Case analysis walmart case group i

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Binus Business School,

MM Executive Batch 20

Presented by Group I

Alexander Christian

Dina Sandri Fani

Puntin Kulmongkon

Case Study AnalysisWalmart Stores Inc.

Company’s Overview

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Operates in

16 countries

globally

Founded in

1962 by Sam

Walton

Largest global

corporation

by revenues

Largest

market share

of total global

retail

Ranked top 3 in

Forbes and Fortune

500 for past 5 years

History of Walmart

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1960s

Retail RevolutionSam Walton's strategy was

built on an unshakeable

foundation: The Lowest Prices

Anytime, Anywhere

1962On July 2, 1962, the first

Walmart store in Rogers, Ark.

1969The company officially

incorporated as Wal-Mart

Stores, Inc.

1970s

Walmart Goes NationalIn the 1970s, a decade of incredible growth, "Mr. Sam" began

to take Walmart national, proving his vision's widespread

appeal.

1970Walmart became a publicly traded company. The first stock

was sold at $16.50 per share.

1971The first distribution center and Home Office opened in

Bentonville, Ark.

1972Walmart was listed on the New York Stock Exchange (WMT).

With 51 stores, Walmart recorded sales of $78 million

History of Walmart

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1980s

Decade of FirstsIn the 1980s, the first Sam's Club

opened, serving small businesses

and individuals, and the first

Walmart Supercenter opened,

combining a supermarket with

general

1980Walmart reached $1 billion in

annual sales

1983The first Sam’s Club opened in

Midwest City, Okla.

1990s

America’s Top RetailerBy 1990, Walmart was the

nation's number-one retailer.

As the Walmart Supercenter

redefined convenience and

one-stop shopping, Every Day

Low Prices went international.

19911st international stores in

Mexico City (Sam’s Club Store)

1993Walmart celebrated its first $1

billion sales week.

2000s

New MillenniumImplementation of omni-channel

strategy to provide seamless

shopping experience for its

customers

2002Topped the Fortune 500 ranking of

America's largest companies for

the 1st time

2014Doug McMillon succeeded Mike

Duke as CEO. 2.2 million

associates worldwide; serves

>200 million customers each

week at >11,000 stores in 27

countries

Vision and Mission

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people around the world”.

“Our vision is to provide the good quality

and service to our customers, while

remaining the market leader and striving

daily to be the most admired company”

Walmart Business Challenges

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01 External Factors

Maturing market in its core business

Target for critics on social issues: pushing production

from the U.S. to low-wage overseas producers resulted

to a depressed wage growth in the U.S.

02 Internal Factors

Might reach saturation point so unable to sustain high

year on year growth rate

Prodigious rate in stores growth lead to sales

cannibalization

Sam’s Club warehouse stores performance is much

lower than leading store “Costco”

Shifting away from its original target market, i.e. low

income customer which focuses in low price

Hard time in international operations due to inability to

respond local markets

Imbalanced Chinese relation

• Is it possible for Walmart

to sustain its accustomed

high growth rates?

• Is it necessary for

Walmart to find new

business to continue its

historic success?

External AnalysisPorter Five Forces Analysis

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Rivalry

Potential Entrants

Customers

Substitutes

Suppliers

High

The retail business is a highly

competitive industry. Wal-Mart faces a

number of competitors in all segments of

their business.

Exit barriers are high

Slow industry growth

Have excess capacity

Cost structure of firms: sensitive to

cost

Buyer’s switching cost is low

Competitors have similar sizes

Price elasticity of demand

Discount Store

Kmart

Target

Caldor

Warehouse Clubs

Price Club

Costco

Pace

Supercenter

Meijer

Fred Meyer


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Low

Being that the retail industry is a

highly saturated market, new

entrants would face difficulty

succeeding in this industry. In fact, it

is highly difficult for discount

retailers to penetrate other markets

as Wal-Mart tried to enter Germany

and South Korea. The company was

unsuccessful and had to pull out

because of its unprofitability

Rivalry

Potential Entrants

Customers

Substitutes

Suppliers


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High

Consumers today are searching for the

best deals possible. They are waiting

for discounts and sales to bulk up on

products. Customers know what they

want and how far they are willing to

search for the item. Thus, switching

cost is low. Retailers must maintain

high inventory levels to retain

customers and their market share.

Rivalry

Potential Entrants

Customers

Substitutes

Suppliers


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Medium

Substitute products are products that can

be used as replacements for other

products to satisfy the same necessity.

Wal-Mart benefits from this idea as

discounters have lower prices than

department stores and consumers go for

higher quality product with the lowest

prices.

Prices and quality of substitute

products are very competitive.

Performance of substitute products are

similar.

Consumer switching costs are low.

Rivalry

Potential Entrants

Customers

Substitutes

Suppliers


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Medium-Low

Forging relationships with suppliers is

essential to Wal-Mart’s business. Without

timely inventory deliveries, Wal-Mart could

not maintain its full shelves and would lose

customers.

Wal-Mart purchases huge quantities of

products from its suppliers.

Low switching costs from one supplier to

another.

Products have a lot of substitutes.

Almost all the products are not critical for

Wal-Mart.

Rivalry

Potential Entrants

Customers

Substitutes

Suppliers

External AnalysisKnowing Walmart’s competitors

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COMPETITION

Target Corporation

Kmart Corporation

Costco Wholesale Corporation

The Kroger Co.

Albertson's, Inc.

Walgreen Co.

CVS Corporation

Carrefour SA

Royal Ahold N.V.

Toys 'R' Us, Inc.

External AnalysisKnowing Walmart’s competitors

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01 Retailer Industry: Target

Ranked #33 in the Fortune 500.

Target offers very similar products.

Target went abroad in January 2011

02 Supermarket Industry: Dollar General

One of the main competitors, pursuing low

prices.

Good location in smaller communities is the

main competence advantage.

Strategy: Save time, save money

Many items per $1

Internal AnalysisCombined Strategy: Cost Leadership & Differentiation Strategies

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Allowed to achieve a large scale and an

efficient supply chain.

Has its own low-cost brands, like Great Value.

A unique cost structure that allows Walmart to

establish the lowest prices and achieve

competitive advantage. (best value/price

combination )

Present in many different industries and

markets with efficient distribution channels.

Very difficult strategy to imitate by offering a

broad quantity of products at a low price.

Internal AnalysisWalmart SWOT Analysis

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S W

T

Strengths

Customers loyalty

High Brand value

Good inventory control

system

Good reputation on quality

and low price

Emphasis in Human

Resource management and

development

Opportunities

Strategic Alliances and

merger

Increase Demand

Technological developments

New retail formats

Customers concern about

environment

Threats

Cultural differences in new

markets

Countries economic

problems

Local regulations

Antitrust issues

Intense competitive

conditions

O

Weaknesses

Much of the same

merchandise

Low reaction to changes in

market

Insistence on doing things

“the Wal-mart way”

Low current ratio

Low market research in

foreign countrie

Internal AnalysisWalmart Key Success Factor

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Philosophy Keep prices below everybody else

Trip expenses can’t exceed 1% of the purchases

Spent lots of time in his own store and

observe competitors

Culture

Do not show off buying luxury goods

Success The way it treated its associates


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Management style

Maintain an open-door policy

Empowering associates

Maintain technology superiority

Build loyalty among associates,

customers, and suppliers


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Tailor to individual market or individual

store

Information system

A process which indexed product

movements in the store to over a thousand

store and market traits

Using inventory and sales data


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Promotional strategy

Everyday-low-prices

Few promotions

13 major circulars per year

Satisfaction guaranteed policy

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

Lower price

Maximize sales volume

and industry turnover

Minimize

expenses

Internal AnalysisInternalization as key strategy to keep growing

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Why

Internalization?

01 Saturated domestic market

02United States represents only 4%

of world’s population (missing of

96% of potential customers)

Emerging Markets with lower

disposable income offer huge

platforms for growth in discount

retailer.

03

To keep growth in revenues by

creating economies of scale04


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01Management Risk (culture,

language, customer preferences,

distribution systems)

02 High investment

Political and Economic risks03

Exchange Rates risk04

Risk Factors?


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Reasons of

Failure?

01Not able to benefit from economies of

scale, e.g. Germany

02 Unable to become cost leader

Culture differences03

Low profitability market04

Political & legal barriers (India)

Foreign companies are not allowed to set

up big stores

05

Fail to understand the market (South Korea)

Very demanding customers and did not

customize to market

05

RecommendationTOWS Strategies

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RecommendationOther key proposed strategies for Walmart’s consideration

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Fine tuning business

Strategies

Back to basic and shifting

position back to price

leader to gain customer

trust

Consider to sell Sam’s

Club warehouse store

business as no clear

selling point

Consider to raise employee

wage to reduce turnover

rate

Continue Internalization

with a better approaches

Consider to expand to

developing countries as

most people will go for a

cheaper product. Potential

countries to be considered

include Indonesia,

Vietnam, & Philippines

Adjust international

business strategy to match

with local condition

Refresh its supply chain

strategies

Reduce dependent level of

production from China

especially garment

products. Such as:

Bangladesh

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