Fundamentals of International Management

Company Analysis Report on Walmart

Submitted by:

Group 5Anirudh Namboodiri – 6A Goutham Babu Kamepalli – 18A Nitesh Singh – 29ASahil Taneja – 39A Shaily Chauhan – 47A

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TABLE OF CONTENTS

Page no.

Introduction 3

Walmart Overview 3

Products and Services 4

Geographic Presence 6

Organisation Structure 7

Competitive Analysis 10

SWOT Matrix 12

Problems faced in different countries 15

Future Outlook 21

Competitive Forces and Wal-Mart 22

Summary 23

Reference 24

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Introduction

Walmart (Wal-Mart Stores Inc.), is an American multinational retail corporation that runs chains of large discount department stores and warehouse stores.

Headquartered in Bentonville, Arkansas, the company was founded by Sam Walton in 1962 and incorporated on October 31, 1969. The company is the world's largest public corporation, according to the Fortune Global 500 list in 2014. Walmart is a family-owned business, as the company is controlled by the Walton family, who own over 50 percent of Walmart through their holding company, Walton Enterprises. It is also one of the world's most valuable companies (in terms of market value), and is also the largest grocery retailer in the US.

In 2009, it generated 51 percent of its US$258 billion (equivalent to $284 billion in 2014) sales in the US from grocery business. It also owns and operates the Sam's Club retail warehouses in North America.

Company BackgroundIndustry Retail

Founded 1962, Rogers, Arkansas, U.S.

Founder(s) Sam WaltonHeadquarters Bentonville, Arkansas, U.S.

Products Apparel/footwear specialty, cash & carry/warehouse club, discount store, hypermarket/supercenter/superstore,

supermarket, e-commerceWebsite Corporate.Walmart.com

Walmart.comSubsidiaries Asda, Sam's Club, Seiyu Group, Walmex,

@Walmart Labs, Walmart e-commerce

Walmart Operations

Walmart's operations are organized into three divisions:

Walmart Stores U.S.Walmart Stores U.S. is the company's largest division, accounting for $258 billion (equivalent to $279 billion in 2014), or 63.8 percent of total sales for financial year 2010. It consists of three retail formats that have become commonplace in the United States: Discount Stores, Supercenters, and Walmart Markets. The retail department stores sell a variety of mostly non-grocery products, though emphasis has now shifted towards supercenters, which include more grocery items. This division also includes Walmart's online retailer, walmart.com.

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Sam's ClubSam's Club is a chain of warehouse clubs which sell groceries and general merchandise, often in large quantities. Sam's Club stores are "membership" stores and most customers buy annual memberships. There are three kinds of memberships of Sam's Club, Sam’s Plus, Sam's Business and Sam's Savings. Each of those memberships will enable customers various types of benefits and convenience. However, non-members can make purchases either by buying a one-day membership or paying a surcharge based on the price of the purchase. Some locations also sell gasoline. The first Sam's Club opened in 1983 in Midwest City, Oklahoma under the name "Sam's Wholesale Club".

Walmart InternationalWalmart's international operations comprise 6,337 stores and 800,000 workers in 26 countries outside the United States. There are wholly owned operations in Argentina, Brazil, Canada, and the UK. With 2.2 million employees worldwide, the company is the largest private employer in the U.S. and Mexico, and one of the largest in Canada. In the financial year 2010, Walmart's international division sales were $100 billion (equivalent to $108 billion in 2014), or 24.7 percent of total sales.

Geographic Market Retail Wholesale OtherAfrica 279 98 0

Argentina 94 0 0Brazil 461 86 11

Canada 379 0 0Central America 640 2 0

Chile 327 0 2China 385 8 0India 0 20 0Japan 372 0 66

Mexico 1840 142 371UK 564 0 1

From the chart, Mexico is the second largest market for Wal-Mart. This is because Wal-Mart first entered Mexico market in 1992 to operate Sam’s Club through joint ventures with Mexico’s largest retailer.

Products

Walmart offers retail goods in a variety of categories. Customers can buy electronic products such as MP3 players, digital cameras, printers, laptops and computers. Walmart offers music downloads, movies, books and jewellery. In addition to home furnishings, the retailer also offers baby products, sporting goods and grocery items. The company does business in nine different retail formats:

Supercentres

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Food and drugs General merchandise stores Bodegas (small markets) Cash and carry stores Membership warehouse clubs Apparel stores Soft discount stores Restaurants

Services provided by Walmart

Walmart Global e-commerce

Based in San Francisco, California, global e-commerce division provides online retailing for Walmart, Sam's Club, ASDA UK and all other international brands spread across different countries. The mission is to combine technology and world class retailing to provide seamless online shopping experience through websites like www.walmart.com, www.samsclub.com, www.wal-martchina.com, www.asda.com, www.walmart.com.br, www.walmart.com.ar, and www.walmart.ca. There are 3 locations in the United States which are all located in California. They are San Bruno, Sunnyvale, and Brisbane. Other locations outside of the United States include Shanghai (China), Bangalore (India)

Private label brands

About 40 percent of products sold in Walmart are private label store brands, or products offered by Walmart and produced through contracts with manufacturers. Walmart began offering private label brands in 1991 with the launch of Sam's Choice, a brand of drinks produced by Cott Beverages exclusively for Walmart. Sam's Choice quickly became popular, and by 1993 was the third most popular beverage brand in the United States. Other Walmart brands include Great Value and Equate in the US and Canada, and Smart Price in Britain. A 2006 study talked of "the magnitude of mind-share Walmart appears to hold in shoppers' minds when it comes to awareness of private label brands and retailers."

Pharmacy

In 2006, Walmart began offering customers prescriptions for a mere $4. This practice was significant, with many retailers following suit. The company estimates savings to customers total $3 billion since the program's inception. Walmart offers monthly prescriptions for pickup in-store or mail order services for long-term medications. The savings are due in large part to Walmart's catalogue of over 300 generic medications available for $4 in-store or $10 for a 90-day supply.

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Financial Services

Walmart offers several financial services. These include credit cards, debit cards, bill payment, money transfers, check cashing and check printing. Walmart offers a store credit card without an annual fee. Obtain a debit card in-store or online. Walmart offers money transfer services through Moneygram, starting at $4.75. Customers can also purchase money orders and gift cards, send bill payments, order printed checks and cash checks for fees starting at $3.

Wireless Service

Walmart partnered with service provider T-mobile to offer wireless phone service. The Walmart Family Talk Wireless service provides customers with a family plan for unlimited text and voice calls. The service requires no traditional yearly contract and plans start at $45

Distribution

Wal-Mart U.S. segment has approximately 81% purchases of merchandise passed through distribution facilities that are located strategically throughout the US. Its International operations are supported by 160 distribution facilities in the world, including one export consolidation facility in the US. Further, the company also transport by own private truck fleet and common carriers

Locations

Walmart operates over 11,000 retail units under 71 banners in 27 countries.

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Organization Structure:

Wal-Mart’s management structure is created or moulded by Sam Walton’s principles and values. Increasing size and geographical scope of Wal-Mart determined that the corporate executives should remain in touch with customers and store operations on a constant basis. The key to the success of a good structure is the well organised hierarchy levels and effective communication. Wal-Mart is constructed into a three product divisional structure. It is a structure due to which communication between individual stores and headquarters is close and personal. The successful retail business categories include Wal-Mart Stores (U.S.), Sam's Club (U.S.), and International stores. The divisional structure and approach offers an advantage because each division is open to focus on its efforts on specific goals such as products, services, or customers. Narrow focus allows the companies to perform effectively because they pinpoint specific areas which are needed to be changed and adjusted. Wal-Mart’s regional vice presidents are responsible for supervising between 10 and 15 district managers. The divisional structure is divided into three categories: product, market, and geographic.

Product StructureThis division is based upon specific products of Walmart. An example of this would be producing three distinct products, "product a", "product b", and "product c" and having a separate division for each these products.

Market StructureMarket structure groups employees together based upon specific markets in which it competes. At Wal-Mart also a form of market structure is used. It sells products to individual consumers and business customers. The sales and customer service departments are organized using market structure. Consumer sales and consumer customer service function together while corporate sales and corporate customer service worked together.

Geographic StructureGeographic structure groups employees together based upon specific geographic location. This is often used by Wal-Mart as it operates in many areas throughout the United States or in both the U.S. and overseas.

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C. Douglas McMillonPresident and CEO

Wal-mart United StatesGreg Foran - CEO

Wal-mart International David Cheesewright-

CEOSam’s Club

Rosalind Brewer - CEO

Charles M. Holley Jr. - CFO

Karrenann Terrell - CIOGisel Ruiz – COO

Wal-Mart Organization Structure

Geographical

Functional

Wal-Mart follows a Divisional Organisation Structure at the top level and a matrix organizational structure at the store level. Each division is given enough resources and autonomy and has its own functional workforce. The benefit of this organizational structure is that companies are able to specialize its activities into self-reliant divisions, each capable of satisfying customer demands and changes within the business environment. The detailed structure is given below:

The Head office is essentially the place for Divisional or Senior Vice Presidents There are many districts which in turn consist of many stores. Each district is run by a District

Manager, who lives in the field. These District Managers have been replaced by "Market Managers" who will be responsible for a larger number of stores (12-20, or more instead of 5-8).

Reason for market divisional structure - The Company is working to increase the merchandising power of the individual markets, which are now based more on the economic landscape of an area, less on the physical geographies.

Walmart has rolled out a "Store of the Community" program, which customizes everything in a store based on a community's specific needs, from store layout to item selection, which has been illustrated in the new Plano, TX store. The Market Office is not only going to be home to the Market Manager, but to a series of Market Merchandisers in each of the general areas of the store: Food& Consumables, Fashion/Apparel, Homelines & Hardlines (the first two of which have already been created and filled in most, if not all, markets).

Each Wal-Mart store has the same job categories, job descriptions and management hierarchy. At the bottom of the ladder, the primary entry level hourly positions are cashier, sales associate

and stocker. The first step up is hourly Department Manager. Other hourly supervisor positions include

Customer Service Manager (CSM), known as Checkout Supervisor (COS) at Sam's Club. The highest level hourly manager at Wal-Mart is Support Manager.

The next step up is to management trainee, a four-to-five month program which prepares employees for positions as Assistant Managers.

The first salaried management position is Assistant Manager. Each store has several Assistant Managers, varying with the size of the store The next level is Co-Manager, a position used only in larger stores. The top store position is Store Manager/General Manager in Sam's Clubs The stores contain 40-50 different departments

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Bottom Level Hierarchy

Human Resource

Walmart refer to their employees as "associates". Walmart is the biggest private employer in the world with over two million employees.

Key Facts

Employees 2.2 million (2013)

Number of locations 11.208Headquarters Bentonville, Arkansas, U.S.

All Wal-Mart stores in the US and Canada also have designated "greeters" at the store entrance, a practice pioneered by founder Sam Walton and later copied by other retailers. Greeters are trained to help shoppers find what they want and answer their questions. For many years, associates were identified in the store by their signature blue vest, but this was discontinued in June 2007 and replaced with more modern and professional khaki pants and polo shirts. The wardrobe change was part of a larger corporate overhaul for the store in an effort to increase sales and rejuvenate its stock price.

Corporate Strategy

The company hopes to drive comparable-store sales by focusing on local market share positions. Wal-Mart will continue the expansion of its supercentre format and accelerate the expansion of its smaller format stores, in particular Neighbourhood Markets. Square feet growth rate of approximately 2%, which is the average of last several years is expected to continue into the future.

In October 2013, Wal-Mart indicated that it would further accelerate the expansion of its smaller format store, consistent with a strategy that was initially discussed a year earlier. So the domestic square feet growth is expected to increase to a 3% rate in Fiscal year 2014 and 2015.

However, Wal-Mart has been slowing down the expansion in the international market, including closing some unprofitable stores and improving operations based on existing stores. With 6,200 stores outside the U.S., Wal-Mart’s international operations slowed its growth rate to 7.4% of its total sales in fiscal year 2013. It is low by comparing 15.2% of total sales in 2012 and more than 20% before the recession

Life Cycle

Along with the supermarkets and drugstores retailing industry, Wal-Mart is entering the maturity stage of the industry life cycle. Wal-Mart is a major player in the industry. It is steadily upgrading many of stores to include dull lines of groceries, which also involves warehouse clubs, neighbourhood markets and supercentres industry. But less opportunities to expand and highly internal competition, the company is hard to continue to grow at increasing rates. External competition from Internet retailing that are able to offer similar products at discount prices while also providing the convenience of at-home shopping push al lot of pressure on it. Further, according to the annual report, the growth rate has been slowly since 2011

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Competition and Company’s Position

Competitors

Rivalry among discount retailers is fierce; however, the competition is not able to match Wal-Mart in terms of market share. The recent success of “dollar stores” such as Dollar Tree, Dollar General and Family Dollar pose a threat to the company’s market share. However, these competitors are very small and are not able to provide the same variety of products and services as Wal-Mart.

For example, the grocery selection at dollar stores is small and even non-existent in some locations. Fresh meat and produce is generally unavailable, while Wal-Mart is able to provide the same grocery selection as a normal supermarket in addition to discount merchandise not associated with “grocery stores.”

Market Cap Revenue (ttm) EBITDA(ttm) Net Income(ttm)

Walmart $251.51b $469.16b $36.03b $17.08bDirect CompetitorsCostco $46.17b $103.13b $3.78b $1.96bTarget $44.161b $73.30b $7.51b $3.00bSelect Indirect CompetitorsDollar tree $10.55b $7.39b $1.10b $619.3bDollar General $16.49b $16.02b $1.96b $952.66bFamily Dollar $6.88b $9.08b $915.3b $422.17b

A more significant threat to the market share of Wal-Mart comes from the direct competitors Costco and Target. Costco competes with the Sam’s Club segment of Wal-Mart and is the largest discount wholesaler. Costco has been able to attract a consumer with a higher average income than the Sam’s Club shopper, and this strategy has led to strong financial performance. The Costco threat has become more subdued recently, and although there is potential for erosion of market share in the Sam’s Club segment.

In terms of competing with Wal-Mart on all levels, Target poses the biggest threat to the company’s market share. Target has recently begun adding expanded grocery options to their stores and is trying to gain market share from Wal-Mart in many categories. Target follows a similar low priced strategy as Wal-Mart, and has run ad campaigns promising to match any competitor’s price on certain items.

General sentiment from consumers seems to be favourable toward the atmosphere and experience of Target, while generally more in favour of the low prices Wal-Mart is able to offer. If Target is able to continue expanding offerings, this could lead to significant erosion of market share for Wal-Mart. This rivalry is expected to increase in future, as further aggressive pricing and expansion by Target will impact Wal-Mart performance.

Competitive Advantage

The largest competitive advantage for Wal-Mart comes from the scale and supply chain the company has been able to build over its history. The company focuses on providing products at the lowest

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possible prices, and in order to generate profit this must be done on a large scale. Wal-Mart is the largest retailer in the world, and the sheer size of Wal-Mart’s operation is an enormous driver of success.

Through massive economies of scale, Wal-Mart has an advantage over all competitors. Wal-Mart is able to decrease operating expenses by having a large and integrated supply chain. As volume rises for the company, per-unit costs decline and the company is able to pass this savings on to the consumer.

Further, when it comes to supplier dealings with Wal-Mart, the company is able to negotiate very favourable terms in deals. Wal-Mart has a massive market share, and if product manufacturers were to lose contracts with the company there is no doubt they would lose a significant portion of their business. As a result Walmart is able to keep its purchase costs low.

Pricing continues to be a great advantage for the company. Due to the economies of scale mentioned above, the company is able to keep prices much lower than competitors and thus Wal-Mart is able to appeal to the budget-conscious consumer.

With a large middle class in the U.S. and ever-growing middle classes in many developing countries, this aggressive pricing appeals to a vast majority of the consumer market, thereby increasing its penetration.

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SWOT analysis of Walmart

Strengths

1. Scale of operations. Walmart is the largest retailer in the world with more than $400 billion in revenue and 10,130 stores. It makes Walmart the giant that no other retailer can match. Due to such large scale of operations, the corporate can exercise strong buyer power on suppliers to reduce the prices. It can also achieve higher economies of scale than competitors because of its size. Higher economies of scale results in lower prices that are passed to consumers.

2. Competence in information systems. The corporate achieves significant cost savings because of its extensive information systems that tracks orders, inventory levels, sales and other related information in real time. All this information can be instantly accessed analysed and decisions made at each store. Effective management of supply chain and logistics is one of the most important factors for Walmart success.

3. Wide range of products. Walmart can offer wider range of products than any other retailer. It sells grocery, entertainment, health and wellness, apparel and home related products among many other categories and offers both branded and own label goods. Wide range of products attracts more customers to Walmart stores.

4. Cost leadership strategy. This strategy has helped Walmart to become the low cost leader in the retail market. This strategy requires selling products ant the lowest price possible and providing a no frill services to achieve higher economies of scale and attract masses of consumers and that is exactly what the company is doing. It sells products at much lower

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Scale of operationsCompetence in information systemsCost leadership strategyInternational operations

Strengths

Labor related lawsuitsHigh employee turnoverLittle differentiationNegative publicity

Weakness

Retail market growth in emerging marketsRising acceptance of own label productsTrend toward healthy eatingOnline shopping growth

Opportunities

Increasing competition from brick and mortar and online competitorsIncreasing resistance from local communitiesRising commodity prices

Threats

prices than competitors do, builds warehouse style superstores that contain extensive range of products but doesn’t offer much additional benefits or services. All of this result in cost reductions and lower prices for consumers.

5. International operations. Walmart does not rely on sales from US stores only as its competitors do. It has earned $135 billion in sales in 2013 from its international operations, which grew at a much faster rate than sales in the home market. Foreign markets open up new opportunities for Walmart’s growth and provide new experience for the company as it operates quite differently abroad than in the home market.

Weaknesses

1. Labour related lawsuits. Walmart faces labour related lawsuits every year, which costs millions of dollars for the company. It is criticized for poor work conditions, low wages, unpaid overtime work and female discrimination. In addition to litigation costs, corporate’s reputation has been damaged and fewer skilled workers are willing to work for it.

2. High employee turnover. The business suffers from high employee turnover that increases firm’s costs, as it has to train new employees more often. The main reason for high employee turnover is low skilled, poorly paid jobs.

3. Little differentiation. Walmart has no differentiation compared to its competitors, which might hurt the company in the future if commodity prices or average consumer income would increase. In this case, low cost leadership strategy wouldn’t be as effective as it currently is and Walmart’s main competitive advantage would erode.

4. Negative publicity. The company is often criticized for its questionable practices such as bribery of authorities or poor work conditions. Negative publicity damages a corporate’s reputation.

Opportunities

1. Retail market growth in emerging markets. Retail markets grew by at least 5% on average in emerging markets in the last year, opening huge opportunities for Walmart’s revenue growth. The business currently operates in Brazil, Mexico, China and India markets. Walmart should increase its presence in these markets to sustain future growth.

2. Rising acceptance of own label products. The sales of private label products have increased by more than 40% over the last 10 years. This reveals increasing consumer acceptance of supermarket chain products compared to national brand products. Walmart has an opportunity to increase the number of private label products sold at its stores and earn higher profit margins.

3. Trend toward healthy eating. The current trend of eating healthier food has resulted in higher demand for grocery products. Walmart has an opportunity to expand its grocery stores to earn more income from this trend.

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4. Online shopping growth. Online retail sector grew by 4.7% in the US in 2011, reaching $197 billion. Walmart being the biggest offline retailer has huge opportunities to expand its presence in online retail market. The company can offer convenience to pick up the goods ordered online in its more than 10,000 stores and can offer even lower prices online than at the store. As a result, Walmart can reach more customers and increase its revenue.

Threats

1. Increasing competition from brick and mortar and online competitors. Competitors like Target, Costco, Amazon and Tesco (in UK) are putting huge efforts to eliminate price differences that Walmart enjoys. Except the lower prices, Walmart doesn’t differ from other low cost retailers and will experience increased competition from them in the future.

2. Increasing resistance from local communities. Walmart superstores have a negative impact on local retailers and communities. Some of the local retailers are usually forced to close off when Walmart superstore opens in the area. This affects not only the retailers but their families and the community as a whole.

3. Rising commodity product prices. Rising commodity prices squeeze Walmart’s profit margins and erode its competitive advantage. As prices go up, the cost difference between the retailers decreases and competition shifts from price to product and service differentiation.

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Problems faced in different countries

The global markets provide a tremendous opportunity for businesses moving all around the world but they are faced with many challenges when setting up business in a new country. When entering a new market the business needs to adapt to the specific taste of consumer. Even retail brands Walmart who attempt to deliver the same layout of stores throughout the world must adapt to culture in some countries.

Initial Stages- Language problems, pricing difficulties and culture collisions are common

Japan- Entered Japanese market by purchasing 6% stake in the 371-store Seiyu chain. 2008 - Made Seiyu a wholly owned subsidiary. Wal-Mart could not directly transfer its’ corporate culture of low-cost, high -bulk model, hugely successful in US, to Japan. In the Japanese culture living space is much smaller than average American house, therefore high-bulk model will not relate to them.Mind-set of Buyers- There is a tendency among Japanese shoppers to equate low prices with inferior products. Lack of Cross- cultural awareness-Bulk deals don't play well in a country where many live in small urban apartments, and the country's grocery distribution system is populated with wholesalers who broker deals between suppliers and retailers, skimming profits. Corrupted grocery distribution system in Japan - Edward J. Kolodzieski reformed the Seiyu by firing 29% of corporate staff, removed in-store butchers, boosted the direct import of products from manufacturers, and promoted its own private-label brands. 2010 – Japan’s situation stabilized, with bright future for expansion through acquisitions.

India- Government restrictions- Teamed up with Bharti Enterprises in order to open cash-and-carry operations (Best Price Modern Wholesale) in the city of Amritsar as the Indian government requires retailers to source 30 percent from small suppliers which is difficult for Walmart to comply with. Allegations impacting Corporation Image-Continuing US investigation of fraud - In India, the government is investigating whether a loan made by Walmart to Bharti broke foreign investment rules. Both Bharti and Walmart have denied any wrong doing. Targets unfulfilled- Walmart entered into the partnership with Bharti in hopes of achieving a liberalization of the Indian market. This hope was not fulfilled and as a result the relationship with Bharti was no longer desirable.Mind-sets of consumers- Large stores are looked upon as being expensive – it is the smaller neighbourhood stores that are viewed as offering lower prices since the customer believes their expenses are lower.

China- Dealing with a fragmented supply chain, an under-developed distribution network in many parts of the country.Locations focused on big areas and tend to be in out of the way parts of town. There are fewer smaller, more central or more localised, neighbourhood-type stores and that really deters people from going.Food is generally not bought in bulk because customers feel that they can find fresher items in smaller stores and in small quantities. The challenge is that Walmart has to convince their potential customers of

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the quality and freshness of the food, and that the general merchandise offered is of high quality despite its low price.Understanding of Consumer Behaviour - Buying decisions not price driven. Recent scandals involving tainted meat, contaminated milk and questionable cooking oil have made customers apprehensive. As a result, the Chinese customer equates Walmart’s everyday low price policy as being cheap and not very safe.

Mexico-Weak consumer spending- Mexico’s weak economic environment and Wal-Mart’s continued expansion, the retailer’s comparable store sales in the region have declined.Allegations of bribery in Wal-Mart's Mexico operations that surfaced previously have slowed business overseas. Wal-Mart allegedly failed to notify law enforcement that company officials authorised millions of dollars in bribes in Mexico to speed up getting building permits and gain other favours.

Failed Ventures

Walmart in GermanyFirst entered Europe through opening store in GermanyStores were competing with entrenched local general merchandise and food merchants, rendering Walmart unprofitable. The company was restricted from running sales except for certain times, and the operation never appealed to the German shoppers.Lack of planning- Stores were situated in poor locations and geographically dispersed. Multi-cultural awareness - Cultural differences Errors like hiring American managers who implemented the same strategies as they would at home Competitors like Aldi and Lidl - with lower prices. 2006-Losing profits of about 200 million euros a year, Walmart sold the stores to Metro and took a pre-tax loss of about $1 billionSolutions- Begin to understand different perspectives, to adapt behaviour so that respect local cultures, to suspend judgment of what is normal or better and, using this knowledge, adapt sales campaigns and business interactions to specific localities and situations instead of assuming that one approach will work everywhere. It never established comfortable relations with its German labour unions. This lack of scale causes another problem that has afflicted Wal-Mart in several countries

South KoreaAdaptability-Wal-Mart’s stores originally had taller racks than those of local rivals, forcing shoppers to use ladders or stretch for items on high shelves. Wal-Mart’s utilitarian design — ceilings with exposed pipes — put off shoppers used to the decorated ceilings in E-Mart stores.Suitability to Consumers- Wal-Mart’s shoes-to-sausage product line does not suit the shopping habits of many non-American shoppers. They prefer daily outings to a variety of local stores that specialize in groceries, drugs or household goods, rather than shopping once a week at Wal-Mart. Scalability- Wal-Mart had 16 stores — a small presence that contributed to its decision to sell out to a Korean discount chain. Many Koreans have never heard of Wal-Mart. In Seoul, a sprawling area of 10 million, there is only a single store. Competition- Its inability to compete with established discounters, the grocery business has proven the most difficult for Wal-Mart to crack. Aldi, with 4,100 stores in Germany, undercuts Wal-Mart on price, while still offering high-quality food and E-Mart in Korea.2006- Sold its 16 South Korean outlets to Shinsegae, a local retailer, for $882 million.

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RussiaThe impediments to retail development are less visible but no less worrisome. Corruption is rampant with various administrative authorities capable of gumming up operations if payments are not made.High Competition from local players like Metro and Carrefour who already have established presence in Russia.Strategy of expanding in Russia through an acquisition rather than by starting its own retail chain failed.

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Future Outlook

Least-price-guarantee and economy of scale have been Walmart’s key differentiator and growth drivers since its inception. But, changing customer preferences, the struggling U.S. economy and the government benefit cuts have impacted their bottom-line. The new CEO Doug McMillon has acknowledged this fact and highlighted Walmart’s strategy to adapt to this changing scenario.

Small Format Stores

The retailer’s smaller format stores (Neighbourhood Markets and Express Stores) continue to register robust sales. Encouraged by this, Wal-Mart recently doubled the number of smaller stores. It plans to open to add about 270-300 small stores in the U.S in fiscal 2015. The company even has an option of acquiring one of the dollar chains in order to boost its small store expansion.

Traditionally, Wal-Mart has been serving customers who make less frequent stock-up trips. It hasn’t been as effective in catering to buyer needs for easy access, for which they usually go to a traditional convenience store. As a result, local convenience, dollar and grocery stores have been nibbling Wal-Mart’s low-end customer base. Expanding its smaller format network provides Wal-Mart with a great opportunity to win back those customers. By providing them with fresh inventory of food and consumables, the retailer can drive customers from alternative stores to its Neighbourhood markets and Express outlets. Wal-Mart will utilize its large supercentres as “cross docks” to supplement the inventory needs of small stores. Considering that convenience chains operate close to 23,000 outlets in the nation, expansion potential is huge.

E-commerce

Wal-Mart is investing aggressively in its online business, one that accounts for just 3% of its revenues presently. Due to its e-commerce channel’s immaterial size, the retailer wasn’t able to benefit from the recent surge in online orders in the U.S. However, with continued investments on this front, the scenario can change in the long term.

Apart from expanding its store base in the U.S., Wal-Mart is looking to leverage its existing presence to sell more online. The company is rapidly improving its mobile apps, and employing strategies such as ship-from-store, pay-with-cash, scan-&-go, same-day-delivery and crowd sourcing. It is also utilizing its big stores as fulfilment centres to ensure timely delivery of online orders. If the company manages to sustain its online grocery sales while expanding this service throughout the U.S., its e-commerce sales will increase considerably given that groceries account for over 50% of Wal-Mart’s revenues.

E-commerce is not expected to become a big business for Wal-Mart in the near term, but these efforts are gradually pushing it in the right direction. The online channel can become a valuable growth driver for the company in the long run.

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Capital Investment

Wal-Mart Stores, Inc. expects capital investments to range between $11.8 and $12.8 billion for fiscal year 2015.  This range includes a $200 million reduction from the current fiscal year 2014 capital guidance. The company will add between 33 and 37 million net retail square feet worldwide next year, with more than half of the increase driven by Walmart U.S., including accelerated small format openings. The capital plan includes increased investments in technology and e-commerce. 

Capital Expenditure Details (US$ billions)

Segment Actual FY 13

FY14 Original

FY 14 Revised

FY 15 Projected

Walmart U.S. $6.0 $5.5 – 6.0 $6.0 – 6.5 $5.8 – 6.3Sam’s Club U.S. $0.9 ~$1.0 ~$1.0 ~$1.0

Walmart International

$4.6 $4.5 – 5.0 $4.0 – 4.5 $4.0 – 4.5

Corporate & support

$1.4 ~$1.0 ~$1.0 ~$1.0

Total $12.9~$12.0 – 13.

0~$12.0 – 13.

0~$11.8 – 12.8

According to the company’s annual forecast, net sales will grow 3-5% (by $14 to $24 billion) in fiscal year 2015. The company will continue its focus on operational expense discipline, which has been the enabler of the Everyday-Low-Pricing strategy of Walmart.

Total U.S. Unit Growth(Gross) (US$ billions)

Segment Actual FY 13

FY14 Original

FY 14 Revised

FY!5 Projected

Large formats 136 ~125 ~125 ~115Small formats 79 ~95-115 ~120 ~120 – 150Total Walmart

U.S.215 ~220-240 ~245 ~235 – 265

Sam’s Club U.S. 14 ~12-20 ~19 - 21 ~17 – 22Total 229 ~232 - 260 ~264 - 266 ~252 – 287

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International Expansion

International growth was a key component to Wal-Mart’s future and that new investments would result in an even larger Wal-Mart in the global arena. The company expects to add 500,000 new jobs worldwide during the next five years.

Wal-Mart must widen the gap as a low-price leader among its competitors.  He said that more aggressive price cuts are planned as was evidenced by the retailer’s recent announcement that it would bring more transportation logistics in-house (which include the global supply chain as well) to save money.

Although Walmart India has dropped its ambitious plan to rollout “hundreds of stores” in India, in partnership with Bharti Group, they still have a plan to introduce a new e-commerce platform to India in late 2014 (possibly around Diwali season).

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Competitive Forces and Wal-Mart

Threat of new entrants

Walmart's cost advantage arises from a famously efficient distribution system, which requires enormous scale and massive capital investment. The barriers to entry for a broad-based discounter are very high. However, Walmart competes with a large variety of specialized retailers in specific types of products, where barriers to entry may be quite low.

Threat of substitutes

The threat of substitutes in the retailing industry arises largely from the potential elimination of brick-and-mortar retailers by Internet-based retailing. To mitigate this threat, Walmart has launched its own Internet-based sales effort.

Bargaining power of buyers

The bargaining power of buyers is virtually non-existent. Individual consumers have essentially no bargaining leverage against global corporate retailers, and Walmart does not target corporate customers. Walmart is sufficiently large enough that even its biggest customers account for an infinitesimal proportion of its sales.

Bargaining power of suppliers

The bargaining power of suppliers has historically been very low. Wal-Mart is well known for vigorous bargaining with its suppliers of both labour and products. Its enormous presence in the retail sales industry makes it the largest purchaser for many of its suppliers, giving them virtually no bargaining leverage against Walmart.

Walmart has also vigorously resisted efforts to unionize its workers, who have historically had very little bargaining power. That is changing somewhat as accusations of unfair labour practices have cost Wal-Mart market prestige and position, giving labour more leverage with the firm. Even so, the bargaining power of suppliers of labour remains quite low.

Rivalry among existing competitors

Competition among existing competitors in the retail sales industry is very high. An indication of the competitiveness is in Walmart’s global share, which is approximately 3%. The vast majority of other firms have market share too small to be significant on a global basis. Competition in retailing is focused on geographic region, and Walmart's market position varies widely. In the United States, Walmart is the largest retailer of many items it sells and commands 20% of the grocery market. It has a much smaller presence in markets such as Germany, which it eventually abandoned after achieving only 2% share in foods against Aldi's 19%.

Thus, we have Walmart driving its competitive strategy through its enormous scale, which provides significant barriers to entry, low supplier bargaining power, and low buyer bargaining power. Substitutes are available for all products Walmart sells but usually at higher prices. Walmart's scale has historically enabled it to enjoy high profits for its industry.

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However, a principal threat to Wal-Mart's long-term profitability is the increase in supplier power in the form of the influence of its suppliers of labour on the court system, the press, and public opinion. Wal-Mart should take action to reduce the impact of these labour difficulties on the firm. In fact, it has made steps to improve its public relations through actions such as increased and more visible charitable giving.

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Summary

Wal-Mart has strong plans for business expansion, strong market base, product diversification, and innovative nature.

Wal-Mart will continue to expand its business all over the world. The major part the corporate strategy will focus in upcoming years is to expand Neighbourhood Markets in the U.S., which is a small store format. Wal-Mart also has more than 6200 stores outside of the U.S. Such many stores in the world made Wal-Mart become the largest supermarkets in the world.

Internet retailing industry is rising in recent years. As a challenge to Wal-Mart, the company operates online businesses with two websites. Virtual purchases contributed larger and larger in the portion of total sales in these three years.

Competition in retailing industry is high. Typically for those department stores that are in hypermarkets or super centres formats, Wal-Mart will face more competitors in the future as Price is possibly the most influential basis of competition within this industry. With lower disposable incomes, due to prolonged slowdown in the US, consumers have become more price-conscious

The key growth drivers will be Continuing Economic Recovery and Growing ecommerce across the world.

Walmart has some perennial strengths that differentiate it from its competition. These include Strong foundation for growth: Wal-Mart has been increasingly focusing on international

market in recent years with 6148 stores opened to year 2013. Offering low prices points: Low price is a symbol for Wal-Mart. In the marketing mix, price

is an important factor. Price is the most sensitive element to customers, so customers are willing to buy same quality products with lower prices.

However, Walmart is exposed to threats such as increasing exposure about rising wages and related costs: Wal-Mart has 2.2 million people on the payroll, this huge employee base makes overall wage and benefit cost trends become the key determinants of the company’s profitability. U.S. government mandated increases in minimum wages are resulting in an increase in labour costs.

Competitive pressures from major competitors: Even though Wal-Mart is the largest company in its industry, competitors are also projected to earn more market shares in next few years. For instance, Target is aggressively adding groceries as part of the general merchandise stores’ product offering.

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References

http://corporate.walmart.com/our-story/ http://stock.walmart.com/ http://fortune.com/fortune500/wal-mart-stores-inc-1/ http://www.bloomberg.com/quote/WMT:US http://www.huffingtonpost.com/tag/walmart-bloomberg/ http://corporate.walmart.com/our-story/our-business/ http://corporate.walmart.com/our-story/our-business/walmart-us http://corporate.walmart.com/our-story/our-business/sams-club http://corporate.walmart.com/our-story/our-business/international http://www.nytimes.com/2006/05/23/business/worldbusiness/23shop.html?_r=0 http://www.businessweek.com/stories/2003-10-05/a-bumpy-ride-in-europe http://www.nbcnews.com/id/9815727/#.U-p_umN9Z-4 http://www.businessweek.com/stories/2005-04-10/wal-mart-struggling-in-germany

Israel foray and its love for Arms Trade

Israel has once again unleashed the full force of its military against the captive Israel's ability to launch such devastating attacks with great ease largely stems from the vast international military cooperation and trade that it maintains with countries across the world.

In recent years, European countries have exported billions of euros' worth of weapons to Israel, and the EU has furnished Israeli military companies with research grants worth hundreds of millions. Emerging economies such as India, Brazil and Chile are rapidly increasing their military trade and cooperation with Israel, despite their stated support for Palestinian rights. By importing and exporting arms to Israel and facilitating the development of Israeli military technology, governments are effectively sending a clear message of approval for Israel's military aggression, including its war crimes and possible crimes against humanity.

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Israel-Gaza conflict8 July

Israeli offensive began 4,760+ air strikes on Gaza

3,356 rockets fired at Israelo 1,875 people killed in Gaza

UN estimates +85% of deaths are civilians

o 3 civilians killed in Israel64 Israeli soldiers killed

Israel's military technology is marketed as "field-tested" and exported across the world. Military trade and joint military-related research relations with Israel embolden Israeli impunity in committing grave violations of international law and facilitate the entrenchment of Israel's system of occupation, colonisation and systematic denial of Palestinian rights. We call on the UN and governments across the world to take immediate steps to implement a comprehensive and legally binding military embargo on Israel, similar to that imposed on South Africa during apartheid.

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