Post on 18-Nov-2014
description
MGSSS
• Went from just over 100 stores to 859 by end of 1985
• Average store size from 47,000 to 63,000 in 1985
• Highest sales per square foot amongst discount stores
• Lowest inventories and highest inventory turnover in industry
• Successful entry into warehouse clubs in 1983
External Factors
Environment• PEST Analysis
Industry•Porter’s Five Forces
Competition•Side-by-Side Comparison
Market Opportunities
Resources & Capabilities
Environment
Industry
Competition
Strengths & Weaknesses
Architecture, Routines &
Culture
Nature of Change
Impact Opportunities
Threats Strategic Response
POLITICAL
Establishment of Standards i.e.Fair Packing and Labeling act, 1970
Customers were interested in lower priced goods from Self Service Retailers
Sell branded products through discount stores
95 % of non clothing merchandise was branded and nationally advertised
ECO-NOMIC
Stagflation, Oil Crisis of 1973,Stock Market Crash, 1973 – 1974,Recession, 1980 -1982
Rise in price of products because of Cost push inflation ; Consumers looking for Cheap products (following Oil Crisis)
Earn profits by opening discounted stores in less populated areas
Highly volatile USD (1973-1985) could raise the price of goods imported by Wal-Mart, Decrease in household demand on account of listed economic events
Opening Discount stores throughout South west US,Use of Inexpensive fixtures to keep fixed costs lower
PEST AnalysisPEST Analysis
SOCIAL
Rise in population in Sunbelt, Better informati0n, TV advertising Increased demand
Increased demand ,Customers would try the product with right to return the product
Increased population means overall increase in demand
More competition from other discount stores, including K - Mart
Large no. of discount stores in less populated areas, Use of “No questions asked return policy”
TECHNOLO-GICAL
Birth of Modern Computing, Micro processor was launched in 1970
Use of modern Technology to reshape operations
Improve efficiency in purchasing & distribution,Reduce labor costs & overheads by investing in technology
In store terminals linked to Central computer, Central Computer linked to the computers of multiple Vendors. Distribution Center located close to Wal-Mart stores, Electronic Scanning of Uniform Product code, Use of computer program to generate relevant merchandise mix for different stores
Threat of New Entrants
Power of BuyerIntensity of Competitive Rivalry
Threat of Substitutes
Power of Supplier
High
Medium
Low
Other discount stores:- Dayton-Hudson
- Heck’s- K-Mart
- Ross’s Stores- Zayre
Potential of Supermarkets
In this market, there are not many substitutes that offer low pricing.
Require high capital investment:- Warehouse ($5M) 1970- UPC ($500K/store) 1983
- Real Time Communication ($20M) 1986- IT infrastructure: Inv, Sales, Central Comp
1971- Distribution Centre ($5M) 1971
- Opened 3 more in next 7 years
Wal-Mart bargained very hard with its suppliers.
Took no more than a fifth of its volume from any one vendor. In 1985, no vendor
accounted for more than 2.8% of the company’s total purchases.
No buyer controls the major supplyof Wal-Mart.
Wal-MartWal-Mart CompetitionCompetition
Store Mgmt orders product based on store forecast
Centralized Sales Forecasts
Executives are located at HQ with wkly presence in geo.
locations
Executives are located in geographic regions across the
countryStore Mgmt set prices Centralized pricing
Advertising was scheduled 13 times per year
Advertising was sporadic to drive sales
Focused on volume of hard goods
Focused on volume of soft goods
Lowest pricing Low pricing
Proactive in marketing Reactive in marketing
Low in-store inventories High in-store inventories
Direct shipping form vendors Smaller portion was shipped directly from vendors
Competitive Competitive AnalysisAnalysis
Internal Factors
ArchitectureRoutinesCulture
Strengths & Weaknesses
Market Opportunities
Resources & Capabilities
Environment
Industry
Competition
Strengths & Weaknesses
Architecture, Routines &
Culture
Architecture Routines Culture
859 stores, 5 distribution centers
Entered markets where no competition existed
Tightfisted pay scales
One third of stores in areas with no competition
Kept minimal inventoryStore managers have
considerable autonomy
Product orders based on store needs rather than
centralized forecasts
Emphasized branded hard goods
“Our people make the difference”
Two-step hub and spoke distribution with cross-
docking
Adopted new technology early
Executives spent most of their week in the individual stores
• Lowest cost structure
• Highest sales per square foot of store space
• Unmatched efficiency in distribution and communications
• Margins on hard goods not as high as soft goods
• Employee compensation not aligned with emphasis on “people”
• 95% of all stores leased