Wal-Mart 2007

Critical facts
 Wal-Mart was founded in 1962, by Sam Walton
 It become the second largest company in the world in
2007 with sales of $354.
 During 2007 Wal-Mart managed more than 6700 stores
in 14 countries.
 Discount stores 1074

 Supercenters 2257

 Sam’s clubs 579

 Neighborhood markets 112

 International units 2760

 The international stores accounted for 22% of the

company revenue.
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
Company problems
 Wal-Mart was not able to sustain its current rate of
sales growth. Itsgrowth dropped from 10.1% in 2005
to 7.8% in 2007.
 The company faced challenges, both external and
internal, pushing its price per share under 50$.
 Deterioration of the company image related to low
pay, benefit cuts, failure to enforce child labor and
worker safety rules, discrimination strategies.
 Failure to adapt to local market in its foreign segment.

 lagging stores sales.

 Wal-Mart is trying to find right formula to compete

against target and other mass retailers.

 Company current strategies
 Business level
 Wal-Mart has the business strategy of Low Cost Leadership.
 The company do not do much to differentiate itself from its
competitors.
  Wal-Mart has huge influence over its suppliers, It can dictate prices
and even change suppliers manufacturing processes in order to gain
more savings.
 Corporate level
 Wal-Mart expanded from rural markets to urban markets.
 The company is focused on improving operations in merchandising and
store formats and on pursuing major initiatives related to human
capital and public relations.
 Change in store and format and merchandise strategy to appeal to
upscale customers.
 International Level
 Aggressive expansion in to international markets.
 Currently the company has 2760 stores in 14 countries.
 Expansion through acquisition, partnership, and go it alone ventures.


General environment
 Economic segment
 Global recession : Consumers would spend less money than they
usually spend. This trend will further threaten Wal-Mart sales
growth.

 Social Segment.
 Law-suit by female employees who accused Wal-Mart of
discrimination.
 Computerized schedule system that will reduce the employees
comfort of life.
 Negative employer image: low wages, diminishing benefits.

 Global segment.
 The international segment earned only 22% of the company
revenues.
 Industry 5 forces analysis.

Bargaining Power of Suppliers: Wal-Mart has strong

bargaining power over its suppliers . The company uses its
strength over suppliers by threatening to switch to a
different supplier during price negotiations.
High barriers to entry : Wal-Mart has an outstanding

distribution systems, ideal locations, brand name, and

financial capital. These valuable assets increase the barriers
to new entrants.
Substitute Products: there are few substitutes that offer

both convenience and low prices.  Customers can shop in

many specialty stores for products but will forgo Wal-Mart
low prices. 
The industry is in mature life cycle.

Is the industry attractive? NO

 Major Competitors
 Target
 Better image, no price based competition.
 Attracts more upscale clientele willing to pay a premium
price.
 Lower market share, No international presence, Inferior
supply chain, lower inventory turnover, lower sales per
square feet.
 K-Mart
 Higher urban presence, significant market share.
 Lower sales per square feet, poor image due to chapter 11,
lower marketing budget.
 Costco
 More upscale image than Sam’s club, big market share in
wholesale warehouse segment , good employer image.
 Metro (Germany) and Carrefour ( France)
 Good image and significant presence in the global arena.
 Important value chain areas
 Inbound logistics: Wal-Mart is able to offer low
prices and maintain a constant level of inventory
by using inventory replenishment system
triggered by point-of-sale purchases that is
second to none.

 Technology Development: World’s largest
private satellite communication systems which
connects all Wal-Mart stores in to one network.


 Procurement: The company was able to acquire

products at lowest possible price by dictating
prices and changing suppliers manufacturing
processes.
 Financial Information
KM ART KO HLS TARG ET W ALM ART
200820072006 200820072006 200820072006 200820072006
R e v e n 1u 6e , 2 1197 , 2 5168 , 6 4 71 6 , 3 8196 , 4 7145 , 5 4 46 4 , 9 46 83 , 3 65 79 , 4 9 40 0 1 , 2347 48 , 7394 98 , 6 5 0
C O G 1S 2 , 4 4123 , 2 0124 , 0 6 11 0 , 3 3140 , 4 6 90 , 8 9 1 4 5 , 7 64 61 , 8 93 59 , 3 9 39 0 6 , 1258 86 , 5216 54 , 1 5 2
G r o s s P 3r ,o 7f i7t 74 , 0 5 44 , 5 8 6 6 , 0 5 56 , 0 1 45 , 6 5 4 1 9 , 1 82 21 , 4 72 20 , 0 9 19 9 , 4 49 92 , 2 88 44 , 4 9 8
G r o s s P r o f i t 2 M3 . a3 r0g2 %i3n . 5%02 %4 . 6 0 %3 6 . 9 03 %6 . 5 03 %6 . 4 0 %2 9 . 5 03 %3 . 9 03%3 . 8 0 %2 4 . 5 02 %4 . 4 02%4 . 2 0 %
S G & A3 , 4 5 63 , 5 3 73 , 6 2 3 3 , 9 3 63 , 6 9 73 , 4 0 1 1 2 , 9 51 43 , 7 01 42 , 8 1 97 6 , 6 57 10 , 2 86 84 , 0 0 1
D e p r e c i a t1 i 3o 8n 1 1 6 7 7 5 4 1 4 5 2 3 8 8 1 , 8 2 61 , 6 5 91 , 4 9 6 6 , 7 3 96 , 3 1 75 , 4 5 9
O p e r a t i n g I n1 c7 o2 m 4e 0 2 9 4 8 1 , 5 5 71 , 8 2 51 , 8 4 1 4 , 4 3 05 , 2 7 25 , 0 6 9 2 3 , 0 82 22 , 3 02 10 , 7 7 7
O p e r a t i n g 1 M. 0 a6 r %2g i .n3 3 %5 . 0 8 % 9 . 5 0 %1 1 . 1 01 %1 . 8 0 %6 . 8 0 %8 . 3 0 %8 . 5 0 % 5 . 7 0 %5 . 9 0 %6 . 0 0 %

S t o r e s1 , 3 6 81 , 3 8 21 , 3 8 8 1 , 0 0 4 9 2 9 8 1 7 1 , 6 8 21 , 5 9 11 , 4 8 8 7 , 8 7 37 , 2 3 96 , 0 1 4
E m p l o 1y 3e 3e ,s 0 0 0 1 2 6 ,0 0 0 3 5 1 ,0 0 0 2 ,1 0 0 ,0 0 0
* In M illio n s e x c e p t
s t o re s a n d e m p lo y e e s
Key financial ratios
Inven toryTurnov
er 2008 2007 2006 2005
Target 6
.429 6
.51
7 6
.225 5
.863
W al-m art 8.1
4 7
.85
4 7
.647 7
.688
Km a rt 3
.688 3
.98
6 5.7
5 4.4
8

ROA 2008 2007 2006 2005

T
arget 6
.39
4 7
.46
2 6
.88
1 5.8
37
Wal-m art 7
.87
9 8
.05
5 8
.12
7 8
.54
Kma rt 3
.01
5 4
.95
6 3
.10
1 1
2.785

S
alesp ersqua
refoot 2
006 2
005 2
004 2
003
Wal-M a rt $
412 $
358 $
423 $
409
T
arget $
310 $
295 $
289 $
223
Kma rt $
217 $
240
S.W.O.T analysis
 Strengths  Opportunities
 Cost advantage  Improve its image
 Ability to deliver low prices  Further improve its supply chain
 The best supply chain in the  Attract customers from outside
industry the company's traditional
 Good relationship with customer base.
suppliers  Entrance in to underserved
 Popular brand name markets( Africa ).
 Weaknesses  Threats
 Deteriorating image  high competition in USA and
 Lower sales growth ( Target) overseas

 Highly saturated industry

 Online retailers
 7 s analysis
 Strategy: The company strategy is to provide the lowest prices
and to provide convenience by allowing customers to find
everything they need.


 System : Information Technology system including computers,

networking to reduce inventories and speed up deliveries. 
 working with suppliers to improve production processes so
the company pass the savings to its customers.
 Computerized schedule system
 Staff is committed to providing the lowest possible prices. 
The workers skills are geared to find inefficiencies and towards

decreasing prices. 
 Structure:
Company stores are designed in structural advantage and

strategy that Wal-Mart uses. ( one stop shopping)

Wal-Mart has designed management structure that allowed the

company to eliminate its regional office

The company places stores in strategic locations and drives

traffic using convenience and low prices.

 Shared values: always low prices

 Strategy Formulation.
 Wal-Mart should further its expansion in to the major cities of
the United Sates and under populated western states.
 Wal-Mart needs to expand further into international markets. 
The company should consider strategic alliances with
existing companies where possible because it will gain
experience for that particular market and the existing
structure. 
 The company should further differentiate its store formats
based on demographic groups
 Wal-Mart should continue its low cost leadership strategy by
improving its inventory management system, create better
relationship with its suppliers and continue gaining
efficiencies through human resource management.
 Improve its human resource management image :
 The company must improve its reputation in HRM in order to
gain back some of its lost customers.( 8% of its customers. )

 Strategy implementation
 Open stores in cities like Chicago, Boston. (negotiate with unions)
 Open stores Midwestern and western states.
 Expand in to under served markets ( Africa).
 Attract upscale clientele (Target clientele) in the urban areas by
building upscale stores and offer more brand products in its
stores.
 Improve the supply chain by looking for suppliers in countries
with lower labor cost then China. (India, African countries)
 Further educate the suppliers and improve IS.
 Start joint ventures with retailers in countries serving different
cultures. ( Japan, Germany).
 Build store models appropriate for the different countries.
 Enhanced research of local cultures and devise a plan to modify
Wal-Mart culture before entering a new market.
 Increase workforce efficiency and increase rate of pay in order to
reduce employee turnover and improve brand image.
 Increase promotion of women and minorities in to management
positions.
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