Business strategy- Implementation and result

Wal-Mart Beast of Bentonville

Employees Rank 1 in Q1 Fortune500 Revenue 2012 2.2 million (2012) 2009 and 2010 $ 113 Bn

Save Money Live Better

Wal-Mart: Save Money Live Better

In 1962 Sam Walton opened the first Wal-Mart Discount City store located in Arkansas, currently the HQ The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969 Today its the third largest public corporation, the biggest private employer in the world and is the largest retailer in the world Wal-Mart has 8,500 stores in 27 countries, under 69 different names Wal-Mart is a family-owned business controlled by the Walton Family S. Robson Walton (Chairman) Mike Duke (President & CEO) In India outlets are called Best Price (with Bharti)

Red ocean to Blue Ocean

Sam Walton opened the first store Walton's Five and Dime and achieved higher sales volume by marking up slightly less than most competitors In 1962 Wal-Mart opened with the following new strategies
Red Ocean Everything under one roof Lowest price to the consumer
Manufacture r/Supplier to consumer

Blue ocean

Vision 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 Sam Walton Mission statement We save peoples money so they can live better

Division
Operations Walmart Stores US Walmart International

Sams Club

Retail

Wal-Mart Discount Stores

Wal-Mart Supercenters

Wal-Mart Neighborhood Markets

Sams Club

Current Scenario
Revenue Q1 2012 $ 113 Bn (+8.5%) Gross Profit of Q1 2012- $ 32.64 bn

Comparison with other players Q1 2012

Wal-Marts Business Concept

The basic concept of Wal-Mart stand on two pillars
Economies of Scale Better Supply Chain Management

These two approaches were to fulfill the underlying philosophy behind the concept Offer shoppers lower prices than they get anywhere else Wal-Mart cuts down its profit per product and transfers that to the consumer, here Economies of Scale balances out the difference Wal-Mart also cuts down middle-men, thus purchasing straight from the manufacturer and selling directly to the consumer For this Wal-Mart had a decentralized and non-hierarchy structure

Wal-Marts Business strategy

Overall Cost Leadership
offering their customers greater/same quality service and products at a lower price than their competition Supply Chain Management to ensure this
Trip expenses cant exceed 1% of the purchases

Promoting private labels (26%) Providing products at 15-20% less than the price of the competitors

Business Model
Eliminate middle-man and pass the savings onto the customer Provide everything the customer needs under one roof Aggressive Growth Harvesting the business from local competitors Better Supply Chain Management at every step Better communication Uniform Product code UPC and satellite communication
Distribution Wal-Mart Retail Outlets centers Consumers Consumers

Manufactures/ Manufactures/ Suppliers Suppliers

Strategic control- With HP, Wal-Mart has created an Information system looking after Logistics, stocks, consumer preferences, product categories/lines etc For information sharing in the organization Individuals/cash registers to individual retails to organization

Features
Open Door Policy - Managers' doors are open to employees at all levels Sundown Rule - Answering employee, customer, and supplier questions on the same day the questions are received Grass Roots Process - Capturing suggestions and ideas from the sales floor and front lines 3 Basic Beliefs & Values - Respect for the Individual, Service to our Customers, Striving for Excellence 10-Foot Rule - Making eye contact, greeting, and offering help to customers who come within 10 feet Wal-Mart Cheer - An actual structured chant that was created by founder Sam Walton to lift morale every morning

Wal-Mart's Business Cycle

Everyday low prices

Lower prices from suppliers

More customers

More goods sold Lower operating Costs

Intended Strategy to Emergent Strategy

Pre 1990s Encouraging products from American manufacturers and suppliers 1985-"Bring it Home to the USA" programoffering 5% more for US made products to suppliers

1990s
Wal-Mart begins importing from the cheapest source of production around the world due to external factors 1995- 6% of the total merchandise were imported

Post 2000 Wal-Mart starts importing heavily from countries like China, India, Brazil 2005- 60% of its merchandise were imported

Six Sigma Approach

Wal-Mart has a clear business model Management and associates are well-aware of the organization's philosophy: providing customers with products at the lowest price Our People Make the Difference and Yes We Can Sam where associates regularly suggest ways of making the company better and generating savings Wal-Mart keeps obtaining new technologies and evolving itself to increase efficiency Associates are frequently trained with the latest technologies Wal-Mart shares good relations with its suppliers which helps in efficient delivery

Business level strategy Low Price Strategy

Competitive Advantage

Value Chain

Value Creation (% per activity) Inbound Logistics (3.4%) Operations (Building Rentals) (1.9%) Licensing (0.2%) Marketing (1.1%) Shrinkage (1.3%) Salary/Wages (10.8%) Cost of Goods Sold (74%)

Sustaining Competitive Advantage

Wal-Mart indulges in cost-cutting techniques and reduces margins to provide the final product at low prices With more stores and distribution centers opening-up globally, Wal-Mart purchases products at greater volumes, this leads to high entry barriers due to product proliferation/ Economies of scale Constant pursuit of low cost product suppliers Chaining- Imitation of the distribution network and supply chain of Wal-Mart is next to impossible Customer information in the possession of Wal-Mart Lock-in: Due to its massive size and market dominance WalMart has become the industry standard

Corporate Level strategy

Diversification- to increase market share/ reduce risk
Entering international markets of Asia, Europe, Latin America Introducing grocery, pharmaceutical products

Backward integration
Mclane Company- Supply Chain Solutions Texas Retail Grocery

Horizontal integration
Canada- Woolco stores Canada- Woolworth Corp

International Strategy
Wal-Mart constantly expands its market through Global Expansion

Corporate strategy for US and other countries

For USA Sustain as market leader, Maintain market share For other countries Strategic leaderPossession of Valuable resources crucial for competitive advantage

Organizational Structure
Chairman

CEO

Directors

Chief Executive Officer (Global Commerce)

CAO

CFO

Executive Vice-President (Legal)

Executive Vice-President Sourcing

Executive Vice-President International

Executive Vice-President (7)

Chief information Officer

Senior Vice President Controller

Executive officer and country specific Presidents

Chief Technology officer

Senior VicePresident ecommerce

Wal-Mart is a Transactional Organization- Each retail outlet operates independently Wal-Mart establishes indirect control through Cultural Process, this has become part of the organizational culture

Market Process
Wal-Mart plays a dominant role in its relationship with its suppliers Wal-Mart is usually the biggest buyer of its respective suppliers Thus the Bargaining Power of the Suppliers gets minimized, Wal-Mart often dictates terms to its suppliers Being the industry leader Wal-Mart is relatively independent of competitors, as it sets standards for the industry Wal-Mart made Pepsi initially introduce its low-cal variant only its retail outlets

PESTEL
Political- Aware of the political situation of every country they enter or occupy a position in and continuously preparing for any problems concerning the political sector Economic- Wal-Mart can be said to be economically stable, even during recession in US the company came out with great revenues and offered consumers with great value products. On a macro front, Wal-Mart operates in countries with a stable and promising economy Social- Wal-Mart does not offer products which harm the sentiments of any segment, race or gender of the society. Wal-Mart also engages in social activities, The WalMart Foundation is well known for its charities (5 mn to Japan Earthquake Relief)

PESTEL
Technological- Wal-Mart offered new innovations in its technological aspect and introduced new concepts with regards to its industry. Use of highly advanced cash register or better performing slot machines. It also makes use of better security systems. Popularisation of Bar-codes and Micro Electronic Tags Legal- following the different laws of a country they engage transaction in. The company doesnt want to risk their clients welfare and company image by breaking local and international laws. Wal-Mart makes sure that the transactions they engage in will have a legal basis Environmental- making sure of the products they sell are proven to cause minimal problems to the environment. Environmental regulations on what type of product they will sell in their store. Introduction better waste management strategies that aim to reduce pollutants and create a cleaner environment for the future

PORTERs Five Forces

New entrants LOW

Bargaining power of suppliers HIGH

Threat from competitors

LOW

Bargaining power of customers HIGH

Threat from substitute products HIGH

Threat from new entrants: LOW

Creating unique brand identity Low price Ensuring higher switching costs for consumers
Bargaining Power of Customers: MEDIUM

Other retail outlets Significant switching cost Wal-Mart customer relations

Threat from Substitutes: LOW

Wal-Mart focuses on ensuring that the customers are happy Suppliers are delivering quality products at a low cost Wal-Mart low cost and variants

Bargaining Power of Suppliers: LOW

Mass purchases by Wal-Mart Large number of suppliers around the globe Wal-Marts customer base

Threats from competitors: LOW

Low Price of Wal-Mart Fierce price wars amongst the competitors Reach and network of Wal-Mart

Critical Success Factors

Evolving with changing market conditions
Introducing new categories like Grocery/pharmacy Encouraging low cost imports from countries like China, India

Customization of retail outlets

Wal-Mart has changed its name in many countries Walmex in Mexico, Asda in UK, Seiyu in Japan Stores in Texas were constructed to suit local culture Store-to-Store Program Fulfillment/distribution centers where made close to Retails

Cannibalization- Sams Club was open to cater to Small and Medium Sized businesses Loyalty programs
Membership to Sams Club Members on social mediums like Facebook

Critical Success Factors

Creation of Positive Brand and Company Recognition
Entry/exit and in-store experience Concept of greeters during the entry Social-Local Strategy- High responsiveness to local environment and culture Developing concepts on social media for more fan fallowing- your Shelf contest

Communication
Open door policy Upward communication with programs like Yes We Can Sam Reducing margin for error through Management Information Systems

Identifying Consumer Demand and stocking products

Backroom information system Mobile Receipts Point of sale

Critical Success Factors

Developing strategies around core competencies
Every Day Low Prices Supply Chain Management/ Logistics/ Reach Mass buyer of goods

Pioneers in developing and adapting to latest technologies Identifying the potential of e-commerce and penetration in the online sphere Non-unionized workforce
Low salaries Lack of employee benefits Over-time (70 hours a week +overtime)

2009-To ensure Wal-Mart as industry leader three initiatives were taken

Save Money. Live Better
Price Leadership
Everyday Low Prices/ Greater value of goods

Consumables
Reduce Outlays/ Seasonal advertising/ in-store signage

Private Label
Expand Private Label Categories

Integrated Brand Communication

Vendors to increase co-branded advertising campaigns

Leverage Selling General and Administrative Expenses (SG&A)

Increasing Efficiency in the transportation system/ SupplierDistribution center- Store and within the store

 Win. Play. Show Reducing products and suppliers/ Suppliers to reduce prices/ Optimizing the products in each of its stores, for this products were put into three categories Win/Play/Snow
Win
Top priority categories/ gain market share/ lead with price and value

Play
Strategic categories/ a balance growth and profit in the context of overall market performance

Show
Reduce the number of products they stock, but not exit the category

 Fast. Friendly. Clean Improving the customers in-store experience as well as becoming more efficient in and out of each store
Merchandise Flow
48 hours Merchandise Replenishment Cycle/ Cross-dockingreduced operating costs, reduces inventory levels and eliminates unnecessary handling and storage of product

Zero Waste Facilities

Sustainable Green Policies/ maximize the efficiency from the raw material phase to the manufacturing phase, supplier to consumer pantry to consumption with the ultimate goal of Zero Waste

Supply Train Transformation

Improving efficiencies in the supply chain and especially in transportation, 21% increase in fuel efficiency, 6.5% reduction in empty truck miles

2011 Scenario
Wal-Mart lost 1st position among Fortune 500 to Exxon Weakening of Dollar to the Yuan Stress on a unionized workforce Tough competition from Target, providing better variations of products. Apart from that numerous one dollar stores are giving Wal-Mart tough time Saturation of American market- 95% of Americans live in a 15 mile radius of a Wal-Mart/ one quarter of American population visit Wal-Mart every week Wal-Mart criticized for being futile for American economy

Strength
Strong Brand Name It has ability to make strategic adjustments

Weakness
Its standing in the supply chain

Its relationships with clients

It has poor sales in clothing merchandise It is not known reseller of garments

Its supply chain system as the products are kept in a secure place until it is needed
Its website is easy to use, attractive, and informative

SWOT
Opportunity
To attract clients who have varied tastes It is to improve the features of their website

Threat
It is the competitors Competitors could have a better standing in the supply chain The laws in the country they are operating in The tariff and taxes that the company has in different countries The culture of some clients in other countries they operate in

It should device faster means to deliver supplies

It is to reach out to newer territories

Future outlook
Long-term Objective Sales growth of 5% to 7% in the fiscal 2012-13 Increase its overall square footage by 36 million to 39 million square feet in 2012 and by 45 million to 49 million square feet in fiscal 2013 International return on investment should rise 3 to 4% between fiscal 2012 and 2017

Short term objectives

Same Store Sales a 1% drop to a 1% increase - in the fiscal third quarter, which ends in October 2012 lowering capital spending at the U.S. Wal-Mart division by 7.4% raising Wal-Mart international capital spending by 11.8% 130 to 135 Supercentres and 80 to 100 small-to-medium in 2012 Investing $2 billion over the next two years to keep its prices lower than those of competitors Wal-Mart's U.S. discount chain is resuming holiday layaways after a fiveyear hiatus heavily increasing its advertising spending as it tries to win back lowerincome shoppers Increasing e-commerce through www.walmart.com by 2-3% by the end of 2012

Functional Tactics
Maintaining the revenues through the grocery and private label products Embracing social media and developing mobile strategies
My Local Wal-Mart Facebook Grabble- receipts on mobile Mobile marketing through Proximity Technology

10,000 items back to stores, propelling sales of goods Sam's Club adding 5 new warehouses in US to increase loyalty/membership in the Q1 of 2012, Expanding or relocating over 10 warehouse clubs over the Q2 and Q3 Association with Apple Inc. to sell Apple merchandise as Sams Club Launching smaller format stores like Wal-Mart Express Wal-Mart Christmas Price Guarantee/ Black-Friday to create positive brand recognition Stock based on customer demand rather than low prices (matching the competitors pricing sometimes)

Failed Strategies South Korea- 2006

Failure to localize and poor product positioning Failure to adapt its business model to local needs thus loosing its competitive advantage South Koreas seek out more luxurious products and surroundings, and are not susceptible to the warehouse-style design of retail outlets preferred by many western companies Inability to partner with a local company . Unlike its successful competitor TESCO which partnered with one ( Samsung was the partner)

Failed Strategies Germany- 2009

Lost attention of how to execute its strategy Inability to gauge the service mindset prevalent in Germany It couldnt benefit especially from its usually efficient supply chain, since it didnt have the buyer power in Germany as it has in the US German customers didnt care about good customer service when it comes to grocery and department stores Poor customer service provided by its German employees

About to fail - Mexico

In 2005 Wal-Mart's Vice Chairman and a corporate Vice President tried to use the companys size to wring more out of gift card and merchandise suppliers. Both were caught and fired for fraud. In 2006 Wal-Mart hired a new head of marketing to update the strategy, and improve the stores and merchandise. But upon realizing her recommendations violated the existing WalMart industrial strategy the company fired her after only a few months, and went public with character besmirching allegations that she and an ad agency executive were having an affair. In 2008 a Wal-Mart employee became an invalid in a truck accident. When the employee won a lawsuit related to the accident, WalMart sued the invalid employee to return $470,000 in insurance payments made by Wal-Mart. In a cost saving move, Wal-Mart moved its marketing group under merchandising, in order to reduce employees and the breadth of merchandise, as well as keep the company more tightly focused on its historical strategy.

Global Challenges
Inability to increase the same store sales Reluctance of consumer to spend Global Financial crisis Emergence of lower priced rivals and shift in psychology Call for unionizing workforce Weakening of Dollar

Challenges in India
Protests from small businesses ( Kirana) FDI restrictions no policy clarity Indias poor infrastructure image Poor public image predatory pricing , unemployment Indias diversity and heterogeneity Competition from India Retailers including Shoppers Stop , Pantaloon , Big Bazaar , etc. Regional governments are very strong politically

Conclusion
Recent years have seen a sluggish growth for Wal-Mart specially due to saturation of American market Criticism of Wal-Mart as an employer and pay-master has to be tackled soon to prevent the company image from harm Growing threat from competitors like Target, Costo, Amazon, Tesco are challenging Wal-Marts position as industry leader Governance issues have to be sorted out at the earliest Could expand in newer formats such as online retail in the emerging markets It should not tinker with its supply chain as that is its brand identity It should work on its image and get its strategies sorted out. Before execution can commence.

Thank You