Group 12

About Wal-Mart
Wal-Mart is an American multinational retail corporation that operates
a chain of hypermarkets, discount department stores and grocery
stores.
For the fiscal year ended January 31, 2015, Wal-Mart increased net
sales by 1.9% to $482.2 billion
Walmart Internationaloperates more than 6,200 retail units

world's largest
company by
revenue

founded by
Sam Walton in
1962

$215 Billion
market
capitalization

biggest private
employer with
2.2 million
employees

10 billion
transactions a
year

11,620 stores
in 28 countries

About US Retail Industry

US retailer employ nearly 42 Million people.

Total US Retail Sales is estimated to be around $5 Trillion in 2015.
In 2013, retail represented 27.0% of nominal US GDP.
Ecommerce still represents a small portion of overall retail salesa
mere 5.8% last year. However, ecommerce continue to increase in
the double digits

Global Top 5 Retailers

Company

FY 2014
Revenue
(US$
billion)

FY2014
Net profit
Margin

FY200914 Retail
revenue
CAGR

#
countries
of
operation

% of
revenue
from
foreign
operation

Wal-Mart

485.6

3.5%

3.6%

28

28.3%

Costco

112.6

1.9%

9.5%

10

28.6%

The Kroger
Co.

108

1.6%

7.2%

Tesco

99.7

-9.3%

1.8

13

30%

Carrefour

98.4

1.8%

-2.8%

34

52.7%

Industry Concentration in the US

market

Margins have eroded over

the years despite rising
revenues.
This trend is also expected
in the near future.

The market share of the top 4

players have increased over the
years.
Still it is less than 40% which means
that the industry is very
competitive.

Average Revenue and

Profit for the Top 20

Level of Globalization by
region
European retailers are, by
far, the most globally active
especially those based in
Germany and France, where
revenue from foreign
operations exceeds 40
percent.
Asia/Pacific companies are
more focused towards their
domestic operations.

 Three divisions
General
Merchandise
Stores, Food
and Beverage
and Non-Store
account for
58.3% of the
total market.

Walmart Vs Competitors

How Wal-Mart Keeps Its Competitive Edge

PURCHASE : Did not become too dependent on any one

vendor , persuaded its nearly 3,000 vendors to have
electronic "hook-ups" with stores to reduce overall order
entry and processing costs for itself and its vendors.
INBOUND LOGISTICS :. A distribution centre was
strategically placed so that it could eventually serve
between 150 and 200 Wal-Mart stores within a day.
STORE LOCATION : In the early years, Wal-Mart's
strategy was to build large discount stores in small rural
towns
HUMAN RESOURCE MANAGEMENT

Why Globalize?
Walmart needed high levels of growth to continue to
survive.
Company needed to show increases in both sales and
profits to satisfy capital market expectations.
High levels of growth possible only through globalization.
Saturation of domestic markets.
US accounts for 4% of worlds population.
Emerging markets, with their lower levels of disposable
income, offered huge platforms for growth in discount
retailing.

YIPS DRIVERS ANALYSIS WITH WALMART / DISCOUNT MERCHANDISERS

MARKET DRIVERS
Global homogenous customer needs are present but
localization of the products cannot be ignored today
as consumers are shifting from globalization to
glocalization.
Global distribution channels exists on the whole but
its still more on the local and national sourcing due
to the nature of products dealt with.
Marketing is tailored to local tastes and preferences

COST DRIVERS
Research and development costs are significantly lower in this
industry
Economies of scale are highly significant
Transport costs do not discourage centralized production
(sourcing/warehousing).
Wide choice of countries to place production
COUNTRY DRIVERS
Low trade barriers but being built-up rapidly legally and by the
industry and markets.
Divergence of national standards
COMPETITIVE DRIVERS
Competitive interdependence of major markets between
countries
New global competitors have entered the local market

Walmart Early Internationalization

During 1991-1995 Walmart decides to concentrate on the following markets in the
Americas:
Mexico

3 largest populations in Latin America

Brazil
Argentina
Canada - easiest entry because of the similar business environment

European market imposed difficulties:

Competition (Metro A.G. in Germany, Carrefour in France...)
Lack of strong local customer relationships
Asian market difficulties:
Logistically too far away from USA
Different Culture
Higher entrance costs

India
Walmart has 1 Wholesale outlet in India.
Teamed up with Bharti Enterprises in order to open cashand-carry operations (Best Price Modern Wholesale) in the
city of Amritsar because alone it is hard to bypass
government restrictions.
Planning to open 10-15 stores through the partnership.
India has overall great potential because of high level of
educated workers

SWOT ANALYSIS
STRENGTHS
Diversity in products & services
Convenient prices & locations reputation
Strong market presence
Customer loyalty
Strong financial performance commerce
Cost and pricing advantages over rivals
Good supply chain

WEAKNESSES
Low global presence
Behind rivals in e-commerce

SWOT ANALYSIS
OPPORTUNITIES
Global Expansion: new geographic areas
Increasing online sales
Strategic alliances Acquiring rival firms

THREATS
Intense Competition areas
Laws and Regulations: Trade policy
Cultural barriers
Current economy
Slow market growth
Transport of distinctive competency

The Five Forces Model

1. Bargaining Power of Customers: Low

I. Customers usually make small purchases.
II. A large number of customers.
III. Wal-Marts main customers are individuals.

2. Bargaining Power of Suppliers: Medium-Low

I. Wal-Mart purchases huge quantities of products from its suppliers.
II. Low switching costs from one supplier to another.
III. Products have a lot of substitutes.
IV. Almost all the products are not critical for Wal-Mart.

The Five Forces Model

3. Potential entrants / Barriers to entry: Medium-High
I. Economies of scale.
II. High capital requirements.
III. Customers mainly look for products with low prices and
standard
quality.
IV. Low switching costs among companies for customers.
V. Requires a precise distribution system.

4. Power of Substitutes: High

I. Prices and quality of substitute products are very competitive.
II. Performance of substitute products are similar.
III. Consumer switching costs are low.

The Five Forces Model

5. Potential Competitors/ Rivalry: High

I. Wal-Mart represents the 25% share of the U.S.
Supermarket business.
II. Competitors have similar sizes.
III. Industry growth is slow.
IV. Exit barriers are high.
V. There is a high production capacity WAL-MART main
competitors: Retailer Industry: Target,K-Mart
VI. Supermarket Industry : Lowes Food , Dollar General

Forces Favoring Globalization

3 main reasons
Saturated domestic market
United States represents only 4% of worlds
population (missing of 96% of potential
customers)
Emerging Markets with lower disposable
income offer huge platforms for growth in
discount retailer

Economies of Scale
Growth
Revenues

Risks of Expanding Abroad

Management Risk Culture, language, customer

preferences, distribution systems
High investment
Political and Economic risks
Exchange Rates risk

Entry Decisions

Important decisions any company needs to face

when going international:
What markets to enter, when and what size?
What strategy to follow?
What mode of entry?

What markets to enter?

Europe
Mature Markets
High Rivalry
Lack of strong costumer relationship
Asia
Most distant geographically
Most different culturally and logistically
Required high financial and managerial resources
Latin America
Closest markets
Large population
Emerging Markets

Examples of International Success

Mexico: Largest Walmarts foreign presence (68%) 38%

Retail Market Share in Mexico

Canada One of the most successful international

expansion Acquired Woolco Stores and changed structure

China: Most populous country Lower income in middleclass families Adaptation to market 85% of products from
local suppliers.

Examples of International Failure

India Political and legal barriers: Foreign

companies are not allowed to set up big stores
unless they sell only one brand
South Korea Very demanding customers Did
not customized to market Big companies also fail
in South Korea

Key Success Factors

A supply chain with integrated technology

An ability to generate large sales volume
(economies of scale)
Every Day Low Prices
Superior logistics systems
Decentralized operations
A strong and unique culture (in U.S.)