PAMANTASAN NG LUNGSOD NG MAYNILA

(University of the City of Manila)

Intramuros, Manila

GRADUATE SCHOOL OF MANAGEMENT

Master in Business Administration

CASE ANALYSIS
WAL-MART STORES, INC.

Management Consultancy
Prof. Dante “Klink” Ang II

Submitted by:
 CASE ANALYSIS: WAL-MART STORES, INC.

VIEWPOINT: DAVID D. GLASS, President and CEO

TIME CONTEXT: 1993

I. Problem Statement

- How can Wal-Mart Stores, Inc. mitigate its impending slowdown growth in 3 years?

II. Statement of the Objective

- To increase Wal-Mart Stores, Inc. sales gains based on 1% inflation rate in the given time
frame.

III. Areas of Consideration

STRENGHTS:

 Wal-Mart was regarded as an industry leader in testing, adapting and applying a wide range of
cutting edge merchandising approaches.
 Wal-Mart was the only top 10 that located a majority of its stores in rural areas.
 In November 1990 Wal-Mart acquired Wholesale Club in a $172 million transaction
 Increased the size of Sam’s chain to 168 stores by adding 27 stores in six Midwestern states
 Sam became the undisputed leader of the warehouse club segment
 Wal-Mart put heavy emphasis on forging working relationships with both suppliers and
employees
 55 percent of the households considered Wall-Mart’s prices as lower or better than competitors
 Wall-Mart management had turned the company’s centralized distribution systems into
competitive edge
 Wall-Mart got an early jump on competitors in distribution efficiency because of its rural store
locations
 Wall-Mart distribution cost advantage over Sears and Kmart was significant
 Wall-Mart was aggressive in applying the latest technological advances to increase productivity
and drive costs down
 Between 1985 and 1987 Wall-Mart installed the nation’s largest private satellite communication
network
 In 1989 Wall-Mart established direct satellite linkage with about 1,700 vendors supplying close to
80 percent of the goods sold by Wall-Mart
 The Company had exemplary data processing and information system
 The company has the lowest-cost, most efficient date processing operations of any company its
size in the world
 Environmentally safe packaging
 JIT (Just In Time) Ordering through auto ordering proposition
 Streamline distribution
 Saturates market with new stores of Wal-Mart
 Perfected Supercenter concept
 Bonuses for employees to outperformed the average sales
 Provides trainings, seminars, guidelines and even exams to improve performance
 Conducts largest stockholders meeting, worldwide.
 Wal-Mart executives relied on MBWA (Management by Walking Around); they visited stores,
distributions centers, and support facilities regularly, staying on top of what was happening and
listening to what employees had to say about how things were going.
 Work atmosphere at Wal-Mart is a family-oriented place.
 Wal-Mart had extensive system of incentives that allowed associates to share monetarily in the
company’s success such as profit-sharing plan, stock purchase plan, sales contests and other
incentive programs.
 One of Wal-Mart’s most successful incentive programs was its VPI (Volume Producing Item)
contests.
 Wal-Mart held year-end manager’s meetings every February in a convention hall. Senior
Executives viewed these meetings as a way to reinforce the bonds of teamwork within the
management ranks.
 “Eat What You Cook” program is another technique that Wal-Mart used to keep buyers in touch
with the customers and attuned with store operations.

WEAKNESSES:

 Wall-Mart relied less on advertising than any of its competitors

 The company distributed only one or two circulars per month and ran occasional TV ads,
relying primarily on word-of-mouth to communicate its marketing message
 Wall-Mart advertising expenditures were the lowest in the discount industry
 Wall-Mart spending for radio and TV advertising was so low that it didn’t register on national
rating scales
 Impending on embarrassing event cost on dubious light on operating practices
 Fell up to 13% sale during 1993-1994
 Wal-mart still had vestiges of some “old-fashioned” beliefs and employment practices that
seemed out o step in an otherwise progressive company.
 Wal-mart did not provide a specialized training course for its hourly associates.

OPPORTUNITIES:

 The success of the club concept had fueled geographic expansion by all competitors
 As of 1994 Wall-Mart was expanding or relocating stores at the rate of 100 per year
 Expanding into states
 Moving into international markets
 Desire to carry more US made goods in Wal-Mart
 The editors of the trade publication Mass Market Retailers paid tribute to Wal-Mart’s associates
in 1989 by recognizing them collectively as the “1989 Mass Market Retailers of the Year.”
 To further promote management training, in November 1985 the Walton Institute of Retailing
was opened in affiliation with the University of Arkansas.
 The company used meetings both as a communication device and as a culture-building exercise.
Wal-Mart claimed to hold the largest annual stockholders’ meeting in the world.
 In 1990, some retailing analysts were even more bullish on Wal-Mart’s long-term prospects,
predicting that the number of stores, clubs, and Supercenters could number over 4,300 and could
generate nearly $200 billion in sales by the turn of the century.
 In 1994, the company was operating 18 stores in Mexico in a joint venture with CIFRA, Mexico’s
largest retailer, and two Wal-Mart Supercenters.
 In early 1994, Wal-Mart announced plans to acquire 120 Woolco stores in Canada and spend
$100 MM to revamp them to Wal-Mart format.

THREATS:

 In 1994 the wholesale club in the US was regarded as mature

 Nation’s balance of trade deficit and conveyed the company’s desire to carry more US-made
goods in Mall-Mart’s Stores
 Lawsuits (Child labor & sweatshop tactics, Apparels came from foreign sources despite claims of
US made, Predatory pricing of beauty products)
 Community resist on construction permits as this may impair to attract tourists and
 In early 1994, there were signs of an impending slowdown in Wal-Mart’s growth, and in addition
the company had suffered through a series of embarrassing events that cast a dubious light on
some of its operating practices.
 Wal-Mart’s stock price, which had historically risen each year, fell 13% during 1993 and in early
1994 was trading in the $23 to $28 range – substantially below the record high of $33 reached in
early 1993.
 A report on CBS’ “60 minutes” showed instances of Wal-Mart stores’ posting Made in America
signs on racks of apparel that actually came from foreign sources.
 There were also rumors that Wal-Mart had sourced merchandise from foreign manufacturers that
utilized child labor and sweatshop tactics in their factories to hold down costs and meet the price
levels that Wal-Mart’s buyers insisted on.

Assumptions
 No assumptions

IV. Alternative Courses of Action:

ACA 1 – Invest in advertising activities.

ACA 2 – Opening of Sam wholesale club in unreached areas and integrate Wal-Mart
Supercenter.

ACA 3 – Expand Wal-Mart Supercenter on existing Wal-Mart stores.

V. Analysis:

Alternative Course of Advantages Disadvantages

Action
ACA 1 – Invest in  Can advertise positive  Will require investment
advertising activities. reputation of the of time.
company.  Need to spend large
 Enhanced brand amount of money.
recognition.
 Promotion of the
business.
ACA 3 – Opening of ● Can capture larger market. ● Only qualified customers
Sam wholesale club in ● Can raise sales on can apply for membership.
unreached areas and wholesale merchandising ● Higher production levels.
integrate Wal-Mart and supercenter.
Supercenter. ● Achieve economics of
scope. (ex. Since
companies are sharing the
resources, it helps
reducing cost redundancy)
ACA 3 – Expand Wal- ● Can raise sales on retail. ● Will incur high cost.
Mart Supercenter on ● Can expose the business to ● Need to recruit extra
existing Wal-Mart wider audience. customer service staff.
stores.

VI. Conclusion:

Decision Criteria ACA 1 ACA 2 ACA 3

Bring intended result 1 3 2

Contributed to 2 3 1
increase in sales

Ease of 3 2 1
implementation

Cost implication 2 3 1

TOTAL 8 11 5
**Good = 1, Better = 2, Best = 3

Therefore, the best ACA is the opening of Sam wholesale club in unreached areas and integrate
Wal-Mart Supercenter.
 VII. Plan of Action:

Activity Responsible Person Implementation Time

1. Develop a clear and detailed CEO and Operations Team 10 months
action plan, for the expansion of
Sam Wholesale Club and
integration of Wal-Mart
Supercenters.
2. Communicate the approved Area Managers 7 months
plan to all business units.
3. Implement the approved Operations Team 12 months
plans.
4. Monitoring and evaluation. Operations Team 7 months