Business 109 Strategic Audit July 28, 2014

Created for: Dr. Jasso and Peter Phung

Created by: Carolyn Bianco, Dan Gallagher,

Shagandeep Kaur, Myrian Lamas, Karla Legorreta, Laurie Maemura, Shih-Chin Pan,

Kamile Petraityte, Diana Phan, and Pengyu Yue

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Wal-Mart Strategic Audit Team

Carolyn Bianco

3rd

Year

Marketing

Daniel Gallagher

4th

Year

Accounting

Shagandeep Kaur

4th

Year

General Management

Myrian Lamas

4th

Year

Marketing

2

Karla Legorreta

4th

Year

Marketing

Laurie Maemura

4th

Year

Accounting

Shih-Chin Pan

3rd

Year

Marketing

Kamile Petraityte

4th

Year

Finance

3

Diana Phan

4th

Year

Finance

Pengyu Yue

2nd

Year Transfer

Finance

4

TABLE OF CONTENTS

I. Current Situation 8

1.1 History 8

1.2 Current Performance 9

1.2.1 Ratio Analysis 9

1.2.2 Competitors’ Comparison 10

1.2.3 Industry Comparison 13

1.3 Mission 13

1.4 Objectives 14

1.5 Strategic Posture 14

1.5.1 Corporate Strategy 14

1.5.2 Business Strategy 18

1.5.3 Functional Strategy 19

1.6 Policies 20

1.7 Alignment 25

II. Corporate Governance 26

2.1 Board of Directors 26

2.2 Top Management 30

III. External Environment: Opportunities and Threats (SWOT) 32

3.1 Natural Physical Environment: Sustainability Issues 32

3.2 Societal Environment 34

3.2.1 Economic 34

3.2.2 Technological 37

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3.2.3 Political-Legal 38

3.2.4 Socio-Cultural 39

3.3 Task Environment 39

3.3.1 Threat of New Entrants 39

3.3.2 Bargaining Power of Suppliers 40

3.3.3 Threat of Substitute 41

3.3.4 Bargaining Power of Buyers 42

3.3.5 Rivalry Among Existing Firms 42

3.3.6 The Sixth Force 43

3.4 EFAS Table 45

IV. Internal Environment: Strengths And Weaknesses (SWOT) 46

4.1 Core Competencies 46

4.2 VRIO Analysis 48

4.3 Business Model 50

4.4 Value Chain 51

4.5 Corporate Structure 52

4.6 Corporate Culture 52

4.7 Corporate Resource 54

4.7.1 Marketing 54

4.7.2 Finance 54

4.7.3 Research and Development 55

4.7.4 Operations and Logistics 57

4.7.5 Human Resources 58

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4.7.6 Information System 59

4.8 IFAS Table 60

V. Analysis of Strategic Factors (SWOT) 61

5.1 Situational Analysis 62

5.2 Review of Mission and Objectives 62

VI. Strategic Alternatives and Recommended Strategy 64

6.1 TOWS Matrix 64

6.2 Strategies Alternatives 65

6.2.1 Pros and Cons 65

6.3 Recommended Strategy 67

6.3.1 Corporate Strategy 68

6.3.2 Business Strategy 69

6.3.3 Functional Strategy 69

6.3.4 Policies 71

VII. Implementation 72

7.1 Implementation Program 72

7.2 What must be done 72

7.2.1 Programs Activities 72

7.2.2 Action Steps 72

7.2.3 Who Implements Strategy 72

7.2.4 Matrix of Change 80

7.3 Organizing for Action 81

7.3.1 Corporate Structure 81

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7.3.2 Job Creation 81

7.4 Action Plan 72

VIII. Evaluation and Control 82

8.1 Balanced Scorecard 83

8.1.1 Financial 83

8.1.2 Customer 83

8.1.3 Internal Business Process 85

8.1.4 Learning and Growth 88

IX. Appendix 92

X. Work Cited 99

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I. CURRENT SITUATION

1.1 - HISTORY

Wal-Mart was opened on July 2, 1962 in Rogers, Arkansas. Sam Walton, founder and

CEO at the time, envisioned providing customers the “Lowest Prices Anytime, Anywhere”. This

was an uncontested market at the time and gained ground quickly in the discount, variety store

industry. Within seven years of its creation, the company was incorporated in Delaware on

October 31, 1969 and a year after incorporation, Wal-Mart was put on the New York Stock

Exchange starting at $16.50 with 100 shares (Walmart, 2014).

By 1972, the company had 51 stores in operation and generated over $78 million in

revenues. This was miniscule by 1980 when the company had reached its first $1 billion dollar

sales year – faster than any other company in history. They had 276 stores opened and employed

21,000 workers across the Midwest (Flowing Data, 2014). Within the same decade, the company

began Sam’s Club. Sam’s Club is a warehouse that specializes in bulk sales and was started to

meet the growing needs of customers who wanted to buy bulk products. Shortly after opening

Sam’s Club, Wal-Mart Stores Incorporated installed the largest private satellite communications

system in the U.S. that connected the entire business electronically (Walmart, 2014).

In the 1990’s the company had expanded to 1,928 stores and clubs with over 371,000

employees (Flowing Data, 2014). The company also had begun international expansion and had

its first international store in China. During this time period, the company had its first $1 billion

sales week and first $100 billion sales year (Walmart, 2014). The company grew quickly and

spread all across the United States and continued expanding into countries such as Canada as

well as European countries.

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Since the turn of the century, Wal-Mart has topped the Fortune 500 list multiple times;

the first time it topped the list was in 2002. In 2007 the company introduced “site-to-store”

service from their website, walmart.com, that allowed customers to order products online and

have in-store pickup and delivery. 2009 was the first year the company exceeded $400 billion

annual sales and opened stores in India. Now, in 2014, the company has grown to over 11,000

stores in 27 countries worldwide and employs some 2.2 million people (Walmart, 2014).

1.2 - CURRENT PERFORMANCE

Financial reports can be found in the Appendix

1.2.1 - RATIO ANALYSIS

Analyzing the last five years of data will provide a good understanding of how Wal-Mart

has performed in the market place. Reviewing key financial ratios, the company’s strengths and

weakness will be made apparent. This analysis will also compare industry averages in order to

give a deeper understanding of what is expected from the company.

The Appendix includes Wal-Mart’s, Costco’s, Target’s balance sheet. There you can

compare between the three company’s biggest numbers. These numbers though do not represent

the actual performance of the companies since they do not include operating cash flows or

expenditures and capital investments.

Looking at Wal-Mart, the company’s gross profit margin is 24.81%, which is slightly

above the industry standard of 23.98% (Retail Owner, 2014). The gross profit margin indicates

the total profit margin available to cover other expenses that go beyond the cost of goods sold.

The reason for Wal-Mart’s 24.81% margin is that it specializes in selling extremely low priced

goods. Since the company’s profit margin for each dollar of sales is $0.033, it is operating on

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making very little profit for every sale, but the number of sales is what keeps the company’s

annual sales well above $400 billion. The company has been extremely profitable and its

shareholders have been reaping the benefits. In the last five years, the company’s dividend

payout has risen to $1.88 in 2014 compared to $1.09 back in 2010. Its earnings per share have

also raised up to $4.87 per common share (ignoring all dilutive securities) (Mergent Online,

2014).

1.2.2 – COMPETITOR’S COMPARISON

The Variety Stores Industry is becoming more competitive amongst the reigning big

companies. Wal-Mart’s biggest competition lies with Costco Wholesalers and Target. All three

companies have focused on discount product sales and therefore all three compete on price

comparison. In order to achieve this, each company’s business strategy is a Lower Cost strategy

that relies heavily on operational efficiency. However, each company makes its defining

difference through customer satisfaction, store environment and layout, bulk sales versus small

packaged items, and convenience through location, products and services provided and, once

again, price. Wal-Mart Stores, Inc. currently leads the industry in revenue boasting over $473

billion as of January 2014 (Mergent Online, 2014).

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2013 Revenue Comparisons

2013 Key Company Numbers

Wal-Mart’s Return on Equity ratio also leads the industry with 22.09% compared to the

industry average of 22.10% (Hoovers, 2013). Return on Equity measures the book value of the

shareholders’ total investment in the company and how much profit is generated with it. Return

on Assets measures the efficiency of managers at generating earnings from use of the company’s

assets. Wal-Mart’s ROA is 7.82% which is also above industry standard of 7.24% (Hoovers,

2013). Return on invested capital shows a company’s efficiency of allocating its capital to

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profitable investments. Wal-Mart also exceeds the industry standard of 10.69% by having a

13.6% RoIC.

2013 Company Profitability Comparison

Wal-Mart however has not been growing as fast as its competitors or even at the industry

standard. Even though the company’s revenues exceed all competition, its revenue growth of

1.52% is below each one of them. Furthermore, the company’s annual earnings per share growth

is below Costco’s 19% at -3.39%; this means it’s less profitable for its investors. However, the

flip side is that Wal-Mart’s annual dividend growth is more promising at 18.24% (Hoovers,

2013).

2013 Industry Growth Comparison

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1.2.3 – INDUSTRY COMPARISON

Previously, in the competitor comparison, charts also included the industry average for

aforementioned measures of Wal-Mart’s profitability, growth, and efficiency. Wal-Mart Stores,

Inc. is leading the industry in the following key financial distinctions: Revenue, Market Capital,

Gross Profit Margin, Net Profit Margin, Return on Equity, Return on Assets, and Return on

Invested Capital. Please reference the charts above for more detail.

Also within our competitor comparison, Wal-Mart showed areas in which it can improve

in comparison to its competitors and the industry average. These numbers do not in any way

reflect the company’s profitability or beneficial growth, but rather areas of opportunity for

improvement. The following comparison of income, earnings per share, and dividend growth can

also be found in the charts above for more detail: 12-Month and 36-Month Net Income Growth,

12-Month and 36-Month EPS Growth, 12-Month and 36-Month Revenue Growth, 12-Month and

36-Month Dividend Growth. Some of these comparisons do not include an industry standard.

Comparison between Wal-Mart’s competitors Costco and Target can be made and individual

interpretation of the data is necessary. Though Wal-Mart did not meet or exceed industry

expectations or competitor’s numbers, the company did not fall any lower than mid-range for our

comparisons (Hoovers, 2013).

1.3- MISSION

Wal-Mart’s mission statement is, “We save people money, so they can live better” (Wal-

Mart, 2014). With the focus on providing customers with the lowest possible prices, the

company aims to give people the opportunity to improve their quality of life. The company’s

business strategies are completely centered around this concept of increasing operational activity

to lower company costs and decreasing inefficiency to continue providing the customers with

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what they want at the price points they expect. The company has also implemented a company

culture that is meant to keep employees and management focused on their mission. The company

culture consists of four divisions and under each division is a subheading to further breakdown

the importance each aspect holds. To name a few, the company likes to focus on serving,

supporting, communicating, innovating, and honesty. This extends from management to

employee to customer; each person in the Wal-Mart family is expect to live by these pillars of

excellence to keep the company alive and growing (Wal-Mart, 2014).

1.4 – OBJECTIVES

Achieve internationalization and globalization

Construct a more advanced information system

Focus on innovation which attracts customers

Integrate global logistics system.

Have better employees to operate their online shopping

1.5 - STRATEGIC POSTURE

1.5.1 - CORPORATE STRATEGY

Throughout the years, Wal-Mart Stores, Inc. has been striving to better their company by

the use of corporate strategies. On April 22, 2013 the President and Chief Executive Officer

Mike Duke claims, “Walmart is only getting stronger as the world’s healthiest and best-

positioned global retailer. I’m pleased with our business and financial performance last year. But

what give me the most confidence is the changing landscape of retail around the world, and how

our people, our strategies and the customers we know and care about fit in” (Walmart Corporate

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2013). He strongly believes that the entire company is on the right path with its use of everyday

low prices and its shopping experience like no other. A great part of this role involves a great

talented team of associates that follow the model (Corporate 2013).

1.5.1.1 – DIRECTIONAL

Mike Duke’s focus on strategy regards to make sure that the company has the top retail

talent in every single level of the organization (Walmart Corporate 2013). To make sure that this

happens, he will develop, recruit, and maintain the best associates possible as an assurance.

There will also be a focus on delivering products that will enable Wal-Mart to operate fewer

hours in order for prices to go even lower for their customers (Walmart Corporate 2013). This is

also a promise that the company is making to make sure that they follow their mission statement

of saving people money so that they could live better. Another factor of corporate strategy is to

be more disciplined about operating expenses and capital spending (Walmart Corporate 2013).

This is a way of cutting cost for the company to not throw away their money on something that is

not worth the company to keep. Then there is the idea of “investing to serve more customers

globally and accelerating the vision of anytime, anywhere access by bringing together best-in-

class online, mobile and social capabilities and our more than 10,700 stores” (Walmart Corporate

2013). Growth has been one of the most active implementations of this company. Out of 10,700

retail operating stores there are still more yet to come. There are approximately 245 millions of

customers served weekly in the stores located in 27 different countries. This company truly cares

about its customers because it is offering them lower prices with the benefit of establishing their

stores in nearer locations for them. Lastly, Mike Duke states his mission of establishing a method

of benefiting from communities and having a world-class compliance organization (Walmart

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Corporate 2013). The Chairman of the board of directors, Rob Walton believes that there is a

strong commitment in Wal-Mart’s corporate governance principles and recognizes the service of

directors who are elected annually (Walmart Corporate 2013). Rob Walton states proudly, “We

are guided by strong governance principles in our service to shareholders, and in making

decisions that strengthen our ability to serve customers” (Walmart Corporate 2013).

1.5.1.2 – PORTFOLIO ANALYSIS

Wal-Mart portfolio includes many private brands in their stores with a variety of

categories. This includes groceries, personal care to home, and electronics (Brands 2013). Wal-

Mart reports concern the emergence of their marketplace and signs to promote upgraded brand

designs in the aisles. It is said “With this vitality, Marketplace is driving a lot of consumer appeal

in the produce section, and this provides unique flavors and products across dressings,

marinades, salsas and more” (Brands 2013). With Wal-Mart’s private brand portfolio, there is an

aim to target different customers at different tastes and life states (Brands 2013). “Each private

brand’s positioning and segmentation is a strategic choice designed to create a private brand

portfolio that engages Walmart customers, whoever they are” (Brands 2013). Its private brand

portfolio is sophisticated and credible onto a multi-billion dollar asset (Brands 2013). This

company creates differentiation and builds customer loyalty designing methods of being at the

top of competition (Brands 2013).

Walmart’s delivery of good financial performance has allowed them to increase their

earning per share to about 10.6 percent with an addition of $22 billion in net sales (Annual

Report 2013). This has allowed the company to become a $466 billion company. Wal-Mart’s

industry is confident in their strategies are truly competent in each operating segments (Annual

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Reports 2013). Their goal is to put as much effort possible to make sure that they are the best

retail company in every level of the organization (Annual Reports 2013). Wal-Mart has

successfully leveraged operating expenses in the last year and will continue to invest savings into

lower prices and improve returns (Annual Reports 2013). Wal-Mart reports state, “We can offer

customers a truly seamless experience that empowers them to shop in the way most convenient

for them—anytime and anywhere” (Annual reports 2013).

1.5.1.3—PARENTING STRATEGY

The company itself will also focus on a near-term execution to improves sales in the

United States, improve returns International and leverage expenses for a full year (Walmart

Corporate 2013). Doing so, this will also focus on progression on the areas of leverage

initiatives, capital discipline, e-commerce, compliances, and talent recruitment within the

corporate responsibility (Walmart Corporate 2013). Mike Duke understands that this is an

unpredictable global economy and that competition is fairly tough, but raising stakes can go

farther when serving customers (Walmart Corporate 2013). He started prioritizing competitive

sales at Wal-Mart stores in the United States because he guarantees that there will be new

“fantastic” merchandise and an increase in stock levels (Walmart Corporate 2013). He also

believes that there will be increased returns in International Wal-Mart stores because “These

actions, combined with capital disciplined and e-commerce investments, will deliver a solid

framework for future growth and improved returns” (Walmart Corporate 2013). Although it

seems that one should not worry about their business because they are already doing good, that is

not always the case. As a corporate strategist one must be aware of competition. Competitors can

always out stake one’s company with great strategy. The United States Wal-Mart Stores have

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successfully found a way of reducing shipping costs and increasing transportation efficiency in

order to save in labor productivity in China (Walmart Corporate 2013). Mike Duke states that

they are “driving costs out of our system so we can invest those savings into lower prices for

Walmart customers” (Walmart Corporate 2013). Their marketing strategies have done an

outstanding job because of their customer focus. Without customers, there are no revenues, and

without revenues, there is no business. Over the years of using the tactic of saving people money,

they have successfully made it to the top by focusing on their mission statement. Mike Duke also

states that compliance is the essential part of their growth strategy (Walmart 2013).

The strong belief that even if there is an unpredictable economy, there is strength in the

Wal-Mart business is outstanding. Mike Duke’s strong confidence is what makes the

corporation’s strategies work. He states that “We’re making substantial progress in areas that are

the foundation for long-term growth and shareholder returns. And whether I’m meeting with the

leadership team in the Home Office, or walking stores and clubs in any market, I see a team

that’s disciplined, focused and executing on the fundamentals. Walmart will win” (Walmart

Corporate 2013).

1.5.2 – BUSINESS STRATEGY

A new development in Walmart.com has been established upon their new search engine.

This search engine has improved so much that it is able to deliver more results to online shoppers

(Annual Reports 2013). This is an advantage for the company because it has increased sales

conversions. There is also a testing being conducted for great innovations such as same-day

delivery of purchases from the United States Website (Annual Reports 2013). There have also

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been more growth plans where the main goal is to build the next generation global technology

platform (Annual Reports 2013).

In order to keep operations at its best, there must be recruitments, development, and a retainment

of excellence in every level of the organization. “That means executives, managers and front-line

associates that traditionally make up the ranks of a major retailer. But we also need

entrepreneurs, technology specialists, data scientists and consumer Internet professionals”

(Annual Reports 2013). Every Wal-Mart associate must also imply integrity factors in their job

position. Mike Duke states, “Our standard is full compliance with all laws and regulations in the

markets where we operate” (Annual Reports 2013). This is extremely important because it is

how the company gains customers trust. The basic business model for Wal-Mart is to “Leverage

the winning formula” that is to comply with the promise of everyday low prices (Annual Reports

2013). This mission is the cornerstone of the company’s strategy. Mike Duke implies, “Our price

investments across a broad assortment allow us to deliver a lower-priced market basket” (Annual

Reports 2013).

1.5.3 – FUNCTIONAL STRATEGY

Over the last several years, Wal-Mart has managed to develop its company as a powerful

retailer with outstanding sales (Alliance 2014). A great part of their success has to do with their

effective management in its supply chain. The company developed ways of developing cost

structures that allowed them to offer low prices to their customers (Alliance 2014). The way they

succeeded this is by achieving to replenish inventory that relied on logistics method called

docking (Alliance 2014). This method allowed products that are sent out from suppliers are sent

to Wal-Mart warehouses and from there they are shipped to stores without waiting a long period

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in inventory. This Business strategy also successfully reduced Wal-Mart’s costs and allowed

them to save their customers money by their low pricing (Alliance 2014). The main structure of

the supply chain includes the purchasing of operations, distributing, and integration (Alliance

2014). It all begins with purchasing where the manager or buyer are responsible to determine

which products their company will sell (Alliance 2014). This operation is mainly focused on

“demand planning, forecasting, and inventory management. Forecasts estimate customer demand

for a particular product during a specific period or time based on historical data, external drivers

such as upcoming sales and promotions, and any changes in trends or competition” (Alliance

2014). The main function of a supply chain is the distribution function driven by customers that

makes the supply chain move the product from warehouses or manufacturing plants to the stores.

“Walmart’s supply chain begins with strategic sourcing to find products at the best price from

suppliers who are in a position to ensure they can meet demand. Walmart establishes strategic

partnerships with most of their vendors, offering them the potential for long-term and high

volume purchases in exchange for the lowest possible prices” (Alliance 2014).

1.6 - POLICIES

Wal-Mart follows different policies and guidelines to keep their company enact. These

policies show as follows: Ad Match Guarantee, Animal Welfare Policy-Fresh Pork, Conflict

Minerals Policy, Walmart Coupon Policy, Global Anti-Curruption Policy, Government Relations

Policy, Mobile Terms of Use, Photo and Video Use Policy, Privacy Policy, Return Policy, Social

Media Guidelines, and Walmart Statement of Ethics.

The Ad Match Guarantee is a matching price program that ensures that a customer gets

the lower advertised price on an identical product. This policy states that “tell us and we’ll match

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it. Right at the Register” (Walmart Corporate 2014). Of course there are limits to this, and that is

as follows: We will match any local competitor’s advertised price, We do not require customers

to have the ad with them to honor a competitor’s ad, Items purchased must be identical to the ad

(size, quantity, brand, flavor, color, etc.) (Walmart Corporate 2014). There are certain items that

they do not honor and those are when the actual price for items cannot be determined, internet

pricing, misprinted ad prices of other retailers, ‘Going out of business’ sales or ‘closeout’ prices

(Walmart Corporate 2014).

The Policy on Animal Welfare in Fresh Pork Supply Chain is following Wal-Mart’s

commitment to providing customers with safe, affordable and sustainable food, also regarding

promoting humane treatment of animals (Walmart Corporate 2014). It states, “We seek

continuous improvement in animal welfare practices within our fresh pork supply chain. As a

result, in addition to our current programs, Wal-Mart is launching a new tracking and audit

program for our fresh pork supply” (Walmart Corporate 2014). In other words, every supplier

must meet required program requirements before any of the products enter their stores. This

procedure includes that each fresh pork supplier has a on-farm video monitoring for sow farms

and unannounced animal welfare video audits (Walmart Corporate 2014).There must also be an

internal annual welfare audit for all farms, and documentation and results of tracking the audit

program available to Walmart as requested (Walmart Corporate 2014). These procedures must

be done no less than twice annually.

The Wal-Mart Stores, Inc. Conflict Minerals Policy involves rules requiring public

trading companies to report all products that are manufactures that contain tin, tantalum, tungsten

or gold mined in the Democratic Republic and related countries that support human right

violations (Walmart Corporate 2014). Wal-Mart and its product suppliers actively support this

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policy. They follow these regulations by: “adopting responsible mineral sourcing policies in

dealing with their supply chains that are consistent with this policy and the OECD guidance,

supplying products to Walmart that do not contain 3TG minerals that have been sourced under

circumstances that contribute to or support human rights violations in the DRC, and providing

evidence to support their representations as to the conflicts minerals status of their products upon

request” (Walmart Corporate 2014).

The Walmart Coupon Policy are glad to accept any type of coupon that is valid upon

request. The following coupons are acceptable: “Print-at-home Internet coupons, Manufacturers’

coupons, Competitor’s coupon, Soft drink container caps, and Checkout coupons (“Catalinas”)

(Walmart Corporate 2014). The following are not accepted: “Checkout coupons, Print-at-home

Internet coupons that require no purchase, and Competitors’ coupons without specified price

(Walmart Corporate 2014). The guidelines for these coupons are that they must be for products

that arse sonld and must be presented at the time of purchase (Walmart Corporate 2014). There is

only one coupon per item and item must be identical to the coupon. There is no limit on the

number of coupons per transaction but must be redeemed prior to expiration date (Walmart

Corporate 2014).

Wal-Mart’s Global Anti-Corruption Policy involves a commitment to maintain the

highest ethical standards in the corporation and comply with all applicable laws (Walmart

Corporate 2014). Within the company’s operations, “Walmart seeks to avoid even the

appearance of impropriety with respect to the actions of any of its officers, directors, associates,

employees, agents or representatives” (Walmart Corporate 2014). No corrupt payments must be

done in any circumstances especially when dealing with government officials and private sector

(Walmart Corporate 2014). No paying bribes or giving money of any type to any any person

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including any Government Official (Walmart Corporate 2014). Any person who violates this

policy will be subject to disciplinary measures and include termination of case of the associate

and business relation of third party (Walmart Corporate 2014).

The Government Relations Policy applies to all associates in the Wal-Mart Stores, Inc.

This allows the Government Relations Department go coordinate any company interactions with

its officials and legislative bodies at any federal, and local level (Walmart Corporate 2014). It

states, “ To help ensure consistent management of these relationships, all conversations and

engagement with elected officials or government agencies should be done in coordination with

your Government Relations contact” (Walmart Corporate 2014). The rules will be applied even

if there are fundraising events, but officers may distribute political literature or solicitation

(Walmart Corporate 2014).

The Photo and Video Use Policy states that all photos and videos in the media library are

accredited news organizations (Walmart Corporate 2014). This company “grants its permission

for use of these items for the sole purpose of accompanying related news content in print,

broadcast and online channels by professional news organizations” (Walmart Corporate 2014).

Wal-Mart does not represent rights of publicity, copyright or any other rights with the images.

(Walmart Corporate 2014).

The Privacy Policy applies to the Wal-Mart Customers. Customer information will be

collected such as transactions, customer service operations, surveys, and website registrations

(Walmart Corporate 2014). Also information of other sources will be collected such as

information when a customer enters the Wal-Mart website and in stores such as via video camera

(Walmart Corporate 2014). The company will not sell or rent customers personal information

and this “will support core business functions such as service fulfillment, internal business

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processes, marketing, authentication, loss and fraud prevention, public safety and legal

functions” (Walmart Corporate 2014). The company will also disclose a customer’s personal

information within the corporate family, and third parties (Walmart Corporate 2014).

The Return Policy regards the goal to satisfy Wal-Mart customers by their choice to

exchange, refund, or repair. This policy states “As an added convenience for customers, Walmart

has adjusted its return policy for the holiday gift buying season for items that have a limited

return/exchange period (15 days, 30 days, etc.). For these items purchased between Nov. 1 and

Dec. 24, the limited return period will begin Dec. 26. This includes items such as TVs, cameras,

computers, DVD and music players that can have a 15-30 day return period” (Walmart

Corporate 2014). There are times where the stores accept returns without a receipt. This gives

customers the option of a cash refund or an exchange or a product (Walmart Corporate 2014).

This is a great advantage that other competitors do not have.

Wal-Mart’s Social Media Guidelines state that the company is engaged with customers

and stakeholders beyond the walls of stores. One can find the company on Facebook, Twitter,

YouTube, Flickr, and Foursquare (Walmart Corporate 2014). This allows better engagement

with customers over social media with guidelines of what o expects from them and where one

can find more information (Walmart Corporate 2014).

The Ethics and Integrity policy revolves around the Global Ethics Office where it is

responsible in promoting Wal-Mart’s culture of Integrity (Walmart Corporate 2014). This

definitely includes the development and upholding of Wal-Mart’s ethical behavior for all

stakeholders everywhere (Walmart Corporate 2014). The Global Ethics Office is essential for the

company because it serves as a guide for ethical decision-making provides a confidential and

anonymous reporting system, and it also leads ethical education and communication systems

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(Walmart Corporate 2014). Wal-Mart intends to act and promote integrity in everyday behaviors

and implement these actions toward associates and existing functional-area training (Walmart

Corporate 2014).

1.7 – ALIGNMENT

Wal-Mart’s operations consist of about 16,000 to 20,000 suppliers. Their joint business

planning process limits to about 300 suppliers due to the achievement in alignment on the broad

overarching strategies that guide the business (Troy 2013).The company is “expected to be active

in participants in joint business planning and focus on driving everyday low cost which

underpins Walmart’s everyday low price value proposition” (Troy 2013). Business planners must

also be involved leaders and for suppliers to invest in Walmart because it would bring trust

relationships on customers (Troy 2013). Wal-Mart Stores Inc. has found a way of aligning their

P&G strategy by delivering innovation and driving joint value creation (Troy 2013).

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II. CORPORATE GOVERNANCE

2.1 – BOARD OF DIRECTORS

S. Robson Walton

Walton is currently chairman of the Board of

Directors. Having been on the board since 1978, Rob

Walton, is the son of Wal-Mart’s founder Sam

Walton. His positions include senior vice president,

corporate secretary, general counsel and vice

chairman. He also worked with the law firm, Connor

& Winters. Besides spending his time with Wal-

Mart, he is also a chairman of the executive

committee of the Conservation International.

Aida M. Alavrez

Former Administrator of the U.S. Small Business

Administration, Alavrez is the founding director of the

Office of Federal Housing Enterprise Oversight for

four years, Alvarez was responsible for leading the

agency with financial oversight for the secondary

mortgage market and ensuring the capital adequacy

and safety of the FNDA and the FHLMC. She is chair

of the Latino Community Foundation of San

Francisco, and is also the director of UnionBalCal

Corporation and Union Bank.

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James I. Cash, Jr.

Currently holding the position as an Independent

Presiding Director, his profession as associate dean

and chairman of HBS Publishing provides his

research on strategic use of information technology,

and the development of performance measurement

systems. He has an accounting degree and has been

published extensively in journals. James has been

director for a number of public companies including

Phase Forward, The Chubb Corporation, GE, and

Microsoft Corporation.

Roger C. Corbett

Corbett is the retired CEO and Group Managing

Director of Woolsworth Limited in Australia. He

joined the board in 2006 as a member of the

strategic planning and finance. He is also a

director of the Reserve Bank of Australia and

Deputy chairman of PrimeAg Australia, and the

former chairman of CIES Food Business Forum of

France.

28

Pamela J. Craig

Craig is the retired Chief Financial Officer of

Accenture PLC, a global management consulting,

technology services, and outsourcing company. She

recently joined the board in 2013 as a member of

the Audit committee.

Douglas N. Daft

As the retired chairman and CEO of the Coca-

Cola Company, a beverage manufacturer, he

joined the board in 2005 as part of the

compensation, nominating, and governance

committee.

29

Michael T. Duke

Joined the board in 2008, Duke is the retired

President and CEO of Wal-Mart Stores, Inc. and

Chairman, Executive Committee of the Board of

Directors. He has served this position from

February 2009 to January 2014.

Timothy P. Flynn

Mr. Flynn is the retired Chairman of

KPMG International, a professional

services firm.

Marissa A. Mayer

Ms. Mayer is the CEO and President and Director

of Yahoo!, Inc., a digital media company.

30

2.2-- TOP MANAGEMENT

Bill Simon: President and CEO, Walmart U.S.

Simon’s responsibility is to execute Walmart’s core business model by lowering costs in order to

offer customers lower prices and fulfill the company’s mission of saving people money so they

can live better. For three years, Simon worked to drive innovation and improvement. He also led

his team to create and launch a $4 prescription drug program. He was also the president of

Diageo Southeast and North America Ready to Drink where he held senior sales and marketing

roles with Cadbury-Schweppes, PepsiCo, and RJR-Nabisco. He attended the University of

Connecticut with a bachelor of arts in economics and an MBA in management.

David Cheesewright: President and CEO, Walmart International

As President and CEO, Walmart International, Cheesewright currently serves for more than

6,400 stores and more than 796,000 associates serving customers in 26 foreign countries. For

more than 25 years, his career was revolved around international retail and manufacturing

sectors. His positions were in operations, merchandising, logistics, strategy and format

development. His education is of first-class honors degree in sports science and mathematics

from Loughborough University, U.K.

Rosalind G. Brewer: President and CEO, Sam’s Club

Neil M. Ashe: President and CEO, Global eCommerce

John Aden: Executive Vice President, Sales Innovation, Walmart U.S.

Claire Babineaux-Fontenot: Executive Vice President and Treasurer

Andy Barron: Executive Vice President, Softlines, Walmart U.S.

31

Dan Bartlett: Executive Vice President, Corporate Affairs

Michael J. Bender: President, Walmart West, Walmart U.S.

Brett Biggs: Executive Vice President and Chief Financial Officer, Walmart International

Steve Bratspies: Executive Vice President, General Merchandise, Walmart U.S.

Shelley Broader: President and Chief Executive Officer, Walmart EMEA

M. Susan Chambers: Executive Vice President, Global People Division

Michael Dastugue: Executive Vice President and Chief Financial Officer, Sam's Club

Cindy Davis: Executive Vice President, Global Customer Insights and Analytics

Jeff Davis: Executive Vice President and Chief Financial Officer, Walmart U.S.

Greg Foran: President and CEO, Walmart Asia

Rollin L. Ford: Executive Vice President, Chief Administrative Officer

Don Frieson: Executive Vice President, Operations, Sam's Club

32

III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT)

3.1 – NATURAL PHYSICAL ENVIRONMENT: SUSTAINABILITY ISSUES

Since Wal-Mart Stores Inc. is such a massive company that has the ability to impact the

natural environment of wherever its nearly 11,000 stores are located around the world, the

company is currently focused on three goals that

revolve around environmental sustainability: energy,

waste and product sustainability. These goals are

implemented throughout all of Wal-Mart’s stores

worldwide and they were chosen to help further

support the company’s famous mission statement of

helping people so that they can live better. When

more sustainability initiatives and programs are

being implemented throughout the corporation, the logic is that operational costs will be cheaper,

which will then translates into lower prices on products for consumers. Not only do cleaner

forms of energy help Wal-Mart save money in its manufacturing and store operations, the

company also believes that it is doing a greater good by helping out people and the environment

so that everyone is living better.

In terms of energy, Wal-Mart is considered a global renewable energy leader and one of

the largest onsite renewable energy consumers (Walmart Corporate, 2014).i The company’s

ultimate goal is to be powered by 100% renewable energy sources. This goal was established in

2005 and since then, Wal-Mart has been leveraging its huge size and scale to develop, test and

utilize new and different forms of renewable energy like fuel cells, solar energy, LED lighting

and wind turbines to power its retail stores and distribution centers according to a 2013 video on

33

the company’s corporate YouTube channel. Since the end of 2013, 24.2% of Wal-Mart’s global

energy needs are being met by renewable sources (Walmart Corporate). By the end of 2020,

Wal-Mart wants to generate a total of 7 billion kilowatt-hour (kWH) of renewable energy to

power its stores, reduce its energy per square foot intensity required to power its stores by 20%

based off of its baseline in 2010ii and equip

1,000 of its U.S. stores with solar panels

(Ibid).

In regards to waste, Wal-Mart is

aiming to create zero waste across its global

operations by the year 2020 as well

(Walmart Corporate, 2014). In fact, two of

Walmart U.S.’s international segments,

Seiyu in Japan and Asda in the United

Kingdom, have reduced their waste by 80%

through recycling, donating usable food to charities and reusing leftover foods for animal feed

and compost (MMR, 2014) using a Zero-Waste-to-Landfill program illustrated in the next page.

The company’s purpose behind this program is to reduce the amount of waste that ends up going

to landfills, which then results in less energy used to dispose of this waste, fewer emissions

emitted in that process, and a lesser impact on the environment as a whole. Wal-Mart has also

taken other initiatives to achieve its zero-waste goal by reducing its plastic bag waste,

negotiating with its suppliers to reduce product packaging waste, and implementing an

electronics recycling program for smartphones where consumers trade in their various mobile

34

devices for store credit towards a cheaper smartphone, which thus eliminates the amount of

electronic waste in landfills (Ibid).

For more product sustainability, Wal-Mart has created a Sustainability Index with the

help of The Sustainability Consortium (TSC). This organization develops transparent

methodologies, tools and strategies in order to drive a new generation of products and supply

networks that address environmental, social, and economic imperatives ("The Sustainability

Consortium").

This index measures and

reports to Wal-Mart about the

sustainability so that Wal-Mart is able to

talk to its suppliers about these findings in

order for products to be more sustainable

and provide more efficiency (“Transparent

Supply Chain is Goal”). This index also

integrates sustainability into the business

of buying and selling merchandise and it

helps customers’ trust in the products that

Wal-Mart carries (Walmart Corporate, 2014).

3.2 – SOCIETAL ENVIRONMENT

3.2.1 – ECONOMIC

S&P Capital IQ’s industry survey on supermarkets and drugstores reports that the

“wealth effect,” or peoples’ feeling of being wealthier, in the United States increased in 2013

because of moderate inflation on food prices and lower gasoline prices softened the effect of the

35

January 2013 expiration of a 2% Social Security payroll tax cut (“Wal-Mart Stores, Inc. SWOT

Analyis). Also, housing prices rose along with stock market values during this year, which

further increased the “wealth effect.” The survey also reports that the national unemployment

rate for the United States went down to 7.4% in 2013 compared to an 8.1% rate from 2012.

Even though the U.S. economy experienced favorable conditions for consumer spending,

retail supercenter giants like Wal-Mart Stores, Inc., Costco Wholesale Corp., and WholeFoods,

faced increasing competition among each other because low-income households were not

shopping as often because of the previously mention payroll tax cut and an feeling of job

insecurity (Ibid). In order to differentiate from the competition, these big retailers started

targeting middle to high-income families by providing higher quality products in their stores.

However, for the case of Wal-Mart Stores, Inc. the company was able to still target low-

income households, along with discount dollar stores, and it actually also increased its market

share during this period. Despite this, Wal-Mart is facing increasing competition from dollar

stores that offer a few popular brand name products in its store with almost the same

convenience but with a smaller sales floor space as Walmart stores. The good news for Wal-Mart

is that these dollar stores are only popular if the economy is not doing well. Once the economy

starts improving, then more people will be able to retain their jobs and earn more disposable

income to then spend.

Recently in China, second quarter reports show that the country’s real GDP growth has

increased 7.5% compared to 7.4% from January to March 2014. This growth in the second

quarter is a result of China’s industrial production increasing to 9.4% in June 2014 versus only

an 8.8% growth in May. There is a decrease in investment growth in property development,

however, government-backed spending on the country’s infrastructure helped make up for this

36

loss. Nominal retail sales growth has been steady at 12.2% year on year including in June and

consumption in China accounted for about 55% of the real GDP growth for the first half of 2014

(Economist Intelligence Unit, 2014).

So what does this information mean? China’s economy is still growing and the second

quarter summary on provided from The Economist details that the most growth has happened so

far. The decline of investment in property by local business could open doors for Wal-Mart

Stores, Inc. to open more of its stores in the country and an increase in infrastructure investment

will literally pave opportunities for Wal-Mart to reach more rural areas in China. After all,

consumer consumption makes up nearly half of real GDP growth, which means people are

willing to spend their money on goods and services.

Earlier this month the nations that make up BRICS (Brazil, Russia, India, China, and

South America) agreed to establish a new types of banks that each country has access to and can

use in times of financial crisis. One new bank is called the New Development Bank (NBD) that

will be headquartered in Shanghai and that will have a capital of $100 billion U.S. dollars. Each

country will realistically contribute about $2 billion U.S. dollars to this bank, but this agreement

is still in talks and will consequently need to be ratified. It supposedly will take about two years

for this back to start operating and its exact functions remain unknown as of now. A contingency

reserve agreement (CRA) will also be established that each country will again contribute to, but

this in this instance, each contribution is relative to the size of each country’s GDP. The CRA

will not be a physical bank, but instead it will be based on guarantees that any one of the five

countries can use if a financial crisis arises (Economist Intelligence Unit, 2014).

37

3.2.2 – TECHNOLOGICAL

A technology that was once reserved for the military is now being utilized for different

means thanks to advancements in technology that make it more affordable to own. According to

the MIT Technology Review, farmers are utilizing drones for agricultural purposes (Anderson,

2014). These drones are completely automated to operate without a pilot controlling it from the

ground, which frees up a busy farmers time. These agricultural drones are specially equipped

with features like a camera and GPS navigation and can be

flown below the clouds to give farmers a new perspective on

the health of their crops. The information comes largely from

photos taken by the drones that can show farmers any irrigation

problems, pest and fungal infestations, or soil variations that

could be overlooked. Infrared photos, like the one seen on

above that shows the chlorophyll levels of crops, can also

distinguish healthy crops from unhealthy crops that the human

eye cannot pick up. Lastly, the drones can be operated over

various periods of time to survey crops and picture together a

timeline of a certain crop’s health. This new technology is

looking to be a huge aid in agriculture where expansive fields of crops may be too difficult to

survey from a human, ground perspective. For Wal-Mart, this new technology will provide a

more efficient method for its suppliers to monitor their crops and keep them healthy.

The use of drones is also being tested by one of Wal-Mart’s competitors, Amazon.com to

increase productivity when issuing deliveries to peoples’ doorsteps. The technology is not quite

38

developed as Amazon.com CEO Jeff Bezos says, but the service, Prime Air, could be up and

running in as little as four years. However, there are some FAA obstacles that stand in the way of

this service, so Amazon.com is working on ways to prove to the FAA that its drones will serve a

true delivery purpose (Barr, 2013).

Another new technology that the MIT Technology Review reports on is a more accurate

forecasting system that cuts cost on backup plants that power wind turbines in the event of there

being no wind (Bullis, 2014). The backup plants are actually costly to run and use fossil fuels to

operate, which then pollutes the environment. The National Center of Atmospheric Research first

introduced its forecasting system back in 2009, but last year the technology made a breakthrough

this past year where its data allows power plant dispatchers to turn off the its idling backup

plants, thus saving money for an energy company. This new, smarter forecasting can be applied

to Wal-Mart’s own renewable energy sources so that they are being utilized more efficiently all

the while saving the company money.

3.2.3 – POLITICAL-LEGAL

Back in 2012, a New York Times article made accusations of foreign bribery situation in

Mexico that occurred in 2005, which involved Mexican officials who were supposedly bribed by

Wal-Mart executives with money in order to obtain construction permits for a Wal-Mart store

(Barstow, 2012). Following this article, Wal-Mart sent out a team to investigate these claims and

now the company could still face the threat of a class-action lawsuit for its actions in this scandal

after its request to have the suit dismissed were denied by a judge (Investor’s Business, 2014). A

lawsuit of this proportion could tarnish Wal-Mart’s brand image, being that the company is such

a prominent force in the retail industry.

39

Wal-Mart Stores, Inc. is also indirectly linked to a trial involving a fatal accident where a

Wal-Mart truck driver crashed into the back of a vehicle that left one person dead and severely

injured actor Tracy Morgan in New Jersey. Although Wal-Mart says its trucks are equipped with

technology including forward-looking radar with interactive cruise control, designed to slow

down the vehicles in heavy traffic (Bashan, 2014) this poses lawsuit also threatens the brand

image of Wal-Mart Stores, Inc.

3.2.4 – SOCIO-CULTURE

As previously noted, there is a huge trend towards online retailing. In fact U.S. sales

through online retailers has increased from $142.6 billion in 2009 to $224.4 billion in 2012.

(Wal-Mart Stores, Inc. SWOT Analysis, 2014). Wal-Mart’s website was actually the number

two, most-visited website on Black Friday in 2013.

Another trend gaining steam, is that consumers are more willing to accept private label brands as

substitutes to more expensive, nationally-known products. This not only applies to Wal-Mart, but

across all retailers in the U.S., since 2009 private brand sales have grown at an average of about

5% annually compared to only 2% sales growth for more recognizable, national brands.

3.3—TASK ENVIRONMENT

3.3.1 – THREAT OF NEW ENTRANTS

The threat of potential entrants mainly refers to the new entrants into the kind of retail

business in the retail industry to bring new production capacity, new resources, the desire to win

some of the companies carved up in existing markets , thereby and competition among existing

enterprises , resulting in decreased prices of similar products , in addition, it is possible to

compete with the original product 's market share with existing retail, and existing retail

40

businesses competing for limited resources, lead to increased costs for the industry , the

formation of the overall decline in the profitability of the retail industry , the worst case there

may be a crisis of these enterprises to survive. Wal-Mart as a very significant economies of scale

supermarket chains, as Wal-Mart have appeared throughout the entire average cost supermarket

gradually diminishing, the general potential new entrants have such a difficult moment between

economic strength, to Wal-Mart scale supermarket chains, Wal-Mart, so relative terms, the

average cost is higher than the potential entrants such a purchase at most supermarket chains, in

the future it will be in a passive position among the competition. Therefore, from economies of

scale in terms of new entrants Wal-Mart has a great advantage.

3.3.2 – BARGAINING POWER OF SUPPLIERS

Wal-Mart's supplier bargaining power is very strong, mainly Wal-Mart's supply channels

and more hesitant, its retail system and procurement system are two separate parts procurement

is lower prices to each other through suppliers, who pay a bottom who possibility to get big

orders, while Wal-Mart mainly by taking direct orders from the factory, uniform ordering and

supporting suppliers to reduce costs equal to reduce purchase costs. Many of the customer

demand in the number of goods for Wal-Mart is so large retail supermarkets, they are consumers

to obtain goods direct channels, followed by most of the products they sell to customers who are

necessities, furthermore transformed other supply customers cost providers who purchase higher

than Wal-Mart, and Wal-Mart to get good service attitude very high customer satisfaction in the

retail industry in. In fact, Wal-Mart adopt measures to harmonize the procurement of Wal-Mart,

which are generally one-time order, the headquarters of a unified contract , arranged the

purchase, due to the large number of contracts signed one-time , thus forming the advantage on

41

the purchase price obtained is much higher than counterparts. Wal-Mart in their own

development , but also actively help its suppliers to help them improve their management level,

improve product quality , reduce labor costs , reduce costs by helping providers to improve their

efficiency, and therefore , Wal-Mart and similar industries compared with a strong ability to

control suppliers.

3.3.3 – THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

Originally retailing for Wal-Mart , because many types of products , there is no fixed

main product, due to the intrusion of alternative producers , making Wal-Mart must improve

product quality, reduce costs or by reducing prices, or make their products more features

otherwise, Wal-Mart sales volume and profit growth target is likely to be limited. For example,

Wal-Mart's main threat comes from the network. With the development of the network, the rise

of online shopping, people increasingly fast pace of life, more and more people, especially

people do not want to spend time at the mall shopping, especially some of the female consumers

prefer online spending, spend time on the network, you can not go out and buy but also to enjoy

a wide variety of merchandise. And online goods are generally lower than a physical store, and

those merchandises can be delivered to your door so there is a serious threat in this regard for

Wal-Mart. There is still some threat of substitutes for Wal-Mart such as development of hotels

and other related services Because most hotels in addition to providing catering and

accommodation services residues outside , while also providing consumer -related necessities of

daily life , such as cigarettes, drinks , snacks , socks, underwear and some other items. Although

these items at hotel have higher price than Wal-Mart, but because these items more convenient,

the customer will usually accept these products. There are also a number of food and beverage

42

industry issues , along with the rapid development of the economic level , the rhythm of

improving people's lives , more and more consumers, especially office workers, due to the busy

work , they are more interested in spending on food and beverage industries such as restaurant.

While Wal-Mart everyday low prices, but a huge number of consumers, for those who do not

want to buy food in the supermarket, the restaurant industry is the first choice, so in this respect

constitutes a threat to Wal-Mart.

3.3.4 – BARGAINING POWER OF BUYERS

Buyers, mainly through lower prices and the ability to request a higher quality of service

or product to existing retail businesses affected profitability. For Wal-Mart, its sales of products

are mostly relatively low price elasticity of the necessities of life, consumption is relatively fixed

and stable, and so consumers this problem does not exist in the bargaining actual purchase

process. But Wal-Mart to " everyday low prices , always " as the slogan for everyday low prices

for their own purposes, to reduce its own costs through vendor supply prices down , allowing

consumers to enjoy low-cost deals.

3.3.5 – RIVALRY AMONG EXISTING FIRMS

Most industry competitors , mutual interests are closely linked , as each part of their

overall business strategy of simple competition, competition among existing enterprises are often

reflected in the price , advertising , products, sale services and so on. Because Wal-Mart retail

enterprises to provide the degree of product differentiation is very small, the number of similar

retail business and very much, for example, Target, Costco, etc. So the competition between

them is fierce

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3.3.6 – THE 6TH FORCE

Since Wal-Mart will spread its tentacles into the world, so far, Wal-Mart has opened

4,058 stores in the United States. For Americans, now every hour, it spent $ 35 million in Wal-

Mart; 90 percent of Americans will be able to find out within 15 miles of a Wal-Mart; 70% of

U.S. retail new jobs come from Wal-Mart...... "Everyday low prices" Wal-Mart is an

unprecedented way to re- shape the business principles, consumer habits and lives of American

workers, and even throughout the United States and the world economy. In fact, the 6th

force of

Wal-Mart is the relative power of other stakeholders from Wheelen and Hunger. As a retail

business , Wal-Mart from the purchase , distribution to sales, from daily operations to occur

contact the social welfare activities, and many different interest groups , these interest groups

including customers, managers, employees, shareholders, creditors , government, suppliers , etc.

First, the customer , because the customer is a source of wealth , has a good customer resources

is a prerequisite for corporate financial goals to achieve, on the other hand , Wal-Mart also

always meet customer needs as the primary principle. It is mainly to meet customer needs

approach: everyday low. Followed by management, management is the company’s leadership

core and backbone of whether they can effectively is an important condition for the development

of enterprises can. Wal-Mart in addition to strengthening communication with managers' ideas,

to make them fully aware of the importance they attached to the enterprise, the very early use of

allotted shares ways to reward managers. The third is the workers to ensure that the interests of

employees, effective incentives are an important factor in the success of Wal-Mart. Because

Wal-Mart employees respect and trust, improve incentives to encourage employees to actively

work played a role. Fourth, shareholders, owners of the enterprise, the enterprise must go

through a major financial decision to vote in general meeting or the board of directors, the

44

shareholders have a significant impact on the company's financial administrator. Wal-Mart's

operating performance and return on investment so that shareholders are very satisfied. They

have more confidence to continue investing Wal-Mart. Finally, the government, as a national

authority in the formulation of economic macro-control policies, provides public services, have a

direct or indirect impact on production and operation. In fact, for such a multinational Wal-Mart,

where the national government can establish a good relationship will affect their further

development , expansion and achieve financial goals. So Wal-Mart strategy through a number of

columns, to establish a good relationship with the local government, For example, to achieve "

localization strategy , " the management team of localization , localization procurement , etc., to

promote the country of employment , increasing the national income.

45

EFAS TABLE

External Factors Weight Rating Weighted

Score

Comments

Opportunities

Continuous economic

development of China

.15 4.0 .60 Wal-Mart wants to keep growing as a

company and remain a top player in

its industry.

Agricultural drones .10 2.5 .25 Can increase Wal-Mart’s productivity

in its grocery department

Acceptance of private-

label brands

.10 3.5 .35 People are willing to substitute brand

image with price

Growing online

retailing

.20 4.0 .80 Wal-Mart was the #2 most visited

website on Black Friday in 2013.

Threats

Popularity of dollar

stores

.05 3.5 .18 Dollar stores are only popular when

the economy is bad.

Foreign bribery and

legal troubles

.05 3.0 .15 This tarnishes Wal-Mart’s brand

image.

Rising healthcare costs

for employees

.15 3.0 .45 Labor relations affect store operations.

Competitive pressures

from different channels

.20 3.5 .70 Wal-Mart needs to be more innovative

to say ahead of the game of

competitors like Amazon.com

TOTAL SCORES 1.00 3.48

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IV. Internal Environment: Strengths and Weaknesses (SWOT)

4.1—CORE COMPETENCIES

Wal-Mart can successfully implement their international business is because it formed its

own core competencies. This company has continuously improved its management and corporate

culture since the beginning. Wal-Mart has truly achieved modern management, and reached a

very high standard because of its business philosophy and techniques constantly innovate. Back

in 1962, when Wal-Mart was first founded, Sam Walton began to use innovative business ideas,

changing the model of traditional business of retail and wholesale, emphasizing the accumulation

of operational knowledge, and then made those rules gradually embedded it in the company,

which formed the Wal-Mart chain management model. In 1970, Wal-Mart established the first

distribution center. In that year, computer was not even popular, and Sam Started using computer

to manage inventories. Operate traditional enterprises with high-tech equipment, Sam first

brought out this whole new concept. Advanced management concept and high level technology

greatly enhanced the core competencies of Wal-Mart (Schrage, 2013).

For all these years, Wal-Mart has always maintained one strategy which is small profit

and quick return. The reason it can be able to do “everyday low prices” is the low cost compare

to the competitors. Flexible and efficient logistics system is the core factors that Wal-Mart can

reach the maximum sales with the lowest cost. There are eighty-five percentages of total sales of

the products are supplied by these distribution centers, however, their competitors like Kmart,

are about only fifty to sixty-five percentages. Viewing the whole industry chain of Wal-Mart, its

logistics and distribution is the most advanced retail network in the world. The massive data even

made Wal-Mart rented a satellite. It cost four hundred million to launch a business satellite,

which helps Wal-Mart achieved a global network. Wal-Mart is able to record all products

47

inventory, shelves and sales within one hour in more than four thousand store all over the world.

It can also inform truck drivers, update traffic information, and adjust the best line for all the

vehicles. Wal-Mart can be so ahead of all the competitors is because it has been investing on the

retail information system (Schrage, 2013).

Under the information technology support, Wal-Mart is able to operate the company

globally by the lowest cost, highest quality service, and the fastest response in management.

Although the information technology is not a sufficient element for the success of Wal-Mart, it is

a necessary condition for the success. These investments have made Wal-Mart can significantly

reduce costs and improve the productivity of capital and labor. Wal-Mart also uses a more

advanced system instead the procurement directives, which truly implements the automatic

ordering. This system uses bar code scanning and satellite communications to exchange daily

sales, transportation and ordering information with suppliers. With the advanced electronic

information tools, Wal-Mart stores sales can keep pace with the distribution centers, and also the

distribution centers with the suppliers, which definitely improve efficiency and reduce costs.

This information system have brought tremendous benefits for both Wal-Mart and suppliers.

Wal-Mart does the survey on customer expectations and reflections every week. Managers

gather information based on computer information, as well as through the directly surveys to

collect customer expectations, which can make them update product portfolio, organize

procurement, improve merchandising display, and create a comfortable shopping environment.

This strategy became one of the core competency of Wal-Mart (Schrage, 2013).

Wal-Mart has always attached great importance to the corporate culture which provides a

wealth content, scientific management ides, open management style and flexible management

methods for the modern business management theory. The three basic tenets that developed by

48

Sam Walton for Wal-Mart’s corporate culture are “customer is God,” “respect for employees,”

and “Strive for excellence” (Schrage, 2013).

4.2-- VRIO ANALYSIS

The VRIO framework stands for value, rarity, inimitability and organization. This is the

in-depth research and analysis of the internal environment based on SWOT model.

Through these four points there can be evaluation of the Wal-Mart’s advantages and

disadvantages.

First question is “does it provide customer value and competitive advantage?” The

answer to this question is definitely a yes. Consumer response is one of the most important factor

for Wal-Mart. Customer value is seen as a fundamental task, rather than create profits. Wal-Mart

advocates positive, aggressive and never be satisfied. The leaders in Wal-Mart have to be more

diligent than their opponents, and more sensitive to provide better quality products. No matter

how busy these managers are, they must take time to go visit other stores around to make sure

that they have the lowest prices on their product, and also see and learn the strengths that their

opponents have. Loss is the enemy and threat of the retail industry. The strategy that Wal-Mart

uses to reduce the loss is they sharing the profits which is obtained from reducing losses with

their employees. If a store’s loss is in the company’s control, the store will receive bonus for

each employee. Continue to adhere new business ideas and creativity; constantly developing new

technologies for their own services; thereby creating best service and performance. This is why

Wal-Mart has the capabilities to neutralize the external threats (Jurevicius, 2013).

Second question is “do no other competitors possess it?” Wal-Mart is the largest retailer

in the world. Their opponents are no longer those supermarkets due to their unrivaled prices, but

49

it could be Amazon. Now, under the Amazon’s threat, Wal-Mart is actively trying to explore

new market through learning the technology business. This is including the creation of Internet

Shopping Headquarters, WalmartLabs. Wal-Mart is the leader of the physical store, and Amazon

is the leader in the online shopping world. Those two largest retail companies are competing for

the most talented engineers. They are doing the online shopping price war, and trying to take the

lead. They both want to control not just online shopping, but all the shopping activities. While

Wal-Mart is working on the online shopping, Amazon is opening physical stores and distribution

centers. They both understand that the future is not just physical store or online store, is the

combination (Jurevicius, 2013).

Third question is “is it costly for others to imitate?” Wal-Mart’s annual sales is the

second largest retailer which is four times of Carrefour. There’s no doubt that Wal-Mart is more

successful than Carrefour, however, for them in China it’s just a beginning. This place is full of

unknowns, and also has great consumer ability. On the other hand, it also has a considerable

crisis. If Wal-Mart really wants to create a new empire in China, then, they need to understand

the crisis, and make them as turning points. China is very special, which all the successful

strategies might not work here, moreover, knowing how to make changes is also important. As

everyone knows, Wal-Mart is a very powerful company. They don’t usually make changes, but

they make people change. If Wal-Mart wants to defeat Carrefour, it’s all depending on their new

strategies

(Jurevicius, 2013).

Forth question is “Is the firm organized to exploit the resource?” I would say, Wal-Mart

is organized and ready to exploit the resource. Wal-Mart is a very different enterprise compare to

others. We all surprised that it makes success so quickly, and make people discuss and learn the

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strategies. Behind its success, Wal-Mart brought very amazing effect to the world. When Wal-

Mart enters a new area, they provide really low price for customers, at the same time, they

pressure the price of the industry down through competitions (Jurevicius, 2013). When the price

drops, it’s definitely benefit the customers. There will be more and more customers want to shop

at Wal-Mart, therefore, they have more and more power from customers.

4.3-- BUSINESS MODEL

Wal-Mart’s business model is make their customers save money, and provide them with

the cheapest goods. Wal-Mart engaged in traditional retail, and there’s nothing special about the

format of the transaction. However, Wal-Mart can have business all over the world by just doing

the traditional retailing, and became the richest family in the world is because their successful

business model. Wal-Mart carefully planning everything to improve the quality of products, but

they can maintain “everyday low prices” at the same time. They use every possible way to drive

down the costs, for example, bulk purchases; minimize logistics costs through the information

technology and logistics optimization. All files are used on both sides of paper, and office is also

the warehouse so sometimes managers need to stand in the meeting, therefore, same products,

but Wal-Mart’s prices are cheaper (Johnson, 2006). Customers are willing to go there and shop

there due to their cheapest products, therefore, Wal-Mart can purchase products with large

quantities with cheaper prices.

Wal-Mart’s founder Sam Walton has been the soul of the company. His innovative

thinking let him established the first discount store in a small town which had less than one

hundred people. This action created him local advantages. He purchased large quantities of

products directly from the manufacturers, and provided low prices products to attract customers.

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After the success in the township, he actively developed toward the metropolitan area. So far, the

main business model are Walmart Discount Stores, Walmart Supercenters, Sam’s Club and

Walmart Neighborhood Markets. This four kings of stores have nearly one hundred million

customers weekly, their staff have more than two point two million in ten thousand and seven

hundred stores in the America, Europe and Asia, which form a “Wal-Mart effect” in global

economy (Johnson, 2006). “Save money, live better” is Wal-Mart’s main mission statement.

They try to help each customer to save money, and provide them inexpensive goods. Walton

said, “When we save customer money, we can get their trust.” Therefore, it’s necessary to

implement Wal-Mart’s “everyday low price” strategy. If customers are not satisfied with their

products, they can return or have a full refund.

4.4-- VALUE CHAIN

From the Wal-Mart’s management strategies, we can clearly understand that the

development of a business to be successful is to create the maximum value. Wal-Mart uses the

strategy that sell more with low profit to save larger amount of customer money, which is a value

creation. In addition, Wal-Mart used to open the stores at rural and urban areas, which brought

the local residents convenient. This is also a part of value creation. Therefore, Wal-Mart can

maximize profits and value.

Wal-Mart’s value chain mainly divided into two partS, supporting activities and main

activities. The supporting activities includes the basic structure of operations, human resources,

skill development study and procurement. The main activities progress start with purchase

products by using Wal-Mart’s logistics system. Second, store all the products in warehouses.

Wal-Mart is able to inventory with high level of information technology system. Third, send all

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the products to all different stores. Forth stage is display all the products in the store. After go

though the better customer service, eventually, they sold their products, which the last stage

(Traub, 2012). All these activities can help Wal-Mart maximize the profits. This is how Wal-

Mart’s value chain works, which is an implement of Wal-Mart’s management strategies.

4.5-- CORPORATE STRUCTURE

The first Walmart was inaugurated in 1962 in Arkansas by Sam Walton whose strategy

was to bring “The Lowest prices Anytime, Anywhere” (Walmart Corporate, 2014). Now there

are 2.2 million employees where more than 11,000 stores are located in 27 countries.

4.6-- CORPORATE CULTURE

“A sophisticated understanding of the past is one of the most powerful tools they have for

shaping the future” (Seaman Jr., 2012).

Walmart hopes to enrich their associates with the same passion and “strong conviction... toward

helping... people save money and live better” (Seaman Jr., 2012) by openly displaying and

communicating the values that guide every decision or initiative that strengthen and complement

their corporate and business strategy.

Wal-Mart makes it priority to let associates, customers and everyone invested in

Walmart, that they act according to their beliefs which make up their corporate culture; “service

to our customers, respect for the individual, striving for excellence and acting with

integrity”(Seaman Jr., 2012). Walmart believes their associates live and breathe the company

culture and demonstrate the same passion in upholding those beliefs in all Walmart stores around

the world.

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Walmart’s Beliefs

“Service to our customers” (Walmart Corporate, 2014) - All associates are reminded that

customer is Walmart’s reason for existing.

Prioritize customer

(Walmart) Be a source of strength for associates so they can perform better and transfer that

helpfulness to customers

Bond with local community to have closer customer relationships

“Respect for the individual” (Walmart Corporate, 2014) - All associates, customers and

anyone who interacts with Walmart, deserve respect.

Acknowledge every associate’s efforts and merits

Emphasis responsibility and leadership

Promote transparency and listen to associate’s suggestions

“Strive for excellence” (Walmart Corporate, 2014) - Treating every situation as a learning

experience and to assume leadership without restrictions.

Developing new methods to enhance business activities

Uphold a system that thrives on positive examples

Encouraging and guiding one another

“Act with integrity” (Walmart Corporate, 2014) - Maintain an infrastructure filled with

transparency, trustworthiness, and justice

Responsibility and ownership for actions

Unbiased behavior and transparency with everyone involved with company

Following ethical and legal guidelines while making focused Walmart-oriented decisions

that most benefit them

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4.7-- CORPORATE RESOURCE

4.7.1-- MARKETING

Walmart’s endeavors in marketing have consisted of 2.3 billion in 2013 in promoting

Walmart in “print, television and online ads (Neff, 2014)

Local television ads that show actual customer receipts at local Walmart locations and

compare Walmart’s lower prices to local competitor’s

As of 2013 their price-comparison ads range over 60 markets and have created 1,500

TV ads (Neff, 2014)

Using “real-time marketing” (Neff, 2014) approach

Exploiting competitor prices with Price Match Guarantee

Price Match Guarantee uses third-party tracking to search local competitor prices and

give Walmart’s consumers a refund if lower prices are found through a Walmart gift

card

Airing both national and local TV ads in order to speak with local consumers

The objectives for their marketing efforts is to emphasis their ad-match guarantee and

research consumer brand or product preferences. Walmart tries to think “in terms of 5 P’s- the

traditional four P’s of price, product, place and promotion plus people” (Springer, 2014) and

acknowledge that consumers rather shop locally then consider traveling further to a Walmart

store so Walmart tries to relate and communicate with to local consumers (Neff, 2013).

4.7.2-- FINANCE

Walmart’s financial health has been shaken in the past fiscal year and is currently exhibiting

quarterly earnings growth of -5% (Income Statement, 2014) Their debt to equity ratio is

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177.40% meaning they are highly leveraged with debt to finance its investments. Walmart has

stated that the unusual drop in sales was the harsh winter that burdened Walmart’s operating

expenses and deterred customers from shopping (Rayman, 2014). However prior to this year,

there has been steady growth of 2-5% in sales.

Debt to Equity ratio : $129,658,000 / 73,088,000 = 1.7739 or 177.40%

Revenue vs. Net Income [Chart] (2014)

4.7.3-- RESEARCH AND DEVELOPMENT

Wal-Mart have introduced their development plans and intentions at Walmart’s annual

shareholder’s meeting that includes several initiatives; “new store formats, innovations and

capabilities” (Walmart's Global E-commerce Top Of Mind For Future, 2012).

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Wal-Mart Express stores that look like a convenience store but have same capacity as

regular Walmart stores “with the help of technology” (Walmart's Global E-commerce

Top Of Mind For Future, 2012) but “designed to capitalize on distinct trip missions”

(Walmart's Global E-commerce Top Of Mind For Future, 2012).

Savings Catcher app that incorporates electronic receipts to capture consumer’s data

and shopping behavior (Return to Merchandising Roots Revitalizes Walmart, 2013)

Introducing the concept of grocery pickup centers that transfer online orders to

physical store drive-thru locations.

In-store care clinics starting in Texas locations

Adding more services; auto insurance, money transfers and in-store 3D printing

Along with introducing their “Four-Point Global strategy” (Walmart's Global E-

commerce Top Of Mind For Future, 2012) that allows Walmart to:

1. “Know customer - by name- to create personalized commerce” (Springer,

2014)

2. Offer more than 1 million products online

3. “Be the ecommerce market share king in key international markets across all

formats; sites, apps, stores and clubs” (Walmart's Global E-commerce Top Of

Mind For Future, 2012)

4. Using technology as competitive advantage in “monitoring pricing across the

Internet and using crowdsourcing to broaden product appeal” (Walmart's

Global E-commerce Top Of Mind For Future, 2012)

In order to strengthen Wal-Mart’s e-commerce strategy, Wal-Mart intends to use data

analytics to “personalize the shopping experience; build out a network of small-format stores;

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and meld its digital and physical initiatives to create a customer-centric ecosystem for the 21st

century” (Wolf, 2014).

4.7.4-- OPERATIONS AND LOGISTICS

Specializing in general merchandise and food retailing, Wal-Mart has branched out to

form Supercenters, Neighborhood Markets, Discount stores and Express stores. These “flagship

stores” (Springer, 2014) are not just store location but are used as distribution points for online

orders.

Their current merchandising strategy is made up of the following parts (Neff, 2014):

1. Secure that all product categories are represented in inventory

2. Offer different price and quality range products and have opportunity to carry new

items

3. Localized brand inventory

4. Price leadership across all product markets

Wal-Mart’s Supercenters were introduced in 1988, employ around 300 associates, and

measure 182,000 square feet. Supercenters strive to offer product categories that range from

“electronics, apparel, toys and home furnishings and the convenience of a grocery store with

fresh produce, bakery, deli and meat and dairy products”(Walmart Corporate, 2014). Most

Supercenters are aligned with regular Walmart store hours and are also open 24 hours but offer a

different range of services and “specialty shops such as pharmacies, banks, hair and nail salons,

name-brand restaurants, vision centers or health clinics” (Walmart Corporate, 2014).

Now dwindling, Wal-Mart Discount Stores were established in 1962 and scattered around

the U.S, discount stores measure around 106,000 square feet and employ around 200 associates.

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These stores offer fewer products, mainly “electronics, apparel, toys, home furnishings, health

and beauty aids, hardware (Walmart Corporate, 2014).

Wal-Mart Neighborhood Market was introduced in 1998, measure around 38,000 square

feet and employ around 95 associates. These stores were meant to help out consumers who

needed a pharmacy, and would purchase available groceries and products. Currently,

Neighborhood markets have a pharmacy, carry produce, bakery, deli items and household,

health, and beauty supplies.

Wal-Mart Express was introduced in 2011 and measure 15,000 square feet. The smallest

in their chain stores, they wanted to an “ideal format for urban and rural areas that lack access to

larger stores” (Walmart Corporate, 2014) with all the amenities of their regular Wal-Mart stores.

4.7.5-- HUMAN RESOURCES

Sam Walton used to refer to Human Resources as “The People Division” because he

knew how vital his employees were to be able to deliver their “seven overriding strategies (price,

operations, culture, key items/products, expenses, talent and service)” (Bergdahl, 2010)

“Focus walmart employees to do everything they possibly can to hold down costs”

(Bergdahl, 2010)

“How does HR focus people to insure operational success?” (Bergdahl, 2010)

Through “continuous learning, improvement, empowerment and teamwork” (Bergdahl,

2010)

“How does HR foster a culture committed to business success?” (Bergdahl, 2010)

Management attends cultural training

“How does HR connect Wal-Mart’s people to products?” (Bergdahl, 2010)

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“Deciding on behalf of customers” (Bergdahl, 2010)

“How does HR focus employees to reduce expenses?” (Bergdahl, 2010)

“Expense control - as sales go up expenses as a percentage of sales must also go down”

(Bergdahl, 2010)

“How does HR’s talent strategy drive results at Wal-Mart?” (Bergdahl, 2010)

Aggressively hiring college graduates and providing great training

“How does HR align every functional area with service?” (Bergdahl, 2010)

“Crediting their employees around the world who support Walmart” (Bergdahl, 2010)

4.7.6-- INFORMATION SYSTEMS

Wal-Mart “pioneered the use of barcode scanners, slick supply chains and inventory

management tweaked to local purchasing preferences...the next step are RFID chips” (Karlgaard,

2005).

With $6 billion of Wal-Mart’s capital going into a food inventory, Wal-Mart knows when,

where, and how much it needs at every Walmart location (Springer, 2014).

Incorporating the OSA 2.0 (On Shelf Availability) system knows how much inventory is being

purchased at every store and signals when sales are slowing down which means inventory is out

of stock (Springer, 2014).

In addition, Wal-Mart has begun building strong supplier relationships by including

suppliers in Wal-Mart’s “regular joint planning sessions” (Springer, 2014) and started using

point-of-sale data to follow and enhance Walmart’s operational performance.

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IFAS Table

Internal Factors Weight Rating Weighted

Score

Comments

Strengths

Financial support .10 4.0 .40 Economies of scale and

$473 billion annual

profits

Industry positioning .10 3.5 .40 Strong industry

leadership

Technological advancements in

supply chain management

.15 3.0 .50 OSA 2.0

and RFID inventory

tracking

Marketing strategy .10 3.5 .40 Targeting local

competitors

Weaknesses

Pressure to sustain price

leadership position

.10 4.0 .40 Significant investment in

supply chain efficiency

Customer service .10 3.5 .30 Not focused in forming

customer relationships

E-commerce .10 3.0 .20 Slow adoption and no

targets

Controversial labor practices .10 2.5 .30 Standardize quality HR

Consumer trends that conflict

with Walmart’s corporate

strategy

.05 1.5 .30 99 Cents Only stores

Total Scores 1.00

3.20

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V. ANALYSIS OF STRATEGIC FACTORS (SWOT)

5.1—SITUATIONAL ANALYSIS

SWOT ANALYSIS

Strengths:

Efficient supply chain management

Market leader in the industry

Unprecedented global presence

Low cost leadership enables

company to offer low price points

Small-store formats increase

competitiveness

Weaknesses:

Litigations regarding labor relations

Allegations and controversies related

to violation of anti-corruption laws

Limited amount of resources

Opportunities:

Growth in e-commerce and internet

retailing

Increasing acceptance of private

label merchandise

Outperformance of retail sectors in

market

Low prices appeal to struggling

economy

Threats:

Increase in employees increase

exposure to higher wage and healthcare

costs

Increasing competitive pressures from

different channels such as Target and

Costco

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SFAS TABLE

Strategic Factors Weight Rating Weighted

Score

S I L Comments

Technological

advancements in

supply chain

management (S)

.15 3.5 .525 X OSA 2.0

and RFID inventory

tracking

Industry position (S) .15 4.5 .675 X X X Market leader in

industry

Customer service (W) .10 3.0 .30 X Poor customer service

Allegations and

controversies of labor

practices (W)

.10 4.0 .40 X Controversies have

adverse effect on

consumers

Growing online

retailing (O)

.15 4.0 .60 X Wal-Mart was the #2

most visited website on

Black Friday in 2013.

Continuous economic

development of China

(O)

.10 4.0 .40 X Continuous global

expansion

Competitive pressures

from different

channels (T)

.15 3.5 .525 X Wal-Mart needs to be

more innovative to say

ahead of the game of

competitors like

Amazon.com

Rising healthcare

costs for employees

(T)

.10 3.0 .3 X Labor relations affect

store operations

Total Scores 1.00 3.725

5.2-- REVIEW OF MISSIONS AND OBJECTIVES

The retail business in 21st century is like the patterns of information, services and global

supply connecting to each other. Customers want their order to have quick response and just-in

time services. Speed will be the key to become success, therefore, global logistics management is

very important. Wal-Mart responses to the globalization with the high degree of the coordination

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of the international operational processes. Wal-Mart connects their goods, information, financial

and operational performance, and operate smoothly with each other.

Wal-Mart’s missions and objectives are includes get into the internationalization and

globalization of the industry environment; construct a no cultural differences, no time difference,

internal and external information system; promote the innovation movement which is based on

customers; integrate the global logistics systems, as well as operate the virtual teams on the

internet (Farfan).

In order to accelerate the establishment of competitive advantages and have the ability to

become global organization, Wal-Mart needs to maintain their missions and objectives. In the

implementation of global logistics, it often needs to face those uncontrollable variables, which

influence its performance. For those uncontrollable factors are including geographical, social,

cultural factors, legal, economic, and competitors, Wal-Mart need to seek other methods. Those

controllable factors are customer service, warehouse, inventories, transportation, packing, etc.

(Farfan). Therefore, Wal-Mart must use associated strategies and information technology to

manage. Wal-Mart will be able to continue to develop, expand, and also become the benchmark

for other companies.

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VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY

6.1- TOWS MATRIX

Internal Factors (Row)—

External Factors (Column)

Strengths

Market leader with

unrivaled scale and

wide product

variations

Low cost leadership

allows products to be

placed at low prices

Internationalization

strategy enables strong

foundation for growth

Increase in

competitiveness with

small-store formats in

urban environments

Weaknesses

Lawsuits affect

labor relations

adversely

Allegations related

to violation of anti-

corruption laws

(SWOT)

Opportunities

Outperformance of

retail sectors in

emerging markets

Growth in e-

commerce to serve

larger market

Low prices appeal to

struggling economy

Expansion to

developing countries

desiring low products

SO Strategy

Implement

internationalization

strategy (S) to e-

commerce (O)

Emerging small-stores

(S) to increase market

share in urban areas and

developing countries (O)

WO Strategy

Settle allegations (W)

and use scrutiny to

appeal to public eye

in order to clear

reputation serve a

larger, more receptive

market (O)

Labor relations can

be enhanced (W)

through expansion of

e-commerce and

hiring new employees

in the expansion (O)

Threats

Rising number of

employees increase

exposure to higher

wages and healthcare

costs

ST Strategy

Strong foundation for

growth (S) increases

revenue to cover rising

employee costs (T)

Small-store formats (S)

WT Strategy

Fairly compensate

employees (W) to

avoid revenue leaking

in lawsuits (T)

Avoid violating anti-

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Increasing

competition from

different channels

combat intensifying

competitive pressures

(T)

corruption laws (W)

to reduce tarnished

brand name in order

to successfully

compete with

competition from

different channels (T)

6.2—STRATEGIC ALTERNATIVES

6.2.1—PROS AND CONS

SO Strategy:

Wal-Mart’s effective internationalization strategy (S) should be implemented into its emerging

internet retail (O)

Pro: Continuous growth is Wal-Mart’s strategy to ensure their unprecedented position

in the market. The opportunity to both grow in physical environments as well as e-

commerce will ensure that position.

Con: Not all environments, such as developing countries, will be receptive to e-

commerce.

The emergence of small-store formats (S) will allow growth in urban areas (O)

Pro: Wal-Mart can increase market share by creating stores in areas where the usual

size format would not normally fit.

Con: New small-store formats could cause complications in supply chain

management

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WO Strategy:

With allegations causing Wal-Mart to be under scrutiny by the public eye (W), the company

must settle allegations in order to clear its reputation in order to serve a larger, more receptive

market (O)

Pro: Wal-Mart can use the public’s attention to its advantage by proving its

philanthropic qualities in order to appeal to more customers.

Con: If Wal-Mart continues to be under scrutiny in a bad light, the brand reputation

will be tarnished and further expenses to settle litigations will drain revenue.

Through the expansion of e-commerce and small-store formats (O), Wal-Mart can use the new

inflow of employees to enhance labor relations (W)

Pro: Wal-Mart can renew brand image with the opportunity of its new emerging

stores.

Con: If Wal-Mart does not revise its labor relations with the inflow of new

employees, the company will continue to have a poor image.

ST Strategy:

Wal-Mart’s strong foundation for growth (S) will allow for increasing revenue, covering rising

employee wages and healthcare costs (T)

Pro: Rising employee wages can take a toll on the company, but that toll can be

combatted by Wal-Mart’s growth capabilities.

Con: If Wal-Mart’s growth does not expand at the same rate as employee costs, the

company will run into discrepancies.

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The introduction of small-store formats (S) will contend with increasing competitive pressures

from different channels (T)

Pro: Wal-Mart’s strategy to minimize stores in order to fit smaller areas will allow

consumers to choose between rivaling companies such as Target or Costco.

Con: Urban areas may not be the demographic that chooses Wal-Mart as a retail

store.

WT Strategy:

Wal-Mart can avoid lawsuits that result in leaking revenue (T) by fairly compensating employees

(W) in order to enhance labor relations

Pro: Lawsuits that claim unfair treatment and pay from employees results in diverting

large amounts of money towards counterproductive activity. By fairly compensating

employees in the first place, Wal-Mart will be able to avoid such litigations.

Pro: Fair labor practices will result in more skilled and qualified employees.

Con: Compensating employees may create a higher demand, even if Wal-Mart abides

by labor practice laws.

Wal-Mart can avoid violating anti-corruption laws (W) to reduce the tarnished brand name (T)

Pro: Violating anti-corruption laws has halted the expansion of business in

developing countries such as India. By abiding by these laws, Wal-Mart will be able

to reinforce the company’s reputation and allow further growth opportunities.

Con: Wal-Mart can ultimately miss out on major profits if it continues to violate anti-

corruption laws.

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6.3—RECOMMENDED STRATEGY

The recommended strategy to use for Wal-Mart is the growth strategy of implementation

of both e-commerce and small-store fronts in order to appeal to a larger demographic. Wal-

Mart’s effective internationalization strategy (S) will enable it to expand to both internet retailing

and urban and developing areas (O).

6.3.1—CORPORATE STRATEGY

In Strategic Management and Business Policy, corporate strategy is defined as “the

choice of direction for a firm as a whole and the management of its business or product

portfolio” (Wheelen and Hunger, 2012, p. 206). In other words, corporate strategy defines a

company’s overall direction in terms of growth and management of its various business product

lines.

Wal-Mart’s current strategy is to maintain its global position as well as expanding into

more international markets and e-commerce while keeping in line with its mission of low prices.

In order for Wal-Mart to achieve this, the company will have to use growth and stability

strategies.

Wal-Mart’s overall direction is to maintain the position of a leading global entity as well

as growing as much as possible within the industry. Currently Wal-Mart operates over 11,000

retail unites in 27 countries such as Brazil, China, Japan, South Africa, and the United Kingdom

(Walmart.com). Wal-Mart has current objectives to expand in India and other developing

countries.

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In addition, Wal-Mart wants to have the same global presence in internet retailing and is

consistently using technology as a means to advance e-commerce transactions. Competitors such

as Amazon, are increasing in market share, putting Wal-Mart at a disadvantage. Wal-Mart’s

efforts at e-commerce include delivery from its website as well as mobile applications for easy

access for users. In order to Wal-Mart to enhance its technological presence and capabilities,

Wal-Mart must advance its delivery options that are up to par with its competitors as well as

website use for every country that has Wal-Mart stores.

6.3.2—BUSINESS STRATEGY

Business strategy, according to Wheelen and Hunger, is the strategy that “emphasizes

improvement of the competitive position of a corporation’s products or services in the specific

industry or market segment served by that business unit” (Wheelen and Hunger, 2012, p. 19). In

other words, it poses the question of “how will we compete in the marketplace?” Wal-Mart’s

mission is to save money so that people can live better. Its current business strategy is price

differentiation, which in Wal-Mart’s case is offering the lowest prices possible.

In order to keep in line with Wal-Mart’s business strategy, the company must maintain its

efficiency in operations. However, with the growth strategy and its overwhelming presence in

the market place, Wal-Mart must also take other measures to ensure its position. Wal-Mart has

been under scrutiny by its labor practices and controversies surrounding the company such as

violating anti-corruption laws. These allegations affect the revenue of the company, allocating

millions to otherwise counterproductive situations. This leaking revenue has an adverse effect on

the mission and vision of keeping prices low.

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In order to sustain this business strategy of low prices, Wal-Mart must make an effort to

deal with external situations that have an adverse effect on the company. It needs to make

changes in its reputation as well as its alignment with the law.

6.3.3—FUNCTIONAL STRATEGY

In Wheelen and Hunger’s Strategic Management and Business Policy, functional strategy

is “the approach taken by a functional area to achieve corporate and business unit objectives and

strategies by maximizing resource productivity” (Wheelen and Hunger, 2012, p. 20). It is

concerned with developing coherent processes that provide a company with a competitive

advantage.

Wal-Mart’s functional strategy will have to revise if the business and corporate growth

strategies change. Wal-Mart should focus on the functions of marketing and operating strategies

to ensure stability and growth within the company. Under operations, Wal-Mart can make

changes to the already efficient supply chain management in order to appeal to a larger customer

base.

Operations strategy involves the relationships with suppliers, how and where products

and services are produced, the use of physical resources, and the level of integration within the

production process. The area that Wal-Mart must make improvements on is the relationship with

suppliers. An issue within customer demand is that at the cost of low prices, Wal-Mart does not

supply what consumers want. In order to alleviate this issue, Wal-Mart must find relations with

suppliers willing to supply what consumers want. This shift in supply chain management may

increase costs, but at the result of the expansion of customers and their satisfaction.

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Wal-Mart’s supply chain management is what enables it to assume market leadership

position due to its effective integration. The processes and systems begin with strategic sourcing

in order to find products at the lowest price possible. Wal-Mart then creates contracts with these

suppliers, agreeing to buy long-term at the lowest price at the highest volume. Then, suppliers

ship the product to Wal-Mart’s distribution centers where they are directly sent to Wal-Mart

stores. Distribution management and direct transportation keeps inventory and transportation

costs low. This, in turn, creates a sustainable competitive advantage that allows Wal-Mart to

keep prices low.

6.3.4—POLICIES

Strategic Management and Business Policy defines a policy as “ a broad guideline for

decision making that links the formulation of strategy with its implementation” (Wheelen and

Hunger, 2012, p. 21). These policies ensure employees throughout the business make decisions

and take actions that align with a business’s mission, objectives, and strategies. The policies that

will help Wal-Mart implement these strategies include sufficient contracts with suppliers and the

objective to be number one as a global retail competitor wherever the company goes.

Wal-Mart’s size and reach puts the company in a position that attracts suppliers.

According to Billy Link Jr., a store manager, the “company's partnership with black enterprise,

and its deep commitment to supplier diversity in general, is simply good business” (Nichols,

2013). As long as Wal-Mart implements the policies and follows the guidelines with its current

suppliers to its potential new suppliers, the growth strategy will continue.

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VII. IMPLEMENTATION

7.1-- IMPLEMENTATION PROGRAM

Internationalization Program – Coordinate the international processes that occur with

respect to inventory management and supply chain management.

Affordable Pricing Program – Ensure prices for goods are competitive with that of

competitors and online stores.

Informational Technology Program – Implement advanced systems to smooth

exchange of time-sensitive information among store-location and automate in-store

processes such as the checkout process to increase the productivity of labor and capital.

Corporate Culture Program – Strengthen the corporate culture among employees by

emphasizing respect for customers and team members while also encouraging them to

strive for excellence.

7.2-- WHAT MUST BE DONE

7.2.1-- PROGRAMS ACTIVITIES

7.2.2—ACTION STEPS

7.2.3—WHO IMPLEMENTS STRATEGY

7.4—ACTION PLAN

Internationalization Program – Coordinate the international processes for inventory

management and supply chain management.

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Action Plan for the Board of Directors Responsibilities:

President & CEO of Walmart Stores, Inc., Doug McMillon

Executive VP & CFO, Charles M. Holley, Jr. and Jeff Davis,

Executive Vice President & COO of Walmart U.S., Gisel Ruiz.

President & CEO of Walmart Asia, Greg Foran

1. Increase the efficiency of the delivery of inventory by reducing the overall transit time

between the output supplier, warehouse and retail location.

Actions Steps:

o Review and analyze current delivery process (COO)

January 1st to February 1st

o Consider adjustments to process (Board of Directors)

February 2nd

to March 1st

2. Assess the long-term financial position of existing retail locations in Canada and Europe.

Consider additional opportunities for international retail locations whereby strong

business opportunities exist.

Actions Steps:

o Review the financial statements for international retail locations (CFO)

January 1st to April 1

st

o Request 5-year and 10-year financial projections for international retail

locations. (CFO)

January 1st to December 31

st

o Request financial forecasts of new locations (CFO)

January 1st to December 31

st

74

3. Maintain strong relationships with suppliers. Given increasingly complex international

politics, it is important for Walmart to maintain their business connections.

Actions steps:

o Conduct quarterly or annual meetings with suppliers to discuss

logistical issues and any concerns. (CEO)

January 1st to April 30

th

o Immediately report any urgent or important matters to the Board of

Directors should they come up at the meetings. (COO)

January 1st to December 31

st

4. Critically assess Wal-Mart’s business satellite on an ongoing basis to search for

innovative ideas to improve the existing wholesale/retail model.

Actions steps:

o Hire consultant team to identify areas for improvement (CEO)

April 30th

to December 31st

5. Consider the expansion of online-retailing in developing countries so that basic

necessities are provided and transported at the lowest costs.

Action Steps:

o Request financial projections for locations in Southeast Asia and

Africa (CEO of Asia)

January 1st to June 1

st

o Discussion among Board of Directors

June 1st to December 31

st

75

Affordable Pricing Program – Ensure prices for goods are competitive with that of competitors

and online stores.

Action Plan for the Board of Directors Responsibilities:

Executive VP & CFO, Charles M. Holley, Jr.

Senior VP & Controller, Steven P. Whaley

Executive VP & General Counsel of Walmart Stores, Inc., Karen Roberts

Executive VP & Chief Marketing Officer of Walmart U.S., Stephen F. Quinn

1. Continuously ensure that the “everyday low prices” are indeed competitive with that of

other stores.

Action Steps:

o Special department within Financial Department that compares prices

on a real-time basis. (Controller)

March 1st to May 30

th

2. Strategically promote prices of specific products during seasonal patterns to maximize

sales. Because margins are relatively small for these goods, quantity sold is a very critical

determinant of profit.

Action Steps:

o Ask various people. (CFO)

January 1st to January 30th

o Send reminder emails during special seasonal patterns (General

Counsel)

76

January 1st to February 28

th

3. Promote the “affordability” of products in all family-oriented advertisements and

construct deals that benefit families.

Action Steps:

o Special department within Marketing Department that will ensure

promotion deals. (Quinn - CMO)

January 1st to April 1

st

4. Establish various strong feedback channels for customers to provide their comments on

pricing and affordability.

Action Steps:

o Develop respectful lines of communication (CFO)

February 1st to March 30th

o Discussion among Board of Directors

March 31st to July 31

st

Informational Technology Program – Implement advanced systems to smooth exchange of

time-sensitive information.

Action Plan for the Board of Directors Responsibilities:

Chief Development Officer, Judith McKenna

Executive VP of Sales Innovation of Walmart U.S., John Aden

Executive VP of Global Governance & Corporate Secretary, Jeffrey J. Gearhard

77

1. With respect to the supply chain, implement new technology for truck drivers to reduce

transit times. This new technology program will inform truck drivers, update traffic

information, and adjust the best line for all the vehicles.

Action Steps:

o Hire applicants with efficiency skills (CDO)

January 1stth

to 15th

o Install top technologic GPS programs (CDO)

January 1st to 31ST

2. Automate an advanced management system that will increase the efficiency of product

ordering.

Action Steps:

o Upgrade to advanced technology (Aden)

January 1st to 15th

o Discussion among Board of Directors (Aden)

January 1st to 15th

3. Automate the checkout process to increase the productivity of labor and capital.

Action Steps:

o Upgrade technology versions to ensure machine efficiency (Aden)

January 15th

to 31st

o Discussion among Board of Directors (Aden)

January 15th

to 31st

78

4. Use retail information system to collect massive data to create unique algorithms about

customer purchasing patterns given seasons, gender, and various factors. Accordingly,

use the information in the future to reduce quantity of un-purchased inventory.

Action Steps:

o Conduct customer surveys for consumer knowledge (Gearhard)

February 1st to March 1st

5. Establish “virtual teams” through the Internet to unite Walmart employees across

countries.

Action Steps:

o Provide an email messaging program for 24 hours communication

(Gearhard)

March 2nd

to April 1st

Corporate Culture Program – Strengthen the corporate culture among customers, employees,

and management.

Executive VP of Global People Division, M. Susan Chambers

Regional Managers of Walmart U.S.

Executive VP of Walmart U.S. People, Kristin Oliver

1. Promote customer service and teach employees values that customers always come

first.

Action Steps:

79

o Provide mandatory employee training (Chambers)

January 1st to December 31

st

o Complete with stamp and certification (Chambers)

January 1st to December 31

st

2. Encourage employees to respect one another by working efficiently and effectively

through teamwork.

Action Steps:

o Create team bonding activities and social meetings (Regional

Managers, Oliver)

January 1st to December 31

st

o Ensure environment is friendly and respectful (Regional Managers,

Oliver)

January 1st to December 31

st

3. Encourage employees to always strive for excellence with respect to their duties.

Action Steps:

o Recite honor code, mission, and vision statement (Regional Managers,

Oliver)

January 1st to December 31

st

o Ensure employees know what they stand for (Regional Managers,

Oliver)

January 1st to December 31

st

4. Conduct management training that emphasizes communication, empowerment, and

teambuilding.

80

Action Steps:

o Enforce required and mandatory training after hiring process (Regional

Managers, Oliver)

January 1st to December 31

st

o Provide enjoyable and positive environment (Regional Managers,

Oliver)

January 1st to December 31

st

7.2.4 MATRIX OF CHANGE

81

7.3—ORGANIZING FOR ACTION

7.3.1-- CORPORATE STRUCTURE

7.3.2—JOB CREATION

82

VIII. EVALUATION AND CONTROL

8.1—BALANCED SCORECARD

8.1.1—FINANCIAL

8.1.2—CUSTOMER

8.1.3—INTERNAL BUSINESS PROCESS

8.1.4—LEARNING AND GROWTH

(Charts can be seen on the next page)

83

Financial “To succeed

financially,

how should

we appear to

our

shareholder?”

Objectives Measures Targets Initiatives

Reduce operation

costs by 5% in the

next year

Check annual reports in

operating expenses

Increase annual

savings in order

to reinvest into

growth and

capture larger

market share

Cutting operating

hours, reducing

shipping costs, and

increasing

transportation

efficiency

Increase employee

efficiency by 5% in

the next 2 years

Check annual reports for

decrease in wage expense

Higher Revenue

with lower wage

expense to make

stores more

profitable

During the first

year, increase

employee

efficiency through

training and new

technology

Increase sales by 5%

in the next year

Check annual reports for

sales income

Increase market

share by

increasing

revenues

Invest in

ecommerce and

store expansion to

capture more of the

market

Customer

“To achieve

our vision,

how should

we appear

to our

customers?”

Objectives Measures Targets Initiatives Reduce number of

customer complaints

by 5% every year

for the next 3 years

Check to see change

in customer

complaints

Increase customer

satisfaction

Improve customer

experience by training

employees better and

improve quality control

of stocked items

Increase number of

customer visits at

each store by 5% for

the next 2 years

Check an increase in

number of

transactions and

order placed

Increase marker

share by bringing

in more new

customers

To bring in more

customers the stores will

offer new merchandise,

lots of rollbacks, and

better in-stock levels

Increase customer

loyalty and

satisfaction in the

next 2 years

Check annual

reports if sales are

increasing

Protect current

market share

Make it better shopping

experience by focusing

on fundamentals

including the “greeters”

and better store layouts

Vision: if we work together, we’ll

lower the cost of living for everyone.

We’ll give the world an opportunity

to see what it’s like to save money

and have a better life.

Mission: we save people money so

they can live better.

84

“To satisfy our

shareholders

and customers,

what business

processes must

we excel at?”

Internal Business Process

Objectives Measures Targets Initiatives

Purchase U.S.

made products

Increase in the

number of U.S.

suppliers and their

products

Patriotic image Spend 250 Billion

dollars in 10 years

Higher quality

products

Quarterly sales Customer trust Quality Control

through Six Sigma

Greener

Distribution

Transportation

savings

Increased

Philanthropy

Packaging

Scorecard

“To achieve our

vision, how will

we sustain our

ability to

change and

improve?”

Learning and Growth

Objectives Measures Targets Initiatives

Expansion of

Market Share

Store Expansion More stores in

U.S.A. and China

Real Estate

Consumption

Emobile &

Ecommerce growth

Quarterly sales

online vs. brick and

mortar

Customer

Convenience

Increased

investment in Web

2.0

Knowledgeable

workers

Proficiency

Examination

Higher Sales Mandatory Annual

Training

Vision: if we work together, we’ll lower

the cost of living for everyone. We’ll

give the world an opportunity to see what

it’s like to save money and have a better

life.

Mission: we save people money so they

can live better.

85

8.1.3 INTERNAL BUSINESS PROCESS

Wal-Mart has the vision to lower the cost of living for everyone so that everyone can

save money and live better (Wal-Mart 2014). To achieve their vision, they need to resolve a few

of their internal processes that are hindering them from realizing it.

First, Wal-Mart is known for having everyday low prices and most of their items are in

fact imported from other countries that have loose labor and ethical laws. They have been

tainted with the image of being a corporation that gets the products for the cheapest price

possible and doesn’t support American labor because a majority of their manufacturing is done

in China. To decrease their image of being a bad corporation that outsources job, as well as

lower their transportation costs, their objective should be to purchase more U.S. made products.

In doing so, they will be able to keep manufacturing and supplier jobs in the United States, rather

than outsourcing, which will boost employment. Since Wal-Mart wouldn’t have to send raw

materials to China for manufacturing and then having the finished product imported, they will

save on transportation. Their initiative to follow through on this idea is through their pledge to

spend 250 billion dollars over the next ten years on U.S. suppliers (Wal-Mart Uses...2014). This

means that they will in fact implement a way to increase their U.S. suppliers and therefore have

more U.S. made goods in their stores. Their measure for the implementation is to look at the

number of suppliers and manufacturers they currently have in the U.S. and whether or not they

need to increase those numbers or remain static. Even though the U.S. supplier may charge Wal-

Mart more per unit of an item, Wal-Mart will still remain profitable because of their target. Their

target should be establishing a patriotic image for the company by proudly selling the ‘made in

U.S.’ items. This is an advantage for them because they will improve their company image as

86

well as gain customer who want to support U.S. manufacturing jobs by purchasing those made in

U.S. products.

Second, since Wal-Mart does import most of their products from third world countries,

they get the products for much cheaper than they would through their U.S. suppliers, however,

the tradeoff is the quality of those products. The Products are produced with cheaper materials

and therefore aren’t built to last for years but only to be utilized and broken down in a few

months. Their objective, then, should be to offer higher quality products to their customers. This

will ultimately mean using higher quality of raw materials and inputs and lead to higher costs.

This higher cost can be minimized if they take the initiative to do quality control through Six

Sigma. This would mean that the company analyzes their manufacturing costs and find out

where the inconsistencies are occurring so that variances can be minimized, if not eliminated.

This would mean that the production managers would have to look for ways to cut corner

without compromising quality. This initiative can be easily measure through the company’s

quarterly sales reports to see whether or not the number of sales for higher quality products have

risen or not, compared to the lower quality products. In the end, the target is to gain the

customer’s trust so that Wal-Mart can be positioned in their mind as a reliable place for them to

shop. This positioning can lead to a broader customer base through word of mouth and through

the quality of the product itself.

Third, Wal-Mart is global corporation that has to consider its footprint on Earth. They are

very active when it comes to philanthropic work as an organization and their ideology of the

three R’s is quite active; the R’s being Reduce, Reuse, and Recycle. To satisfy their shareholders

and customers, they need to excel in reducing waste. Their objective is to have a greener

distribution of their product shipments so that they can reduce waste to the bare minimum. To

87

reduce their shipment waste, they have taken the initiative of creating a packaging scorecard.

This scorecard is used to evaluate how efficient the packaging of the suppliers is and each

supplier gets a score between 1-15 (Wal-Mart Rolls…2008). The lower the score, the less

efficient the shipment process is and it needs to be improved or the supplier may be dropped. To

give an incentive to the suppliers to improve, the scores are posted so the suppliers can see each

other’s scores and can therefore see where they stand compared to other suppliers. This

scorecard is to help the suppliers not only be more green with their packaging but to also be

efficient by sending in the maximum number of items in each shipment without compromising

their integrity. To measure this initiative, Wal-Mart can look at their transportation and waste

management costs and see how much savings they have each quarter. These savings should

reflect how efficient and productive their suppliers are being. The whole point of this green

distribution is for Wal-Mart to be a responsible corporation that seeks to better the world outside

of itself. Their target is to increase their philanthropy in the global scope and in doing so they are

not only seen as a responsible company but they are also cutting their unnecessary costs. They

are branding themselves as a globally responsible citizen that is being proactive about

environmental issues.

88

8.1.4-- LEARNING AND GROWTH

Objective Measure Target Initiative

Expansion of

Market Share

Store Expansion More stores in U.S.A.

and China

Real Estate

Consumption

Emobile &

Ecommerce growth

Quarterly sales online

vs. brick and mortar

Customer

Convenience

Increased investment

in Web 2.0

Knowledgeable

Workers

Proficiency

Examination

Higher Sales Mandatory

Annual Training

89

For the learning and growth to be functional, it has to figure out how to answer the

question of how it will sustain its capability to keep improving and changing. For a company to

remain profitable it has to keep attracting customers and if it saturates one market then the

company should move into other markets, which is exactly what Wal-Mart has done and

continues to do. Even though Wal-Mart is the leader in the discount retail industry, it continues

to reach out to grab more of the market share.

First, their objective is to expand their market share so that they can continue to grow and

their economies of scale continue to be the barrier to entry for their competitors. To expand, their

initiative is real estate consumption. For the store to be profitable it needs to be located in a

shopping center or somewhere where it is accessible to the most number of people. Real estate

consumption can be leasing the land to build the store upon or purchasing the land and making it

an asset of the company. The objective can be measured by how many stores Wal-Mart will

open. According to research, Wal-Mart is going to open between 270 to 300 stores in the U.S.

alone in 2014 (Wal-Mart is set…2014). The number of stores will determine the number of lands

that are in question and whether or not they are leased of owned by Wal-Mart. Walmart is trying

to not only target the U.S. market, but also the global market, China in particular, because of the

number of imported goods from there. It’s a developing country that has seen growth over the

last 30 years and it has also become technologically advanced. Wal-Mart is trying to sustain their

growth in U.S. but they are also trying to establish themselves in China.

Second, technological advances have been rapid in the past few years and that has led to

better communication as well as easy access to information. For Wal-Mart to remain relevant

with the emerging technologies, they have to increase their e-mobile and e-commerce growth

(Wal-Mart is set…2014). As people become more technology-savvy, they prefer to order their

90

items online, through their laptops or tablets, or through their phones. As the consumers become

less reliant on brick and mortar and shift themselves towards online, Wal-Mart needs to meet

those consumer needs before their competitors do. Their initiative would be to increase

investment in Web 2.0. This way the consumers will be able to not only browse their websites

but will get customized searches geared towards them. These would increase the chance of the

consumer buying products. Also, if the consumer is able to read feedback of other consumers on

items, then that gives them more confidence to buy because they aren’t just trusting the company

but they are seeing what individuals like them think about the products and the interface is more

personal. To measure the impact of this initiative, the measure should be to compare the

quarterly sales online to the brick and mortar sales of the same items. This would help identify

what products the consumers are looking for online rather than in stores and this could help the

company improve their ecommerce and emobile strategy. According to the CEO of Wal-Mart,

more research into this area could help identify a way to unify brick and mortar and online (Wal-

Mart News 2014). The target for this objective is customer convenience. The customers should

be able to order from the Wal-Mart website without leaving their homes. This convenience

would increase sales because then would be up to par with websites like Amazon.

Third, Wal-Mart has over 2.7million workers worldwide but not all the workers are able

to perform all the tasks. The objective for Wal-Mart is to have knowledgeable workers in areas

such as electronics, appliances, and jewelry. This would be helpful in keeping their brick and

mortar stores relevant because if the worker if able to give the customer information that they

need, they will not be tempted to Google the information and go somewhere else. The initiative

would be to have a mandatory annual training for the Wal-Mart workers in those sections

because then they will stay current on the newest models and know that they information they

91

provide will be worth the customer’s time. To measure this initiative, there should be a

proficiency examination to determine whether or not the employee has comprehended the new

information and will be able to help the customers with their need. Lastly, the target for this

objective is to have higher sales. Once the workers are knowledgeable and helpful to the

customers, the customers will be more willing to buy the product at Wal-Mart than somewhere

else.

92

Appendix

Wal-Mart Stores, Inc. (NYS: WMT)

As Reported Annual Balance Sheet Report Date 01/31/20

14 01/31/20

13 01/31/20

12 01/31/20

11 01/31/20

10

Currency USD USD USD USD USD Audit Status Not

Qualified Not

Qualified Not

Qualified Not

Qualified Not

Qualified

Consolidated Yes Yes Yes Yes Yes Scale Thousand

s Thousan

ds Thousand

s Thousand

s Thousand

s

Cash & cash equivalents 7281000 7781000 6550000 7395000 7907000 Receivables, net 6677000 6768000 5937000 5089000 4144000 Inventories 44858000 4380300

0 40714000 36318000 33160000

Prepaid expenses & other current assets

1909000 1588000 1685000 2960000 2980000

Current assets of discontinued operations

460000 - 89000 131000 140000

Total current assets 61185000 59940000

54975000 51893000 48331000

Land 26184000 25612000

23499000 24386000 22591000

Buildings & improvements 95488000 90686000

84275000 79051000 77452000

Fixtures & equipment 42971000 40903000

39234000 38290000 35450000

Transportation equipment 2785000 2796000 2682000 2595000 2355000 Construction in progress 5661000 5828000 5312000 4262000 - Property & equipment, at cost 17308900

0 1658250

00 15500200

0 14858400

0 13784800

0

Less: accumulated depreciation 57725000 51896000

45399000 43486000 38304000

Property & equipment, net 115364000

113929000

109603000

105098000

99544000

Property under capital leases 5589000 5899000 5936000 5905000 5669000 Less: accumulated amortization 3046000 3147000 3215000 3125000 2906000 Property under capital leases, net 2543000 2752000 2721000 2780000 2763000 Goodwill 19510000 2049700

0 20651000 16763000 16126000

Other assets & deferred charges 6149000 5987000 5456000 4129000 3942000 Total assets 20475100

0 2031050

00 19340600

0 18066300

0 17070600

0

Short-term borrowings 7670000 6805000 4047000 1031000 523000 Accounts payable 37415000 3808000

0 36608000 33557000 30451000

Accrued wages & benefits 4652000 5059000 5089000 5895000 5986000 Self-insurance 3477000 3373000 3638000 3447000 3224000

93

Accrued taxes 2554000 2851000 - - - Other accrued liabilities 8110000 7525000 9427000 9359000 9524000 Accrued liabilities 18793000 1880800

0 18154000 18701000 18734000

Accrued income taxes 966000 2211000 1164000 157000 1365000 Long-term debt due within one year

4103000 5587000 1975000 4655000 4050000

Obligations under capital leases due within one year

309000 327000 326000 336000 346000

Current liabilities of discontinued operation

89000 - 26000 47000 92000

Total current liabilities 69345000 71818000

62300000 58484000 55561000

Notes - - - - 36651000 Unsecured debt 45073000 4288200

0 44660000 43543000 -

Other debt 801000 1099000 1202000 1537000 - Other long-term debt (mortgages & sale/leasebacks)

- - - - 630000

Total long-term debt 45874000 43981000

45862000 45080000 37281000

Less: current portion 4103000 5587000 1975000 4655000 4050000 Derivative fair value adjustments - - 183000 267000 - Long-term debt, net of current portion

41771000 38394000

44070000 40692000 33231000

Long-term obligations under capital leases

2788000 3023000 3009000 3150000 3170000

Deferred income taxes & other liabilities

8017000 7613000 7862000 6682000 5508000

Redeemable noncontrolling interest

1491000 519000 404000 408000 307000

Common stock 323000 332000 342000 352000 378000 Capital in excess of par value 2362000 3620000 3692000 3577000 3803000 Retained earnings (accumulated deficit)

76566000 72978000

68691000 63967000 66638000

Currency translation & other -2722000 47000 -806000 1226000 348000 Derivative instruments 336000 129000 -7000 60000 77000 Minimum pension liability -610000 -763000 -597000 -640000 -495000 Accumulated other comprehensive income (loss)

-2996000 -587000 -1410000 646000 -70000

Total Walmart shareholders' equity

76255000 76343000

71315000 68542000 70749000

Noncontrolling interests 5084000 5395000 4446000 2705000 2180000 Total equity 81339000 8173800

0 75761000 71247000 72929000

94

Costco Wholesale Corp (NMS: COST)

As Reported Annual Balance Sheet Report Date 09/01/2

013 09/02/2

012 08/28/20

11 08/29/2

010 08/30/2

009

Currency USD USD USD USD USD Audit Status Not

Qualified Not

Qualified Not

Qualified Not

Qualified Not

Qualified

Consolidated Yes Yes Yes Yes Yes Scale Thousan

ds Thousan

ds Thousan

ds Thousan

ds Thousan

ds

Cash & cash equivalents 4644000 3528000 4009000 3214000 3157000 Short-term investments 1480000 1326000 1604000 1535000 570000 Vendor receivables, & other - - 487000 448000 418000 Vendor receivables 581000 545000 - - - Reinsurance receivables 238000 226000 201000 196000 169000 Receivables from governmental entities

228000 87000 98000 64000 95000

Third-party pharmacy receivables 102000 104000 86000 75000 73000 Other receivables 52000 66000 96000 103000 82000 Less: allowance for doubtful accounts - 2000 3000 2000 3000 Receivables, net 1201000 1026000 965000 884000 834000 Merchandise inventories - United States

5560000 4967000 4548000 4150000 4080000

Merchandise inventories - Foreign 2334000 2129000 2090000 1488000 1325000 Merchandise inventories 7894000 7096000 6638000 5638000 5405000 Deferred income taxes & other current assets

621000 550000 490000 437000 371000

Total current assets 15840000

13526000

13706000

11708000

10337000

Land 4409000 4032000 3819000 3484000 3341000 Buildings & leasehold & land improvements

- - - 9096000 8453000

Buildings & improvements 11556000

10879000

10278000

- -

Equipment & fixtures 4472000 4261000 4002000 3513000 3265000 Construction in progress 585000 374000 269000 267000 264000 Gross property & equipment 2102200

0 1954600

0 1836800

0 1636000

0 1532300

0

Less accumulated depreciation & amortization

7141000 6585000 5936000 5046000 4423000

Net property & equipment 13881000

12961000

12432000

11314000

10900000

Prepaid rents, lease costs & long-term deposits

236000 230000 211000 186000 170000

Receivables from governmental entities

128000 225000 - - -

Tax-related assets - - 179000 - - Cash surrender value of life insurance 74000 76000 64000 65000 73000 Goodwill, net 63000 66000 74000 71000 71000 Other assets 61000 56000 95000 60000 50000

95

Investment in Mexico - - 0 357000 319000 Notes receivable - - - 54000 56000 Long-term investments - - - 0 3000 Other assets 562000 653000 623000 793000 742000 Total assets 3028300

0 2714000

0 2676100

0 2381500

0 2197900

0

Short-term borrowings - - 0 26000 16000 Accounts payable 7872000 7303000 6544000 5947000 5450000 Current portion long-term debt - 1000 900000 0 81000 Accrued salaries & benefits 2037000 1832000 1758000 1571000 1418000 Accrued member rewards 710000 661000 - - - Accrued sales & other taxes 382000 397000 335000 322000 302000 Deferred membership fees 1167000 1101000 973000 869000 824000 Reward liability - - - 522000 456000 Insurance-related liabilities 346000 308000 276000 263000 241000 Deferred sales 204000 159000 141000 77000 65000 Cash card liability 159000 133000 112000 100000 93000 Other current liabilities 162000 104000 96000 87000 83000 Sales return reserve 95000 86000 74000 72000 79000 Tax-related liabilities 77000 88000 122000 79000 54000 Vendor consideration liabilities 46000 57000 66000 - - Interest payable - 30000 51000 51000 51000 Accrued member rewards - - 602000 - - Sales & vendor consideration liabilities

- - - 77000 68000

Other current liabilities 1089000 965000 1540000 1328000 1190000 Total current liabilities 1325700

0 1226000

0 1205000

0 1006300

0 9281000

Senior notes 4595000 1097000 1997000 1995000 1995000 Promissory notes - - 85000 77000 144000 Term loan - - 39000 35000 32000 Convertible subordinated notes - - 31000 32000 32000 Capital lease obligations & other - - - - 84000 Other long-term debt 403000 285000 1000 2000 - Total long-term debt 4998000 1382000 2153000 2141000 2287000 Less: current portion 0 1000 900000 0 81000 Long-term debt, excluding current portion

4998000 1381000 1253000 2141000 2206000

Deferred income taxes & other liabilities

1016000 981000 885000 681000 388000

Total liabilities 19271000

14622000

14188000

12885000

11875000

Minority interest - - - - 86000 Common stock 2000 2000 2000 2000 2000 Additional paid-in capital 4670000 4369000 4516000 4115000 3811000 Unrealized gains (losses) on short-term investments

- 156000 7000 6000 3000

Foreign-currency translation adjustment & other accumulated other comprehensive income (loss)

- - 366000 116000 101000

Accumulated other comprehensive income (loss)

-122000 156000 373000 122000 104000

96

Retained earnings 6283000 7834000 7111000 6590000 6101000 Total Costco Wholesale Corp stockholders' equity

10833000

12361000

12002000

10829000

10018000

Noncontrolling interests 179000 157000 571000 101000 - Total equity 1101200

0 1251800

0 1257300

0 1093000

0 -

97

Target Corp (NYS: TGT)

As Reported Annual Balance Sheet

Report Date 02/01/2014

02/02/2013

01/28/2012

01/29/2011

01/30/2010

Currency USD USD USD USD USD

Audit Status Not Qualifie

d

Not Qualifie

d

Not Qualifie

d

Not Qualifie

d

Not Qualifie

d

Consolidated Yes Yes Yes Yes Yes Scale Millions Millions Millions Millions Millions Cash & cash equivalents 695 784 794 1712 2200 Credit card receivables, held for sale

- 5841 - - -

Credit card receivables, gross - - 6357 6843 7982 Less: Allowance for doubtful accounts

- - 430 690 1016

Credit card receivables, net - - 5927 6153 6966 Inventory 8766 7903 7918 7596 7179 Pharmacy, income tax & other receivables

792 - - - -

Vendor income receivable 555 621 589 517 390 Other receivables - 395 411 405 526 Prepaid expenses 272 310 - - - Deferred taxes 177 193 275 379 724 Other current assets 316 341 535 451 439 Total other current assets 2112 1860 1810 1752 2079 Total current assets 11573 16388 16449 17213 18424 Land 6234 6206 6122 5928 5793 Buildings & improvements 30356 28653 26837 23081 22152 Fixtures & equipment 5583 5362 5141 4939 4743 Computer hardware & software 2764 2567 2468 2533 2575 Construction-in-progress 843 1176 963 567 502 Accumulated depreciation 14402 13311 12382 11555 10485 Property & equipment, net 31378 30653 29149 25493 25280 Deferred taxes 469 206 - - - Goodwill & intangible assets 357 224 242 223 239 Cash surrender value of life insurance

305 269 371 358 319

Interest rate swaps 62 85 114 139 131 Other noncurrent assets 409 338 305 279 140 Other noncurrent assets, subtotal

1602 1122 1032 999 829

Total assets 44553 48163 46630 43705 44533 Accounts payable 7683 7056 6857 6625 6511 Wages & benefits 887 938 898 921 959 Real estate, sales & other taxes payable

669 624 - - -

Gift card liability 521 503 467 422 387 Dividends payable 272 232 202 176 127 Poject costs accrual 256 347 - - - Construction in process accrual

- - - - 72

Straight-line rent accrual 248 235 215 200 185

98

Income taxes payable 221 272 257 144 - Taxes payable - - 547 497 490 Workers' compensation & general liability

152 160 164 158 163

Interest payable 85 91 109 103 105 Other accrued & other current liabilities

623 579 785 705 632

Accrued & other current liabilities

3934 3981 3644 3326 3120

Unsecured debt & other borrowings

- 1494 3036 119 796

Nonrecourse debt collateralized by credit card receivables

- 1500 750 - 900

Current portion of long-term debt & other borrowings

1160 - - - -

Total current liabilities 12777 14031 14287 10070 11327 Total notes & debentures 11678 14648 - - - Swap valuation adjustments 53 78 - - - Capital lease obligations 1971 1952 - - - Less: current portion 1080 2024 - - - Unsecured debt & other borrowings

12622 14654 - - -

Unsecured debt & other borrowings

- - 13447 11653 10643

Nonrecourse debt collateralized by credit card receivables

- - 250 3954 4475

Deferred income taxes 1433 1311 1191 934 835 Deferred compensation 491 479 421 396 369 Workers' compensation & general liability

424 467 482 470 490

Income tax liability 174 180 224 313 579 Pension & postretirement health care benefits

115 170 225 128 178

Other noncurrent liabilities 286 313 282 300 290 Total other noncurrent liabilities

1490 1609 1634 1607 1906

Total non-current liabilities 15545 17574 16522 18148 17859 Common stock 53 54 56 59 62 Additional paid-in-capital 4470 3925 3487 3311 2919 Retained earnings 12599 13155 12959 12698 12947 Pension & other benefit liability adjustments

-422 -532 - -541 -537

Currency translation adjustment & cash flow hedges

-469 -44 - - -

Derivative instruments, foreign currency & other accumulated other comprehensive income (loss)

- - - -40 -44

Accumulated other comprehensive income (loss)

- - -681 -581 -581

Total shareholders' investment 16231 16558 15821 15487 15347

99

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