STRATEGI MANAGEMENT

CASE STUDY: WALMART STORES

PREPARED BY: AHMED HASSAN HADI (A101190313)

PREPARED FOR: Dr Tengku

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EXCUTIVE SUMMARY This report involves analysis of Wal-Mart Stores, and how it has changed over the years. In the following report, a brief introduction and a brief background will be given for the company and the report will then go on to take into account various matrixes that will help us identify which strategies need to be adopted by Wal-Mart Stores. Furthermore, the vision and mission statement for the company has also been identified; in addition, the objectives and strategies have also been put forward. Moreover, as mentioned already, matrixes such as external factor evaluation matrix, internal factor evaluation matrix, competitive profile matrix, SWOT matrix, BCG matrix, IE matrix, SPACE matrix and the Grand Strategy matrix have all been identified. Finally, the report will express alternate strategies for Wal-Mart Stores and evaluate in order to find out which strategy is suitable for Wal-Mart Stores in order to be effective and success in the future.

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1.0 INTRODUCTION Wal-Mart Stores, Inc is an American public corporation that runs a chain of large discount department stores and a chain of warehouse stores. In 2009 and 2010 it was the world's largest public corporation by revenue, according to the Forbes Global. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. Wal-Mart, headquartered in Bentonville, Arkansas, is the largest majority private employer and the largest grocery retailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business. It also owns and operates the Sam's Club retail warehouses in North America. Wal-Mart has 8500 stores in 15 countries, with 55 different names. The company operates under its own name in the United States, including the 50 states. It also operates under its own name in Puerto Rico. Wal-Mart operates in Mexico as Walmex, in the United Kingdom as Asda and Japan as Seiyu,. It has wholly-owned operations in Argentina, Brazil, and Canada. Wal-Mart's investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, while it was forced to pull out of Germany and South Korea when ventures there were unsuccessful. 1.1 BACKGROUND No word better describes Wal-Mart than growth. In 1945, Sam Walton opened his first Ben Franklin franchise in Newport, Arkansas. Living in rural Bentonville, Arkansas, at the time, Walton, his wife Helen, and his brother Bud operated the nations most successful Ben Franklin franchises. We were a small chain, said Walton of his 16 store operation. Things were running so smoothly that we even had time for our families. What more could a man want? A great deal as it turned out. Sam and Bud Walton could see that the variety store was gradually dying because supermarkets and discounters were developing. Far from being secure, Walton knew that he was under siege and decided to counter attack. He first tried to convince the people in top management of Ben Franklin to enter discounting. After their refusal, Sam Walton made a quick trip around the country in search of ideas. He then began opening his own discount stores in small Arkansas towns like Bentonville and Rogers.
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The company opened its first discount department stores (Wal-Mart) in November 1962. The early stores had bare tile floors and pipe racks. Wal-Mart did not begin to revamp its image significantly until the mid- 1970s, and growth in the early years was slow. However, once the company went public in 1970s, sales began to increase rapidly. When it initially went public, 100 shares of Wal-Mart stock would have cost $1,650. Now, those 100 shares are worth over $6million. Such retailers as Target, Venture, and Kmart provided the examples that Wal-Mart sought to emulate in its growth. The old Wal-Mart store colors, dark and white (too harsh), were dumped in favor of a three- tone combination of light beige, soft blue, and burnt orange. Carpeting, which had long been discarded on apparel sales floors, was put back. New racks were put into use that displayed the entire garment instead of only an outer edge. Sam Walton died in 1992. Bud Walton died in 1995. Wal-Marts 1995 annual report was dedicated to Bud. Sam Walton once said about Bud, Of course, my number-one retail partner has been my brother, Bud. Buds wise counsel and guidance kept us from many a mistake. Often, Bud would advice taking a different direction or may be changing the timing. I soon learned to listen to him because he has exceptional judgment and a great deal of common sense. In 2000, H. Lee Scott was named president and CEO of Wal-Mart. In February 2009, Mike Duke became the new president and CEO when Scott retired from the position. According to duke, our company is so well positioned for todays difficult economy and tomorrows changing world. We have an exceptionally strong management team, able to execute our strategy, perform every single day, and deliver results.

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1.3 VISION STATEMENT "Promotion of ownership of ethical culture" 1.4 MISSION STATEMENT Wal-Mart does not officially have a mission statement according to the case study but nowadays they officially published this mission statement. We save people money so they can live better.

1.5 THE COMPANYS BUSINESS STRATEGY The Business strategies Wal-Mart uses and how they differentiate their services/products. There are 3 generic business strategies and they consist of the Focus strategy, the Differentiation strategy, and Overall Cost leadership 1.5.1 Focus strategies Focus strategy is usually defined as focusing on offering products and services to a particular market segment or buyer group, within a segment of a product line, and/ or to a specific geographic market. 1.5.2 The Differentiation strategy: The Differentiation strategy is defined as offering a product or service that is perceived as unique in the marketplace. 1.5.3 Overall Cost leadership: Wal-Marts strategy is Overall Cost Leadership, offering their customers great quality service and products at a lower price than their competition. Overall Cost Leadership is defined as offering the same or better quality product or service at a price that is less than what any of the competition is able to do

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1.6 COMPETITORS Wal-Mart's primary competition includes department stores like Kmart, and Target Corporation. Competitor of Wal-Mart's Sam's Club division is Costco Wholesale. 1.6.1 Target Corporation Target Corporation, originally the Dayton Dry Goods Company and later the Dayton Hudson Corporation, is an American retailing company, founded in 1902 and headquartered in Minneapolis, Minnesota. It is the second-largest discount retailer in the United States, preceded by Wal-Mart. The company is ranked at number 38 on the Fortune 500 as of 2012 and is a component of the Standard & Poor's 500 index. Its bulls eye trademark is licensed to Wesfarmers, owners of the separate Target Australia chain which is unrelated to Target Corporation. The first Target store was opened in 1962 in nearby Roseville, Minnesota. Target grew and eventually became the largest division of Dayton Hudson Corporation, culminating in the company being renamed as Target Corporation in August 2000. On January 13, 2011, Target announced its expansion into Canada. Target Canada will operate 100 to 150 stores by 2013, through its purchase of leaseholds from the Canadian chain Zellers. 1.6.2 Kmart Kmar is an American chain of discount stores headquartered in the United States. The chain purchased Sears in 2005, forming a new corporation under the name Sears Holdings Corporation. The company was founded in 1962 and is the third largest discount store chain in the world, behind Wal-Mart and Target, with stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Guam (which houses the world's largest Kmart). As of January 29, 2011, Kmart operated a total of 1,307 (6 closing by early 2011) Kmart stores across 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands. This store count included 1,278 discount stores, averaging 93,000 sq ft (8,600 m2), and 29 Super Centers, averaging 169,000 sq ft (15,700 m).

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Kmart became known for its "Blue Light Specials." They occurred at surprise moments when a store worker would light up a mobile police light and offer a discount in a specific department of the store. At the height of Kmart's popularity, the phrase "attention Kmart shoppers" also entered into the American pop psyche, appearing in films and other media such as Troop Beverly Hills, Six Days Seven Nights, Rain Man, Beetle juice, and Dawn of the Dead. Kmart's world headquarters was located in Troy, Michigan, but since the purchase of Sears, has been relocated to Hoffman Estates, Illinois. Kmart also exists in Australia and New Zealand (see Kmart Australia), although it now has no relation to the American stores except in name, after U.S. equity in the Australian business was purchased in the late 1970s. 1.6.3 Costco Wholesale Costco Wholesale Corporation is a membership-only warehouse club that provides a wide selection of merchandise. As of July 2012, it is the second largest retailer in the United States, the seventh largest retailer in the world and the largest membership warehouse club chain in the United States. Costco is headquartered in Issaquah, Washington, United States] and was founded in 1976 in San Diego,CA with its first warehouse in Seattle. Today Costco has a total of 626 locations in the UK (23), Australia (3), Canada (85), Mexico (33), Taiwan (9), South Korea (9), Japan (15), and the United States(449).

2.0 FINANCIAL RATIO ANALYSIS

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Financial ratios are computed from an organizations income statement and balance sheet. Computing financial ratios is like taking a picture because the results reflect a situation at just one point in time. Comparing ratios over time and to industry average is more likely to result in meaningful statistics that can be used to identify and evaluate strengths and weaknesses. Key financial ratios can be classified into the following five types: 2.1 LIQUIDITY RATIOS Liquidity ratios measure a firms ability to meet maturing short-term obligations. Liquidity ratios consist of two parts one is called current ratio and the one is called quick or acidtest ratio. Ratio Current Ratio Formula Current assets / current liabilities 2008 48020/ 58478 = 0.82 2009 48949/ 55390 = 0.88

From the above calculation we can conclude that the company capability for every $ 1 of current liability, the company ability $ 0.82 of its current assets which means the company is recommended to increase its current ratio in the fiscal year 2008 . However, in year 2009 the above calculation indicated that the company capability for every $ 1 of current liability, the company ability $ 0.88 of its current assets which means the company is recommended to increase its current ratio. Ratio Quick Ratio Formula Current assets inventory / current liabilities Based on the above table, the quick ratio in 2008 implies that the company might have overstocking problem because the quick ratio is less than one and also less than the current ratio. Whereas, in 2009, there is a slightly difference between quick ratio of the company in 2008 and 2009. Meaning that, the company might have overstocking problem because the quick ratio is less than one and also less than the current ratio.
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2008 48020-35159/ 58478 = 0.22

2009 48949-34511/ 55390 = 0.26

2.2 LEVERAGE RATIOS Leverage ratios measure the extent to which a firm has been financed by debt. Such as debt-to total-assets ratio, debt-to-equity ratio, long-term debt-to-equity ratio, long-term debt-toequity ratio, and time-interest-earned (or coverage) ratio. Ratio Debt-to-Total-Assets Ratio Formula Total debt / Total assets 2008 29799+ 3603/ 163514 = 0.20 2009 31349+ 3200/ 163429 = 0.21

The above ratio for the year 2008 and the year 2009 indicates that the company is confidence to gain the trust from its creditors because the debt ratio is low. Ratio Debt-to-Equity Ratio Formula
Total debt/ Total stockholders Equity

2008 29799+ 3603/ 64608 = 0.52

2009 31349+ 3200/ 65285 = 0.53

Regarding to the above the table it is clear to said that the company uses less borrowing as the source of financing. When the company use less borrowing it is implied that the company is well dependable to creates its financing to operate its business by its own resources. Ratio Long-term debt- in Equity Ratio Formula Long-term Debt / Total stockholders Equity 2008 29799/ 64608 = 0.46 2009 31349 / 65285 = 0.48

The above ratio stated that the company relies on its stockholders equity rather than long term debt. In this sense the company prefer to ignoring to take long term debt when its stockholders fulfills its needs meaning that the company use its own sources of financing in the efficient way.

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Ratio Time-interest- earned

Formula Profits before interest and taxes ( PBIT)/ Total interest charges

2008 20159 / 1794 = 11.23

2009 20898 / 1900 = 11

Based in the above calculation of the time interest earned it can be said that Wal-Mart have good ability to fulfills interest obligations. Because the time interest earned measure the firms ability to cover its interest charges out of its operating profits. Based on this concept the higher the ratio the higher is the firms ability to fulfill interest obligations. Ratio Time-interest- earned Formula Profits before interest and taxes ( PBIT)/ Total interest charges 2008 20159 / 1794 = 11.23 2009 20898 / 1900 = 11

2.3 ACTIVITY RATIOS Activity ratios measure how effectively a firm is using its resources. Activity ratios involve inventory turnover, fixed assets turnover, total assets turnover, accounts receivable turnover, and the average collection period. Ratio Inventory turnover Formula 2008 2009 401244 / 34511 = 11.63

Sales / Inventory of 374307 / 35159 finished goods = 10.65

The above ratio determines that (360/11.63) takes around 31 days to turn its stock into sales. In other words there is a slightly improvement in regards of inventory turnover than 2008. This ratio determines that (360/10.65) takes around 34 days to turn its stock into sales.
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Ratio Fixed Turnover

Formula Assets Sales / Fixed Assets

2008 374307 / 93725 = 3.99

2009 401 244 / 92856 = 4.32

The above ratio indicates that the utilization of the companys fixed assets is approximately 4 times of its sales. The above ratio indicates that the utilization of the companys fixed assets is more than 4 times of its sales. Ratio Total Assets Turnover Formula Sales / Total Assets 2008 374307 / 163514 = 2.29 2009 401244 / 163429 = 2.46

The above figure determines that the company total assets turnover is more than 2 of utilization of its total assets. The company is recommended to increase its total assets turnover. This figure determines that the company total assets turnover is more than 2 of utilization of its total assets. The company is recommended to increase its total assets turnover. Ratio Accounts Turnover Formula receivable Annual credit Sales / Accounts Receivable 2008 374307 / 3642 = 102.78 2009 401244 / 3905 = 102.75

On the above table, the company account receivable turnover is 102, which express that the company is recommended to reduce this ratio and improve it to collect its debts from its customers from shorter time rather than collect its debts from its customer on 102 days.

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Ratio Average period

Formula

2008

2009

collection Accounts receivable / 3642 / 374307/ 365 3905 / 401244/ 365 Total credit sales / days 3.6 days 365 days days 3.6 days

Based on the above table , we can say that the company has a very good average collection period which is only around 3.6 days only and it is highly efficient that the Wal-Mart stores collect its money from its account receivable or its customers in a short time of period which means that the company absolutely doing well. 2.4 PROFATIBILITY RATIOS Profitability ratios measure managements overall effectiveness as shown by the returns generated on sales and investment. Profitability ratios include the following: stockholders equity (ROE), Earnings per share (EPS), and Price-earnings ratio. Ratio Gross profit margin Formula Sales- cost of goods sold / Sales 2008 374307- 286350 / 374307 = 0.23 100=23 % 2009 401244- 306158 / 401244 = 0.24 100=24 % Gross profit

margin, Operating profit margin, Net profit margin, Return on total assets (ROA), Return on

From the above illustration we can conclude that the ratio of the gross profit margin in 2009 indicated that how much the company has gained for every $ 1 sale made. From this ratio the company shows the efficiency of the company in controlling its costs of goods sold. A Wal-Mart store is a profitable company. Ratio Operating profit margin Formula Earnings before interest and taxes ( EBIT) /Sales 2008 21952 / 374307 = 0.034 x 100=3.4 % 2009 13400 / 401244 = 0.033 x100=3.3 %

Regarding to the above table Wal-Mart stores have gotten a very low operating profit margin because the industry average for operating profit margin suppose to be 17% . From the above
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calculation it is clear the gap is big between the average industry and Wal-Mart stores. So that, Wal-Mart is recommended to increase its operating profit margin. Since the operating profit margin is derived after deducting all cost and expenses perhaps the company has to look which kind of expenses can be eliminated. Ratio Price earnings ratio Formula 2008 2009 0.10 / 1.70 = 0.06

Market price per share 0.10 / 1.61 / earnings per share = 0.06

Based on the above mentioned, the price earnings ratio is the tool that used on the financial ratio that show how much investors are willing to pay the companys shares. This ratio measures the confidence in the firms future prospective. Based on the above ratio for Wal-Mart stores for the two executives years 2008 and 2009 the company price earnings ratio cannot motivate the investors to buy Wal-Mart shares because the earning is very low and it does not show the confidence of the investors. 2.5 GROWTH RATIOS Growth ratios measure the firms ability to maintain its economic position in the growth of economy and industry. Growth ratio involves the following functions: Sales, Net income, Earnings per share and Dividends per share. Ratio Sales Formula Annual percentage growth in total sales 2008 374307- 344759 / 344759 = 0.086x100= 8.6% 2009 401244- 374 307 / 374307 = 0.072 x100=7.2%

The above table expresses the growth in total sales for Wal-Mart Company in two consecutive years. However in 2009 Wal-Mart has slightly little bit difference than 2009. On the overall the company has gotten a good sales ratio in the both years. As well as, the company has to improve its ratio in the next coming years.

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Ratio Net income

Formula Annual percentage growth

2008 12731-11284 / 11284 = 0.04 x100 = 4%

2009 13400- 12731 / 12731 = 0.05x100%=5%

The above net income ratio is measuring the firms growth rate in profits. In regards of net income for Wal-Mart Company, the figures above indicted that the company got a good net income in the two consecutive years. Ratio Earnings per share Formula Annual percentage growth in EPS 2008 1.61 1.43 / 1.43 = 0.13 2009 1.70- 1.61 / 1.61 = 0.06

The above Earnings per share is one of the most widely ratios concerning common stock. As we can see from the above figure there was a decreasing for the earning per share for Wal-Mart stores which implies that Wal-Mart should look what is the reason for the earning per share to be decreased in 2009 and the company have to improve its earnings per share because a higher value indicates a higher profits per share . Since Wal-Mart company is profit oriented so it must concerned about this aspect.

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3.0 INTERNAL FACTOR EVALUATION MATRIX (IFE) IFE Matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business. Strengths: 1. Wal-Mart focuses on low cost, best value, greatest selection of quality merchandise and highest standards of customer service. (page. 242, paragraph 3, line1, 2, and 3). 2. Wal-Mart operated internationally in 13 countries and Puerto rico, with 762 discount stores and 436 supercenters. (Page 238, paragraph 7, line 9 and 10). 3. Wal-Mart has one the worlds largest private satellite communication systems, which enables it to control distribution. (Page 242, paragraph 6, line 9 and 10) 4. Wal-Marts sales rose from $374.3 billion in fiscal year 2008 to $401.2 billion in 2009 while net income rose from $12.7 billion to $13.4 billion. (Page 233, paragraph 3, line 2 and 3). Weaknesses: 1. Wal-Mart does not have a formal mission statement. (Page 233, paragraph 5, line 1). 2. Although these stores represent Wal-Marts heritage, they had become lost in the shuffle as the company opened 120,000 to 150,000 square- foot stores. (Page 238, paragraph 8, line 6 and 7). 3. The company avoids spending money on consultants and marketing experts.(page 246. Paragraph 2, line 3 and 4) 4. Sam's clubs were never designed to sell merchandise categories, but rather items. (Page 241, paragraph 3, line 1 and 2).

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INTERNAL FACTOR EVALUATION MATRIX (IFE)

Key Internal factors Strength Wal-Mart focuses on low cost, best value, greatest selection of quality merchandise and highest standards of customer service. (page. 302, paragraph 3, line 2, 3 and 4). Wal-Mart operated internationally in 13 countries and Puerto rico, with 762 discount stores and 436 supercenters. (Page 298, paragraph 7, line 9 and 10). Wal-Mart has one the worlds largest private satellite communication systems, which enables it to control distribution. (Page Wal-Marts sales rose from $374.3 billion in fiscal year 2008 to $401.2 billion in 2009 while net income rose from $12.7 billion to $13.4 billion. (Page 293, paragraph 3, line 2 and 3). Weaknesses Wal-Mart does not have a formal mission statement. (Page 293, paragraph 5, line 1). Although these stores represent WalMarts heritage, they had become lost in the shuffle as the company opened 120,000 to 150,000 square- foot stores. (Page 298, paragraph 8, line 6 and 7).

Weight

Rating

Weighted Score

0.20

0.80

0.09

0.27

0.15

0.60

0.10

0.30

0.07

0.14

0.16

0.16

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 The company avoids spending money on consultants and marketing experts. Sam's clubs were never designed to sell merchandise categories, but rather items. (page301, paragraph 3, line 1 and 2).

0.13

0.13

0.10

0.20

Total

2.60

After conducted the calculation for the internal analysis, the total weighted score is 2.60 which means the company has good internal strength and weakness because it is above the ideal value. 4.0 EXTERNAL FACTOR EVALUATION MATRIX (EFE) EFE matrix is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing. Opportunity: 1. Wal-Marts community involvement year after year is phenomenal. According to the chronicle of philanthropy, the Wal-Mart foundation is the largest corporate cash contributor in America. (Page 2465, paragraph 5, line 1, 2, and 3). 2. Wal-Mart maintains a strategic competitive focus on global positioning. (Page 242, paragraph 3, line 1). 3. Wal-Mart is in the retail business, which also includes Internet E-tailing (page 243, paragraph 1, line 1) Threats: 1. Nationally and internationally, Wal-Mart has been faced with the United Food and Commercial workers Union, trying to persuade employees to become part of the union (Page 242, paragraph 5, line 1 and 2).

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2. Target has now become a fierce competitor of Wal-Mart and is ranked second among discount retailers with sales of nearly $65 billion with 366,000 employees. (page 246, paragraph 4, line 1 and 2) 3. Most recent comparisons show that while the Sams club division of Wal-Mart brought in over $44billion in net sales while Costco finished the year at just over $72 billion.(246, paragraph 6, line 4 and 5)

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5.0 EXTERNAL FACTOR EVALUATION MATRIX (EFE)

Key external factors Opportunity Wal-Marts community involvement year after year is phenomenal. According to the chronicle of philanthropy, the Wal-Mart foundation is the largest corporate cash contributor in America. (Page 305,

Weight

Rating

Weighted Score

0.22

0.88

paragraph 5, line 1, 2, and 3). Wal-Mart maintains a strategic competitive focus on global positioning. (Page 302, paragraph 3, line 1). Wal-Mart is in the retail business, which also includes Internet E-tailing (page 303, paragraph 2, line1). Threats Nationally and internationally, Wal-Mart has been faced with the United Food and Commercial workers Union, trying to persuade employees to become part of the union (Page 302, paragraph 5, line 1 and 2). Target has now become a fierce competitor of Wal-Mart and is ranked second among discount retailers with sales of nearly $65 billion with 366,000 employees. 0.13 2 0.26 0.18 3 0.54 0.17 3 0.51 0.21 4 0.84

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 Most recent comparisons show that while the Sams club division of Wal-Mart brought in over $44billion in net sales while Costco finished the year at just over $72 billion. 0.09 1 0.09

Total

3.12

According to the above analysis we can conclude that the company is very good because the total weight score is higher than 2.50. The total score is 3.12 that mean the company can overcome its threats and can come across its opportunities.

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6.0 COMPETITIVE PROFILE MATRIX (CPM)

Wal-Mart
1

Costco Wholesale2 Score 0.60 0.75 0.40 0.50 Rating 3 4 3 1

Target4 Score 0.90 1.00 0.60 0.25

Critical success factors Financial position Price competitiveness Advertisement Global expansion Total

Weight
0.30 0.25 0.20 0.25

Rating 3 4 3 3

score 0.90 1.00 0.60 0.75

Rating 2 3 2 2

1.00

3.25

2.25

2.75

The competitive profile matrix for Wal-Mart Stores classifies the companys top competitors such as Costco Wholesale and Target. Companies are then evaluated on the basis of significant success factors. And the success factors are weighed from (0.0, not important to 1.0 very important) and the ratings pass on to the strengths and weaknesses by 4 being the major strength, to 1 for major weaknesses. According to the CPM table Wal-Mart Stores is the highest top performer with value of 3.25. Meanwhile, Target Corporation is the second top performer with value of 2.75 and Costco is third performer with value of 2.25.

1 2 3 4

http://en.wikipedia.org/wiki/Costco http://www.managementparadise.com/forums/marketing-management/209222-marketing-strategy-costco.html

http://media.corporate-ir.net/media_files/irol/65/65828/AP_Hi.pdf http://en.wikipedia.org/wiki/Target_Corporation
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7.0 SWOT MATRIX ANALYSIS SWOT Matrix Is a systematic approach used to identify strengths, weaknesses, opportunities and threats (SWOT) to assist the strategic planning process.

STRENGTHS 1). Wal-Mart focuses on low cost, best value, greatest selection of quality merchandise and highest standards of customer service. 2).Wal-Mart operated internationally in 13 countries and Puerto rico, with 762 discount stores and 436 supercenters. 3). Wal-Mart has one the worlds largest private satellite communication systems, which enables it to control distribution. 4). Wal-Marts sales rose from $374.3 billion in fiscal year 2008 to $401.2 billion in 2009 while net income rose from $12.7 billion to $13.4 billion.

WEAKNESSES 1. Wal-Mart does not have a formal mission statement. 2. Although represent these stores Wal-Marts

heritage, they had become lost in the shuffle as the company opened 120,000 to 150,000 square- foot stores. 3. The company money avoids on

spending

consultants and marketing experts. 4. Sam's clubs were never designed merchandise to sell

categories,

but rather items.

OPPORTUNITIES Wal-Marts

SO STRATEGIES

WO STRATEGIES

community 1). Maintain low cost leadership to 1). Spending more money on improve strategic competitiveness and involvement year after year consultants and marketing experts in business E-tailing. is phenomenal. According (S1, 02, 03) Product development order to improve business E- tailing to the chronicle of and to gain strategic

philanthropy, the Wal-Mart foundation is the largest corporate cash contributor

competitiveness. (W3, 02, 03) Market Penetration strategy

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in America. Wal-Mart maintains a 2). Develop business E-tailing by

strategic competitive focus getting the benefit of private satellite on global positioning. communication in order to maintain Wal-Mart is in the retail strategic competiveness. business, which also (S3, 02, 03) Product development strategy

includes Internet E-tailing

THREATS Nationally internationally,

ST STRATEGIES

WT STRATEGIES

and 1). Increase salary both nationally and 1). Create formal mission statement Wal-Mart internationally for the employees in to increase net sales. W1, T3) (Market Penetration)

has been faced with the order to prevent united food and United Commercial Food and commercial workers union. workers (S3, T1) (Horizontal Integration)

Union, trying to persuade employees to become part of the union Target has now become a fierce competitor of WalMart and is ranked second among discount retailers with sales of nearly $65 billion with 366,000

2). Add merchandise category to compete effectively with Target in order to increase market share. (W4, T2) (Market penetration)

employees. Most recent comparisons show that while the Sams club division of Wal-Mart brought in over $44billion in net sales while Costco finished the year at just over $72 billion.

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8.0 STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX The SPACE matrix evaluates different variables and assigns them a score considering how important they are for the situation of the company. It analyzes four different areas (two internal to the company and two external) that will represent four quadrants in a graphic. The purpose of this matrix is to situate the company in one of these four quadrants and give a suggestion.
Financial Position (FP) Stability Position (SP) +3 +1 +5 +2 +11 2.75

1. Liquidity 2. operating income 3. Inventory turnover ratio 4. Working capital Total Average

1. Competitive pressure 2. Barriers to entry into market 3. Ease of exit from market 4. Technological changes Total

-1 -3 -3 -2 -9

Average

-2.25

Competitive Position (CP)

Industry Position (IP)

1. Market share 2. product Quality 3. Technological Skill 4. Customer loyalty Total

-2 -3 -1 -4 -10

1. Growth Potential 2. Profit potential 3. Financial Stability 4. Ease of entry into market Total

+6 +5 +6 +7 +24

Average -2.5

Average

+6

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Calculation: X = IP+CP = 6 + (-2.5) = 3.5 Y= FP+CP= 2.75 + (-2.5) = 0.5

FP

CONSERVATIVE

+7 +6 +5 +4 +3 +2 +1

AGGRESSIVE

(3.5, 0.5)

CP -8 -7 -6 -5 -4 -3 -2 -1 -1 -2 -3 -4 -5 -6 DEFENSIVE -7 -8 COMPETITIVE + 1 +2 +3 +4 +5 +6 +7 +8 +9

IP

SP

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According to the above graph we can see that the company have aggressive stretagy which contains backward, forward, horizental integration, market penetration, market development, product development and diversification (related/ unrelated). 9.0 BOSTON CONSULTING GROUP (BSG) MATRIX The BCG matrix, invented by the Boston Consulting Group, is a tool that allows to classify and evaluate the products and services of a business. It is a decision making tool in order to balance the activities of a company among those which make profits, those who ensure growth, those which constitute the future of the firm or those who are its heritage. The BCG matrix is divided into four types of circumstances and they are the stars, cash, cows, dogs and questions marks. Company Wal-Mart Costco Target Sales in 2009 401,244 69,889 65,357 Sales in 2008 374,307 70,977 64,948

Relative Market Share Wal-Mart sales in 2009 = 401,244 Target sales in 2009 Market share = 65,357 = 65,357/401,244 = 0.16 Company Sales in 2009 Sales in 2008 Calculation Average Growth Rate Wal-Mart Costco Target Total 401,244 69,889 65,357 374,307 70,977 64,948 401,244 - 374,307/374,307= 69,889 70977/70977 = 65,357-64,948/ 64,948 = 7.2% (1.5%) 0.63 6.33

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Industry Growth = 6.33/3 = 2.11% Relative market share

High 1 High +20

Medum 0.50 0.16

Low 0.0

STARS

QUESTION MARK

2.11 Industry Growth Meduim 0

CASH COWS

DOGS

Low

- 20

In the above BCG Matrix express the relative market share and the industry growth rate of WalMart. The relative market share of Wal-Mart is 0.16% while the industry growth rate of 2.11% and the position lies in the first cell question mark which represents the strategies of market penetration, market development, product developmet and divestiture. Last but not least, the company has low relative market share but high industry growth rate.

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10.0 INTERNAL- EXTERNAL (IE) MATRIX The Internal external (IE) Matrix is a strategic management tool used to analyze working conditions and strategic position of a business. The Internal External Matrix or short IE matrix is based on an analysis of internal and external business factors which are combined into one suggestive model. The IE matrix is based on the following two criteria: Score from the EFE matrix -this score is plotted on the y-axis, and Score from the IFE matrix -- plotted on the x-axis.

THE IFE TOTAL WEIGHTED SCORES Strong 3.0 to 4.0 4.0 Grow and build I 3.12 3.0 EFE TOTAL WEIGHTED SCORE 2.0 3.0 Average 2.0 to 2.99 2.60 II 2.0 Weak 1.0to 1.99 1.0

III

IV

V1

VII 1.0

VIII

IX

1. IFE Total weighted score: 2.60 2. EFE Total weighted score: 3.12

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As mentioned in the above diagram, the total IFE weighted score of 2.60falls in X axis and the Total EFE weighted score of 3.12 falls in the Y axis. According to the IE matrix below, WalMart stores falls in the second cell and so as they should follow the strategy of grow and build. This strategy contains backward, forward, horizental integration, market penetration, market development, product development 11.0 GRAND STRATEGY MATRIX The grand strategy is a useful tool for creating different and alternative strategies for an organization. Grand matrix has four quadrants; each quadrant contains different sets of strategies and the entire firms along with their respective divisions must fall in one of the quadrant. This matrix has two dimentions competitive position and market growth. The following daigram is walmarts grand strategy matrix.

RAPID MARKET GROWTH

Quadrant II

Quadrant I

STRONG COMPETITIVE POSITION

Quadrant III Quadrant IV

SLOW MARKET GROWTH

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According to the Grand Strategy Matrix, the position of Wal-Mart Stores lies in the first quadrant which reveals that the company has a strong competitive position among the competitive market and very rapid market growth as the annual growth in sales exceeds above 5%. Furthermore, the strategies recommended are market development, market penetration, product development, forward integration, backward integration, horizontal integration, and related diversification.

12.0 THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM) The quantitive strategic planning matrix is a strategic tool that allows strategists to evaluate an alternative strategies objectivly, based on previously identified external and internal critical success factors. THE PREVIOUS STRATEGIES IN SWOT MATRIX SO Strategies: 1. Maintain low cost leadership to improve strategic competitiveness and business E-tailing. 2. Develop business E-tailing by getting the benefit of private satellite communication in order to maintain strategic competiveness. WO Strategies: 1. Spending more money on consultants and marketing experts in order to improve business E- tailing and to gain strategic competitiveness. ST Strategies: 1. Increase salary both nationally and internationally for the employees in order to prevent united food and commercial workers union. WT Stragies: 1. Create formal mission statement to increase net sales. 2. Expand the merchandise category in the market to compete effectively with Target in order to increase market share.

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Matching the new alternative strategy 1. Maintain lowcost leadership and spend more money to marketing experts in order to increase net sales (product development). 2. add merchandise category to compete effectively with Target in order to increase market share.(Market Penetration) The quantitative strategic planning matrix (qspm): Maintain low cost leadership and spend more money to Add merchandise category in the stores to compete effectively with Target in order to increase market share. (Market Penetration)

marketing experts in order to increase net sales.(product development)

Strengths Weight AS 0.80 TAS 3

AS 0.60

TAS

0.20

0.09

0.18

0.27

0.15

--

---

--

--

1. Wal-Marts sales rose from

0.10

0.40

0.30

$374.3 billion in fiscal year

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2008 to $401.2 billion in 2009 while net income rose from $12.7 billion to $13.4 billion.
Weakness

1. Wal-Mart does not have a formal mission statement. 2. Although these stores represent Wal-Marts heritage, they had become lost in the shuffle as the company opened 120,000 to 150,000 square- foot stores. 3. The company avoids spending money on consultants marketing experts.
4. Sam's

0.07

0.21

0.07

0.16

----

-----

-----

-----

0.13

0.52

0.39

and

clubs were never designed to sell merchandise categories, but rather items.

0.10

0.20

0.40

TOTAL

1.00

Opportunities

1. Wal-Marts

community

0.22

0.44

0.22

involvement year after year is phenomenal. According to the chronicle of philanthropy, the

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Wal-Mart foundation is the largest corporate cash

contributor in America. 2. Wal-Mart maintains a strategic competitive focus on global positioning. 3. Wal-Mart is in the retail
3 0.51 2 0.34 2 0.42 3 0.63

0.21

0.17

business, which also includes Internet E-tailing

Threat

1. Nationally and internationally, Wal-Mart has been faced with the United Food and

0.18

-------

-------

--------

-------

Commercial workers Union, trying to persuade employees to become part of the union.
2. Target has now become 4 0.52 3 0.39

0.13

a fierce competitor of Wal-Mart and is ranked second among discount retailers with sales of nearly $65 billion with 366,000 employees Most recent comparisons show that while the Sams club division of Wal-Mart brought
0.09 2 0.18 3 0.27

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in over $44billion in net sales while Costco finished the year at just over $72 billion.
Total 1.00

4.38

3.88

According to the above table, the total attractive score of QSPM of Wal-Mart stores, the first strategy, Maintain low cost leadership and spend more money to marketing experts in order to increase net sales.(product development) express that 4.38. whese as the second strategy which is Add merchandise category in the stores to compete effectively with Target in order to increase market share. (Market Penetration) have 3.88 total attractive score. So we can conclude that the first strategy has been chosen as the best strategy for Wal-Mart Stores to overcome its problems and succeed in the industry.

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CONCLUSION In conclusion , Wal-Mart is consieded as the largest retaliers company over the world. In regards of its financial ratio , the company has gain a good ratio which experss how the stronger the company is. Furthemore, in the internal factors, the company has many strengthes comparing to its weaknesses. And its net sales increasing year by year both domestically and internationally. In addition, Wal-Marts external factors, according to its opportuninites Wal-Mart foundation is the largest corporate cash contibutor in America and it is community involvement is phonomenal compare to its threats is United food and commercial workers union trying to persuade emplyees to become part of the unoin . On the other hand, Wal-Marts competitive profile matrix (CPM) one of its majorest competitors are Target corporation, Kmart, and Costco Whole Sales. According to the CPM matrix Wal-Mart is the top performed compare to its competotors . In addition, Wal-Marts Space Matrix its strategy aggressive stretagy which contains backward, forward, horizental integration, market penetration, market development, product development and diversification (related/ unrelated).Meanwhile , Wal-Marts grand matrix lies in the first quadrant which means the company has an excellent strategy position and also tells that the company has a strong competitive position among the competitive market and very rapid market growth as the annual growth in sales exceeds above 5%. According to the IE matrix, Wal-Mart stores falls in the second cell and so as they should follow the strategy of grow and build. This strategy contains backward, forward, horizental integration, market penetration, market development. Meanwhile the BCG Matrix of Wal-Mart Stores lies in the Question mark which means low relative market share but high industry growth rate. Lastly. Wal-Mart inoder to move forward, we recommended that Wal-mart uses product development strategy which comes out from the QSPM matrix. All in all in order to move forward Wal-Mart should apply this solid strategy in order to beat its competitors and increase its market share.

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