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WAL-MART STORES IN 2003 by Aris Metin ABOUT WAL-MART / HISTORY The worlds largest company with $245 billion

n in revenues and $8billion in net income, the worlds largest employer with 1.4 million employees Founded by Sam Walton, current CEO is H. Lee Scott Jr. Operated 1,212 stores in nine (9) countries outside the US,employed 300,000 associates, accounting for $ 2 billion in operating profilt 37% stake in Japans Seiyu, a struggling supermarket chain Acquired Britains ASDA chain with 229 stores and $14billion in sales Plans to open 120 to 130 new international stores in 2003 WAL-MART UNDER SAM WALTON Born in 1918, energy and drive evident in his athletic attainments, student leadership, entrepreneurial ventures Management trainee with JC Penney imitated some of Penney policies calling employees associates (ala Starbucks) Opened 1st store in the format of Ben Franklin -- became the largest BF franchisee by 1960s Opened Wal-Mart Discount City in 1962 in Rogers, Arkansas; went public raising $3.3 million for its warehouse and expansion Hired senior managers externally, some outside retailing in nontraditional areas Wal-mart became a leader in an IT-driven transformation of retailing, spending 1% of sales while competitors spend 1.76% Imitation and Adaptation borrowing ideas self-service, company cheers, greeters and the Sams Club Frugality and Plain-folks Manner Caring for Employees Tighly controlled compensation at all levels Communicated pride and fun, hardworking CEO Received the Presidential Medal of Freedom, died in 1992 PROBLEM STATEMENTS / CHALLENGES Are store managers treating people appropriately? Are our expenses too high? Is our competitors better than we are in certain categories? Why are we not moving faster? LITIGATIONS Off the clock work, Alleged Gender Discrimination, Illegal workers International operations still experiencing performance problems Looking beyond discount retailing Experimentation vacation planning, flower delivery, DVD rentals Financial services target 20% of customers who did not have bank accounts RETAILING FORMATS DISCOUNT STORE required a customer base of 150,000, 91K sq/ft, full-line grocery store, specialty departments, food, ancillary services, operating margins of 6.6% NEIGHBORHOOD MARKETS space-constraine, smallmarts, focus on groceries and limited lines of gen merchandise, drugstore, photo processing SAMS CLUBS high-volumes, low-cost merchandising, bulk buying, assortments, gross margin of 10% vs. 25-35% for traditional discounters. Costco is better in this segment WALMART.COM founded in 2000, generated $100 million, help drive store traffic i.e. photo orders should be picked up in the stores. PROCUREMENT - TRIP EXPENSES not exceed 1% of value of purchases - Called suppliers collect - Bypass manufacture representatives, saving 4% in cost - Bargained hard but built partnerships with suppliers by sharing information forecasting, planning, replenishing and shipping - Top 75 suppliers are included in strategic discussions - Required suppliers to comply with standards concerning child labor, workplace safety and local laws.

DISTRIBUTION - Cost estimated 2-3% for Walmart vs. 4-5% for other retailers - Cross-docking transfer merchandising directly from inbound to outbound trucks, increasing throughput by 18%

MERCHANDISING - Offering broad assortment of products at consistently low prices in cheap by cheerful stores - Manage product assortment by store rather than by region (Targets approach), by using sales data - Volume Producing Item contest among top managers - Modular Category Assortment Planning System involve suppliers to create store-specific modular MARKETING - By advertising, sponsoring community events, creating in-store excitement - Contributions to local charities, funding scholarships - .3% advertising to sales ratio - Distributed flyers less intensively PEOPLE - Performance appraisal, soliciting ideas, profit sharing, open door policy, tight payroll control

PRICING - Everyday Low Prices Always the Lowest Price. Always.

STORE OPERATIONS - Open 24 hours, M S - Rental cost is 0.45% of sales