WAL-MART EFFECT

PRESENTED BY:THE SHOW STOPPERS1.ANIK BANERJEE2.ANTARA GHOSH3. ARGHYA NAG4.ARINDAM NATH5.RAHUL MODI6.SAMRAT SANYAL7.SANANDA SANYAL

IN THE NEXT FEW MINUTES….

INTRODUCTION ABOUT WAL-MARTGLOBAL PROCUREMENT PROCESSADMINISTRATIVE FUNCTIONOPERATIONSFINANCEHRMMARKETING

INTRODUCTION The world’s largest

public corporation by revenue

The largest private employer in the world

The largest grocery retailer in the USA

The largest toy seller in America

Each year 93% of the American households do shopping in some Wal-Mart store at least once

In 2006 around 7,2 billions of people will enter some of the Wal-Mart stores

MISSION

“Wal-Mart’s mission is to help people save money so they can live better.”

VISION

“To become the worldwide leader in retailing”

VISION AND MISSION

VALUES

1. Respect for the Individual

3. Striving for Excellence

2. Service to our Customers

3 BASIC BELIEFS & VALUES

Strength WeaknessCost advantage Low price & customer-orientedStrong supply chainPeople are key to success

Ignore store decorationSince Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.

Opportunity ThreatBuild its own brandPut efforts on social welfare better imageNew locations and store typesOverseas markets

Other competitorsIntense price competition

SWOT ANALYSIS

Based in Shenzhen, China

Third busiest port in the world

Employs several hundred

80% of Wal-Mart’s 6000 global suppliers are located in China

Wal-Mart & China are a joint venture

GLOBAL PROCUREMENT CENTER

ADMINISTRATIVE FUNCTION

Planning OrganizingLeading Controlling Authority Decision making

PLANNING

In Wal-Mart’s strategic planning stage, they are highly regarded as visionaries.

they develop planning processes that enable the company to understand where they want to go, how they want to get there, and what things they must focus on along the way to drive the plan.

Part of their tactical planning was to figure out how to get customers to buy more once they were in the store.

they wanted to make sure that they improved the way that goods made it to store shelves so that the consumer bought them.

ORGANIZING

Two key factors helped with the success and expansion -knowledge and technology.

“If we work together, we’ll lower the cost of living of everyone… we’ll give the world an opportunity to see what it’s like to save and have a better life (Wal-Mart, 2010).”

LEADINGWal-Mart’s success grew

rapidly, extending throughout America and into several international markets (Wal-Mart, 2010).

Effective leadership stimulates associates to perform to lofty standards, in so doing, promoting outstanding achievement.

Leadership is an integral part of effective management, which Bateman and Snell (2009) define as “the process of working with people and resources to accomplish organizational goals”.

CONTROLLINGSam Walton believed in the

importance of control systems in an organization; as he established certain strategic control systems in the company.

Walton wanted everyone within the organization to be committed to Wal-Mart's goal "total customer satisfaction", and the strategic control systems were set accordingly.

Wal-Mart has a sophisticated satellite system used for their output control systems.

The company is using a linking performance to reward strategy in order to raise performance; where managers' performance and ability to meet goals and targets are linked to their pay raise promotion.

AUTHORITYTo control store operations, Wal-Mart has created a vertical operating structure

Based on clear definition of authority and responsibilityDecision making is highly centralized

Each store manager has the same book of rules and procedures and accounting standards.

Store managers are still given some flexibility – allows store managers to make decisions on their own.

Higher levels of management also rely on mutual adjustment when they have to decide on products or how to improve operations

DECISION MAKING Making decisions on the

basis ofexperience, feelings, and accumulatedjudgment.

It acknowledges both subjective and objective

thinking and blends analytical with intuitive

thinking. It requires only as much

information and analysis as is necessary to resolve a particular dilemma.

It encourages and guides the gathering of relevant information and informed opinion.

OPERATIONS

Introduction to operations management

Operations strategy

INPUT MaterialMachinesLaborManagementCapital

OUTPUT GoodsServices

TRANSFORMATION PROCESS

OPERATIONS AS A TRANSFORMATION PROCESS

Feedback

INPUT MaterialMachinesLaborManagementCapital

OUTPUT GoodsServices

TRANSFORMATION PROCESS

OPERATIONS AS A BASIC FUNCTION

IMPACT ON OPERATIONS MANAGEMENT

Industrial Revolution

Scientific Management

Human Relations or the lack thereof

Advent of Management Science

Quality Emphasis

Globalization of Supply Chains

Information Age/Internet Revolution

Productivity =OutputInput

Productivity improves when firms:

Become more efficient Downsize Expand Retrench Achieve breakthroughs

PRODUCTIVITY

Define a primary task Assess core

competencies Determine order

winners & order qualifiers Positioning the firm

STRATEGY FORMULATION

Provide support for overall strategy of a firm

Serve as firm’s distinctive competence

Must be consistentMust be consistent with

overall strategy

OPERATIONS ROLE IN CORPORATE STRATEGY

OPERATIONS

STRATEGY AT

WAL-MART

Products Processes and Technology

Capacity

Human Resources Quality

Facilities Sourcing

Services

Operating Systems

STRATEGIC DECISIONS IN OPERATIONS

Make-to-Orderproducts and services are made to customer

specifications after an order has been receivedMake-to-Stock

products and services are made in anticipation of demand

Assemble-to-Orderproducts and services add options according to

customer specifications

OPERATIONS STRATEGY: PRODUCTS AND SERVICES

Projectone-at-a-time production of a product to

customer orderBatch Production

systems process many different jobs at the same time in groups (or batches)

Mass Production large volumes of a standard product for a mass

marketContinuous Production

used for very high volume commodity products

PRODUCTION STRATEGY:PROCESSES AND TECHNOLOGY

Professional Servicehighly customized and very labor intensive

Service Shopcustomized and labor intensive

Mass Serviceless customized and less labor intensive

Service Factoryleast customized and least labor intensive

SERVICE STRATEGY:PROCESSES AND TECHNOLOGY

FINANCEFor the fiscal year ending

January 31, 2009, Wal-Mart reported a net income of $13.6 billion on $404 billion of revenue (3.4% profit margin).

Amidst the worst ever economic recession, Wal-Mart had a very strong quarter with sales being $97.6 billion, an increase of 7.5% over the same period last year.

One of Wal-Mart financial performance highlights has been to ensure that inventories grow at the half pace of sales.

Total sales increased by 6.1% in U.S segment.

HOME DEPOT

DELL

TARGET

WAL MART

COSTCO

KROGER

•Wal-Mart’s Win-Play-Show merchandising strategy went a great way in improving the sales particularly in apparels, electronics such as Flat TV,GPS units etc.

•There was a decrease in sales in Sam’s club segment due to rapid development of new stores in the International and Wal-Mart stores segments.

•The major increase in sales is attributed to inflation in food prices which led to people spending less on eating out and concentrating more in eating at home.

QUICK OVERVIEW

There was an increase in diluted earnings per share from $2.92 in 2007 to $3.16 in 2008.

This increase is attributed to decrease in capital expenditures.

The company paid a dividend of $0.88 per share in this fiscal year an increase of 31.3% with respect to previous year.

QUICK OVERVIEW (CONTD.)

Financial ratios are used by managers within a firm, by current and potential stockholders (owners) of a firm, and by a firm's creditors.

Values used in calculating financial ratios are taken from Wal-Mart’s balance sheet, income statement, cash flow statement and statement of equity.

RATIO ANALYSIS

2004200

5200

6200

7200

8 2009

Current Ratio 0.980.9

1 0.90 0.90 0.90 0.81

Quick Ratio 0.140.1

7 0.17 0.19 0.20 0.16

Cash Ratio 0.090.1

4 0.13 0.13 0.15 0.10

LIQUIDITY RATIOS

2004 2005 2006 2007 2008

Gross profit margin 23.17%

23.72%

23.86%

24.24%

24.36%

Operating Margin 5.81%

5.93% 6.00% 5.88% 5.81%

Return on Equity 21.85%

22.61%

22.88 %

21.97%

21.06%

Return on Assets 15.17%

15.33%

14.67%

14.34%

14.15%

It measures how well the firm controls its expenses to generate an acceptable rate of return or profit.

PROFITABILITY RATIOS

2004 2005

2006

2007

2008

Interest Burden Ratio 0.9520

0.9460

0.9382

0.9254

0.9165

Interest Coverage Ratio(Times Interest Earned)

20.84

18.51

16.19

13.41

11.97

Debt Ratio 0.59 0.59 0.62

0.59

0.60

It measures the firm's ability to repay long-term debt.

DEBT RATIOS

HRM: HUMAN RESOURCEMANAGEMENT

Skill levels required

Degree of autonomy

Policies

Profit sharing

Individual or team work

Supervision methods

Levels of management

Training

Wal-Mart employment problems are : Illegal immigrants mopping its floors

Sex discrimination

Low wages lead worker strike

Unions and community groups.

They were not being able to pay for health insurance and other benefits.

Wal-Mart workers generally gave the company high performances, but they never get proper pay and benefits.

Lack of human capital

HRM PROBLEMS

What services are provided by HREmployee screening and selectionTraining classes offeredCompensation levelsHealthcare benefits

The speed and utility of these servicesTime to hire new employeesTime to deliver training to employeesTime-to-performance for new hiresResponse to information requestsEmployee satisfaction with HR

HR OUTCOMES: SERVICE

Human resources staff per FTE Program administration costs

Advertising for recruitingTravel time for interviewsTest costsTraining materialsCompensation and benefits outlays

Managerial time performing HR administration

Litigation and settlement expenses

HR OUTCOMES: COSTS

Job satisfaction A pleasant feeling from doing work that fulfills one’s goals

Organizational commitment A desire to work towards your organization’s goals and objectives

Stress A feeling of psychological arousal that comes from pressure,

deadlines, expectations, etc.Absenteeism

Failing to report for work as scheduledTurnover

Voluntary and permanent departure from an organization

HR OUTCOMES: ATTITUDES

Productivity/task performance Effectiveness

Achieving assigned goals consistently Efficiency

Minimizing resource use Creativity

Finding new ways to do work, or defining new goals for work

Organizational citizenship behavior (OCB) Behavior that enhances the social and psychological environment

Firm performance Increased productivity Decreased costs Increased agility

HR OUTCOMES: PERFORMANCE

Employees 2,100.000 BenefitsStore Associate Positions

Medical Coverage

Exclusive, Everyday Savings

Grow Your Future

Wal-Mart Success = Your Success

Store Careers

Store Management Positions

Stores Training & Development

Driving Careers

MARKETING

Key strategies for growing Locate store in isolated

rural areas and small towns (population 5000~25000)

Pattern of expansion Always push from inside

outMid-1980s One third were located in

areas that were not served by any of its competitors

National Promotion Overlay Dream girls Dream girls VIP (Movie Premier)Sweepstakes National Print Advertising Internet Banner AdvertisingNational PublicityViral MarketingRetail Micro-siteWal-Mart TV Red Carpet

CorrespondentFour-market Top-spin ActivitiesDream girls Dream girls In-store Kiosk Community MarketingRegional PublicityUrban Radio & Print

Advertising

INTEGRATED MARKETING RECOMMENDATION

Promotional strategyEveryday-low-prices

Few promotions13 major circulars per year1993

Satisfaction guaranteed policy

Lower price

Maximize sales volume and industry

turnover

Minimizeexpenses

MERCHANDISING

Marketing slogan Lower price

Store managers set up prices

2-4% pricing differential between Wal-Mart and its best competitors in most markets in early 1990s

•Always the low price-Always

•Always low prices-Always

MERCHANDISING

The company utilizes product differentiation approach as their marketing strategy to ensure that with these new entrants their product will still be different, unique and full of quality to satisfy their target market.

it appeals directly to its customers with a basic price message and plays by its own marketing rules.

Wal-Mart ranked 57th in total broadcast and print advertising.

Wal-Mart has been able to adapt to the marketing environment because of its strong commitment of providing quality products and services for both of their business operations.

MARKETING STRATEGIES

These include cost leadership, differentiation, focused cost leadership and integrated cost leadership/differentiation.

Much of Wal-Mart's success has been ascribed to its stockless warehouse JIT distribution system.

The marketing concept has been defined as ‘the key to achieving organizational goals’ and the marketing concept rests on ‘market focus, customer orientation, coordinated marketing and profitability’.

MARKETING STRATEGIES (CONTD.)

 

Existing Products New Products

Existing Markets Wal-Mart focuses on

selling existing

products into existing

markets. These are

products that are

available also in the

other branches of Wal-

Mart.

Wal-Mart introduces

new products into

existing markets.

These could be

products that are

unique only to the

Chinese market.

New Markets Sell its existing

products into new

markets, e.g.,

introduce Wal-Mart

online shopping in

China.

Wal-Mart markets new

products in new

markets. This can be

done by offering new

products that are

available only online.

ANSOFF’S GROWTH MATRIX

First, understanding competitors will facilitate the firm’s management to understand their competitive advantage and disadvantages in relation to their competitors.

Second, understanding competitors will also generate understanding of the past, present and future strategies of the firm.

Third, it offers the firm an informed basis to develop strategies in order to gain or maintain competitive advantage against their competitors in the future.

Lastly, understanding competitors will also facilitate the firm in forecasting or predicting the financial returns that they made from future investments.

BENEFITS

Wal-Mart Strategic business goals and objectivesWal-Mart has always aimed at

increasing sales through its friendly prices. This image has stuck with the company for a very long time. Not only is the company associated with low prices, but it has a variety of items under one roof. These qualities favor the rural clientele.

Strategic marketing program marketing objectives, targeting and positioningThe Company needs to change

its marketing objectives in such a way that they can attract a different market segment

Affluent clients tend to shy away from the retail giant due to the misconception that Walmart's products are of lower quality

MARKETING STRATEGIESProduct:The company should not

abandon its idea of attracting the affluent client

Company had introduced Metro 7 stalls in 1,500 stores

The company should introduce expensive products only in stores located in affluent neighborhoods.

The focus should be on electronics.Place

The focus should be on international markets.

Wal-Mart should choose economically secure countries

PriceThe pricing aspect of Wal-

Mart's marketing mix is part of the reason why the company has done so well so far

The company should maintain their low pricing strategies but they should merge this with product choices.

They need to improve on the quality of service and their items

PromotionOne of the most notable

promotional strategies in Wal-Mart is the use of public relations.

The company takes part in charitable events and has marketed itself as a community based institution

they could offer their employees access to the in-house clinics

MARKETING STRATEGIES (CONTD.)

Wal-Mart's success as based solely on its "Everyday Low Prices focus,".

Fast, Friendly, Clean" demonstrates Wal-Mart's renewed focus, ensuring associates are friendly and providing a less cluttered shopping experience.

Wal-Mart New Statement “Now more than ever”

CONCLUSION

THANK YOU

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