Sams Clubs

CASE STUDY Wal*Mart Stores, Inc.(2009)

Presented by: Adil Ahmad Kamal Khwaja Fahad liaqat

Overview of Presentation
Overview of WAL-Mart History The Divisions Their Mission and Vision Statement Proposed Mission and Vision Statement Objectives & strategies BCG External Opportunities and Threats CPM EFE Internal Strengths and Weaknesses IFE Analysis SWOT Matrix SPACE IE Matrix Grand Strategy Matrix Key Ratios Different Strategies QSPM Strategy recommendation Conclusion References

History of Wal-Mart
In 1945 Sam Walton opened the first Ben Franklin franchise in Newport Arkansas and operated them with his wife, Helen and brother, Bud. These were small chains that were very successful. In November of 1962 Wal-Mart was opened. Wasnt until mid 1970s that Wal-Mart began to grow. That time 100 shares were worth $1,650 dollars and now the same 100 shares are worth more than $6 million dollars.

History
1987
2 new concept implemented Hypermarkets, which sell everything including food Supercenters which are scaled down supermarkets

In 1992 Sam Walton Died and in 1996 Bud Walton died.

In 1995 Wal-Marts Annual Report was dedicated to Bud.

New president and CEO H. Lee Scott states that While our history is rich with success, theres no question that our best years are yet to come.

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 Nowadays, Wal-Mart owns 8,500 stores worldwide. Employing more than 2million employees and headquartered in Arkansas, United States.
The Walton family and management (as insiders) own nearly 44 percent of WalMart stock. These holdings are worth nearly $28 billion today.
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Divisions of WAL-MART
Neighborhood Markets International Sams Club Supercenters Distribution Centers

Continued..
The discount stores, neighborhood markets and superstores are mainly targeting : the broad customer base, whereby mostly lowand middle-income customers make the majority of all customers. These three divisions are mainly differentiating through size of the store size of the city where the store is resident the number of employees.

Continued..
The discount stores are mostly sized between 50,000 and 100,000 square feet, employing 220 employees in average. While the superstores have 186,000 square feet in average and employ between 200 and 550workers. The neighborhood markets have usually round about 40,000 square feet and employ between 80 and 100 people.

Neighborhood Markets
Began in 1998 Located in market with Wal-Mart Supercenters Offers customer groceries, pharmaceuticals & general merchandise. Provides 28,000 items to customers.

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International
Wal-Mart expanded so that customers everywhere would associate its name with low cost, best value, greatest selection of quality merchandise and highest standards of customer service. Wal-Mart focused on Global Positioning. Wal-Mart is active in 14 countries, including 4,200 stores and 600,000 employees.

Sams Club
Membership-only, cash-and-carry operations. Financial service credit card program (Discover Card) available at all clubs. Annual membership fee is $35; the Elite Membership is $100. Elite membership has additional benefits like automotive service contracts, roadside assistance, home improvement, auto brokering and pharmacy discounts. Bulk displays and name brand merchandise. Has more than 45 million registered members. It mainly offers groceries and general merchandises in large quantities. One can say that the Sams Club segment found a niche market.

 Wal-Mart Stores US- sales amounted to 63.7% Discount Stores- 891 U.S Supercenters- 2612 U.S Neighborhood Markets- 153 stores U.S Sams Club- sales amounted to 11.7% 602 stores U.S Is a member only, cash and carry operations International- sales amounted to 24.6% Discount stores- 762 Hypermarkets- 370 Supercenters- 436 Supermarkets- 1064 Others- 983

Their Mission & Vision Statement

They dont have a formal mission statement They are most interested in the customers needs The culture consists of Respect for the individual Service to customers Strive for excellence If they did have a formal mission statement it would be, To provide quality products at an everyday low price and with extended Customer servicealways.

Their Mission & Vision Statement

On their homepage, Wal-Mart names the Purpose of their business, which was created by the founder of the company, Sam Walton. This statement can be regarded as being similar to an actual mission statement:
If we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life.

In addition the statement Saving People Money So They Can Live Better can be found on the homepage, which is kind of the short version of the previous statement.
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Their Mission & Vision Statement

One could argue that these statements could also be the vision statement of the company it gives more an overall idea of the companys business instead of defining what the company wants to become, even though it does not specifically answer the question What is our business?. Wherefore one has to say that all three statements are not broad in scope or inspiring They do not imply the 9 essential components of a mission statement, established by Fred R.David

Proposed Vision Statement

Our commitment is to become the leader in the retailing branch all around the world, which makes the life of every customer more enjoyable by offering products with the highest quality standards for the lowest price possible in combination with the best and most supportive service available.

Proposed mission statement

The proposed mission statement for Wal-Mart should define the organization's purpose, primary objectives. It should stick to nine elements of an appropriate mission statement, established by Fred R. David. Bearing this in mind, the proposed mission statement could be as following: 1. Our customers - We feel to have the obligation to satisfy our customers all around the world. 2. Our products - All products, in every store, no matter where it is located, maintain the same quality standards to ensure that our customers get highest quality available.

 3. Our markets - The world is our market and we will put all of our effort into staying the world market leader in the retail business. 4. Our Technology - The nature of our business makes it indispensable to operate with the most current technology available to increase the speed of our daily operations and to ensure that our customers receive the best service available. 5. Our concern for financial soundness A constantly ongoing strives for increasing growth- and profit rates is the catalyzer of all our employee. In addition it gives an assurance to the shareholders that it is of highest importance to us to put all efforts into our business. 6. Our philosophy - It is our basic belief that every individual deserves respect and a fair treatment.
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 7. Our concept - Offering high-quality products for the lowest price possible enables us to obtain a predominant position in the retail business. 8. Our community involvement - The highest concern of our foundations and charitable partners is to be a role model in supporting all kinds of social, community and environmental projects through personal engagement and donations. 9. Our employees - Every employee is a member of the Wal-Mart family and the most valuable asset of the firm, no matter what kind of origin, race, gender, age or religious affiliation.

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Objectives and Strategies

The main strategy of Wal-Mart is to use discount retailing and offering all products for the lowest prices possible in combination with the best quality available for this price. The stated purpose of Wal-Marts pricing policy is to meet or beat. On the one side, this cost leadership strategy mostly creates satisfied customers, because they only have to pay low prices for their products. On the other side, local competitors often cannot keep up with the low prices of Wal-Mart. Every Wal-Mart store is expected from management to compete against its local competitors (which are often smaller local stores) until the Wal-Mart store has gained significant control over the respective market.
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Objectives and Strategies

In practice this often means, that either the Wal-Mart store or the other competing store(s) win over customers standing, while the other one often has to be shut down. However, in most cases, Wal-Mart is very successful with this strategy. To push on their international expansion, Wal-Mart often makes use of corporate takeovers of a national retailer to get into the specific markets. After the respective companies have been bought, Wal-Mart reconstructs them into Wal-Mart stores. Even though this aggressive strategy is often successful

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(BCG) Matrix
Wal-Mart U.S.s market share of Wal-Marts overall sales was 63.7%, with an increase of 6.8% compared to the previous year. Wal-Mart International market share of Wal-Marts overall sales was 24.6%, with an increase of 9.1% compared to the previous year.

Sams Club market share of Wal-Marts overall sales was 11.7%, with an increase of 5.6% compared to the previous year.
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(BCG) Matrix

External Factors

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Key External Factors

Opportunities Increase online shopping Economic conditions cause greater demand for low priced products Increased use of mobile/social marketing to increase purchasing by consumers Growth plan to open new supercenters in US & abroad Conversion of regular stores into Supercenters Wide variety of products available to consumers Decline in consumer loyalty to one store for needs based purchases
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Key External Factors

Threats Increased competition from online retailers Product substitution Economic Downtown-lower consumer spending Raw material increases can cause product price increases Government regulations on trade/importing Political problems in foreign governments Currency Fluctuation Consumer opposition to opening new stores in small towns
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External Factor Evaluation Matrix for Wal-Mart

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Key External Factors Opportunities 1. Increase online shopping 2. Economic conditions cause greater demand for low priced products 3. Increased use of mobile/social marketing to increase purchasing by consumers 4. Growth plan to open new supercenters in US & abroad 5. Conversion of regular stores into Supercenters 6. Wide variety of products available to consumers 7. Decline in consumer loyalty to one store for needs based purchases Threats 8. Increased competition from online retailers

Weight

Rating

Weighted Score .4 .21 .10

.10 .07 .05

4 3 2

.10
.08 .10 .05

4
4 3 3

.40
.32 .3 .15

.10 .05 .07 .07 .08 .04 .04

4 2 2 3 2 2 2

.4 .10 .14 .21 .16 .08 .08

9. Product substitution 10. Economic Downtown-lower consumer spending

11. Raw material increases can cause product price increases 12. Government regulations on trade/importing 13. Political problems in foreign governments 14. Consumer opposition to opening new stores in small towns Total

1.0

3.05

Internal Factors

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Key Internal Factors

Strengths Powerful Retail Brand Diverse Workforce Competitive Benefits Package Provide thousands with first job/skills training each year 75% of store managers were promoted from within Sales and Net Income increased over past 10 years Strong buyback program for stock with over 1 million shares being purchased back each year Strong Global Supply Chain
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Key Internal Factors

Weaknesses High levels of inventory Sell products manufactured in countries with unethical labor laws Strong consumer dislike for putting smaller community retailers out of business Many part time staff not receiving benefits Standardized approach for each country Sensitive to government trade regulations Limited access to international markets High employee turnover rates
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Internal Factor Evaluation Matrix for Wal-Mart

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

Weight

Rating

Weighted Score .32 .15 .20 .09 .15 .40 .28 .36

.08 .05 .05 .03 .05 .10 .07 .09

4 3 4 3 3 4 4 4

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

1 2 1 2 1 1 1 1

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

1.0

2.51

Competitive Profile Matrix (CPM)

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SPACE matrix

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ENVIRONMENTAL (ES)
FINANCIAL (FS) -1 Best, -6 Worst +6 best, +1 worst (+6) Net Sales (-1) Technology (+3) Current Ratio
Y

(-2) Demand Increase

(+6) Revenues
(-5) Barriers to entry (+5) Net Income (-6) Competitive pressure (+6) Comparative store sales Increase (-3) Antitrust Issues

Avg. = 5.2 Avg. = -3.4

COMPETITIVE (CA) -1 best, -6 worst (-1) Costumers loyalty (-1) Brand value
X

INDUSTRY (IS) +6 best, +1 worst (+5) Growth potential (+5) Profit potential (+5) Developments in technology (+6) Consolidation (+2) Easy to entry

(-2) Product Quality (-1) Human resource management (-1) Inventory Control System

Avg. = -1.2
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Avg. = 4.6

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

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Internal-External (IE) Matrix

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Grand Strategy Matrix

When having in mind the Competitive Profile Matrix, Wal-Mart has a strong competitive position and scored with 3.25 in total. This score is relatively high and shows that Wal-Mart has a strong competitive position.

Wal-Marts market growth rate in 2009, with 11.3%, can also be considered to be a rapid growth rate. For these reasons the company can be positioned in the first quadrant of the matrix.
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Grand Strategy Matrix

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Key Ratios
Ratios Quick Ratio Current Ratio Current Liabilities to Net Worth Total Liabilities to Net Worth Fixed Assets to Net Worth Collection Period Days Sales to Inventory Ratio Assets to Sales Ratio Sales to Net Working Capital Accounts Payable to Sales Ratio Return on Sales Ratio Return on Assets Ratio Return on Net Worth Ratio
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D 4 a y ' s R a n g e : 5 . 4 0 4 5 . 7 4 4 5 2 w k R a n g e : 2 . 3 1 5 0 . 8 7

1 V o l u m e : 2 , 1 4 3 , 6 0 0

v g V o l
( 3 m )

1 , 9 4 4 , 4 0 0

M 1 a r k e t C a p :

8 9 . 7 8 B

P/

E
( t t m )

6 . 9 8

E 2. P S
( t t m )

6 8

Di

0. v & Y i e l d : ( 1 . 5 0 % ) 6 7

Wal-Mart .2 .9 31.2% 59.9% 82.5% 4 Days 11.62 42.8% 64.00 7.9% 4.0% 9.4% 24.8%

Industry .7 2.9 34.9% 53.7% 26.1% 4.8 Days 5.1 45.2% 5.1 4.9% 2.2% 5.3% 9.3%

SWOT matrix

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Continued..

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Continued..

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Outcomes of SWOT
Wal-Mart represents powerful retail brand as noted in the SWOT Analysis. Their strong brand presence, customer loyalty, and drive to expand globally can help the company to grow. Because Wal-Mart is trying to obtain an international presence, the focus on improving their internal weaknesses so that opportunities do not bypass them. To do this, increasing the online presence should offset their high inventory. Wal-Mart can take advantage of their strengths in order to reduce the impact of external threats. As a part of the WT strategy, they could look into products that are being made in the U.S. to provide more jobs to Americans and to avoid unethical labor laws abroad. Lastly, they could offer those living in small towns better jobs and benefits in order to gain their approval of entering their community with new retail outlets.

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Different Strategies
Wal-Mart could penetrate the international market with their discount retail chain. The company could use their brand image and low prices to market to different segments of consumers. They could look at backward integration to get even lower prices on goods for its customers.
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QSPM analysis
According to QSPM analysis, Wal-Mart should focus on backward integration in order to better control their suppliers. By doing so, Wal-Mart could reduce the cost of producing goods to consumers. Consumers will get more for their money as reduced manufacturing costs reflect prices in stores. Also, in order to build relationships with suppliers who manufacture higher quality goods. Consumers today want low prices, but also want quality products that will last.
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Strategy Recommendation
To maintain its title as a retail leader, it must constantly develop and implement new strategies to address present and future obstacles. CNN Money stated that Wal-Marts, chief rival Target has been beating Wal-Marts prices on some groceries and household products This intense competition illustrates the need for Wal-Mart to develop alternative strategies, in areas of integration, intensity, and diversification. Integration strategies allow Wal-Mart to gain capable suppliers, acquire mergers and acquisitions, and remain competitive amongst their rivals. Wal-Mart should consider backward integration.

Conclusion
They must work to seize opportunities in the areas of online shopping, new global stores and supercenters, and offering an increased variety of products online. Therefore, collaboration of the two strategies of backward integration and related diversification of products must be used. The related diversification strategy allows Wal-Mart to provide more services and products on their website which increases on-line sales. Backward integration, allows Wal-Mart to develop stronger relationships with suppliers in an effort to reduce costs.
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References
Fish Info & Services Co.Ltd, (2011). Wal-Mart / Wal-Mart Stores, Inc. Supermarket -Headquarter. Retrieved from http://fis.com/fis/companies/details.asp?l=e&company_id=154597 Forbes.com (2011). Walmart Stock Report. Retrieved from http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?tkr=wmt&period=qtr Kavilanz, P. (2011).CNN Money. Walmart: Our shoppers are running out of money Retrieved from http://money.cnn.com/2011/04/27/news/companies/walmart_ceo_consumers_under_pressure/index.htm Kavilanz, P. (2011).CNN Money. Walmarts ready to do battle. Retrieved from http://money.cnn.com/2011/04/11/news/companies/walmart_prices_products_changes/index.htm?iid=EAL Rapid Business Intelligence Success. (2008). Examples of Vision Statements. Retrieved from http://www.rapid-businessintelligence-success.com/examples-of-vision-statements.html Target.com (2011). Creating Diversity. Retrieved from http://sites.target.com/site/en/company/page.jsp?contentId=WCMP04-031762 Walmart (2011). Corporate Facts Sheet. Retrieved from http://walmartstores.com/pressroom/factsheets/ WalMart Corporate (2011). About us. Retrieved from https://walmartstores.com/AboutUs/ Walmartstores.com (2008). 2008 Annual Report. Retrieved from http://walmartstores.com/sites/annualreport/2008/docs/wal_mart_annual_report_2008.pdf Zager, Marsha. (7 Oct 2009). For The Children's Place, Complexity Is Child's Play. Apparel: Technology and Business Insight. Retrieved from http://apparel.edgl.com/news/For-The-Children-s-Place,-Complexity-Is-Child-s-Play63004 http://www.walmart.com http://finance.yahoo.com Strategic Management Concepts and Cases http://galenet.galegroup.com.prxy6.ursus.maine.edu/servlet/BCRC?locID=maine_fortkent Tony Gauvins presentation on Krogers http://www.target.com

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