Wal-Mart Strategic Audit

7/28/2019 Wal-Mart Strategic Audit

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ReportOn

Strategic Management

Table of Contents


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ParticularsPage No.Executive Summary

I. Current Situation1

A. Current Performance1

B. Strategic Position1

1. Mission1

2. Objectives1-2

3. Policies

24. Strategies

2-3

II. Strategic Managers3

A. Board of Directors3

B. Top Management3-5

III. External Environment: Opportunities And Threat (Swot)5

A. Natural Environment 5

B. Societal Economy 5

1.Economic5

2.Technology5

3.Political-Legal6

4.Socio-cultural6

C. Task Environment 7

IV. Internal Environment7

A. Corporate Structure 7

B. Corporate Culture 8

C. Corporate Resources 8

1.Marketing8


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2.Finance9

3.R&D9

4.Operations9

5.Human Resources10

6.Information Systems10

V. Analysis of Strategic Factors11

A. Situational Analysis 11

1.Strengths 11

2.Weaknesses 11

3.Opportunities

11 4.Threats12

VI. Strategic Alternatives and Recommended Strategy12

A. Strategic Alternatives 12

B. Recommended Strategy 13-14

VII. Implementation14-15

VIII. Evaluation and Control15

IX. Appendix16-17


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Executive Summary

Wal-Mart was founded in 1962 by a man named Samuel Moore Walton. He

was considered one of the most influential retailers of the century

(Wheelen & Hunger, 740). Sam Walton started his retail career in

management in 1940 with J.C. Penney Co. His training and hard work at J.C.

Penney Co. led him to his great Wal-Mart idea. He decided that small town

populations would welcome, and make profitable, large discount shopping

stores. When Sam Walton created Wal-Mart in 1962, he declared that three

policy goals would define his business: respect for the individual, service to

customers, and striving for excellence (Walmartstores.com).

Wal-Mart stores sold nationally advertised, well-known-brand

merchandise at low prices in austere surroundings (Wheelen & Hunger,

738). The 1970s marked significant growth for Wal-Mart with its first Wal-

Mart Distribution Center as well as the Wal-Mart Home Office. By the end of


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1979, there were 276 Wal-Mart stores in 11 states and in 1991, the firm had

1,573 stores in 35 states to include the international market. Wal-Mart sales

growth continued into the 1980s. Wal-Mart was divided into three business

segments: Wal-Mart stores, Sams Clubs, and the International Division.

In 1983 the company opened its first three Sam's Wholesale Clubs and

began its expansion into bigger city markets. Wal-Mart Supercenters were

large combination stores that included a full-line grocery center, a general

merchandise discount store, banks and some even offered a food court of

restaurants. Wal-Marts international expansion accelerated managements

plans for expansion and notoriety. In 2000, Fortune magazine named it as

one of the 100 Best Places to Work and in 2002, Wal-Mart officially

became the worlds largest company based on its $245 billion in sales

(Wheelen & Hunger, 731).

Wal-Marts winning strategy in the United States was based on selling

brand products at low cost while still offering the customer a quality product.

Wal-Mart is in the business of selling everything customers need in their

everyday lives. This includes the consumer goods listed above as well as

food-service items. Wal-Mart took pride in its domestic strategies and

programs that were based on a set of two priorities:

1) Customers would be provided with what they want, when they want it, all

at a value.


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2) Treating each other as we would hope to be treated, acknowledging our

total dependency on our Associate-partners to sustain our success

(Wheelen & Hunger, 747).

In the year ending January 31, 2006, Wal-Marts financials reflected the

following: (all dollar amounts are in millions)

Total revenue - $315, 654

Net income - $11,231

Total assets - $138,187

Total liabilities - $48,826

Total shareholders equity - $53,171. According to the 2006 consolidated balance sheets

total liabilities and shareholders equity equaled $138,187 not just totals shareholders

equity as previously shown.

Wal-Mart History

Wal-Mart was founded in 1962 by Samuel Moore Walton. He was considered

one of the most influential retailers of the century (Wheelen & Hunger, 740). Sam

Walton started his retail career in management in 1940 with J.C. Penney Co. His

training and hard work at J.C. Penney Co. led him to his great Wal-Mart idea. He

decided that small town populations would welcome, and make profitable, large


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discount shopping stores. When Sam Walton created Wal-Mart in 1962, he declared

that three policy goals would define his business: respect for the individual, service

to customers, and striving for excellence (Walmartstores.com).

Wal-Mart stores sold nationally advertised, well-known-brand merchandise

at low prices in austere surroundings (Wheelen & Hunger, 738). The 1970s

marked significant growth for Wal-Mart with its first Wal-Mart Distribution Center as

well as the Wal-Mart Home Office. By the end of 1979, there were 276 Wal-Mart

stores in 11 states and in 1991; the firm had 1,573 stores in 35 states to include the

international market. Wal-Mart sales growth continued into the 1980s. Wal-Mart was

divided into three business segments: Wal-Mart stores, Sams Clubs, and the

International Division.

In 1983 the company opened its first three Sam's Wholesale Clubs and began

its expansion into bigger city markets. Wal-Mart Supercenters were large

combination stores that included a full-line grocery center, a general merchandise

discount store, banks and some even offered a food court of restaurants. Wal-

Marts international expansion accelerated managements plans for expansion and

notoriety. In 2000, Fortune magazine named it as one of the 100 Best Places to

Work and in 2002, Wal-Mart officially became the worlds largest company based

on its $245 billion in sales (Wheelen & Hunger, 731).

Wal-Marts winning strategy in the United States was based on selling brand

products at low cost while still offering the customer a quality product. Wal-Mart is

in the business of selling what customers need in their everyday lives. This includes

the consumer goods listed above as well as food-service items. Wal-Mart took

pride in its domestic strategies and programs that were based on a set of two

priorities: 1) Customers would be provided with what they want, when they want it,


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all at a value. 2) Treating each other as we would hope to be treated,

acknowledging our total dependency on our Associate-partners to sustain our

success (Wheelen & Hunger, 747).

In the year ending January 31, 2006, Wal-Marts financials reflected the

following: (all dollar amounts are in millions)

Total revenue - $315, 654

Net income - $11,231

Total assets - $138,187

Total liabilities - $48,826

Total shareholders equity - $53,171. According to the 2006 consolidated balance sheets

total liabilities and shareholders equity equaled $138,187 not just totals shareholders

equity as previously shown.


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Wal-Mart Strategic Audit

I. Current Situation

A. Current Performance

Wal-Mart (WM) is divided into three business segments: Wal-Mart Stores, Sam's

Club, and the International Division. In 2002, Wal-Mart officially became the

worlds largest company based on its $245 billion in sales (Wheelen and Hunger

19-1). As of January 31, 2006, the company had over 6,100 stores worldwide,

bought products from 70 countries, and 20% of its business was generated

outside of the United States (Wheelen and Hunger 19-2).

1. 2006 fiscal year sales of $312.4 billion, a 9.5% year over year increase.

2. $11.2 billion net income, up 9.4% to $2.68 per share.

3. Stock price of $46.11, down from $56.98 on January 31, 2002. (Likely due to better

competition and future expected growth slowdown.)

B. Strategic Position

1. Mission

Wal-Mart Stores, Inc. is a global retailer committed to improving the standard

of living for our customers throughout the world (Annual Report 2006).

2. Objectives

Comparative store sales indicates the performance of our existing stores by measuring

the growth in sales for a time period corresponding to the prior year period

Operating income growth greater than net sales growth has long been a measure of

success for us.


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Inventory growth at a rate less than that of net sales is a key measure of our

efficiency.

With an asset base as large as ours, we are focused on continuing to make certain our

assets are productive. It is important for us to sustain our return on assets (Annual

Report 2006).

3. Policies

We earn the trust of our customers every day by providing a broad assortment of

quality merchandise and services at everyday low prices (EDLP) while fostering a

culture that rewards and embraces mutual respect, integrity and diversity. Putting Our

Customers First.

EDLP is our pricing philosophy under which we price items at a low price every day

so that our customers trust that our prices will not change erratically under frequent

promotional activity.

Our focus for SAMS CLUB is to provide exceptional value on brand-name

merchandise at members only prices for both business and personal use.

Internationally, we operate with similar philosophies (Annual Report 2006).

4. Strategies

We have developed several initiatives to help mitigate this pressure and to grow

comparable store sales through becoming more relevant to the customer by creating a

better store shopping experience, continual improvement in product assortment and

an aggressive store upgrade program to be instituted over the next 18 months.


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Our expansion programs consist of opening new units, converting discount stores to

supercenters, relocations that result in more square footage, as well as expansions of

existing stores.

Sams Club - We believe that a greater focus on providing a quality in-club

experience for our members will improve overall sales, including sales in these

categories.

International A shift in the mix of products sold toward general merchandise

categories which carry a higher margin (Annual Report 2006).

II. Strategic Managers

A. Board of Directors

Thirteen members, four affiliated with the company, nine independent, three women, two

African Americans, two Hispanic Americans.

Chairman of the Board, S. Robson Walton (son of founder.)

B. Top Management

Eduardo Castro-Wright Executive Vice President, President and Chief Executive Officer,

Wal-Mart Stores Division U.S.

M. Susan Chambers Executive Vice President, People Division

Patricia A. Curran Executive Vice President, Store Operations, Wal-Mart Stores Division

U.S.

Douglas J. Degn Executive Vice President, Food, Consumables, and Hardlines, Wal-Mart

Stores Division U.S.

Linda M. Dillman Executive Vice President, Risk Management and Benefits

Administration


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Johnnie Dobbs Executive Vice President, Logistics and Supply Chain

Michael T. Duke Vice Chairman, Responsible for Wal-Mart International

Joseph J. Fitzsimmons Senior Vice President, Treasurer

John E. Fleming Executive Vice President, Chief Marketing Officer, Wal-Mart Stores

Division U.S.

Rollin L. Ford Executive Vice President and Chief Information Officer

David D. Glass Chairman of the Executive Committee of the Board of Directors

Mark D. Goodman Executive Vice President, Marketing, Membership and E-commerce,

SAMS CLUB

Craig R. Herkert Executive Vice President, President and Chief Executive Officer, The

Americas, Wal-Mart International

Charles M. Holley, Jr. Senior Vice President, Finance

Thomas D. Hyde Executive Vice President and Corporate Secretary

Lawrence V. Jackson Executive Vice President, President and Chief Executive Officer,

Global Procurement

Gregory L. Johnston Executive Vice President, Club Operations, SAMS CLUB

C. Douglas McMillon Executive Vice President, President and Chief Executive Officer,

SAMS CLUB

John B. Menzer Vice Chairman, Responsible for U.S.

Thomas M. Schoewe Executive Vice President and Chief Financial Officer

H. Lee Scott, Jr. President and Chief Executive Officer


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Gregory E. Spragg Executive Vice President, Merchandising and Replenishment, SAMS

CLUB

S. Robson Walton Chairman of the Board of Directors

Claire A. Watts Executive Vice President, Product Development, Apparel and Home

Merchandising, Wal-Mart Stores Division U.S.

Eric S. Zorn Executive Vice President, Wal-Mart Realty (Annual Report 2006).

III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND

THREAT (SWOT)

A. Natural Environment

Raw materials availability.(O)

Land availability. (O)

Electricity usage. (T)

Oil and Gas usage. (T)

Water scarcity. (T)

Hazardous waste storage, transportation and disposal. (T?)

B. Societal Economy

1. Economic

Interest rate increases may signal end of economic expansion (T).

Economic deterioration may mean more frugal shopping habits. (T)

Increasing commodity costs. (T)

Increasing transportation costs. (T)


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Currency fluctuations. (T)

Slowing national economy (T)

2. Technology

Increased usage of RFID for inventory management. (O)

Internet presence allows for customer options. (O)

Information technology increasingly important. (O)

3. Political-Legal

Regional trade pacts are making free trade available between countries. (O)

Differing laws between countries may evoke compliance issues. (T)

Potential unionization of workforce. (T)

The Company is involved in a number of legal proceedings. In accordance with

Statement of Financial Accounting Standards No. 5, Accounting for Contingencies,

the Company has made accruals with respect to these matters, where appropriate,

which are reflected in the Companys consolidated financial statements (Annual

Report 2006). (T)

The Company is a defendant in numerous cases containing class action allegations in

which the plaintiffs have brought claims under the Fair Labor Standards Act

(FLSA), corresponding state statutes, or other laws (Annual Report 2006). (T)

4. Sociocultural

Aging U.S. demographics. (O)

Slowing U.S. population growth. (T)

Wal-Mart seen as a reason for closing of mom and pop stores. (T)


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International cultural differences. (T)

Green environmental movement. (O)

C. Task Environment

United States market saturation. (T)

Expansion into Europe, China, South America, Canada, and Mexico. (O)

Rivalry High. Target, Sears, K-Mart (T)

Chance of new entrants low. (O)

Purchasing power high. (O)

Substitute power high. (T)

Government regulations power medium. (T)

IV. Internal Environment

A. Corporate Structure

Three business units, Wal-Mart Stores USA, Sams Club, and Wal-Mart International

(Wheelen and Hunger 19-12). (S)

o Wal-Mart Stores unit had 3,289 locations and included the companys

supercenters, discount stores, Neighborhood Markets in the US, and

walmart.com.

o Sams Club unit had 567 locations and included the warehouse membership

clubs in the US plus samsclub.com.

o Wal-Mart International had 2,285 locations in 10 countries. The International

total was increased in February 2006 by purchasing a majority control of


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CARHCO with 360 locations in five Central American countries (Wheelen

and Hunger 19-12).

B. Corporate Culture

In-depth employee involvement in company affairs. (S)

Trained employees to be merchants by being responsible for the performance of their

own departments. (S)

Reflection of the founders values. (S)

Conservative values create some problems when expanding to larger cities. (W)

Non-Union stance is viewed unfavorably is some areas. (W)

Offered $8.5 million worth of grants from its Safe Neighborhood Heroes program

to recognize emergency professionals. (S)

Donated $3 million in supplies when Hurricane Katrina devastated Americas Gulf

Coast. (S)

C. Corporate Resources

1. Marketing

Advertising costs are expensed as incurred and were $1.6 billion in 2006. Advertising

costs consist primarily of print and television advertisements (Annual Report 2006).

Buy American campaign. (S)

Green marketing offers the option of buying products which were better for

environment. (S)

Offers quality brand names at lower-than-competitive prices (Wheelen and Hunger

19-19). (S)


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Introduced a Value Plan benefits plan to its employees at premiums ranging from

$11 to $65 a month. (S)

2. Finance

$312.6 billion in annual sales. (S)

$11.2 billion net income. (S)

$2.68 earnings per share. (S)

8.9% return on assets. (S)

11.4% increase in sales and operating income for the international business (Wheelen

and Hunger 19-24). (S)

3. R&D

More involved with the development side. (W)

Focusing on expansion and development of already established business model. (W)

4. Operations

Wal-Mart USA. We are intent on driving comparative store sales by being relevant to

our broad customer base and by improving our cost structure and inventory flow to

strengthen return on investment. (S)

Sams Club. We remain committed to serving the needs of our members where

pennies matter by leveraging productivity improvements and lowering expenses, so

that we can provide the products and services they want at the lowest prices in the

industry. (S)


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Wal-Mart International. Our approach to ensuring continued profitable growth

includes three dimensions new markets with multiple formats, new store growth in

existing markets and increasing sales at existing stores (Annual Report 2006). (S)

5. Human Resources

Employees are called associates. (S)

Employee stock ownership and profit-sharing program. (S)

Decentralized approach to retail management development. (S)

Utilizes the Total Quality Management approach. (S)

Discourages unionization (Wheelen and Hunger 19-23). (W)

6. Information Systems

Leader in RFID technology. (S)

Good internet presence. (S)

Utilizes satellite communications, data centers, and handheld devices. (S)

V. Analysis of Strategic Factors

A. Situational Analysis

1. Strengths

International brand name.

Financial position.

Market leadership.

2. Weaknesses


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Market saturation.

Public opinion.

Adjustment to cultural differences after entering a foreign market.

Supplier alienation.

Past employee discrimination.

Employee health benefits.

International supplier employee violations.

3. Opportunities

International expansion.

Environmental leadership.

Workers rights leadership.

Community involvement.

Social initiatives.

4. Threats

Strong U.S. competition.

Changing demographics.

Economic uncertainty.

Current litigation.

Employee unionization.

VI. Strategic Alternatives and Recommended Strategy

A. Strategic Alternatives


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Adopt a friendlier corporate attitude and image

o Pro. Improved customer service

o Pro. Business growth

o Pro. Stronger relationships with its suppliers and customers

o Con. The negative image tarnishes their moral and ethical image

Con. Popular image is that Wal-Mart comes to town and locally-owned retailers

shrivel up and die (Parnell, 2008).

Ease into foreign and domestic markets instead of barging in

o Pro. Create a more positive corporate image by not devouring every business

in sight.

o Pro. Creates an image with integrity

o Pro. Customer loyalty

o Pro. Increase friendlier competition

o Con. Creates ill-will among smaller businesses

o Con. Viewed as a bully corporation

Expansion

o Pro. Provides a new source of tax revenue for the community


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o Pro. Creates more jobs

o Pro. Promotes community expansion and individuals who will patronize from

other communities

o Pro. Opportunities for employee growth in the organization

o Con. Associates may receive unjust wages due to the compensation of lower

cost products

o Con. Purchasing practices require most suppliers to manufacture goods in

third world countries

o Con. Reduces the value on competing businesses

B. Recommended Strategy

Continue to expand the brand and operations in to urban & rural areas and foreign

countries. The companys reputation of being a bully needs to be eliminated by

implementing social awareness/advancement programs similar to Boys and Girls

clubs or the Police Athletic League. The goal of such a program will be to invite the

community to take part in Wal-Marts growth by mentoring, providing training,

internships and/or jobs that will aid the community.

Mom and Pop establishments should not be taken for granted. It is not the intention

of Wal-Mart to take from anyones dream, but to it is Wal-Marts goal to provide cost

savings to its consumers. A possible strategy for easing the anxiety of many small

business owners on the onset of Wal-Mart entering the community is offering these

owners the opportunity to become a part of Wal-Mart staff in a capacity that would


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provide them sense of security. Offering small business owners a position will not

only eradicate the discontent of loyal customers but will display Wal-Marts

willingness to enter a community and enhance it.

With the attitude of business is a dog eat dog world, Wal-Mart has been able to

enter the market eat stores that have tried to follow its precedence but have not

been able to attain Wal-Marts recognition. Entering into foreign markets may be

extremely difficult, as many nations are known for their loyalty and enriched cultures.

Unlike the United States, countries like China and Japan are accustom to living with

less, so the attractiveness of buying more due to cost savings may not be received as

well as in the United States. It is in the best interest of Wal-Mart to establish stores in

foreign markets, but to adopt the culture of the area and continue to maintain its

mission of enhancement not degradation.

VII. Implementation

Management needs to be open to change regarding clashes with grass-roots

movements that push to keep new construction of Wal-Mart stores in rural America.

While many residents welcome a new Wal-Mart, there will always be opposition and

by developing ways to appease those that oppose the giant retailer, they will be more

welcome to the neighborhood.

Wal-Mart has been steadily reaching into every corner of the earth, but not always

with successful results. Upper management is making the assumption that every

culture will welcome box stores and the American culture of which Wal-Mart is

known. As has been proven time and again, this is not always true. There needs to

be committees established that can perform thorough research.


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Several lawsuits have been filed regarding the treatment of employees. Wal-Mart

needs to develop a way to ensure employees are getting the right benefits that are

equal to the retail industrys average worker.

VII. Evaluation and Control

Wal-Mart needs to develop scout teams that can visit locations of opportunity and

solicit the communities concerns if Wal-Mart builds nearby.

Implement incentivized customer satisfaction surveys and employee surveys, which

will increase the chance of them being completed.

Monitor industry trends in foreign countries of interest.

Shift from monopolizing to publicly displaying how important Mom and Pop

establishments are to our society and how Wal-Mart can effectively and efficiently

incorporate these individuals and there keen sense of business into the large picture of

providing consumers cost savings.


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EFAS (External Factor Analysis Summary)

Key Internal

Factors

Weight Rating Weighte

dScores

Comments

Opportunities

Internationalexpansion

.20 3 .60 Required to remaincompetitive & #1 inmarket

Environmentalleadership

.05 2 .10 Will take time

Workers rightsleadership

.05 2 .10 Will take time andinitiative to steertowards a win - win

Communityinvolvement .10 2 .20 Ensures community buy-in and acceptance

Social initiatives .10 2 .20 Fosters relationships

Threats

Strong U.S.competition

.15 4 .60 Kmart and Target arecapturing an opposingniche while Wal-Martremains a catch all ofconvenient shopping

Changingdemographics

.10 3 .30

Economic uncertainty .05 3 .15 Domestic recession,

lower discretionaryspending, increasingunemployment

Current litigation .10 3 .3

Employeeunionization

.10 3 .3

Total Scores 1.0 2.85

IFAS (Internal Factor Analysis Summary)

Key Internal Factors Weight

Rating

WeightedScores

Comments

Strengths

International brand name .15 4 .60

Financial position .15 4 .60

Market Leadership .15 4 .60 Grew stronger as theeconomy grew weaker

Weakness


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Market saturation .15 3 .45 Embarking oninternationalopportunities

Adjustment to culturaldifferences

.10 3 .30

Supplier alienation .20 3 .60

Past employeediscrimination

.05 2 .10

Employee health benefits .05 2 .10


SFAS (Strategic Factor Analysis Summary)

Key StrategicFactors

Weight

Rating

Weighted Score

DurationS I L

Comments

International brandname

.15 4 .60 X X X NameRecognition

Market saturation .15 3 .45 X X

Supplier alienation .20 3 .60 X X X


.20 3 .60 X X X

Social initiatives .10 2 .20 X X X Communityoutreachprograms


.15 4 .60 X X X Kmart andTarget arecapturing anopposing

niche whileWal-Martremains acatch all ofconvenientshopping

Economicuncertainty

.05 3 .15 Domesticrecession,lowerdiscretionaryspending,increasing

unemployment

TOTAL SCORES 1.00 3.20


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Wal-Mart, Inc.

Executive Summary

An in-depth strategic audit was conducted on Wal-Mart, Inc. by Strategic

Audit Team Two and several recommended alternatives and strategies have been

recommended. The purpose of this executive summary is to detail those strategies

and recommendations that are discussed in three different phases: Strategic

Alternatives and Recommendations, Implementation and Evaluation and Control.

Strategic Alternatives

In order for Wal-Mart to maintain its course to becoming the global retail

leader, we have determined several Strategic Alternatives as well as Recommended

Strategies. For this summary, we will examine the pros and cons of the three

alternatives we have decided as having the most importance.

Many towns and communities see Wal-Mart as an aggressive corporation that

has done nothing to the community except destroy existing small businesses. One

strategic alternative is to develop a friendlier corporate image in dealing with the

public as well as its employees. Management could get more involved with

community charities or provide employees with better benefits. Employees that are

more content on the job will likely provide better customer service. Wal-Mart will

also be accepted into the communities more easily, rather than having to struggle

against grass-root movements, petitions and lawsuits.


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A negative side-effect could be lower profits as employee wages and benefits

increase as well as prices. Everyone comes to expect low prices but in order to

appease employees and the community, prices will have to rise.

The second strategic alternative that our team has agreed upon is

incorporating changes into the methodology of Wal-Marts expansion in global

markets. In the past, Wal-Mart has made bad decisions regarding product choices

in a foreign country. For example, certain products didnt sell well in countries like

Mexico and Argentina. Mistakes were also made upon entering the foreign markets

and trying to maintain a presence. German Wal-Marts were managed by American

executives who caused German managers to quit. Brazilian Wal-Marts were not

wholly accepted by the local populace due to unfamiliarity with the Wal-Mart brand.

Wal-Marts in China were tightly managed and highly restricted by local laws which

did not allow for growth. And South Korean Wal-Marts simply closed their doors

when they were deemed unsuccessful with consumers. By taking the time and

assigning a task force to research the new market, Wal-Mart would be able to ease

into a new global market instead of its common method of simply barging in and

buying up chains of existing retail stores and simply slapping the Wal-Mart brand

onto the store. This easement would allow time for the local populace to accept

Wal-Mart as just another retail store instead of a retail bully. This in turn would

create a more positive corporate image in the foreign market. Also, by slowly

establishing itself it could allow for friendlier competition with existing retail firms.

The downside of slowly easing into a new market is not being able to

establish its place in the retail business. Large chains will still have the advantage

of loyal customers that may stay clear of Wal-Mart which would quickly cut into

profits. Many foreign consumers may not be familiar with the Wal-Mart brand and


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by not establishing a solid foothold in their country, they never will. Also, the

supply chain that Wal-Mart is well known for is not as established in the global

market.

The last strategic alternative is Wal-Marts future expansion. In order for Wal-

Mart to stay competitive against its nearest rival, Target, and other big box type

retailers, it must continue with building new stores. Even though many

communities do not approve of Wal-Mart moving in, many residents agree that the

new store provides jobs and in some rural areas where joblessness is high, this is a

big benefit. Many large companies, Wal-Mart included, provide tax revenues that

allow the community to grow and develop. Without a large company, smaller

communities do not have the resources to put towards new parks or infrastructures.

Wal-Mart stores provide competition which allows lower prices for common,

everyday items, and in times of recessions, this is always a big plus in areas where

mid to lower income families live.

Unfortunately, there are many disadvantages to expansion. By building too

many new Wal-Mart stores, the market will become saturated and stores will earn

less profit per location. Local businesses will always suffer in the shadow of a new

Wal-Mart which will bring some community resentment. New stores will provide

many jobs, but usually at the lowest pay allowed by law. Wal-Mart will always have

to deal with petitions, lawsuits and other legal issues prior to and during any

construction.

Recommended Strategies:


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Wal-Mart needs to continue to expand the brand and operations into urban

and rural areas as well as foreign countries. The companys reputation of being a

bully needs to be eliminated by implementing social awareness/advancement

programs similar to Boys and Girls clubs or the Police Athletic League. The goal of

such a program will be to invite the community to take part in Wal-Marts growth by

mentoring, providing training, internships and/or jobs that will aid the community

versus hinder it.

Mom and Pop establishments should not be taken for granted. It is not the

intention of Wal-Mart to take from anyones dream, but it is Wal-Marts goal to

provide cost savings to its consumers. A possible strategy for easing the anxiety of

many small business owners on the onset of Wal-Mart entering the community is

offering these owners the opportunity to become a part of Wal-Mart staff in a

capacity that would provide them a sense of a security. Offering small business

owners a position will not only eradicate the discontent of loyal customers but will

display Wal-Marts willingness to enter a community and enhance it.

With the attitude of business is a dog eat dog world, Wal-Mart has been

able to enter the market and eat stores that have tried to follow its precedence

but have not been able to attain Wal-Marts recognition. Entering into foreign

markets may be extremely difficult, as many nations are known for their loyalty and

enriched cultures. Unlike the United States, countries like China and Japan are

accustomed to with less, so the attractiveness of buying more due to cost savings

may not be received as well as in the United States. It is in the best interest of Wal-

Mart to establish stores in foreign markets, but to adopt the culture of the area and

continue to maintain its mission of enhancement not degradation.


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Implementation:

Management needs to be open to change regarding clashes with grass-

roots movements that push to keep new construction of Wal-Mart stores in rural

and urban America. While many residents welcome a new box style retailer, there

will always be opposition. By developing ways to appease those that oppose the

giant retailer, they will be more welcome to the neighborhood.

Wal-Mart has been steadily reaching into every corner on earth, but not

always with successful results. Upper management is making the assumption that

every foreign culture will welcome box stores and the American culture for which

Wal-Mart is known. As has been proven time and again, this is not always true.

Management needs to develop executive steering committees with a single goal of

researching the host country to establish the local customs. Otherwise, Wal-Mart

will continue to experience local opposition on foreign land.

Several lawsuits have been filed regarding the treatment of Wal-Marts

employees, as well as local communities. Some of the employee key issues are pay

and benefits. Human Resource Management should develop a strategy that would

evaluate the pay and benefits of employees to ensure fair treatment. Studies

should be conducted that would evaluate the average pay and benefits being

offered at other competing retailers and make changes as necessary. This would

greatly increase Wal-Marts image in local communities just by providing better

than minimum wage to associates.

Evaluation and Control:


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Works Cited

Parnell, John A., and Donald L. Lester. Competitive strategy and the Wal-Mart threat:

positioning for survival and success. Bnet. Web.

Wheelen, Thomas L., and J. David Hunger. Strategic Management and Business Policy:

Achieving Sustainability. Upper Saddle River: Prentice, 2010. Print.

Walmart 2006 Annual Report

I. Current Situation

A. Current Performance

Wal-Mart (WM) is divided into three business segments: Wal-Mart Stores,

Sam's Club, and the International Division. In 2002, WM officially became

the worlds largest company based on its $245 billion in sales (Wheelen

and Hunger 19-1). As of January 31, 2006, the company had over 6,100


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stores worldwide, bought products from 70 countries, and 20% of its

business was generated outside of the United States (Wheelen and

Hunger 19-2).

4. 2006 fiscal year sales of $312.4 billion, a 9.5% year over year increase.

5. $11.2 billion net income, up 9.4% to $2.68 per share.

6. Stock price of $46.11, down from $56.98 on January 31, 2002. (Likely due to better

competition and future expected growth slowdown.)

B. Strategic Position

1. Mission

Wal-Mart Stores, Inc. is a global retailer committed to improving the

standard of living for our customers throughout the world (Annual

Report 2006).

2. Objectives

Comparative store sales is a measure which indicates the performance of our

existing stores by measuring the growth in sales for such stores for a particular

period over the corresponding period in the prior year.

Operating income growth greater than net sales growth has long been a measure

of success for us.

Inventory growth at a rate less than that of net sales is a key measure of our

efficiency.


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With an asset base as large as ours, we are focused on continuing to make certain

our assets are productive. It is important for us to sustain our return on assets

(Annual Report 2006).

3. Policies

We earn the trust of our customers every day by providing a broad assortment of

quality merchandise and services at everyday low prices (EDLP) while

fostering a culture that rewards and embraces mutual respect, integrity and

diversity. Putting Our Customers First.

EDLP is our pricing philosophy under which we price items at a low price every

day so that our customers trust that our prices will not change erratically under

frequent promotional activity.

Our focus for SAMS CLUB is to provide exceptional value on brand-name

merchandise at members only prices for both business and personal use.

Internationally, we operate with similar philosophies (Annual Report 2006).

4. Strategies

We have developed several initiatives to help mitigate this pressure and to grow

comparable store sales through becoming more relevant to the customer by

creating a better store shopping experience, continual improvement in product

assortment and an aggressive store upgrade program to be instituted over the next

18 months.

Our expansion programs consist of opening new units, converting discount stores

to supercenters, relocations that result in more square footage, as well as

expansions of existing stores.


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Joseph J. Fitzsimmons Senior Vice President, Treasurer

John E. Fleming Executive Vice President, Chief Marketing Officer, Wal-Mart Stores

Division U.S.

Rollin L. Ford Executive Vice President and Chief Information Officer

David D. Glass Chairman of the Executive Committee of the Board of Directors

Mark D. Goodman Executive Vice President, Marketing, Membership and E-

commerce, SAMS CLUB

Craig R. Herkert Executive Vice President, President and Chief Executive Officer,

The Americas, Wal-Mart International

Charles M. Holley, Jr. Senior Vice President, Finance

Thomas D. Hyde Executive Vice President and Corporate Secretary

Lawrence V. Jackson Executive Vice President, President and Chief Executive

Officer, Global Procurement

Gregory L. Johnston Executive Vice President, Club Operations, SAMS CLUB

C. Douglas McMillon Executive Vice President, President and Chief Executive

Officer, SAMS CLUB

John B. Menzer Vice Chairman, Responsible for U.S.

Thomas M. Schoewe Executive Vice President and Chief Financial Officer

H. Lee Scott, Jr. President and Chief Executive Officer

Gregory E. Spragg Executive Vice President, Merchandising and Replenishment,

SAMS CLUB

S. Robson Walton Chairman of the Board of Directors


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Claire A. Watts Executive Vice President, Product Development, Apparel and Home

Merchandising, Wal-Mart Stores Division U.S.

III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND

THREAT (SWOT)

D. Natural Environment

Raw materials availability.(O)

Land availability. (O)

Electricity usage. (T)

Oil and Gas usage. (T)

Water scarcity. (T)

Hazardous waste storage, transportation and disposal. (T?)

E. Societal Economy

1. Economic

Interest rate increases may signal end of economic expansion (T).

Economic deterioration may mean more frugal shopping habits. (O)

Increasing commodity costs. (T)

Increasing transportation costs. (T)

Currency fluctuations. (T)

Slowing national economy (T)

2. Technology

Increased usage of RFID for inventory management. (O)


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Internet presence allows for customer options. (O)

Information technology increasingly important. (O)

3. Political-Legal

Regional trade pacts are making free trade available between countries. (O)

Differing laws between countries may evoke compliance issues. (T)

Potential unionization of workforce. (T)

The Company is involved in a number of legal proceedings. In accordance with

Statement of Financial Accounting Standards No. 5, Accounting for

Contingencies, the Company has made accruals with respect to these matters,

where appropriate, which are reflected in the Companys consolidated financial

statements (Annual Report 2006). (T)

The Company is a defendant in numerous cases containing class action

allegations in which the plaintiffs have brought claims under the Fair Labor

Standards Act (FLSA), corresponding state statutes, or other laws (Annual

Report 2006). (T)

4. Socio-cultural

Aging U.S. demographics. (O)

Slowing U.S. population growth. (T)

Wal-Mart seen as a reason for closing of mom and pop stores. (T)

International cultural differences. (T)

Green environmental movement. (O)


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F. Task Environment

United States market saturation. (T)

Expansion into Europe, China, South America, Canada, and Mexico. (O)

Rivalry High. Target, Sears, K-Mart (T)

Chance of new entrants low. (O)

Purchasing power high. (O)

Substitute power high. (T)

Government regulations power medium. (T)

IV. Internal Environment

D. Corporate Structure

Three business units, Wal-Mart Stores USA, Sams Club, and Wal-Mart International


Wal-Mart Stores unit had 3,289 locations and included the companys

supercenters, discount stores, Neighborhood Markets in the US, and

walmart.com.

Sams Club unit had 567 locations and included the warehouse membership

clubs in the US plus samsclub.com.


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Wal-Mart International had 2,285 locations in 10 countries. The International

total was increased in February 2006 by purchasing a majority control of

CARHCO with 360 locations in five Central American countries (Wheelen

and Hunger 19-12).

E. Corporate Culture

In-depth employee involvement in company affairs. (S)

Trained employees to be merchants by being responsible for the performance of

their own departments. (S)

Reflection of the founders values. (S)

Conservative values create some problems when expanding to larger cities. (W)

Non-Union stance is viewed unfavorably is some areas. (W)

Offered $8.5 million worth of grants from its Safe Neighborhood Heroes

program to recognize emergency professionals. (S)

Donated $3 million in supplies when Hurricane Katrina devastated Americas

Gulf Coast. (S)

F. Corporate Resources

7. Marketing

Advertising costs are expensed as incurred and were $1.6 billion in 2006.

Advertising costs consist primarily of print and television advertisements (Annual

Report 2006).

Buy American campaign. (S)


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Green marketing offers the option of buying products which were better for

environment. (S)

Offers quality brand names at lower-than-competitive prices (Wheelen and

Hunger 19-19). (S)

Introduced a Value Plan benefits plan to its employees at premiums ranging

from $11 to $65 a month. (S)

8. Finance

$312.6 billion in annual sales. (S)

$11.2 billion net income. (S)

$2.68 earnings per share. (S)

8.9% return on assets. (S)

11.4% increase in sales and operating income for the international business


9. R&D

More involved with the development side. (W)

Focusing on expansion and development of already established business model.

(W)

10. Operations

Wal-Mart USA. We are intent on driving comparative store sales by being relevant to our

broad customer base and by improving our cost structure and inventory flow to

strengthen return on investment. (S)


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Sams Club. We remain committed to serving the needs of our members where pennies

matter by leveraging productivity improvements and lowering expenses, so that we can

provide the products and services they want at the lowest prices in the industry. (S)

Wal-Mart International. Our approach to ensuring continued profitable growth includes

three dimensions new markets with multiple formats, new store growth in existing

markets and increasing sales at existing stores (Annual Report 2006). (S)

11. Human Resources

Employees are called associates. (S)

Employee stock ownership and profit-sharing program. (S)

Decentralized approach to retail management development. (S)

Utilizes the Total Quality Management approach. (S)

Discourages unionization (Wheelen and Hunger 19-23). (W)

12. Information Systems

Leader in RFID technology. (S)

Good internet presence. (S)

Utilizes satellite communications, data centers, and handheld devices. (S)


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V. Analysis of Strategic Factors

B. Situational Analysis

5. Strengths

International brand name.

Financial position.

Market leadership.

6. Weaknesses

Market saturation.

Public opinion.

Adjustment to cultural differences after entering a foreign market.

Supplier alienation.

Past employee discrimination.

Employee health benefits.


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International supplier employee violation

7. Opportunities

International expansion.

Environmental leadership.

Workers rights leadership.

Community involvement.

Social initiatives.

8. Threats

Strong U.S. competition.

Changing demographics.

Economic uncertainty.

Current litigation.

Employee unionization.

.

VI. Strategic Alternatives and Recommended Strategy

C. Strategic Alternatives

Adopt a friendlier corporate attitude and image

Pro. Improved customer service


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Pro. Business growth

Pro. Stronger relationships with its suppliers and customers

Con. The negative image tarnishes their moral and ethical image

Con. Popular image is that Wal-Mart comes to town and locally-owned retailers

shrivel up and die (Parnell, 2008).

Ease into foreign and domestic markets instead of barging in

Pro. Create a more positive corporate image by not devouring every business

in sight.

Pro. Creates an image with integrity

Pro. Customer loyalty

Pro. Increase friendlier competition

Con. Creates ill-will among smaller businesses

Expansion

Pro. Provides a new source of tax revenue for the community

Pro. Creates more jobs

Pro. Promotes community expansion and individuals who will patronize from

other communities


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Pro. Opportunities for employee growth in the organization

Con. Associates may receive unjust wages due to the compensation of lower

cost products

Con. Purchasing practices require most suppliers to manufacture goods in

third world countries

Con. Reduces the value on competing businesses

D. Recommended Strategy

Continue to expand the brand and operations in to urban & rural areas and foreign

countries. The companys reputation of being a bully needs to be eliminated by

implementing social awareness/advancement programs similar to Boys and Girls

clubs or the Police Athletic League. The goal of such a program will be to invite the

community to take part in Wal-Marts growth by mentoring, providing training,

internships and/or jobs that will aid the community.

Mom and Pop establishments should not be taken for granted. It is not the intention

of Wal-Mart to take from anyones dream, but to it is Wal-Marts goal to provide cost

savings to its consumers. A possible strategy for easing the anxiety of many small

business owners on the onset of Wal-Mart entering the community is offering these

owners the opportunity to become a part of Wal-Mart staff in a capacity that would

provide them sense of security. Offering small business owners a position will not

only eradicate the discontent of loyal customers but will display Wal-Marts

willingness to enter a community and enhance it.


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With the attitude of business is a dog eat dog world, Wal-Mart has been able to

enter the market eat stores that have tried to follow its precedence but have not

been able to attain Wal-Marts recognition. Entering into foreign markets may be

extremely difficult, as many nations are known for their loyalty and enriched

cultures. Unlike the United States, countries like China and Japan are accustom to

living with less, so the attractiveness of buying more due to cost savings may not

be received as well as in the United States. It is in the best interest of Wal-Mart to

establish stores in foreign markets, but to adopt the culture of the area and

continue to maintain its mission of enhancement not degradation.

VII. Implementation

Management needs to be open to change regarding clashes with grass-roots

movements that push to keep new construction of Wal-Mart stores in rural America.

While many residents welcome a new Wal-Mart, there will always be opposition and

by developing ways to appease those that oppose the giant retailer, they will be more

welcome to the neighborhood.

Wal-Mart has been steadily reaching into every corner of the earth, but not always

with successful results. Upper management is making the assumption that every

culture will welcome box stores and the American culture that Wal-Mart is known

for. As has been proven time and again, this is not always true. There need to be

committees established that can perform thorough research before just barging onto

foreign land.


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Several lawsuits have been filed regarding the treatment of employees. Wal-Mart

needs to get involved with developing a way to ensure employees are getting the right

benefits that is equal to the retail industrys average worker.

VIII. Evaluation and Control

Wal-Mart needs to develop scout teams that can visit locations of opportunity and

solicit the communities concerns if Wal-Mart builds nearby.

Implement incentivized customer satisfaction surveys and employee surveys, which

will increase the chance of them being completed.

Monitor industry trends in foreign countries of interest.

Shift from monopolizing to publicly displaying how important Mom and Pop

establishments are to our society and how Wal-Mart can effectively and efficiently

incorporate these individuals and there keen sense of business into the large picture of

providing consumers cost savings.


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IX. Appendix

EFAS (External Factor Analysis Summary)Key Internal

FactorsWeight Rating Weighte

dScores

Comments

Opportunities


.20 3 .60 Required to remaincompetitive & #1 inmarket

Environmentalleadership

.05 2 .10 Will take time

Workers rights

leadership

.05 2 .10 Will take time and

initiative to steertowards a win - win

Communityinvolvement

.10 2 .20 Ensures community buy-in and acceptance

Social initiatives .10 2 .20 Fosters relationships

Threats


.15 4 .60 Kmart and Target arecapturing an opposingniche while Wal-Martremains a catch all ofconvenient shopping

Changingdemographics .10 3 .30

Economic uncertainty .05 3 .15 Domestic recession,lower discretionaryspending, increasingunemployment

Current litigation .10 3 .3

Employeeunionization

.10 3 .3


IFAS (Internal Factor Analysis Summary)

Key Internal Factors Weight

Rating

WeightedScores

Comments

Strengths

International brand name .15 4 .60

Financial position .15 4 .60


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Market Leadership .15 4 .60 Grew stronger as theeconomy grew weaker

Weakness

Market saturation .15 3 .45 Embarking oninternationalopportunities

Adjustment to culturaldifferences

.10 3 .30

Supplier alienation .20 3 .60

Past employeediscrimination

.05 2 .10

Employee health benefits .05 2 .10


SFAS (Strategic Factor Analysis Summary)

Key StrategicFactors

Weight

Rating

Weighted Score

DurationS I L

Comments

International brandname

.15 4 .60 X X X NameRecognition

Market saturation .15 3 .45 X X

Supplier alienation .20 3 .60 X X X


.20 3 .60 X X X

Social initiatives .10 2 .20 X X X Communityoutreachprograms

Strong U.S.

competition

.15 4 .60 X X X Kmart and

Target arecapturing anopposingniche whileWal-Martremains acatch all ofconvenientshopping

Economicuncertainty

.05 3 .15 Domesticrecession,lower

discretionaryspending,increasingunemployment

TOTAL SCORES 1.00 3.20


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Documents

Wal-Mart Strategic Audit