income through reducing the issues of internet selling and increase in sales of walmart.com (W4,T9)
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4 Target is ranked second among discount retailers (p.306) 5 Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) 6 Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) 7 Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) 8 Kmart, have operated in Vermont for years (p.293) 9 Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303) 10 Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306)
4 Adding new products and services to compete with Target (S3,S4,S8,T7)
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19.2
LIST OF ALTERNATIVE STRATEGIES SO Alternative Strategies WO Alternative Strategies

1. Costleadership(type1):Keepthepriceslowinordertogainhighersales (W1,W5,O4,O6) 2. Costleadership(type1):Trytoavoidpredatorypricingandasan alternativetousecompellingpricing(W7,W8,O4) 3. ProductDevelopment:Usinglatesttechnologiesinordertofacilitate distributionsystem(W2,O7)
1. ProductDevelopment:Keepintroducingnewproductsandservicesin ordertokeepthemarketsharehigh(S1,S3,S4,S8,O5) 2. MarketDevelopment:ContinueopeningstoresinMexicoandChina (S5,S6,S7,O2,O3) 3. Horizontalintegration:Acquiringothercompetitors(walmart.com competitors)togainmoremarketshare(S2,O1,O5) 4. Costleadership(type1):KeeptheROAhighthroughusingthelatest technologies(S10,O7,O8) 5. Costleadership(type1):Keepthepriceslowinordertokeepsaleshigh (S9,O4,O6)
ST Alternative Strategies
WT Alternative Strategies
1. MarketPenetration:Keepthesaleshighintheeconomicrecession(S9,T1) 1. MarketPenetration:Increasesalesinordertoavoidtheeffectsof economicrecessiononthecompany(W1,W5,T1) 2. MarketPenetration:Keepthesaleshightobeatthecompetitorsoutof market(S9,T2,T3,T4) 3. Productdevelopment:Keepintroducingnewproductsandservicesfor SamsclubsinordertoovercomeCostco(S1,T5,T6,T10) 4. Productdevelopment:Addingnewproductsandservicestocompetewith Target(S3,S4,S8,T7) 2. CostLeadership(type1):DecreasetheexpensestoovercomeCostcoin salesincrease(W2,T5,T6,T10) 3. CostLeadership(type1):Increasenetincomethroughreducingtheissues ofinternetsellingandincreaseinsalesofwalmart.com(W4,T9)
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19.3
SWOT ANALYSIS DIAGRAM
Three strategies that seem suitable according to the current situation of the industry are as follows:
1. MarketDevelopment 2. ProductDevelopment 3. MarketPenetration
Numerous environmental opportunities
Cell 1: Supports an aggressive strategy
Critical internal weaknesses
Substantial internal weaknesses
Major environmental threats
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19.4
CONVERTING INTO STRATEGIC TERMS
19.4.1 CORPORATE LEVEL STRATEGIES No. A Alternative Strategies

a. SO1 b. WO3 c. ST3 d. ST4
Type of Strategy Product Development
B C
a. SO2 a. ST1 b. ST2 c. WT1
Market Development Market Penetration
19.4.2 BUSINESS LEVEL STRATEGIES No. A Alternative Strategies

a. SO4 b. SO5 c. WO1 d. WO2 e. WT2
Type of Strategy Cost Leadership (Type 1)
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f.
WT3
CostLeadership (Type1) MarketPenetration
ProductDevelopment
MarketDevelopment
Level of Strategy Business Level Strategy Cost Leadership (Type 1) Corporate level Strategies Market Penetration Product Development Market Development
Original Alternative Strategy Keep the prices low in order to gain higher sales
Given Code WO-1
Keep the sales high to beat the competitors out of market Keep introducing new products and services in order to keep the market share high Continue opening stores in Mexico and China
ST-2 SO-1 SO-2
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20.0
SPACE
Strategy Position Financial Position(FP)

Gross profit margin of the company increased from 0.234 to 0.236 from 2008 to 2009. (financial analysis) Earnings per share increased from 3.204 to 3.414 from 2008 to 2009. (financial analysis) Current Ratio increased from 0.82 to 0.88 from 2008 to 2009. (financial analysis) Sales decreased from 8.5% to 7.1% in 2009 in comparison to previous year increase. (financial analysis)
Rating
4 4 4 2
Total: Industry Strength(IP)

Environmentalists in Vermont say the rural character of the state is endangered by "sprawl-mart development." (p.293) Kmart, have operated in Vermont for years, so some residents are mystified by the current controversy. (p.293) The U.S. Chamber of Commerce has actively fought against legislation of providing health insurance to all employees for several years. (p.293)
14
5 5 5
Total: Stability Position (SP)

In 2008-2009, a recession happened in the economy (p.293) The Internet has interesting aspects and will definitely serve a growing market throughout the 21st century. (p.303) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306)
15
-3 -5 -2
Total: Competitive Position(CP)

Wal-Mart has gained market share more quickly than planned (p.301)
-10
-3
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The T merchandise is carefully se e elected to ensure quality and m be made in the United State (p.299) e must es. Wal-Mart leads the industry in information tec W chnology. (p.302 2)
-3 -2
Total: T
CONCLUSION: FP F Average: 3.50 P IP Average: 5 SP S Average: -4.3 33 CP C Average: -2.66 Directional Vect Coordinate: D tor x axis = 2.33 y axis = - 0.83 CP
FP
-8
IP
Competitiv ve Competitive e
SP 20.1 2 CONCLU USION
According to the above results, Wal-Mart is in the competitive quadrant. Ref A e n e ferring to the bo (p.215), as t vector is nea to right x-axis (IP), ook the arer Wal-Mart has m W major competitiv advantages in a high-growth industry. ve n h
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To conclude, the company can select one of the strategies of this quadrant. I selected market development and product development as the best strategies according to the result of SPACE Matrix.
21.0
BCG MATRIX
BCG matrix is used for multi-divisional companies. It seems that Wal-Marts Sams Clubs and International segment has the same business with U.S. segment of Wal-Mart. Therefore, I supposed all as one division which are working relatively a same business rather than doing related or unrelated business. Consequently, it is not possible to draw BCG matrix for Wal-Mart.
22.0
IE MATRIX
Revenue ($ in Millions) Wal-Mart Total: 405,607 405,607 Revenue (%) 100 100 Profit ($ in Millions) 13,400 13,400 Profit (%) 100 100 IFE 2.82 2.82 EFE 2.93 2.93
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4.0 The EFE Total Weighted Score High 3.0-4.0 3.0 Medium 2.0-2.99 2.0 Low 1.0-1.99 1.0
The IFE Total Weighted Score Strong 3.0-4.0 Average 2.0-2.99 3.0 2.0
Weak 1.0-1.99 1.0
IFE= 2.26 Wal-Mart EFE= 2.00
Conclusion: According to data available and IE matrix analysis, Wal-Mart Company is in hold and maintain cell. Therefore, the selected strategy for Wal-Mart is product development.
23.0
GRAND STRATEGY MATRIX
It is not mentioned about market (industry) growth in the case. But from other competitors high sales (such as Costco and Target in page 306) and Wal-Marts high sales (p.293), I concluded that the industry growth is somehow high in the current situation. And for competitive position of the firm, there is enough information. For example in CPM, I concluded that the firm is on top. Or in items like being leader in information technology (p.302), number of stores (p.298), sales and food distribution advantages (p.301) I concluded that among major competitors Wal-Mart is the best in the industry. Consequently, I put the company in quadrant I in which the market growth is high and Wal-Mart has strong competitive position. In this quadrant I selected market development and product development.
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24.0 2
24.1 2
QSPM ( (QUANTITA ATIVE STRAT TEGIC PLAN NNING MATRIX)

SELECTI STRATEGIE ING ES SW WOT SP PACE BCG B IE GSM G Total T Product Development 4 Market Development 3 Market Penetrat tion 1
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24.2
CONCLUSION
According to the above table, I gathered all previous strategies from all matrixes. From the total number of strategies, it is depicted that two strategies are selected in more items than the other strategy. Besides, I concluded that 2 strategies are sufficient to implement for the company since it makes it difficult for the company to implement more than two. Moreover, the more strategies selected, it is more difficult to focus on all of them precisely. Finally, I selected product development and market development for Wal-Mart to evaluate QSPM and making the last decision and selecting the best strategy. 24.3 QSPM Key factors
Weight MarketDevelopment (1) AS TAS ProductDevelopment(2) AS TAS
Opportunities During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) The company's broad assortments and everyday low prices are very compelling (p.301) Wal-Mart has gained market share more quickly than planned (p.301) Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) Threats In 2008-2009, a recession happened in the economy (p.293) Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306)
0.08 0.06 0.05 0.05 0.07 0.08 0.07 0.06
3 2 3 -
0 0 0.15 0 0.14 0.24 0 0 0 0
3 3 4 3 3
0 0 0 0.15 0.21 0.32 0.21 0.18 0 0
0.06 0.04
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Target has now become a fierce competitor of Wal-Mart (p.306) Target is ranked second among discount retailers (p.306) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) Costco finished the year at just over $72 billion while the Sam's Club division of WalMart brought in over $44 billion in net sales (p.306) Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) Kmart, have operated in Vermont for years (p.293) Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) TOTAL Strengths Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) Opening of several new stores in the near future in Mexico is planned In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302) In May 2009, company indicated it will observe the performance of these pilot stores
0.04 0.05 0.06 0.05 0.05
2 2 1
0 0 0.12 0.1 0.05
2 2 2
0 0 0.12 0.1 0.1
0.04 0.05
2 -
0.08 0
0 0
0.04
0.08
1.00
0 0 0 0 0.16 0.15 0.15 0.12
0.04 0.05 0.05 0.04
4 3 3 3
0.07 0.08
3 3
0.21 0.24
0 0
0.07
0.14
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and determine whether to expand this idea. (p.302) . In addition Wal-Mart is developing new services such as music downloads and 1hour photos. (p.303) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 Higher Return on Total Assets (ROA) Weaknesses Having lower sales in comparison to Costco: Sams is a $46.8 billion business that is starting to grow again (p.301) Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301) Increase in expense in comparison to previous years: Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304) Lower Net Income Lower Sales Three independent pharmacies in Conway, Arkansas, filed a suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304) Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304) The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304) In Sams Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301) TOTAL TOTAL ATTRACTIVENESS SCORE
0.06 0.09 0.07
0 0 0 0 0 0
4 -
0.24 0 0 0 0.03 0
0.06 0.03 0.05
1 -
0.06 0.06 0.04 0.04
0 0 0 0
0 0 0 0
0.02
0 0
0 0.04
0.02
1.00
1.55
2.28
Conclusion: The most attractive strategy is product development for Wal-Mart because it has gained the highest rate (2.28) and is the most attractive strategy for this company.
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25.0
25.1
MANAGEMENT AND OPERATION ISSUES

COMPARING NEW STRATEGY WITH EXISTING ONES Existing Strategies New Strategies
CostLeadership (Type1) MarketPenetration
CostLeadership (Type1) ProductDevelopment
ProductDevelopment MarketDevelopment MarketDevelopment
From the drawing above, it seems that the new strategies are in line with the existing ones. Cost leadership (type 1) in new strategy which is a business level strategy was taken from SWOT analysis and product development and market development are taken from QSPM selected strategies that are corporate level strategies. The existing strategies are those strategies which are taken from Objectives and Strategies chapter. In the table below, the new strategies implementation are the results of using the new developed strategy in the existing ones. However, as it was impossible to use all three strategies (cost leadership (type 1), Product Development and Market Development) in implementing in all new strategies, I manipulated as much strategy as possible. For example, in the item In May 2009, company indicated it will observe the performance of these pilot stores in China and determine whether to expand this idea. (p.302), I used cost leadership (type 1) and market development that resulted in writing down the sentence Adding convenient stores in China and selling low-cost products because my focus for implementing this strategy was developing the market and selling inexpensive products. In this case, although providing high quality products (product development) is necessary and useful, I wanted the company to focus more on adding stores in China with low cost products rather than providing high quality products.
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Other issue to mention is that in corporate level strategy, I did not find any match for service development for service industry. Therefore, I supposed product development as service development as in service industry, service should be developed rather than product and goods. As an example, when Wal-Mart brings new products to its stores like Dell laptops, I called this product (service) development. 25.2 OBJECTIVES Existing Strategy Strategic Long-term Objectives New Strategies New Strategies Implementation Merchandizing the same products that Circuit City, Best Buy and Amazon are selling with low prices. Providing low cost and high quality foods to stores and improving the distribution system. Proving high quality foods with low price to beat the food retailers out in the market Adding international Wal-Mart stores in Mexico while keeping the customer support in a high quality condition and using low cost strategy Adding convenient stores in China and selling low-cost products
Type of Objective Business expansion Accelerating distribution system Focusing on food retailing Market development
The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business. (p.293) Wal-Mart is working hard to expand its food distribution capabilities. (p.301) Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town." (p.301) Wal-Mart de Mexico is strengthened by strong customer support, and the opening of several new stores in the near future is planned. (p.302) In May 2009, company indicated it will observe the performance of these pilot stores in China and determine whether to expand this idea. (p.302) Wal-Mart looks at Internet retailing as another store with possibility, but without walls. (p.302) Its initiative, "Sustainability 360," is a companywide effort to take sustainability beyond Wal-Mart's direct footprint to encompass Wal-Mart's associates, suppliers, communities and customers. (p.305)
C.L.(T.1) ProductDevelopment MarketDevelopment
Attaining sustainability
Expanding distribution of internet selling to expand its market and lowering the cost of delivery Providing high quality products to make the customers loyal and gain more sustainability
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Social responsibility
"Wal-Mart's environmental goals are to be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain our resources and the environment." (p.305) Financial Long-term Objectives New Strategies
Providing recyclable handbags for customers to carry their purchased products
Type of Objective NA
NA
Existing Strategy
New Strategies Implementation NA
Type of Objective Renewing the stores
Existing Strategy
Strategic Objectives New Strategies
New Strategies Implementation Continue renewing the stores to attract new customers. As a result, new customers would find low-cost products in Wal-Mart stores Developing (providing) new products to attract customers to select Wal-Mart as a store that they can find anything they need.
Increasing product variability
In May 2009, Wal-Mart began revamping the electronics departments in its 3,500 U.S. stores to make them much more interactive and roomier. (p.293) Wal-Mart now carries more sophisticated electronics products such as Research in Motion Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu-ray disc players. (p.293) In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) Wal-Mart has also developed new apparel lines,
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Increasing customer satisfaction through improving service quality
Marketing the product Market share Opening small stores in China
Developing new services Lower the
such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) In 2003, Wal-Mart grouped its smaller discount stores, such as the one in Bennington, Vermont, into a new Hometown USA program. This strategy allows the company to give special attention to customers in smaller markets in rural America (p.298) Hometown USA consists of the stores are less than 50,000 square feet and are under one regional manager. The idea is to enable these stores to develop locally and with a different mix from the large prototypes. (p.298) Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302) This WalMart.com ventures distinct purpose is to provide consumers with a convenient and rewarding online shopping experience. (p.303) Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) However, the company has gained market share more quickly than planned. (p.301) In December 2008, although known for its megastores, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302) Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) It is Wal-Mart's policy that its store managers
Adding more discount stores that provides variable products with low price products
Improving the facilities for customers in order to attract more customers
Manufacturing every-day consumable products like cheap cakes and sweets in the name of WalMart or Sams Club. Continue providing low-cost products to gain more market share Adding 3 convenient stores in China to develop market in this high population area
Providing other service like tiny fast food restaurants inside stores. Attracting more customers through lowering the
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retailing prices
Social responsibility
Cost control
monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) The stated purpose of Wal-Mart's pricing policy is to meet or beat" the retail prices contemporaneously charged by competitors for highly competitive, price-sensitive merchandise; to maintain "low-price leadership" in the local marketplace; and to "attract a disproportionate number of customers into a store to increase traffic." (p.304) The company's broad assortments and everyday low prices are very compelling; extensive advertising is not needed. (p.301) In 2009, Wal-Mart pledged to double its use of solar energy in California. (p.305) In addition, in February 2009, Wal-Mart Foundation announced it will donate $5.7 million for the creation of green jobs in the United States. (p.305) Supercenters move more into food distribution, they gain a major cost advantage over Super Kmart and Super Target. (p.301) In delivering goods to stores: This back-haul rate averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302) The company avoids spending money on consultants and marketing experts. Instead, decisions are made based on the intuitive judgments of managers and employees and on the assessment of strategies of other retail
prices by controlling the cost of distribution system.
Gain more market penetration through taking care of environmental responsibility.
Reducing cost of distribution and transportation system to gain more advantage in selling the products lower than the other retailers selling price.
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chains. (p.306) Financial Objectives Type of Existing Strategy New Strategies Objective Wal-Mart's sales rose from $374.3 billion in Increasing the sales of all stores fiscal year 2008 to $401.2 billion in 2009 while C.L.(T.1) net income rose from $12.7 billion to $13.4 billion. (p.293) ProductDevelopment International sales accounted for approximately Increasing the MarketDevelopment 24.6 percent of total company sales in fiscal sales of specific 2009. (p.293) stores Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.293) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008. (p.301) When it initially went public, 100 shares of WalHigher earning Mart stock would have cost $1,650. Now, those per share 100 shares are worth over $6 million. (p.298) 25.3 MANAGEMENT ISSUES
New Strategies Implementation Selling low-cost products to gain more increase in sales
Focusing more on Supercenters, Sams Clubs and International segment rather than ordinary stores.
Providing new products to gain more value for companys shares
In this section, I am going to put the new strategies in the existing strategies. In management issues in my case analysis, there are more than 150 items from management issues to marketing research except finance section, I thought that it would be illogical to have strategies for all these items (according to the slide 11 of sample, we were supposed to Write down all issues stated in Chapter 4 COMPLETELY). Therefore, I combined those strategies that were similar in structure and wrote down a unique new strategy for similar items. As an example, Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities had more than 5 items related to this in Motivation Section. So I used the main sentence as the symbol of this item.
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Management Issue Planning
Organizing
Motivating
Staffing
Management Audit Existing Strategy New Strategies In May 2009, Wal-Mart began revamping the electronics departments in its 3,500 U.S. stores C.L.(T.1) to make them much more interactive and roomier (p.293) ProductDevelopment The company wants all the business that Circuit MarketDevelopment City's failure left and also wants Best Buy and Amazon's business (p.293) In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303) Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities (p.305) Wal-Mart already provides health insurance to all its employees (p.293) This back-haul rate averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302)
New Strategies Implementation Continue renewing the stores to attract new customers. As a result, new customers would find low-cost products in Wal-Mart stores Merchandizing the same products that Circuit City, Best Buy and Amazon are selling with low prices. Developing (providing) new products to attract customers to select Wal-Mart as a store that they can find anything they need. To train new employees for recruiting them in new convenient stores in China according to the culture of Chinese people To increase the promotion of employees for better serving of the customers and developing better services To keep the employees satisfied in order to make them serving the customers better and developing better services Attracting more customers through lowering the prices by controlling the cost of distribution system.
controlling
25.4
PRODUCTION AND OPERATION Production and operation With an information systems staff of 1,200 and system links with about 5,000 manufacturers, C.L.(T.1) Wal-Mart leads the industry in information Using the latest technology to make the Justin-Time process quicker.
Process
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Capacity
technology (p.302) The one-stop convenience aspect of the stores has such broad appeal that it is drawing a larger customer audience on a regular basis. (p.301) Sam's Clubs usually offer over 3,500 items, which are used most often by the consumers they serve. (p.301) The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303) The merchandise is carefully selected to ensure quality and must be made in the United States. (p.299)
ProductDevelopment MarketDevelopment
Inventory
Workforce
Adding 3 convenient stores in China to develop market in this high population area since these stores are very popular and profitable Providing more variable and fashionable products beside higher quality services in Sams Clubs to take over Target To train new employees for recruiting them in new convenient stores in China according to the culture of Chinese people
Quality
Continue observation on selecting high quality products to gain loyal customers that can trust on the products that Wal-Mart provides in its stores
25.5 NA 25.6 NA
RESEARCH AND DEVELOPMENT NA MANAGEMENT INFORMATION SYSTEMS NA Management information systems NA NA Research and development NA NA
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25.7
VALUE CHAIN ANALYSIS (VCA)
Value chain Analysis (VCA) Main Activity With an information systems staff of 1,200 Purchase Merchandise from and system links with about 5,000 C.L.(T.1) manufacturers, Wal-Mart leads the industry Manufacturers in information technology. (p.302) ProductDevelopment Distribution to Wal-Mart has one of the world's largest MarketDevelopment Stores private satellite communication systems, which enables it to control distribution (p.302) Marketing the Wal-Mart draws customers into the store by Products radio and television advertising , monthly circulars, and weekly newspaper ads. (p.306) Selling the Products Walmart.com provides easy access 24/7/365 to more than a million products (p.303)
Using the latest technology to make the Justin-Time process quicker.
After-sales Service NA Supporting Activity The company was able to attract a top retail management talent in Jeanne Jackson as the C.L.(T.1) CEO of Walmart.com (p.303) Wal-Mart's sales rose from $374.3 billion in ProductDevelopment fiscal year 2008 to $401.2 billion in 2009 MarketDevelopment while net income rose from $12.7 billion to $13.4 billion. (p.293)
Reducing cost of distribution and transportation system to gain more advantage in selling the products lower than the other retailers selling price. Expanding advertisement through internet advertisement in popular websites like Yahoo and Google to advertise its internet selling services and to introduce its low cost products Expand introducing its internet selling through advertising Delivering Low-cost Products as Fast as Possible NA
Management
Using this existing strategy for recruiting talented managers for new stores in China Focusing more on Supercenters, Sams Clubs and International segment rather than ordinary stores which can bring higher sales
Financial
81
Supplier Costs
Production Costs Distribution Costs
Sales and Marketing Costs Customer Service Costs Management Costs
Wal-Mart owns a fleet of truck-tractors that they frequently pick up merchandise from manufacturers on the way back to the distribution center. (p.302) NA After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302) Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) NA Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304)
Reducing cost transportation system to gain more advantage in selling the products lower than the other retailers selling price. NA Reducing cost transportation system to gain more advantage in selling the products lower than the other retailers selling price. Manufacturing every-day consumable products like cheap cakes and sweets in the name of Wal-Mart or Sams Club. NA To keep the employees satisfied in order to make them serving the customers better and developing better services
26.0
26.1
FINANCE AND MARKETING ISSUES

MARKETING ISSUES Marketing Strategy Supercenters provide mart carts and are all onestory buildings, making the stores handicapped C.L.(T.1) accessible (p.301) In addition to Discover Card, Sam's have also ProductDevelopment recently started accepting MasterCards for Market Development payments. In addition Wal-Mart is developing new services such as music downloads and 1-hour Increasing popularity through providing better services to parents for keeping their children while shopping by providing disposable toys Increasing the services quality in in Sams Clubs to take over Target Providing other service like tiny fast food restaurants inside stores.
Customer Analysis Promotion Programs Product and Service Planning
82
Pricing
Distribution
Marketing Research
photos. (p.303) It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301) The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298)
Monitor competitors prices through collecting customers feedback for prices and asking them to define what store (of competitor) provides lower price
Me of
Providing more variable and fashionable products beside higher quality services in Hometown USA stores
26.2
PRODUCTS/ SERVICES POSITIONING
Two criteria for retailing stores that seem more important are price and variability of products. In the left, I put existing position of Wal-Mart according to the items pricing section and inventory/ capacity section in internal analysis. Besides, I considered CPM to put other competitors as there wasnt enough information about price and product variability of products of competitors except Targets case that says Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306). In the right I considered the implementation of new strategy (Cost leadership (T.1), Market development and Product development) which causes the company to provide low-price products, variable and fashionable products and services and add stores in China (as I explained all items in chapter 7). Therefore, the right map is the result of implementation of new strategies. Consequently, Wal-Mart will reach Target in providing fashionable and upscale products.
K for Kmart C for Costco W for Wal-Mart T for Target
83
Fashionable and variable products

T
Fashionable and variable products High price Low price K W C High price
T
Low price
W K
Old and repeated products
Old and repeated products
26.3
FINANCE
According to the new strategies that I have used in chapter 7, for financing for the next year, I concluded that the company needs to add 3 new convenient stores in China, improving the product and service through, for instance, manufacturing every-day consumable products like cheap cakes and sweets in the name of Wal-Mart or Sams Club or providing other service like tiny fast food restaurants inside stores and reducing the cost of delivering the goods to stores to sell the low-cost products via for example reducing cost transportation system to gain more advantage in selling the products lower than the other retailers selling price or using the latest technology to make distribution quicker and less costly. Therefore, for implementing these strategies, firstly, I need enough capital. The instructor of this course, prof. Bambang has given us the following assumption:
1. 2. 3. 4. 5. 6. 7. CapitalNeeded(Million):10,000 Interestrate:% Taxrate:6% LowconditionofEBIT:12,000 HighConditionofEBIT(Million):35,000 NormalConditionofEBIT(Million):22,798(fromex.1) Usethe3alternativeselection: 1)First:100%STOCK
84
2)Second:100%Debt 3)20%Debt,80%Equity
It seems that interest rate is missed because at first I supposed that interest rate may be given zero but then I found that if interest rate is zero, then borrowing this $10,000 M from debt financing would be very attractive. But how it is possible that a credit company gives this much money without any interest? So I supposed 5% for interest rate for this case. After that for determining which financing is best choice to select I needed number of shares for both common stock financing and debt financing. Number of shares for debt financing is written in ex.2 (balance sheet). It is 3,925. From this, I calculated number of shares for common stock financing: (capital needed / stock price) + number of shares As it is shown in the table below, it was concluded that best financing is 100% debt financing in all three conditions of recession, normal and boom because it gains highest earning per share (2.48, 4.84 and 7.49). 100% Stock
Low Normal High Low
100% Debt
Normal High
20% Debt 80% Equity

Low Normal High
EBIT Interest 5% EBT Taxes 6% EAT # Shares EPS
12,000 0 12,000 720 11,280 13,487 0.83
22,798 0 22,798 1,368 21,430 13,487 1.58
35,000 0 35,000 2,100 32,900 13,487 2.43
12,000 600 11,400 684 10,716 4,313 2.48
22,798 600 22,198 1,332 20,866 4,313 4.84
35,000 600 34,400 2,064 32,336 4,313 7.49
12,000 120 11,880 713 11,167 11,652 0.95
22,798 120 22,678 1,361 21,317 11,652 1.82
35,000 120 34,880 2,093 32,787 11,652 2.81
As I have explained, I want to raise this capital for adding 3 stores in China (market development), improving the product and service through (product/ service development) and selling low-cost products via reducing the costs (cost-leadership: type 1). Besides, I just supposed that by implementing these three strategies, sales will grow by 50% in the next year 2010. Therefore, as it is shown in the below income statement, I calculated all these increases in sales and other items according to the information from previous years and given information. In remarks column I have explained how the number is calculated.
85
Income Statement Year of 2009 Revenues: Net sales Membership and other income Costs and Expenses: Cost of sales Operating, selling, general and administrative expenses Operating income Interest: Debt Capital leases Interest income Interest, net Income from continuing operations before income taxes and minority interest Provision for Income Taxes: Current Deferred Income from continuing operations before minority interest Minority interest Income from continuing operations Income (loss) from discontinued operations, net of tax Projected year of 2010 481492 5236 486728 365,046 87,611 29,204 Remarks
$401,244 4,363 $405,607 306,158 76,651 22,798
20% of increase 75% of sales 18% of sales 6% of sales
1,896 288 (284.00) 1,900 20,898
2,085 317 (312) 2,090 27,114
10% increase in debt
6,564 581 7,145 13,753 (499) 13,254 146
7,502 19,612 (594) 19,018 192
4% increase in tax
86
Net income Net Income per Common Share: Basic income per common share from continuing operations Basic income (loss) per common share from discontinued operations Basic net income per common share Diluted income per common share from continuing operations Diluted incon1e (loss) per common share from discontinued operations Diluted net income per common share Weighted Average Number of Common Shares: Basic Diluted Dividends declared per common share
13,400
19,210
$ 3.36 0.04 $ 3.40 $ 3.35
5.02$ 0.05 5.07$ 4.96 0.08 5.04$ 5.02$ 0.05 5.07$
0.04
$ 3.39
3,939 3,951 $ 0.95
3,802 3805 1.09$
The new income of the year 2010 is defined now. It is $19,210 M. Now I will calculate the dividends of previous years 2008 and 2009 and decide the dividend of year 2010. The way I calculated the dividends are as follows: Number of share of the year dividends declared per common share From previous years I found that the company increased the dividends and decreased number of shared issued from 2007 to 2009. So with the percentage decrease in number of shares, I decided that the dividend that should be paid is as follows:
87
Year 2008 2009 2010
Number of Share 3,973 3,925 3,847
Dividend 3,496 3,729 4,193
Now it is possible to calculate the retained earnings of year 2010 and build new balance sheet. But before calculating dividend I found that RE of 2009 in balance sheet of Wal-Mart is written wrong. It should be 63,660 instead of 3,660 because it is the total of previous year which is accumulated with the new year. So I supposed it as 63,660. RE for this case is calculated as follows: RE (2010) = Income (2010) dividends (2010) + RE of 2009 RE = 15,390 Therefore, I have two capitals to put in my balance sheet. One from debt financing (10,000 M) and one from RE (15,390). As it is shown in the below balance sheet, for projected year of 2010, I put 5% of capital in inventories, 40% in land, 5% in buildings and improvements and 50% in transportation equipment. Besides, I put 5000 of RE as cash for emergency cases (like need of cash or purchasing merchandise) and the remaining (10,390) in land. As I selected 100% debt financing, I put all 10,000 M in long term debt in balance sheet. Balance Sheet Year of 2009 ASSETS Current Assets: Cash and cash equivalents Receivables Inventories Projected year of 2010 Remarks
$ 7,275 3,905 34,511
$ 17,275 3,905 35,011
5,000 of RE (total: 15390) 5% of capital (500 M) to provide upscale and fashionable merchandise for stores to acquire the niche market of Target
Prepaid expenses and other Current assets of discontinued operations. Total Current Assets
3,063 195 $ 48,949
3,063 195 $ 48,949
88
Property and Equipment, at Cost: Land
19,852
34,242
Buildings and improvements
73,810
74,310
40% of capital + remaining of RE (totally 14,390 M) to add 3 convenient stores in China 5% of capital (500 M) to renew the existing stores in U.S. segment to attract more customers 50% of capital (5,000 M) in order to speed up the distribution system and reducing the cost of distribution to sell the low cost products
Fixtures and equipment Transportation equipment
29,851 2,307
29,851 7,307
Property and equipment, at cost Less accumulated depreciation Property and equipment, net Property under Capital Lease: Property under capital lease: Less accumulated depreciation Property under capital lease Goodwill Other assets and deferred charges Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Commercial paper Accounts payable Accrued liabilities Accrued incon1e taxes
125,820 (32,964) 92,856
125,820 (32,964) 92,856
5,341 (2,544) 2,797 15,260 3,567 $ 163,429
5,341 (2,544) 2,797 15,260 3,567 $ 187,955
$10,000 increase in the total Assets
$ 1,506 28,849 18,112 677
$ 1,506 28,849 18,112 677
89
Long-term debt due within one year Obligations under capital leases due within one year Current liabilities of discontinued operations Total current liabilities Long-term debt
5,848 315 83 $ 55,390 31,349
5,848 315 83 $ 55,390 41,349
As the preferred financing was determined as 100% debt financing, I put all capital of 10,000 M in long-term debt that this money could be borrowed from credit companies
Long-term obligations under capital leases Deferred income taxes and other Minority interest Commitment and contingencies Shareholders' Equity: Preferred stock($0.10 par value; 100 shares authorized, none issued Common stock ($0.1 0; 1 1,000 shares authorized, 3,925 and 3973 issued and outstanding at January 31, 2009, and January 31, 2008, respectively) Capital in excess of par value Retained earnings Accumulated other comprehensive (loss) income Total Shareholders' Equity Total Liabilities and Shareholders' Equity 26.4
3,200 6,014 2,191
3,200 6,014 2,191
393 382 3820 0.1 = 382
3,920 3,660 (2,688) 65, 285 $163,429
3,820 79,050 (3,441) 79,811 187,955 $
FIGURE OF ALL EXISTING AND NEW STRATEGIES
90
Wal-Mart is working hard to expand its food distribution capabilities. (p.301)
Chapter 8 B/S
I/S
I/S(New)
Chapter 8 B/S
Providing low cost and high quality foods to stores and improving the distribution system.
Givenby the Case

Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299)
R/E = NIDiv
Start with
Manufacturing every-day consumable products like cheap cakes and sweets in the name of Wal-Mart or Sams Club.
Chapter IV Existing Management Issues (A)

Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food di t ib ti biliti ( 301)
Management Issues (NEW) (A+B) (Dividend)

Using the latest technology to make distribution quicker and less costly
Netincomeof13,400
Netincomeof19,210
CostLeadership (Type1)
CostLeadership (Type1)
ChapterIVExisting ManagementIssues(A) CorporateLevel Strategies (Existing) MarketPenetration ProductDevelopment MarketDevelopment NA

In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers.
NewManagementIssues (A+B)
Developing (providing) new products to attract customers to select Wal-Mart as a store that they can find anything they need. Adding 3 convenient stores in China to develop market in this high population area since these
NewCorporateLevel Strategies ProductDevelopment MarketDevelopment NA NA NewStrategies:(B)
The one-stop convenience aspect of the stores has such broad appeal that it is drawing a larger
Product NA NA
NA NA
Using the latest technology to make the Just-inTime process quicker.
Wal-Mart leads the industry in information technology. (p.302)
91

Majid Shams Nosrati Wal Mart Stores 2009

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STRAT T TEGIC MAN EMEN C NAGE NT

In ndividu Ass ual signmen nt

Majid S M Shams Nosrati MR1012 M 295

2.0EXTERNAL ANALYSIS .................................................................................................................. 5

3.0COMPETITIVE ANALYSIS ............................................................................................................ 6

4.0INDUSTRY ANALYSIS .................................................................................................................... 8

11.0 MARKETING STRATEGY ....................................................................................................... 23

12.0 FINANCIAL ANALYSIS ........................................................................................................... 28

13.0 PRODUCTION AND OPERATION ........................................................................................... 30

17.0 STRENGTHS AND WEAKNESSES .......................................................................................... 39

18.0 OBJECTIVES AND STRATEGIES ........................................................................................... 49

19.0 SWOT ........................................................................................................................................ 57

20.0 SPACE ....................................................................................................................................... 65

25.0 MANAGEMENT AND OPERATION ISSUES ........................................................................... 73

26.0 FINANCE AND MARKETING ISSUES ..................................................................................... 82

WalMart Stores2009 (Majid Shams Nosrati)

Philosophy Self-concept Concern for public image Concern for employees

Reconciliatory Enduring 1.3 1.4 OTHER COMPETITORS MISSION ANALYSIS

WalMart Stores2009 (Majid Shams Nosrati)

EXTERNAL ANALYSIS PEST ANALYSIS

WalMart Stores2009 (Majid Shams Nosrati)

2.2 No. 1 2 3 4 3.0 3.1 Forces Major

competitors Competitors Strength

WalMart Stores2009 (Majid Shams Nosrati)

Competitors Target Kmart Costco Total

WalMart Stores2009 (Majid Shams Nosrati)

Industry Retailing Industry

Target Kmart Costco

WalMart Stores2009 (Majid Sha W ams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

Key success factors Market Share

WalMart Stores2009 (Majid Shams Nosrati)

7.1.2 THREATS No. 1 2 3 4 5 6 7 8 9 10 11 12 13

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

0.06 0.05 0.05 0.07 0.08 0.07 0.06

0.18 0.15 0.2 0.28 0.32 0.28 0.24

WalMart Stores2009 (Majid Shams Nosrati)

CRITICAL SUCCESS FACTORS Market Share Financial Position

Wal-Mart Rating Score

Target Rating Score

Kmart Rating Score

Costco Rating Score

Number of Stores TOTAL:

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

Neighborhood Markets. (p.298)

WalMart Stores2009 (Majid Shams Nosrati)

WalMart Stores2009 (Majid Shams Nosrati)

3.204 NA 8.5% 12.82% NA NA

3.414 NA 7.1% 5.25% NA NA

Net Income Earnings Per Share Dividends Per Share