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Wal-Mart 2007
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Critical factsWal-Mart was founded in 1962, by Sam WaltonIt become the second largest company in the world in
2007 with sales of $354.During 2007 Wal-Mart managed more than 6700 stores
in 14 countries.Discount stores 1074Supercenters 2257Sams clubs 579
Neighborhood markets 112International units 2760
The international stores accounted for 22% of thecompany revenue.
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Company problemsWal-Mart was not able to sustain its current rate of
sales growth. Itsgrowth dropped from 10.1% in 2005to 7.8% in 2007.
The company faced challenges, both external andinternal, pushing its price per share under 50$.
Deterioration of the company image related to lowpay, benefit cuts, failure to enforce child labor andworker safety rules, discrimination strategies.
Failure to adapt to local market in its foreign segment.lagging stores sales.Wal-Mart is trying to find right formula to compete
against target and other mass retailers.
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Company current strategiesBusiness levelWal-Mart has the business strategy of Low Cost Leadership.
The company do not do much to differentiate itself from itscompetitors.Wal-Mart has huge influence over its suppliers, It can dictate prices
and even change suppliers manufacturing processes in order to gainmore savings.
Corporate levelWal-Mart expanded from rural markets to urban markets. The company is focused on improving operations in merchandising and
store formats and on pursuing major initiatives related to humancapital and public relations.
Change in store and format and merchandise strategy to appeal toupscale customers.International LevelAggressive expansion in to international markets.Currently the company has 2760 stores in 14 countries.
Expansion through acquisition, partnership, and go it alone ventures.
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General environmentEconomic segmentGlobal recession : Consumers would spend less money than they
usually spend. This trend will further threaten Wal-Mart salesgrowth.
Social Segment.Law-suit by female employees who accused Wal-Mart of
discrimination.Computerized schedule system that will reduce the employees
comfort of life.Negative employer image: low wages, diminishing benefits.
Global segment.
The international segment earned only 22% of the companyrevenues.
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Industry 5 forces analysis.
Bargaining Power of Suppliers: Wal-Mart has strongbargaining power over its suppliers . The company uses itsstrength over suppliers by threatening to switch to adifferent supplier during price negotiations.
High barriers to entry : Wal-Mart has an outstandingdistribution systems, ideal locations, brand name, andfinancial capital. These valuable assets increase the barriersto new entrants.
Substitute Products : there are few substitutes that offerboth convenience and low prices. Customers can shop inmany specialty stores for products but will forgo Wal-Martlow prices.
The industry is in mature life cycle.
Is the industry attractive? NO
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Major CompetitorsTargetBetter image, no price based competition.Attracts more upscale clientele willing to pay a premium
price.Lower market share, No international presence, Inferior
supply chain, lower inventory turnover, lower sales per
square feet.K-MartHigher urban presence, significant market share.Lower sales per square feet, poor image due to chapter 11,
lower marketing budget.CostcoMore upscale image than Sams club, big market share in
wholesale warehouse segment , good employer image.Metro (Germany) and Carrefour ( France)Good image and significant presence in the global arena.
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Important value chain areasInbound logistics: Wal-Mart is able to offer low
prices and maintain a constant level of inventoryby using inventory replenishment systemtriggered by point-of-sale purchases that is
second to none.
Technology Development: Worlds largestprivate satellite communication systems which
connects all Wal-Mart stores in to one network.
Procurement: The company was able to acquireproducts at lowest possible price by dictating
prices and changing suppliers manufacturingprocesses.
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Financial InformationK M A R T K O H L S T A R G E T W A L M A R
2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8 2 0 0 R e v e n u e1 6 , 2 1 91 7 , 2 5 61 8 , 6 4 71 6 , 3 8 91 6 , 4 7 41 5 , 5 4 46 4 , 9 4 86 3 , 3 6 75 9 , 4 9 04 0 1 , 2 4 43 7 8 , 7 9 93 4 8 ,C O G S1 2 , 4 4 21 3 , 2 0 21 4 , 0 6 11 0 , 3 3 41 0 , 4 6 09 , 8 9 1 4 5 , 7 6 64 1 , 8 9 53 9 , 3 9 93 0 6 , 1 5 82 8 6 , 5 1 52 6 4 ,
G r o s s P r o f i t3 , 7 7 74 , 0 5 44 , 5 8 6 6 , 0 5 56 , 0 1 45 , 6 5 4 1 9 , 1 8 22 1 , 4 7 22 0 , 0 9 19 9 , 4 4 99 2 , 2 8 48 4 ,G r o s s P r o f i t M a r g i n %2 3 . 3 0 %2 3 . 5 0 %2 4 . 6 0 %3 6 . 9 0 %3 6 . 5 0 %3 6 . 4 0 %2 9 . 5 0 %3 3 . 9 0 %3 3 . 8 0 %2 4 . 5 0 %2 4 . 4 0 %2 4 . 2
S G & A3 , 4 5 63 , 5 3 73 , 6 2 3 3 , 9 3 63 , 6 9 73 , 4 0 1 1 2 , 9 5 41 3 , 7 0 41 2 , 8 1 97 6 , 6 5 17 0 , 2 8 86 4 ,D e p r e c i a t i o n1 3 8 1 1 6 7 7 5 4 1 4 5 2 3 8 8 1 , 8 2 61 , 6 5 91 , 4 9 6 6 , 7 3 96 , 3 1 75 ,
O p e r a t i n g I n c o m e1 7 2 4 0 2 9 4 8 1 , 5 5 71 , 8 2 51 , 8 4 1 4 , 4 3 05 , 2 7 25 , 0 6 9 2 3 , 0 8 22 2 , 3 0 12 0 ,O p e r a t i n g M a r g i n1 . 0 6 %2 . 3 3 %5 . 0 8 % 9 . 5 0 %1 1 . 1 0 %1 1 . 8 0 %6 . 8 0 %8 . 3 0 %8 . 5 0 % 5 . 7 0 %5 . 9 0 %6 . 0
S t o r e s1 , 3 6 81 , 3 8 21 , 3 8 8 1 , 0 0 4 9 2 9 8 1 7 1 , 6 8 21 , 5 9 11 , 4 8 8 7 , 8 7 37 , 2 E m p l o y e e s1 3 3 , 0 0 0 1 2 6 , 0 0 0 3 5 1 , 0 0 0 2 , 1 0 0 , 0 0 0
* I n M i l l i os t o r e s a n d
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Key financial ratiosInventoryTurnover 2008 2007 2006 2005
Target 6.429 6.517 6.225 5.863Wal-mart 8.14 7.854 7.647 7.688Kmart 3.688 3.986 5.75 4.48
ROA 2008 2007 2006 2005 Target 6.394 7.462 6.881 5.837
Wal-mart 7.879 8.055 8.127 8.54Kmart 3.015 4.956 3.101 12.785
Sales per squarefoot 2006 2005 2004 2003Wal-Mart $412 $358 $423 $409
Target $310 $295 $289 $223Kmart $217 $240
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S.W.O.T analysisStrengthsCost advantageAbility to deliver low prices
The best supply chain in theindustry
Good relationship withsuppliers
Popular brand name
Weaknesses
Deteriorating imageLower sales growth ( Target)
OpportunitiesImprove its imageFurther improve its supply chainAttract customers from outside
the company's traditional
customer base.Entrance in to underserved
markets( Africa ).
Threats
high competition in USA andoverseasHighly saturated industryOnline retailers
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7 s analysisStrategy: The company strategy is to provide the lowest prices
and to provide convenience by allowing customers to findeverything they need.
System : Information Technology system including computers,
networking to reduce inventories and speed up deliveries.working with suppliers to improve production processes so
the company pass the savings to its customers.
Computerized schedule systemStaff is committed to providing the lowest possible prices.
The workers skills are geared to find inefficiencies and towardsdecreasing prices.Structure:
Company stores are designed in structural advantage andstrategy that Wal-Mart uses. ( one stop shopping)Wal-Mart has designed management structure that allowed the
company to eliminate its regional office The company places stores in strategic locations and drives
traffic using convenience and low prices.
Shared values: always low prices
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Strategy Formulation.Wal-Mart should further its expansion in to the major cities of
the United Sates and under populated western states.Wal-Mart needs to expand further into international markets.
The company should consider strategic alliances withexisting companies where possible because it will gainexperience for that particular market and the existingstructure.
The company should further differentiate its store formatsbased on demographic groups
Wal-Mart should continue its low cost leadership strategy byimproving its inventory management system, create better
relationship with its suppliers and continue gainingefficiencies through human resource management.Improve its human resource management image :The company must improve its reputation in HRM in order to
gain back some of its lost customers.( 8% of its customers. )
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trategy mp ementat on
Open stores in cities like Chicago, Boston. (negotiate with unions)Open stores Midwestern and western states.Expand in to under served markets ( Africa).Attract upscale clientele (Target clientele) in the urban areas by
building upscale stores and offer more brand products in itsstores.
Improve the supply chain by looking for suppliers in countrieswith lower labor cost then China. (India, African countries)
Further educate the suppliers and improve IS.Start joint ventures with retailers in countries serving different
cultures. ( Japan, Germany).Build store models appropriate for the different countries.Enhanced research of local cultures and devise a plan to modify
Wal-Mart culture before entering a new market.Increase workforce efficiency and increase rate of pay in order to
reduce employee turnover and improve brand image.Increase promotion of women and minorities in to management
positions.
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