Wal-Mart Strategic Analysis- Kevin Go

8/2/2019 Wal-Mart Strategic Analysis- Kevin Go

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Strategic Analysis of Wal-Mart

Stores, Inc.

Submitted to: Nino Romyr Saavedra, MBA

Submitted by: Kevin Alexander T. Go


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IntroductionHistory of WalHistory of Wal--MartMart

Sales & Income TrendsSales & Income Trends

Challenges of WalChallenges of Wal--MartMartProfile of the CompetitorProfile of the Competitor

Profile of the IndustryProfile of the Industry

Industry Entry & Exit BarriersIndustry Entry & Exit Barriers

Vision & Mission of WalVision & Mission of Wal--MartMart

Objectives of WalObjectives of Wal--MartMart

Strategies and MatrixesStrategies and Matrixes


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Wal-Mart at a GlanceSam Walton founded WalSam Walton founded Wal--Mart Stores, Inc.Mart Stores, Inc.

Started out first as a Ben Franklin FranchiseStarted out first as a Ben Franklin Franchise

Main headquarters stationed at Bentonville, ArkansasMain headquarters stationed at Bentonville, Arkansas

Current CEO in 2003 is Harold Lee Scott, Jr.Current CEO in 2003 is Harold Lee Scott, Jr.

Currently employs 2.1 million employees (2009)Currently employs 2.1 million employees (2009)

Serves more than 200 million customers a week in 7,800Serves more than 200 million customers a week in 7,800retail units.retail units.

Operates in 15 countries only.Operates in 15 countries only.Slogans: Save money. Live better. Always low prices.Slogans: Save money. Live better. Always low prices.

Always.Always.


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HistorySam WaltonSam WaltonThe man behind it all.The man behind it all.

Born in a farmers family in Kingfisher, Oklahoma onBorn in a farmers family in Kingfisher, Oklahoma on

March 29, 1918.March 29, 1918.

Gave up his job and operated the nations mostGave up his job and operated the nations most

successful Ben Franklin Franchise.successful Ben Franklin Franchise.

Opened the first WalOpened the first Wal--Mart in 1962 at Rogers, ArkansasMart in 1962 at Rogers, Arkansas

Achieved higher sales volume by keeping sales lowerAchieved higher sales volume by keeping sales lower

than his competitors.than his competitors.

WalWal--Marts divisions: Discount stores, supercenters,Marts divisions: Discount stores, supercenters,

Sams Clubs and neighborhood markets.Sams Clubs and neighborhood markets.


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Sales & Income Trends

$137.60

$165

$191.30

$217.80

$244.50

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

1999 2000 2001 2002 2003

$4.40

$5

$6.29$6.67

$8.00

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

1999 2000 2001 2002 2003

Sales Trends (in billions) Net Income Trends (in billions)

Sales in the fiscal year ended January 31, 2003,increased by 12% in fiscal year to $244.5 billion whencompared with fiscal 2002 as illustrated in the graph.

Net income rose from $6.7 billionto $8.0 billion during that period of time.


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Challenges of Wal-MartPeople 50% turnover rate

Legal Issues Worlds most sued entity

because of its famously deep pockets.Growth Potential Global financial slowdown

and political instability.


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Profile of the CompetitorTarget Corporation - #2 discount chain (BehindWal-Mart)

Has more than 1,750 Target and SuperTargetstores in 49 states as well as an online businessat Target.com.

Carved a niche by offering more upscale, fashion-forward merchandise.

Issues a proprietary credit card,good only at Target.


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Profile of the IndustryIndustry size Retail industry is the 2nd

largest industry in the U.S. responsiblefor 12% of all U.S. employment.

Industry Profitability Includes 5,000stores with combined annual revenue of$125 billion.

Industry Seasonability Sales in the

industry remain stable throughout theyear. Typical trends for spring apparel,back-to-school-season, and theChristmas holiday season.


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Industry Entry & Exit BarriersFranchising

Small Store Presence (SSP) -

Low entry and exit barriers.Floor space requirement -

Needs extensive floor space

* When Exiting, a companyshould be aware of things likeindebtedness and its ability tomeet those obligations.


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V

ision & MissionVISION:

To become the worldwide leader in

retailing.

MISSION:

Wal-Marts mission is to help peoplesave money so they can live better.


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Objectives of Wal-MartDominate the retail market

wherever Wal-Mart has apresence.

Growth by expansion in the U.S.and Internationally.

Create widespread namerecognition and customer

satisfaction with Wal-Martbrand.

Branching out into new sectorsof retailing such as pharmacies,automotive repair, and grocery

sales.


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Strategies & MatrixesCPM

Wal-Mart

Target Kmart

Critical SuccessFactors

W R WS R WS R WS

Market Share 0.03 3 0.09 2 0.06 2 0.06

Inventory System 0.02 3 0.06 3 0.06 2 0.04

Financial Position 0.04 3 0.12 2 0.08 3 0.12

Product Quality 0.05 3 0.15 3 0.15 2 0.10

Consumer Loyalty 0.03 3 0.09 2 0.06 2 0.06

Sales Distribution 0.02 4 0.08 3 0.06 2 0.04

Global Expansion 0.03 2 0.06 2 0.06 2 0.06

Organizational

Structure

0.03 3 0.09 3 0.06 2 0.04

Production Capacity 0.01 4 0.04 2 0.02 2 0.02

Advertising 0.25 4 1.00 3 0.75 2 0.50

Customer Service 0.05 3 0.15 3 0.15 3 0.15

Price Competition 0.40 4 1.60 2 0.80 2 0.80

Management Expertise 0.05 3 0.15 2 0.10 3 0.15

Totals 1.00 3.65 2.41 2.14


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EFE Matrix

Key External Factors W R WS

OPPORTUNITIES

Acquisitions & Joint Ventureswith other global retailers

0.08 4 0.32

Merging markets in China,India, Brazil

0.12 4 0.48

Expanding Web Presence 0.10 3 0.30

Increase Online Sales 0.08 3 0.24

Acquiring rival firms 0.12 3 0.36

THREATS

Emerging competition, globallyand locally

0.10 4 0.40

Economic conditions,worldwide recession

0.15 4 0.60

Governmental regulation

0.05 3 0.15

Perceived company image 0.08 3 0.24

Slow market growth 0.12 3 0.36

Total 1.00 3.45


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IFE Matrix

Key Internal Factors W R WS

STRENGTHS

Low priced products 0.15 4 0.60

Powerful retail brand 0.11 4 0.44

One-stop shopping 0.11 4 0.44

Aid the economy by buyinglocally

0.08 4 0.32

Stock ownership and profitsharing for employees

0.05 3 0.15

Strong global supply chain 0.10 4 0.40

WEAKNESSES

Global company, only in 14countries

0.07 3 0.21

Standardized approach for everycountry

0.08 3 0.24

Lack of market research in othercountries

0.08 2 0.16

High turnover rate 0.12 2 0.24

Anti-union 0.05 2 0.10

Total

1.00 3.30


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SWOT MatrixSWOT Matrix Strengths:-Low priced products-Powerful retail brand

-One-stop shopping

-Aid the economy by buying locally

-Stock ownership and profit sharing foremployees

-Strong global supply chain

Weaknesses:

-Global company, only in 14countries

-Standardized approach for everycountry

-Lack of market research in othercountries

-High turnover rate

-Anti-union

Opportunities:

-Acquisitions & Joint Ventures

with other global retailers-Merging markets in China, India,Brazil

-Expanding Web Presence

-Increase Online Sales

-Acquiring rival firms

SO Strategies:

1.) Promote low priced products

internationally and through theinternet. (S1,S2,S6,O1,O2,O3,O4)

2.) Acquire competitors and establishjoint ventures in other countries.(S6,O1,O2,O5)

WO Strategies:

1.) Develop more market in other

countries.(W1,W2,W3,O1,O2,O3,O5)

2.) Give more benefits and perksfor employees to increaseemployee satisfaction globally.(W4,W5,O2)

3.) Be flexible when penetratingand developing in othercountriesmarkets.(W1,W2,W3,O1,O2,O5)

Threats:-Emerging competition, globallyand locally

-Economic conditions, worldwiderecession

-Governmental regulation

-Perceived company image

-Slow market growth

ST Strategies:1.) Use retail brand and supply chain tocompete globally.(S1,S2,S3,S6,T1,T2,T3,T5)

2.) Improve company image throughenvironmental awareness and improvebenefits for employees. (S2,S5,T2,T3,T4)

WT Strategies:1.) Establish more branches andfranchises outside the country.(W1,W2,W3,T1,T2)

2.) Improve compensation foremployees and management.(W4,W5,T2,T4)

3.) Control retailing marketsinternationally.(W1,W2,W3,T1,T2,T4,T5)


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Space Matrix

Financial Strength (FS) Ratings

-Liquidity

-Leverage

-Profitability

-Inventory Turnover

4

4

5

6

Industry Strength (IS)

-Financial Stability

-Productivity-Growth Potential

-Profit Potential

4

55

5

Environmental Stability (ES)

-Price range of major competitors

-Technological Changes

-Barriers of entry in international markets

-2

-4

-4

Competitive Advantage (CA)

-Market Share

-Product Quality

-Customer Loyalty

-Low prices of products

-2

-3

-3

-1


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ES Average -3.33 IS Average 4.75

CA Average -2.25 FS Average 4.75

Directional VectorCoordinates:

X Axis = CA+ IS = -2.25 + 4.75 = 2.5

Y Axis = ES+ FS = -3.33 + 4.75 = 1.42 (2.5 , 1.42)Aggressive


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BCG MatrixDivision Revenues ($) Profits ($) Relative Market

Share PositionIndustry Growth

Rate (%)

Wal-Mart Stores $ 157,121 $ 5,049 64.26 7.6%

Sams Clubs $ 31,702 $ 1,031 12.96 3.2%

International $ 40,794 $ 1,152 16.68 5%

Other $ 14,907 $ 807 6.1 8.7%

Total $ 244,524 $ 8,039 100 24.5%

Relative Market Share Position

Cash Cows III

Stars II64.26%

Question Marks I6.1%

Cash Cows III

12.96%16.68%

Dogs IV


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IE Matrix

I

WAL-MART

IIIII

IVIV VV VI

VII VIII IX

4.0 3.0 2.0 1.0

3.0

2.0

1.0

Total IFE Weighted scores

Total

EFE

Weighted

Scores


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Grand Strategy Matrix

Quadrant I Quadrant II

WAL-MART

1. Market Development

2. Market Penetration

3. Product Development

4. Forward Integration

5. Backward Integration

6. Horizontal Integration

7. Concentric Diversification

Quadrant III Quadrant IV

StrongCompetitivePosition

WeakCompetitivePositio

n

Slow Market Growth

Rapid Market Growth


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Key Factors Wal-mart JointVentur

e inEurope

JointVentur

e inAsia

External Weight AS TAS AS TAS AS TAS

Acquisitions & Joint Ventures with other globalretailers

0.08 4 0.32 4 0.32 4 0.32

Merging markets in China, India, Brazil 0.12 4 0.48 1 0.12 4 0.48

Expanding Web Presence 0.10 3 0.30 4 0.40 4 0.40

Increase Online Sales 0.08 3 0.24 3 0.24 3 0.24

Acquiring Rival firms 0.12 3 0.36 3 0.36 4 0.48

Emerging competition, globally & locally 0.10 4 0.40 3 0.30 2 0.20

Economic conditions, worldwide recession 0.15 4 0.60 3 0.45 3 0.45

Governmental regulation 0.05 3 0.15 3 0.15 2 0.10

Perceived company image 0.08 3 0.24 2 0.16 2 0.16

Slow market growth 0.12 3 0.36 2 0.24 3 0.36

Internal

Low priced products 0.15 4 0.60 4 0.60 4 0.60

Powerful retail Brand 0.11 4 0.44 4 0.44 4 0.44

One-stop Shopping 0.11 4 0.44 4 0.44 4 0.44

Aid the economy by buying locally 0.08 4 0.32 2 0.16 2 0.16

Stock ownership and profit sharing foremployees

0.05 3 0.15 3 0.15 3 0.15

Strong global supply chain 0.10 4 0.40 4 0.40 4 0.40

Global company, only 14 countries 0.07 3 0.21 4 0.28 4 0.28

Standardized approach for every country 0.08 3 0.24 2 0.16 2 0.16

Lack of market research in other countries 0.08 2 0.16 2 0.16 2 0.16

High turnover rate 0.12 2 0.24 2 0.12 2 0.12

Anti-union 0.05 2 0.10 2 0.05 2 0.10

TOTAL 1.00 6.75 5.87 6.32

*The firm should decide to go with joint ventures in Asia based on its attractiveness score of 6.32 which issignificantly higher than a joint venture in Europe of 5.87.


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RecommendedStrat

egies Market Development

- Increase market share into foreign countries

- Expand more into Europe and South America

BackwardI

ntegration- In order to keep prices low, cut costs in other areas

Concentric Diversification

- Improve grocery and food retailing section

- Introduce higher end products concerning technology and othergadgets like computers.

HorizontalIntegration

- Acquire competitors to increase market share

Market Penetration

- Keep low prices as its own marketing efforts in enticing priceconscious customers

Wal-Mart Strategic Analysis- Kevin Go

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