Running Head: WALMART

WALMART Name Course Instructor Date

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Contents
WALMART.................................................................................................................... 1 Contents..................................................................................................................... 2 B. Executive Summary ...............................................................................................4 ................................................................................................................................... 4 C. External Analysis ....................................................................................................4 Industry analysis...................................................................................................... 4 Competitive analysis................................................................................................6 MACRO ENVIRONMENT ............................................................................................6 PEST ANALYSIS OF GENERAL MERCHANISE RETAILERS .........................................6 D. Internal Analysis .................................................................................................... 9 Functional audit....................................................................................................... 9 E. Strategy Formulation ............................................................................................11 Strengths............................................................................................................... 11 Weaknesses...........................................................................................................11 Opportunities.........................................................................................................12

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Threats.................................................................................................................. 12 F. Strategic direction and selection ...........................................................................13 G. Strategic Plan .......................................................................................................14 Strategic Vision .....................................................................................................14 Company purpose..................................................................................................14 Retail market domination.......................................................................................15 Growth through expansion within the US and internationally.................................15 Name recognition and creating a positive brand....................................................16 Venturing into new retailing sectors.......................................................................16 Selected strategies................................................................................................ 16 H. Implementation and monitoring............................................................................17 I. Conclusion .......................................................................................................... 18 ................................................................................................................................. 19 J. References ..........................................................................................................19 K. Appendix ............................................................................................................ 20 ................................................................................................................................. 20

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B. Executive Summary This paper comprehensively analyses Wal-Mart. It commences by carrying out an external analysis of the industry in which Wal-Mart operates. It then looks at the macro environment of the company by carrying outa PEST analysis of the retail industry. An internal analysis of the company and in particular the functional audit s discussed at length. The paper then covers the SWOT analysis of the whole company. It also looks at the strategies adopted by the company in surviving the competitive climate. Finally, the paper ends with a conclusion.

C. External Analysis Industry analysis Wal-Mart operates in a very unique competitive environment. Despite the fact that most of the competition facing Wal-Mart emanates from the general merchandise retailers, supermarket

Running Head: WALMART retailers and warehouse clubs also exert a lot of competitive pressure on it.it should be noted that the discount retail industry is quite substantial and continues to experience phenomenal growth .For the largest competitors they compete at the national and international arena. Consequently, there is fervent competition on location, pricing, store size, merchandise mix, technology and

innovation, layout and environment and the overall image. Generally, the industry is characterized by economies of scale since the top retailers tend to vertically integrate functions such as shipping, advertising, purchasing and manufacturing. Such large scale functions provide the top players with huge cost advantages over their small scale competitors (Kneer, 2009). Generally, in merchandising retailing, the major competitors of Wal-Mart are Kmart and Target. However, retail superstores, Circuit City and bed, Beyond and Bath also pose some competitive challenge on Wal-Mart. Wal-Mart, however, continues to be favored relative to the other stores because it offers high quality goods low prices and a wide variety of products to choose from. In such a competitive environment, attributes such as price quality and variety are very important in remaining competitive (Kneer, 2009). Within the warehouse segment, Costco competes harshly with Wal-Marts Sams club. Despite the fact that Costco has slightly fewer warehouses, it manages to generate great sales and revenues. Most of the Costco customers frequently shop at Costco than is the case with Sams club customers. The dominance of Costco may be as a result of better innovation, that is, it was the first retailer to sell fresh produce and meat as well as gasoline and this innovation enabled the company to develop loyal customers. Wal-Mart also competes fervently with the large supermarkets. In the grocery sector, production capacity is very populated and as such Wal-Mart is a serious threat to the large and

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small supermarkets. Kroger, Safeway and Albertson are increasingly finding it very hard t compete with Wal-Mart due to the low prices offered by Wal-Mart. Since the industry is highly crowded, the large supermarkets are resorting to differentiation to enable them remain afloat (Canak, 2006). Competitive analysis Wal-Marts competitive position is based on the companys unique organization of its distribution and logistics system. Additionally, the companys corporate culture plays a very significant role in facilitating the activities of the company. The information flow within the company is very efficient and as such this facilitates decision making.

MACRO ENVIRONMENT PEST ANALYSIS OF GENERAL MERCHANISE RETAILERS Political The general merchandise industry is affected by politics and the political regime in place. A result of the competitive nature of the industry, governments across the globe have to regulate the extent of competition to create a level playing field and avoid the emergence of a monopoly in the industry. For instance, in some counties such as China, the government was quite hesitant to allow Wal-Mart into their economy because thy feared that the company would lead to a closure of several indigenous supermarkets. Secondly, it must be noted that for the large chain of stores such as Wal-Mart with operations beyond their domicile, the issue of political stability is very fundamental. Most of the stores mainly make marginal profits from the goods they sell and therefore they highly rely on volume of sales to boost their bottom line. Hence, whenever there is political instability, they will

Running Head: WALMART tend to of very minimal sales and this will greatly impact on their profits. In addition, the fact that

most of the large stores rely heavily on outside countries to provide them with raw materials and in some instances finished products, in the event of political turmoil in the countries will suffocate the supply chain and heavily impact on the companys performance (Canak,2006). Third, governments have in most cases put certain employment laws to govern how most of the retailers should select their staff. To commence, in the United States, it is a regulation that the composition of a companys employees must reflect the diversity of the nation. In the international arena, for companies wishing to set shop in countries such as China, it is imperative for the company to employ a certain percentage of company executives from the local communities. This is a prerequisite that has to be followed to the letter. Economic The economy greatly impacts on the performance of the industry. To begin with, economic growth coupled with increased disposable incomes will tremendously increase the marginal propensity to consume of the workers and this will make the stores to increase their revenues. For instance, the BRIC countries re experiencing high economic rates of growth and therefore most of the people have huge disposable incomes that they can use to spend. Consequently, most of the retailers with expansionist policies have embarked on setting shop in these countries to benefit from the huge market presented and the disposable incomes (Kneer, 2009). Inflation is the general rise in prices over time. It greatly affects the industry since increases in prices of goods results in diminished volumes purchased. With high rate of inflation, consumers tend to shun items that they consider to be luxuries and instead opt to buy essentials that they need for their survival.

Running Head: WALMART Social Cultural and social factors greatly influence the merchandise retail industry. First and

foremost, income distribution will determine the spending patterns in the markets within which the company operates. Research has proved that young middleclass consumers account for most of the sales in the luxury segment. Hence, the retailers tend to locate their stores in areas that have young people with huge disposable incomes. This is also buoyed by the changes in lifestyles of the young middle class who tend to do shopping as a hobby or pastime activity. Demography is another consideration for most retailers. Since most of them seek to increase profits by increasing their volume of sales, they therefore opt to locate their stores in areas with burgeoning population. For instance countries like India Brazil, Russia and China together constitute half of the global economy. They are therefore the favorite locations for the retailers seeking to spread their tentacles beyond their domicile. Technology The industry is hugely impacted by the technological advancements in the industry which play a significant role in facilitating business transactions. Changes in information technology greatly assist retailers to expediently handle their large branches operations spread across different geographical areas. Identification of opportunities and threats The general merchandise retail sector has numerous opportunities that remain to be fully optimized. If the retailers increase their product ranges and ensure that the quality of their products is above board, then they will be able to increase the volume of sales they make. Additionally it

Running Head: WALMART must be notes that the industry is mainly dominated by a few large players such as Wal-Mart and Target. These companies already enjoy goodwill and as such they seriously need to venture into countries across the continents with high economic growth rate and high marginal propensity to consume.

The industry is highly threatened as a result of the fact that it mainly engages in an area that is so dependent on economic fundamentals such as interest rates, inflation, employment and price stability. This is a serious challenge due to the fact that some of the macroeconomic variables are determined by sentiment and this can cause the industry to witness a slump. D. Internal Analysis Functional audit.

Offering prices at low costs is one of the leading strategies adopted by Wal-Mart. Hence,

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the companys value chain is very important in identifying the activities behind Wal-Marts ability to achieve the strategies stipulated. First and foremost, the companys supply chain is one of the most cost effective. The company has an elaborate ability to track product movement along the entire value chain. Wal-Mart has the ability of tracking a product whether it is on shipment, in the inventory or even at the cash register in a real time basis. In the operations and distribution departments, strategies adopted have been very instrumental in enabling Wal-Mart to achieve low prices. The strategy of the company has mainly been to locate its stores within large cities and within range of 200 miles from the existing stores. The company mainly relies on word of mouth to gain market share in the large cities that it establishes stores. As a result of locating stores close together, distribution costs tend to be below average. The company, at the operation level, meets the needs of different customers by focusing on four retail alternatives; Superstores, discount stores, neighborhood markets and Sams clubs (Canak, 2006). Wal-Mart has very little expenditure channeled to advertising than its competitors. This is mainly achieved by clustering its stores within a very small area. Hence, due to the closeness of the stores, the advertising costs tend to be minimal. The service department and the marketing department work hand in hand in ensuring that the company provides high standards of service to the consumers Departments such as general administration, human resource management, and research and development provide support to the operations, distribution, sales and marketing, service and supply chain .They facilitate the smooth operation of this departments in the realization of the company goals and objectives.

Running Head: WALMART E. Strategy Formulation Strengths Wal-Mart has a very powerful strategy of countering competition and remaining

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competitive. Its strategy of providing a wide variety of merchandise at relatively low prices ensures that the company is able to attract customers. This has been a key strength because it has enabled the company to have many visitors to its stores and as such it manages to increase its profit margins. Secondly, the company has a very strong financial condition that enables it to be able to buy goods and merchandise in bulk, hence it benefits from huge discounts which it finally translates into cheaper merchandise. The companys brand name is strength as it is a large company known to provide goods at discounted prices which enables it to attract customers on the basis of quality and price. As a result of the partnership the company has with other companies such as McDonalds, the company is able to enjoy economies of scale in areas such as advertising and marketing. In addition due its huge size, it is able to reap huge economies of scale in procurement. The company also has a very wide geographical network that has enabled it to serve a huge clientele and as such it is able to reap from areas less covered by their services (Kneer,2009). Weaknesses Despite the fact that Wal-Mart has a strong brand name, it also has a very weak reputation. This is because of ethical issues surrounding its operations such as accusations of being racist in the deployment of senior company executives. Secondly, the company is anti union and as such it tends to prevent unions from agitating for salary review. This has also tarnished its reputation. Third, as a result of being anti union, the staff turnover rate in the company tends to be phenomenally high and as such this makes the company to incur huge costs in training new employees time and again. The failure of the management to come to a settlement with unions on

Running Head: WALMART issues of salary and other benefits is a great flaw on their part and as such it is a weakness. The

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company also fails by not being consistent in surveying their customers. In terms of E-Business the company still continues to lag behind other players in the industry such as Target. Finally, the strategy adopted by the company is overly complex, by choosing to sell at very low prices; the sustainability of their strategy comes into the fore. Opportunities First, most economies have liberalized their economies and as such, new markets have been to be exploited. For instance, the BRIC economies present numerous challenges that can be exploited to provide markets for the company. Secondly, these countries have rising consumer demand as a result of increased disposable incomes of the consumers. Third, the company needs to serve new market segments that remain to be highly underexploited to diversify its revenue sources. Fourth, the company needs to increase its geographical presence into areas such as Asia and Africa to enable it tap into these underexploited markets. Fifth, as a result of technological advancements, the company needs to look for ways of increasing its online sales segment. Sixth, the company has numerous growth opportunities through acquiring its rival firms or entering into alliances that will enable it increase its stake in the global industry (Canak, 2006). Threats The first and major threat the company has to confront is the issue of increased competition. The major players in the industry and notably Target are a threat to the market share of the company. There are also new entrants in the industry who are threatening the market share of the company. Secondly, the industry is experiencing very slow market growth. This means that the company may not be able to increase its turnover as expected. Third, the growing bargaining power of suppliers and customers threatens the companys power to determine price. Finally, there

Running Head: WALMART are certain regulatory and restrictive trade policies, such as is the case in China, which limits the ability of the company to operate in their markets. Summary
Strengths
P S S E C P I n G G W S o w e n n n t i n p d d e n g e s c g r f u g g o a g n u u e d m d l f i n b r a y v a a s p s o e d n s a n o t r a n d f t a n a l y m r a l e p r S g c t e i a n c e t a d c e h n g l a a s g v e h r i c e a s e y c m l e o s r t i s i n e c t w m r v i c o o v e r k v e o i n a e r a g e r v e g n a g e m r i v a r l s o e n d i t i o n O H W B D l s Q A e e o u n n v e i g e h e e h a k i n s s n d 't n i o r l y t u c r n r e p o o u t r o t r o c o o s

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Weaknesses
m p v e t a l s r v e b l e l e r x r a t i o i n y m c a n e u n - c s a o t o g m m e m m e e r s e n t r c e s t e t r a t e g y

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Opportunities
O R S E I n F A E E a c n x p i s e x c e i n n g g n a g i r i n r i n l o g g s d e t r a g i n m c a o n i n r k n e g o d n e s w i n l i n b l a e w e u t m m t o e a a s h e a r r k n s e a r e d e w l e r s s n c c h e n s o l o g i e s s i n f o r e i g e t m s g e e a g o n d m g e r a n p I n S t s E h L i co G n G A R N c l o n r e w t r y a m o f s e a d r k n a b a a e e c e

Threats
o t w l e s r g r g m t r a t o a a o d r y m g c p r o o t o i n i n g e r e m s i n i n r a p q p o u e w p u g g h t i t i o t h e b p p i c l i c i r e t i t o s o o r s t e e e h s m e n t s a r r n s o o g f f e s c s u u p s p t o l i e m r s e r s n

r v i n p r e l l i n q t e p u a

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F. Strategic direction and selection Wal-Mart has embraced a very aggressive corporate strategy. The scale and magnitude of Wal-Marts expansion has raised a lot of eyebrows and created resentment among other industry players. This is because the company seems to be ruthless in the manner in which it opens its stores. Notably, in every location in which Wal-Mart sets shop, most of the existing business people end up being displaced. However, despite the challenges posed by the rapid expansion of

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the company, it has continued to use its corporate strategy of expansion in a very elaborate manner. By opening up branches internationally and expanding the local ones, the company has been able to increase its market share and this has really impacted on its balance sheet. G. Strategic Plan Strategic Vision Wal-Marts mission statement and its advertising slogan are Similar: "We save people money so they can live better." Wal-Marts corporate mission As Wal-Mart continues to grow into new areas and new Mediums, our success will always be attributed to our culture. Whether you walk into a Wal-Mart store in your one across the country while on vacation, you can always be assured you and that genuine customer service you have come to expect from any department of any store..thats our culture. Company purpose If we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life. Wal-Mart has four man strategic goals and these are; Domination of the retail market in every place that it has some presence Growing by expansion both in the United States and internationally Create name recognition and facilitate customer satisfaction by using the Wal-Mart brand hometown or

are getting low prices

us. You will feel at home in

Running Head: WALMART Venturing into new retailing sectors such as automotive, pharmacies, grocery and repair sales. Retail market domination

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Wal-Mart intends to dominate the retail market .Primarily; Wal-Mart is a discount retailer mainly because it sells most of its products at very low costs. In essence, the philosophy here is to cut prices to the bare minimum hence cutting down on the markup and earn their profits on the basis of increased volume of sales (Chen, 2007). Secondly, the strategy also seeks to inject competitiveness in every unit that it deals with. Each and every store is under immense pressure to compete with other stores until Wal-Mart manages to become the unparalleled market leader in the industry. In terms of sales, the company is currently ranked first and the company seeks to dominate the market in every sphere. Making use of its size and buying power, the company can effectively implement the strategy (Canak, 2006). Growth through expansion within the US and internationally Strategically, the goal of Wal-Mart is to expand. This, admittedly, it has managed to do over the years. The company currently employs over 1.5 million employees with more than one million being in the United States alone. Internationally, the retailer has operations in Canada, Brazil, Mexico, Argentina, Korea, United Kingdom and Germany. The company has over the years adopted an aggressive international strategy. In some instances, it has expanded into other countries by adopting a corporate takeover of national retailers. The corporate takeover strategy places the company in an advantageous position of penetrating into new markets. The company is able to build its brand familiarity while at the same time retaining the initial outlets (Chen, 2007).

Running Head: WALMART Name recognition and creating a positive brand The aim of the company is to create positive impression by meeting the needs of the customers by using the Wal-Mart brand. The aim of the company is to have the customers recognize that it provides the best prices with strict adherence to quality. Hence, by using mass

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media, the company is able to drive the information to its existing and potential customers. In this regard the company enters into partnerships and adopts the use of cobranding. For instance, most of the Wal-Mart stores harbor a McDonalds resident within their premises. Venturing into new retailing sectors Wal-Mart has in the recent past ventured into other retail sectors. Recently, the company has developed a motor repair shop, a pharmacy and a grocery store. The philosophy of the company is that once a company expands in form of infrastructure, then it must begin branching out and compete with other established businesses. Traditionally, the company has focused on the sale of discount and cheap housewares. There are also other departments such as hardware, office supplies, paint supplies, cosmetics and toiletries, shoes, books, magazines confectionary, jewelry sales among other consumer goods. The most notable and controversial foray made by Wal-Mart has been its venture into the groceries industry. The company aggressively established neighborhood markets whereby it competed with businesses in the areas that it operated in. This caused most of the local businesses to close shop. Selected strategies Corporate strategy The corporate strategy of Wal-Mart is to fully dominate the retail industry by offering its customers with low prices. Secondly, the company seeks to expand both in the United States and in the international arena. Thirdly, the company seeks to refine its image by engaging in social

Running Head: WALMART responsibility and engaging in community projects. Finally, the company seeks to open up other sectors not covered by the company to the retailers

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Despite the competitive environment that Wal-Mart has operated in, it has still remained to be competitive. The company has over the years remained to be one of the most resilient companies in the sense that it has maintained its corporate strategy. For instance, the company decision to sell its products at a much subsidized prize has really paid over the years. It has enabled the company to compete favorably with most of its competitors in the field. Notably, the decision of the company to open several branches in almost every city within the US has really been very beneficial and this has been an anchor in terms of the strategies adopted by the company. Wal-Mart has managed to use its pricing strategy to remain dominant in the industry. Compared to other retailers such as Kmart, which is 10% expensive, Wal-Mart is way much cheaper (Leeman,2010). H. Implementation and monitoring Typically, Wal-Mart operates by building more stores and increasing the size of the existing stores. The company strives very hard to increase revenues and dominate its rivals in virtually every field. In fact, some businesses have completely been eliminated from business as a result of Wal-Marts aggressive stance. In fact, the company has had to contend with numerous protests by most local businesses that see Wal-Mart as a threat to the survival of their businesses. In its expansionist approach, Wal-Mart has managed to set shop in virtually every continent across the globe. The decision by the company to foray into highly populous countries such as China is one of the best strategies adopted by the retailer. The Chinese market offers numerous opportunities considering that it is a growing economy with most people having huge disposable incomes and changing lifestyles.

Running Head: WALMART Balanced scorecard Financial Return on equity customer Customer satisfaction Internal business Labor utilization rate

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Learning and growth Employee participation

Return on investment Revenues

Market share Response time

On time delivery Average lead time

Turnover rate Training and investment

Gross margin

Customer loyalty

Average cost per transaction

Employee suggestion

I. Conclusion In conclusion, Wal-Mart remains to be the leading retailer within the United States. The company continues to expand its foothold both nationally and internationally. Additionally, the company has also made forays into other sectors such as grocery, electronics, gas stations and auto maintenance. Hence each year, the number of stakeholders in Wal-Mart continues to grow at a very fast rate. For the company to remain competitive, it is important for the company to keep following the companys corporate strategy Admittedly, Wal-Mart remains to be a very formidable company with a very strong corporate strategy. The company has several avenues that if well exploited, it can really rev up its profits and become the global retailer. However, it must also be noted that the company must deal with certain pertinent issues that threaten to destroy the company boasts of being an employer in the areas that it established its operations. However, this is not the case since it also leads to some of the stores shutting down leaving many people to be unemployed.

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J. References Brunn,S.(2006).Wal-Mart world: the world's biggest corporation in the global economy.Boston: Routledge Canak,N.(2006). Wal Mart Business Case Study.New York: GRIN Verlag, Chen,J.(2007).Wal-Mart case study- China operation. New York: GRIN Verlag. Kneer, C.(2009).The Wal-Mart Success Story. New York: GRIN Verlag. Leeman, J.(2010). Supply Chain Management.BoD Books on Demand.

Running Head: WALMART K. Appendix

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