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WAL-MART
EXECUTIVE SUMMARY
TABLE OF
CONTENT
I.
Current Situation
II. Strategic Managers
III. External Environment
IV. Internal Environment
V. Analysis of Strategic Factors
VI. Strategic Alternatives and
Recommended Strategy
VII. Implementation
VIII. Evaluation and Control
BACKGROUND
I.
Current situation
A. Corporation performance: Overall there is an increase in sales and cash flow from
operating activities. Also there is a growth in national and international business
expansion. Here are some keyed terms in 2006: i) Continuous growth in sales and
earnings. Great international expansion for the last five years; ii) Financial: Current ratio
is 0.9%. Earnings per share increased from $2.41 in 2005 to $2.68 in 2006; iii)
Performance: a) Highpoint: increase in sales of 9.5% comparing to last year. Increase
cash flow from operating activities from $10,267 million to $11,231 million. b) Low
point: low return on assets of 8.91%, low return on shareholders equity with 22.5%,
negative price-earnings per share ratio caused a decline in share price from $56.98 in
2002 to $46.11 in 2006 (;./st decline in 10 years).
B. Strategic posture:
Mission: Always low price, saving people money so they can live better regardless of
background or where they may live and to build a better life.
Objectives: Lines extension and stores expansion.
Strategies: Wal-Marts current strategies concentrate on customer satisfaction and team
spirit. They are implemented through the following programs:
OVERVIEW
The dataset utilized in this situation analysis includes comparison of corporate
performance over the five-year period (2001-2006). Wal-Marts output, behavior, and input
controls were represented by the current ratio (liquidity), earnings per share and return on equity
(profitability), assets turnover ratio (activity), and price-earnings per share ratio. This
comparison indicated the firms current ratio was 0.9%, assets turnover was 8.91%, and negative
price/earnings per share ratio. Though a benchmarking analysis indicated the firms stock price
increase of 9.9% but it is considered low rate comparing to the increase rate of competitors at the
rate from 12.45 to 367%.
II.
Strategic Managers
B. Top Management includes: 25 corporate officers, CEOs assigned to each business unit (WalMart U.S., Sams Club, and Wal-Mart International); Lee Scott was only the third CEO in
the entire history of Wal-Mart when he was selected to the position; During the 12 years
David Glass, the previous CEO held the position, sales grew from 16 billion to 16.5 billion
annually; they are uniquely qualified individuals.
III.
External Environment
The gasoline prices increase cause the closing of Wal-Marts operation in Germany
due to reduce of customer visit the stores
B. Societal Environment
Economic
The increase of consumer debts, interest, and unemployment rates caused rivalry
in the retailing industry on low-price. Wal-Mart also was facing the cost increase
due to currency translation, increase of government restriction in the countries of
its subsidiaries, and changes in local legislature.
Technological
Political-Legal
Socio-cultural
with the Buy American program. The firm has centered its operations on the
low income customer, but recent made changes to including many other
demographic types into its plan.
C. Task Environment
Threats of new entrants in the wholesales segment such as Costco, BJ, etc with
direct attack to Sams Clubs but not Wal-Marts low price, product lines, and
convenience locations.
The bargaining power of suppliers is low. Goods can be purchased from many
different locations and suppliers.
Rivalry in the market that Wal-Mart competes in is at an all time high. Many
companies are beginning to grow and expand into markets and areas which WalMart has been in for years, and as the growing population of special interest groups
expands, so does the dislike for Wal-Marts greedy business actions.
IV.
Internal Environment
A. Corporate Structure
Wal-Mart is structured into three business units. Wal-Mart USA, Sams Club, and
Wal-Mart International. The majority shares are held by family members of its founders and
its centralized management control with the headquarters out of the Bentonville home.
C. Corporate Culture
The firms strong corporate culture of, the Wal-Mart Waywas a reflection of
the values of its founder..southern, rural, conservative (19-23), can be its strength (crosstraining and carry out its mission) as the same time can be a weakness (reject to changes of
mission, objectives, strategies, or policies).
D. Corporate Resources
Wal-Mart operates under economic of scales using marketing mix (low price, the
green marketing program through TV, internet, and through distribution channels). The
firm maximize its resources and with economic value added products and services, private
brands, human resources (skilled employees), and technology competence (computerized
inventory control and real-time reports system). That promotes the firms maximum buying
power, ability to maintain its market position, and financial stability and continue growth of
business.
E. Summary of Internal Factors (Core Competencies)
With the firms abilities to consolidate and maximize its resources and find
propitious niche with its distinctive competencies (outputs, behavior, and inputs controls),
Wal-Mart can win the market competition.
The current financial condition shows there is a strategic inflection point or a
performance gap exists in the firms strategies and programs that need an emphasis in
behavior and input controls. It requires a comprehensive analysis of the market that includes
analyzing of strategic factors using the Strengths, Weaknesses, Opportunities, and Threats
(SWOT) analysis and Strategic Factor Analysis Summary (SFAS) Matrix.
V.
Strengths: Wal-Marts most important strengths (internal factor) are defined in the
management of distribution and logistics. That include: operate under economic of
scales (stores located within the contact of the firms distribution centers); accurate
computerized inventory control systems with real-time reports generated; economic
value-added products and services. These gave Wal-Mart a distinctive competency.
Weaknesses: The most impact on withdrawal of stores located outside of the U.S. was
culture differences due to the strong corporate culture (reflect its founder background
southern conservative). It makes difficult to accept to changes of the corporate
mission, objectives, strategy, and policies.
Threats: the Wal-Mart focus on low cost and centralized structure caused oversight
some ethical issues. This can result in losing skilled workers due to low pay rate
(who might leave Wal-Mart for other companies and the firms distinctive
competence might become transparency) and make easy for attack from competitor.
Current mission is appropriates for output controls and effectively use of resources
(knowledge, skills, abilities, values, and motives)
Current objectives are appropriate with modified business model include global
culture awareness (capabilities). Wal-Mart establishing a program to ensure
awareness of its Open Door policy, Responsibility Center, and Ethics Report
Hotline.
In conducting a strategic audit that includes examination, evaluation, and analyzing; the
qualitative finding leads us to the strategic alternative and a recommended strategy is presented
along with implementation and evaluation and control as follows:
VI.
Wal-Mart to consider. Each of them has pros and cons to consider before making the best
decision. These are: the horizontal growth strategy (growth), the pause-proceed with caution
strategy (stability), and the turnaround strategy (retrenchment).
A. Alternatives:
Horizontal Growth Strategy: Wal-Mart can achieve this strategy, both internally and
externally, by expanding their operations into more international locations while also
offering more fashionable products both domestically and internationally.
o The pros to this strategy include: the ability to form a joint venture with
another country (develop new products and technologies) and acquisitions
(purchasing other companies already operating in the area). The cons to this
strategy
o The cons to this strategy are the fact that Wal-Mart has already entered some
international markets and did not succeed. They had to withdraw from South
Korea because they failed to research the geographic and demographic
characteristics. They did not offer any products the majority of customers
shopped for.
VII.
Implementation
A. Total Quality Management (TQM) functions on the premise that the quality of the products
and processes is the responsibility of everyone who is involved with the creation or
consumption of the products or services offered by the organization. In other words, TQM
capitalizes on the involvement of management, workforce, suppliers, and even customers, in
order to meet or exceed customer expectations.
Wal-Mart could enter into a new agreement and expand to Australia. Australia is
known for the Outback and Wal-Mart carries a wide variety of outdoors gear. It
would be a joint effort between Marketing and the New Zealand government to
develop a plan that will bring adequate products to the country. This could result
in a significant increase in revenue internationally for Wal-Mart.
B. A capital budget program could be set aside that allocated $10 billion for any new
acquisitions of supercenters, discount chains or viable retail companies that would yield a
profit within the first year of operation under the Wal-Mart brand. A timetable should be
imposed on all steps of a business plan regardless if they are individual or not. This is less
than 10% of Wal-Mart operating budget.
C. Standard Operating Procedures (SOP) are a must have for a viable businesses. Once a SOP is
developed for the Australia expansion, a very in depth overview can be obtained; because the
very nature of an SOP will be to determine what is working and what is not. Since this is not
Wal-Marts first international venture, a modified model SOP can be used that should cut
cost and yield greater result.
Investing in a database system when no other retailers had tried this technology was
just a lasting example of the innovative nature of this company. Decreasing costs and
improving the store, employees and customers are very important to Wal-Mart.
Annual audits as well as scheduled maintenance ensures how well the systems that
are in place are performing. Time is money, so every precaution is taken to document
and to review all systems in a timely manner.
Wal-Mart reviews the Strategic Plan to verify that all activities are in direct
compliance. Good performance is awarded based on performance; this is tracked by
the RFID system and reporting. Fuel efficiency has increased by 25% and energy was
reduced. Continuing to be green conscience will allow the company to monitor its
activities to stop any deviation from its goals. The focus of the company is to expand
and continue to operate with strict guidelines that ensure control and continued
evaluations of how to improve, review and implement new procedures.
real-time reports that helps management decision especially in critical situation. The firms
joint partnership with Accel Partners is an effective program in term of financing and cost
eliminating in e-commerce. It provided pull technology (higher positioned in search engine,
webpage design, tracking website visitors) and push technology (TV, popup, pop-under,
email ads and webinar for training), and website maintenance. However, sharing information
with oversea partners (Australia and New Zealand) involves some software differences and
Wal-Marts cost of goods sold increased by sharing of (unused) software upgrading cost.
Communication has been delayed due to being screened or blocked by government tricked
legislature. Also there is an increase for security protection software and risky if security
breached and customers information is compromised. It is also a risk of trade secrete
become transparency. Therefore an Automate Decision Making (ADM) system is needed to
global standardization and monitor SOP. It continues collecting statistic information allocate
intelligence and locates the area of ineffective or inefficient use of the ADM. More security
software should be updated and developed for all possible virus types. In the long run, these
costs of software upgrading and real-time information system will be paid off. It is looked
promising ahead for Wal-Mart and is ready for horizontal growth strategy.
Works Cited
Wheelen, Thomas L. and Hunger, J. David. Strategic Management and Business Policy: Achieving
Sustainability. 12th Edition Upper Saddle River: Pearson Education, Inc., 2010.