(102704838) 26363283-Case-Study-Wal-Mart-Stores-Inc-Rapid-Growth-in-90s.rtf

8/14/2019 (102704838) 26363283-Case-Study-Wal-Mart-Stores-Inc-Rapid-Growth-in-90s.rtf

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Case 22WAL-MART STORES, INC.(1998): RAPID GROWTH IN THE 1990s

I. CASE ASTRACT

Wal-Mart Stores, Inc., in 1998, with corporate headquarters in

Bentonville, Arkansas, was not onl the nation!s lar"est discountdepart#ent store chain $ut also had surpassed Sears, %oe$uck & 'o#pan

as the lar"est retail or"ani(ation in sales volu#e in the )nited

States. *he +ir# operated stores under a variet o+ na#esand retail +or#ats includin" Wal- Mart, discount

depart#ent stores SAM!S 'lu$s,wholesale and retail #e#$ership warehouses

and Supercenters, lar"e co#$ination "eneral #erchandise and "rocer

stores. In the international division, it operated stores in 'anada,Meico, Ar"entina, Bra(il, /er#an and 'hina. *he Mc0ane 'o#pan, a

support division with over 2,333 custo#ers, was the nation!s lar"estdistri$utor o+ +ood and #erchandise to convenience stores and selected

Wal-Marts, SAM!S 'lu$s, and Supercenters. 4n 5anuar 1, 1998, Wal-Martoperated 6,761 Wal-Mart stores, 78 SAM!S 'lu$ stores, and 36

Supercenters, which totaled ,732 stores.

A #aor concern was Wal-Mart!s spectacular "rowth and the do#inance o+

the +ir# in the #arket. *he +ir# was perceived to $e in the accelerateddevelop#ent or "rowth sta"e o+ the institutional li+e ccle in which

sales are increasin" rapidl, pro+its are hi"h, new stores are $ein"

opened, eistin" stores are $ein" re+ur$ished, the product line is$ein" reevaluated, service o++erin"s are $ein" up"raded, auto#ation is

$ein" introduced to store operation, and $etter #ana"e#ent controls are$ein" developed. What #akes this situation unique is that the discount

depart#ent store industr was perceived as $ein" at #aturit. *he

industr +aced increased co#petition, levelin" o+ sales, #oderatepro+its $ survivin" +ir#s, over-stored #arkets, and #ore co#ple

operations pro$le#s than previousl.

Another concern what o+ Wal-Mart without Sa# Walton: A new presidentand chie+ eecutive o++icer was in place. Mana"e#ent clai#ed

;*here!s no transition to #ake $ecause the principles and the $asicvalues to 3> ran"e as in the 1983s and earl

1993s. In ?iscal @ear ?@ 1992 to ?@ 199C, sales increased onl16.7>. Sales +or ?@ 1993 were D6,231,333,333 and increased to

D11C,98,333,333. *he increase was D8,C,333,333 or 621.8>. *he

66-1


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stores were ,732 al#ost dou$le and 1,C61 +or ?@ 199C and ?@ 1993,

respectivel. *he "rowth as a percenta"e slowed $ecause $ase saleswere so lar"e. In ?@ 199C, E#art had sales o+ D6,18,333 and sales o+

D6,3C3,333 in ?@ 1993. E#art sales decreased $ FD11,333,333G while

Wal-Mart sales increased $ D8,C,333,333 +or the ei"ht ?@s 1993-199C.

'opri"ht H 1999 $ *ho#as 0. Wheelen and 5. avid Jun"er. %eprinted $

our per#ission onl +or the Cth Kditions o+ 1 Strategic Management and

Business Policy and 6 Cases in Strategic Management.

De!"s"#$ Da%e: 1998 199& ' Saes: *11&,9+8,000,000

66-6


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Case 22Wal-Mart Stores, Inc. (1998

199& ' Ne% I$!#e: *,+2,000,000

(199! "iscal #ear $"#% &as 'rom "eruary 1, 199! to )anuary *1, 199+

II. CASE ISS/ES AND S/ECTS

Re%a""$D"s!#3$% De4a5%e$%S%#5e I$63s%57

Industr AnalsisKecutive Succession'orporate 'ulture

'o#petitive Strate"

Strate" ?or#ulationMission and 4$ectives

Marketin" Strate"iesKnviron#ental Scannin"

Ju#an %esources Strate"Kecutive 0eadership

Kvaluation and 'ontrol

Strate"ic /roups

/rowth Strate"ies

istinctive 'o#petenciesLation!s 0ar"est %etailer and

0ar"est iscount Store 'hainI#pact o+ ?ounder

Lew Strate"ic Mana"e#ent *ea#'o#petitive Advanta"e

*ar"et MarketsMarket Se"#entation

;/reen; Marketin"

Mature IndustrSta"es o+ evelop#ent

Strate" I#ple#entation4r"ani(ational 0i+e 'cle

'oncentration vs. iversi+ication

66-


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III. STEPS COERED IN STRATEGIC DECISION-MAING PROCESS

Strat

egyF

ormul

ation

Strategy

Evaluation&

Performance

Strategic

Postu

Corporate

Go

External

Facto

Internal

Facto

Strategic

Facto

ReviewMB

Strategic

!ltern

" " # $ % ' ( )

see "igure 1.! on ages 2 and 21

4 K#phasi(ed in 'ase N 'overed in 'ase

I. CASE OECTIES

1. *o discuss Wal-Mart!s success+ul "rowth strate"ies and

per+or#ance over the past decade.

6. *o discuss Wal-Mart!s entr into new retailin" +or#ats

superstores, SAM!S 'lu$. 'an these new retailin" +or#ats $e assuccess+ul as the co#pan!s discount store +or#at:

. *o discuss the concept o+ ;"reen; #arketin" and its i#pact on

custo#ers and suppliers. Jow does ;"reen; #arketin" relate to

social responsi$ilit:

7. *o discuss the phrase, ;*he Wal-Mart Wa; and how it relatesto Wal-Mart!s strate"ic #ana"e#ent.

. *o discuss Sa# Walton!s philosoph and its i#pact uponcorporate culture and dail co#pan activities.

*o discuss how lon" this culture will continue a+ter his

death.

2. *o review how Wal-Mart succeeded in its o$ective to $eco#ethe nation!s nu#$er one retailer.

C. *o discuss what strate"ies Wal-Mart has in place to achievethis o$ective, andOor to su""est so#e new strate"ies to achieve

this o$ective.

8. *o discuss how Wal-Mart can sustain its "rowth strate"ies

while #aintainin" its +inancial position.

9. *o evaluate how success+ul Wal-Mart!s strate"ic #ana"e#ent has$een in a #aturin" industr with intense co#petition.

13. *o evaluate Wal-Mart!s #arketin" strate"ies.

11. Te !ase a3%#5 45#;"6e6 %e %ea!"$


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#?@e!%";es:

*o show how the #arketin" concept is interpreted and applied inretailin" and how and wh an or"ani(ation $eco#es #arketin"orientated.


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*o show what role leadership plas in esta$lishin" direction in a

"iven corporate culture.

*o e#phasi(e the need to identi+ #arket se"#ents and then todesi"n an appropriate retailin" #i to #eet consu#er needs andwants o+ an identi+ied tar"et #arket.

*o dra#ati(e the i#portance o+ developin" a #arketin" strate"which will allow the +ir# to survive and "row in a dna#ic

eternal environ#ent.

*o discuss the static versus dna#ic nature o+ the eternal

#ultidi#ensional environ#ent.

*o do +inancial analsis o+ a hi"h-ield or"ani(ation.

. S/GGESTED CLASSROOM APPROACHES TO THE CASE

1. We provide ou with two #ass #erchandisin" discount chain stores

and one depart#ent store retailer. *he #ass #erchandisin" discountchain store retailin" cases are

Case 21 - E#art 'orporation 1998

Case 22 - Wal-Mart Stores, Inc. 1998

*he depart#ent store retailin" case is

Case 2 - Lordstro#, Inc., 1998

Kach o+ the three cases is a co#plete, stand-alone strate"ic

#ana"e#ent case.

6. I+ ou assi"n $oth the Wal-Mart and E#art cases, we su""estthat ou assi"n the Wal-Mart case +irst since it includes #ore

in+or#ation a$out the issues +acin" the discount store industr.

. *his is an ecellent case that can $e used an ti#e in the

course. *he students are all +a#iliar with discount stores. Wesu""est placin" this case toward the #iddle o+ our course.

7. We would su""est that ou require the students to do li$rar

research on retailin" - issues and chan"es.

*his industr research helps +ra#e the environ#ent +or this case.

*he case still works ver e++ectivel without this research. *heresearch ust enhances the students! learnin" eperience.

. *his case works ver well as a written individual case

analsis or ea#.

2. *his is an ecellent case +or a tea# presentation.

C. We have asked students in our classes to state on a -point

scale which retail store o++ers 1 lowest price, 6 $est qualit +orthe price, $est desi"ned stores, 7 $est custo#er service, and

$est selection o+ #erchandise. We will nor#all list +ive co#panies


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such as E#art, Sears, Wal-Mart, *ar"et, and a couple o+ local

chains. We are trin" to deter#ine the qualit i#a"e o+ each +ir#.

We have $een surprised $ the ver ne"ative i#a"e that E#art has

with students.

8. Te !ase a3%#5 45#;"6e6 %e


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I. DISC/SSION /ESTIONS

1. What are the s%5e$%s and=eaB$esses o+ Wal-Mart:

6. What are the #44#5%3$"%"es and %5ea%s +acin" Wal-Mart:

. What are the s%5a%e"!


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. TEACHING OECTIES - *his was presented earlier in Se!%"#$ I -Case O?@e!%";es. *he last o$ectives 11-1 were provided $the case author.

C. TEACHING S/GGESTIONS - *his was presented earlier in Se!%"#$ - S3es%e6 Cass5## A445#a!es T# Te Case.

P%eprinted $ per#ission o+ the author.

D.'INANCIAL PER'ORMANCE - ata is availa$le in the case to dra#ati(ethe per+or#ance #easures o+ 1 Asset *urnover asset #ana"e#ent, 6

Rro+it Mar"in #ar"in #ana"e#ent, and ?inancial 0evera"e de$t

#ana"e#ent. ata in the case can also $e used to #easure theliquidit o+ the or"ani(ation. *he Strate"ic Rro+it Model, as shown

with nor#ative ratios in Khi$it *L 1, is a use+ul vehicle +oranal(in" the +inancial per+or#ance o+ +ir#s o+ this tpe. ?i"ures

are considered nor#ative +or in-store retailin".

E>"?"% TN 1: S%5a%e"! P5#


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1. I6e$%"%e5$a e$;"5#$e$%%# a$ #5a$"a%"#$ "Be Wa-Ma5%.


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*he eternal environ#ent o+ retailin" or"ani(ations istraditionall thou"ht o+ in ter#s o+ political, le"al,

re"ulator, societal, econo#ic, co#petitive, and technolo"ical

in+luences. *hese in+luences surround $uers in the #arketplaceand the retailin" strate"ist as the retailin" #i is developed.

*he retailin" #i is tpicall thou"ht o+ as controlla$le. *heenviron#ent is usuall perceived $ #ana"e#ent as uncontrolla$le

and constantl chan"in". 'han"e #ust $e accepted $ #ana"e#ent

as it is in the le"ac o+ Sa# Walton.

A nu#$er o+ chan"es had taken place in the eternal environ#ento+ Wal-Mart. *he countr was in an econo#ic recession in the

earl 1993s. espite the +act that the co#pan continued to "row

in ter#s o+ sales volu#e, pro+ita$ilit, and phsical si(e, thediscount depart#ent store industr was perceived to $e in the

#aturit sta"e o+ the institutional li+e ccle.

In ter#s o+ #arket served, the Wal-Mart +ocus was on s#all townsand cities. 4ne question that #i"ht $e eplored is the

accepta$ilit o+ the +ir# in other #arket areas like su$ur$an

and inner cit. An industr analst had questioned, ;Will Wal-Mart take over the world:; *he price-sensitive shopper see#ed

to $e everwhere. Wal-Mart continued to epand in conti"uoustradin" areas and into lar"er ur$an areas such as allas and

Rhoeni.

Wal-Mart senior #ana"e#ent should develop a #odel which

incorporates the co#ponents o+ strate"ic plannin" 1 astate#ent o+ purpose or #ission +or the +ir# 6 speci+ic "oals

and o$ectives +or Wal-Mart and its divisions and speci+ic

retail strate"ies that will ena$le the +ir# to reach itso$ectives and +ul+ill its #ission.

. Wa% !#$!3s"#$ !a$ ?e 65a=$ and %eturn 4n Let Worth, 12.8>.

*he hi"h-per+or#ance #easures in retailin" show that Wal-Mart

Stores is a hi"h-per+or#ance retailer with return on net worth

si"ni+icantl "reater than the industr avera"e and othernor#ative +i"ures. A review o+ the SRM +inancial analsis

su""ests that return on assets is a$ove industr avera"es.Sales have also "rown si"ni+icantl "reater than industr

avera"es. Sales which increase at a decreasin" rate are

characteristic o+ the #aturit sta"e o+ the retail institutionalli+e ccle.


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E>"?"% TN 2:Wa-Ma5% S%#5es, I$!.

See!%e6 S%5a%e"! P5# > >

199C 36. 6.2 38. 6.7 19

1992 36. 6.2 3C. 6. 19

199 36. 6.7 3C. 6. 18

1997 3. 6. 38. 6. 61

199 3. 6. 38. 6.7 61

1996 3. 6.C 39. 6. 66

1991 37. 6.8 11. 6.1 67

1993 37. .1 1. 6.3 6C

1989 37. .6 1. 6.1 6C

1988 3. .1 16. 6.6 6C

198C 3. 6.9 11. 6.7 62

1982 3.9

6.C6

13.

6.76

6.2

F. S4e!3a%e #$ #= 3! "4a!% %e a?se$!e #< Sa3e Wa%#$ ="a;e #$ %e


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1'apture his philosoph in an wa possi$le on +il#, in

$ooks, in articles, in a paintin" to han" in ever store

6Introduce leadership pro"ra#s which would e#phasi(e continuin"

the Mr. Sa# philosoph in the co#pan

evelop Mr. Sa# as a s#$ol or idea as opposed to anindividual

7Rerpetuate in the +ir# all the ideas that Mr. Sa# stood +or,like his ho#espun hu#or, li+e stle, or #oralit.

'ontinue to encoura"e the hu#an reactions and hu#an resource,

$otto#-up stle o+ #ana"e#ent in the +ir#.

In this question the instructor #a wish to introduce the

concept o+ or"ani(ational culture $ discussin" or assi"nin"li$rar research on other corporate leaders like Jenr ?ord.

?.W. Woolworth, Marshall ?ield, %ichard W. Sears, and #orerecentl Ku"ene ?erkau+ at K.5. Eorvette discount stores, Mar

Ea Ash at Mar Ea 'os#etics, and %ichard M. evos and 5a an

Andel o+ A#wa. Jarr 'unnin"ha# was credited as providin" #uchleadership in the "rowth sta"e o+ E#art.

+. Wa% e;"6e$!e "s %e5e %# s3es% %a% %e a5Be%"$ !#$!e4%=as 3$6e5s%##6 a$6 a44"e6 %# Wa-Ma5%

Accordin" to the #arketin" concept, a +ir# should tr to provide

products and services that satis+ custo#ers! needs throu"h acoordinated set o+ activities that also allows the or"ani(ation

to achieve its "oals.

Kvidence o+ an appreciation and application o+ the #arketin"

concept is +ound in annual reports o+ the +ir# and in #ana"e#entco##ents and actions. *he 1993 Annual %eport o+ Wal-Mart

Stores, Inc. su""ested that corporate and #arketin" strate"iesin the 1993s would $e $ased upon a set o+ two #ain o$ectives

which had "uided the +ir# throu"h its "rowth ears in the decade

o+ the 1983s. *he custo#er was +eatured in the +irst o$ective,;'usto#ers would $e provided what the want, when the want it,

and at value.; *he second o$ective e#phasi(ed the tea# spirit,;*reatin" each other as we would hope to $e treated . . .

dependenc on our Associate Rartners to sustain our success.;

*he o$ective was to "row to a trul nationwide retailer insales and earnin"s.

At another point in the case, it was noted that stores were

epected to ;provide the custo#er with a clean, pleasant and

+riendl shoppin" eperience.; So#e have su""ested that it was#an o+ the little thin"s that set Wal-Mart apart +ro# the

co#petition and #ade it an ea#ple o+ the application o+ the#arketin" concept. *he ;people "reeter;, wide aisles, e#ploee

vests +or reco"nition, war# interior decor and eterior colors,and the use o+ $rown paper sacks rather than plastic were

considered ea#ples o+ the ;custo#er +irst; attitude.

Since custo#er satis+action is the #aor ai# o+ the #arketin"

concept, the ;Satis+action /uaranteed %e+und and Kchan"eRro"ra#; could $e interpreted as also part o+ the application o+

the #arketin" concept. *he co##ents #ade $ /lass also re+lect

the concept ;We!ll $e +ine as lon" as we never lose ourresponsiveness to the consu#er.;


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III. ST/DENT STRATEGIC A/DIT O S*)KL* RARK%

I. C/RRENT SIT/ATION

A. Pe5


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6. *o o++er satis+action "uaranteed or re+und or echan"e

polic.

. *o provide qualit, value, selection and low price.

7. *o do thin"s ;the Wal-Mart Wa.;

. *o use J%M policies to win e#ploees to the corporate

culture.

II. CORPORATE GOERNANCE

A. #a56 #< D"5e!%#5s ?ourteen #e#$ers.

?our internal #e#$ers S. %o$son Walton, 'hair#anavid . /lass, 'K4, Rresidentonald /. Soderquist, ice-'hair#an and '44Raul %. 'arter, Kecutive ice Rresident o+ Wal-Mart %ealt

*en outside #e#$ers

Lo cited stock ownership

Rartnership #ana"e#ent

. T#4 Ma$aee$% 4nce a"ain, avid /lass is the onl person#entioned under top #ana"e#ent. Je is hard-drivin" and #ostlikel the $est candidate to succeed Sa# Walton. It appears

that #ana"e#ent is ver active and that the activel re"ulate

the co#pan, $ut the su$scri$e to a $road approach thatinvolves everone while creatin" the desired results.

III. ETERNAL ENIRONMENT (EFAS see EHIIT 1)

A. S#!"e%a E$;"5#$e$%

O44#5%3$"%"es

International epansion $ retailers.

4ne-stop shoppin" center +or convenience.

'onsu#ers! desire +or value +or dollars spent.

/rowin" trend to U$u A#erican.V

/reen #erchandise enterin" the sste#.

T5ea%s

Slow "rowth that #i"ht hurt overall sales.

*he trend o+ +orei"n investors to $u ).S. retail stores.

. TasB E$;"5#$e$%

O44#5%3$"%"es

Man o+ the retail stores have declared $ankruptc andcreated a lar"er consu#er $ase.

So#e states have not $een #arketed in currentl out o+ 3

states have Wal-Marts.

Kcellent distri$ution centers provide an advanta"e over

other corporations.

*he industr is $eco#in" s#aller and Wal-Mart re#ains the

leader in si(e.

T5ea%s


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Lew retail +or#ats includin" superstores and warehouse

retailin".

?actor outlets that o++er drastic price reductions.

Speciali(ed stores that have achieved #erchandise do#inance

in their product cate"ories.

Rossi$ilit o+ industr #aturit.

I. INTERNAL ENIRONMENT (IFAS see EHIIT 2)

A. C#54#5a%e E$;"5#$e$%

Sta"e III corporation.

Stores are located around a #aor warehouse a$out 2 hours

awa.

ecentrali(ed operational decision #akin" occurs at thestores centrali(ed strate" choice is #ade at the corporatelevel.

. C#54#5a%e C3%35e

A +ast-"rowin" co#pan, Wal-Mart relies heavil on its

e#ploees +or co#pan success.

J%M is a hi"h priorit at Wal-Mart.

Kach e#ploee contri$utes to the Wal-Mart store and

co##unit.

ualit and custo#er satis+action are priorities.

C. C#54#5a%e Res#35!es

1. Ma5Be%"$ - S%5e$%s:

0ar"e-scale ad ca#pai"ns.

Knviron#entall sound products and ).S.-#ade productsthis +ollows current ).S. societal trends.

Brand na#es.

Idea that the custo#er #atters.

Sales o+ D3C per square +oot 1992 vs. D196 +or E#art.

International epansion and "rowth o+ SAM!S 'lu$ and

Supercenters.

WeaB$esses - Lone that can $e seen.

2. '"$a$!e - S%5e$%s:

Increasin" sales that can easil contend with the a#ount o+

de$t $ein" used. 0on"-ter# de$t is low +or this industr.

*hirt-+ive ears o+ record sales and pro+its.

Linet-nine quarters o+ "rowth in sales and pro+its $e+ore

the +irst decline in pro+its, $ut the whole ear up.

' 199& ' 199 'Let Rro+it 6.9> 6.9> .%eturn on Assets 8.> C.9> .

Asset *urnover 6.23 6.2 .

WeaB$esses:

0on"-ter# o$li"ations +or leases are #uch too hi"h.


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'urrent assets appears to $e low +or such a lar"e

corporation.

. Resea5! a$6 De;e#4e$% - It was not #entioned.

Jowever, it can $e i#plied that Wal-Mart pas close

attention to societal trends and consu#er pre+erences.

*here is tre#endous research o+ co#petitors and theirstrate"ies in order to learn +ro# their #istakes.

Wal-#art keeps a close check on de#o"raphics o+ its

consu#ers.

F. O4e5a%"#$s - S%5e$%s: -

Kcellent service with discount prices.

Kcellent up-to-date co#puter sste# +or everda

operations and inventor control.

Rolic o+ dealin" onl with top o++icials o+ producers to

ensure price and qualit.

?@ 199C - 6,761 Wal-Mart stores, 78 SAM!S 'lu$s, 36Supercenters, +or a total o+ ,732 stores.

WeaB$esses: - Lone.

+. H3a$ Res#35!e Ma$aee$% - S%5e$%s:'orporate polic dedicated to i#provin" e#ploee

involve#ent and epertise.

Se#inars and trainin" pro"ra#s to ensure qualit in

e#ploee per+or#ance.

Special awards +or e#ploee per+or#ance.

K#ploees UassociatesV encoura"ed to ask #ana"e#ent

questions and o++er su""estions.

WeaB$esses:

Ma create an at#osphere where e#ploees think the have

all the answers or can do anthin" the desire.

. I$


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countries currentl not serviced. Also, add new store

+or#ats as eistin" stores saturate their #arkets.

C#$: %equires #ore de$t load.

2. G5#=% T5#3 C#$!e$%5"! D";e5s"


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I. EFAS, I'AS a$6 S'AS EHIITS

Ex.i5it "

EF!S 6External Factor !nalysis Summary7

E1,ER*!4 S,R!,EGIC F!C,RS -EIG8, R!,I*G -EIG8,E9Opportunities:Intense competition 3 "322

Societal tren: towar: excellent mar;etingresearc.

3#

"322

In:ustry tren: towar: large/scale retailingan: new store formats

3"

% 3'2

Societal tren: towar: environmental pro:ucts an:!merican/ma:e pro:ucts

32

% 3#2

International expansion 3 % 3'2

Threats:In:ustry maturity 3 % 3'2

Slow growt. economy 3 % 3%2

TOTAL SCORES1.00 4.40


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I. IFAS, E'AS a$6 S'AS EHIITS

Ex.i5it #

IF!S 6Internal Factor !nalysis Summary7

I*,ER*!4 S,R!,EGIC F!C,RS -EIG8, R!,I*G -EIG8,E9StrengthsInformation>Inventory controlsystems

3"

3(

4argest retail an: :epartment store 6in sales7 3 3

8RM policies > Corporate culture 3 3

Excellent management teams an: operations 3 % 3

International expansion 3 % 3

Weaknesses:4oss of Sam -alton 3 % 3

TOTAL SCORES1.00 4.50


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I. SFAS, E'AS a$6 I'AS EHIITS

Ex.i5it $SF!S 6Strategic Factor !nalysis Summary7

?E@ S,R!,EGIC F!C,RS -EIG8, R!,I*-EIG8,

E9

Intense competition 3 3

*ew store formats 3 % 3

4argest retail an: :epartment store 3 % 3

Excellent management team 3 % 3

Manage: Growt. 3 3

Mar;eting / Strong name recognition 3 % 3

9istri5ution>Information>Inventory control system 3"

3

8RM policies > Corporate culture 3 3

International expansion 3 % 3

Maturing in:ustry 3 % 3

TOTAL SCORES 1. 4.50

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(102704838) 26363283-Case-Study-Wal-Mart-Stores-Inc-Rapid-Growth-in-90s.rtf