GITAM INSTITUTE OF INTERNATIONAL BUSINESS

A CASE ANALYSIS on WAL-MART

BUSINESS STRATEGY

Submitted
to
Sri G V L
Satyakumar

S
ubmitted by
Mr.
Goutam Dash
MBA (IB)
(2008-10).
 A-Section.
Reg no:
1224108128
Q 1- Evaluate the various elements of strategy of Wal-Mart stores
using the framework learnt in the course?

Wal-Mart Stores Inc. is the largest retail company in the United States and has been
ranked number one on the Fortune 500 Index by Fortune Magazine. Wal-Mart has four
parts to their corporate strategy.
1. Dominance in the Retail Market
2. Expansion in the U.S. and International Markets
3. Creation of Positive Brand and Company Recognition
4. Branch Out into New Sectors of Retail
Wal-mart is based on two main objectives that have guided the firm through their
growth years. The customer is featured in the first objective; "Customers would be
provided what they want, when they want it, all at a value". Team spirit was
emphasized in the second objective, "Treating each other as we would hope to be
treated acknowledging our total dependency on our associate - partners to sustain
our success".
Strategies
Wal-mart contains two set of strategies; Business Strategies and Marketing
Strategies.
Business Strategies include:
1. Same good for less and still earns profit
2. Very good operational efficiency
3. Use of IT in all verticals of business
4. Effective use of logistics management
5. Global Expansion for new market opportunity
6. Bargaining power over suppliers
7. Data used to profile each market
8. Predicts demand, optimizes stock, and
9. Networked to HQ via private satellite
Marketing Strategies include:
 Thinking globally, serving locally
  Saving people money so they can live better
“Every Day Low Prices” is the epicenter of the Wal-mart marketing
strategy.

Wal-Mart's corporate management strategy involves selling high quality and brand
name products at the lowest price. In order to keep low prices, the company reduces
costs by the use of advanced electronic technology and warehousing. It also
negotiates deals for merchandise directly from manufacturers, eliminating the
middleman. Wal-Mart's community outreach focuses on the goals of providing
customer satisfaction, involving itself with local community services, and providing
scholarships. Its emphasis is on children and environmental issues. During the 1970s,
the retail industry became highly competitive, but, at the same time the economy
became weak due to inflation. Sears was the leading retailer in the nation, during the
1970s, however, the recession of 1974-1975 and inflation affected Sears adversely.
Sears targeted middle class families and expanded its overhead. Wal-Mart's strategy
was to compete with its rivals and lower overhead expenses. Compared with Sears,
which consisted of more than 6,000 distribution centers, Wal-Mart had only 2,500
comparable units.
Wal-Mart is also on top of their game because of the management strategies they
employ. The management strategies of Wal-Mart emphasize its workforce and its
corporate culture; that being a morally conservative, religious, and family-oriented
business. Wal-Mart emphasizes how it listens to the needs of its workforce so that
each employee is able to suggest improvements to company policy and practice. At
Wal-Mart, store employees are called "associates." In addition, in order to promote
esprit de corps, the company publishes "Wal-Mart World," an internal magazine for its
associates. The company offers generous financial rewards for employees by means
of profit-sharing plans such as stock-purchase options. Furthermore, the company
provides comprehensive training programs for all employees.
COMPLEMENTARY STRATEGIES
To strengthen its competitiveness, Wal-Mart collaborates closely with suppliers
with strong brand-name who are dominant in their category, who have full product
lines, and who can bring in new and better products to retail shelves. Wal-Mart’s
procurement personnel spends considerable time meeting with vendors,
understanding their cost structure, and learning how a vendor could cut down its costs
in order to capture win-win relationships for both parties.
To expand its geographic coverage, Wal-Mart’s domestic strategy is “backward
expansion.” The company opens stores in small towns surrounding a targeted
metropolitan and saturates each area before moving into new territory. International
expansion involves a combination of new store construction and acquisition. As Wal-
Mart enters foreign markets, it intends to “remain local” by customizing its offering to
match the taste and preferences of local buyers and operating through the
management of natives of the foreign countries.
Wal-Mart also employs simultaneous offensive initiatives on many fronts.
Experiments in store layout, merchandise displays, store color schemes, and
promotions are always under way. Wal-Mart also engages in preemptive strikes
especially when it enters a new market by securing a dominant position in the
geographic area and forcing smaller retailers out of business.
SUPPORTING STRATEGIES
Marketing and Sales: Wal-Mart meets customers’ needs with four different retail
concepts: Discount stores, Supercenters, Sam’s Clubs and Neighborhood markets.
Technology: Wal-Mart is a first-mover in upgrading and improving its technological
capabilities. It uses computers, satellite, and information systems in communicating
with vendors, electronically purchasing orders, tracking sales and inventory,
identifying slow-selling items and squeezing costs out of the supply chain.
Distribution Center Operations: Several labor-intensive tasks had been automated and
cost-efficient system of conveyors, bar-coding and handheld computers have been
utilized to continuously streamline distribution operations.
SWOT Analysis
Strength
1. Cost advantage
2. Low price and customer oriented
3. Focused strategy
4. Strong supply chain management
5. People are key to success
Weakness
1. Ignore store decoration
 2. Wal-mart sell products across many sectors, it may not have the flexibility of
some of its more focused competitors
3. Managing huge span of control

Opportunity
1. Strong brand equity
2. Put efforts on social welfare – better image
3. New locations, and store types
4. Overseas markets
Threats
1. Other competitors
2. Intense price competition

The Company’s ‘Low Price’ image, backed by the strong integrated marketing
strategy is the key success factor of Wal-mart.
People at Wal-Mart believe that, ‘saving money is a good news in any language’.
– This statement (believe) is certainly true as it helped them acquiring success in
which this concept is not so popular – like Germany.
Walton’s 10 commandments for business success were:
1. Commit to your business.
2. Share your profits with your associates (employees), and treat them like your
partners.
3. Energies your colleagues.
4. Communicate everything you possibly can with your partners.
5. Appreciate everything your associates do for the business.
6. Celebrate your success.
7. Listen to everyone in your company.
8. Exceeds your customer’s expectations.
9. Control your expenses better than your competition.
10.Blaze your own path.
Management at Wal-Mart strictly adheres to these commandments, and that’s the key
to their success.
Financial Analysis:
Last year, Wal-Mart earned $1.03 per share from continuing operations in the fourth
quarter, which included a net charge of approximately $0.02 per share for real estate
transactions and certain restructuring of its Japanese operations. Net sales for the
fiscal year were $401.244 billion, an increase of 7.2 percent over fiscal year 2008.
Income from continuing operations increased 3.0 percent to $13.254 billion, up from
$12.863 billion in the prior year. Reported EPS for fiscal year 2009 was $3.35, up 6.0
percent from $3.16 in the prior year. Underlying EPS was $3.42, excluding the
litigation charge.

Net sales (billions of dollars).

Fourth quarter performance

2009 2008 % change

Wal-Mart US 71.464 67.428 6.0%

International 24.696 26.949 -8.4%

Sam’s Club 11.836 11.831 0.0%

Total Company 107.996 106.208 1.7%

Twelve month performance in net sales (billions of dollars)

2009 2008 % change

Wal-Mart US 255.745 239.529 6.8%

International 98.645 90.421 9.1%

Sam’s Club 46.854 44.357 5.6%

Total Company 401.244 374.307 7.2%

Operating Income (billions of dollars)

Fourth quarter performance

2009 2008 % change

Wal-Mart US 5.400 5.286 2.2%

International 1.490 1.739 -14.3%

Sam’s Club 0.427 0.444 -3.8%

 Twelve month performance

2009 2008 % change

Wal-Mart US 18.763 17.516 7.1%

International 4.940 4 .725 4.6%

Sam’s Club 1.610 1 .618 -0.5%

VALUE CHAIN ANALYSIS

Wal-Mart takes care of all the activities internally except partially outsourcing its
logistics requirements. Its systems integration from inventory, to stores, to
headquarters to suppliers is the lifeline of its success. The core activity remains in its
bulk buying and inventory management which supports Wal-Mart’s competitive
advantage of pricing and every element shows traces of cost leadership. Wal-Mart
located its discount stores around regional warehouses allowing a streamlined and
low cost physical distribution.
Inbound Logistics
Wal-Mart’s primary activity of receiving inventory is planned right from the point of
production, which Wal-Mart is not involved with. Wal-Mart has integrated systems with
key suppliers which communicate in real time data with sales information and stock
status so it can replenished in time. Shipments are timed and slotted and planned in
an orchestral way.
Operations
Wal-Mart maintains a lean approach to inventory. Wal-Mart innovated a technique of
replenishment called the Cross-Docking where incoming goods are offloaded into
outgoing trucks directly without stocking them even for a few hours. Most goods pass
through the warehouses within a span of 48 hours, enabling minimum idle time and
lowering excess inventory possibilities. Most of the goods never touch the floor of the
warehouse, as goods are passed on 24 miles length of conveyor belts between
incoming trucks to outgoing trucks.
Outbound Logistics
Goods are transferred within 48 hours of receipt from suppliers. The replenishments
are also done twice weekly, which is double the industry’s standard.
Marketing and Sales
Wal-Mart maintains a simple and effective marketing strategy which it has managed
to replicate globally apart it being the focus of its strategy. The Every Day Low Price
(EDLP) is simple and eliminates unnecessary advertising trying to push sales, as Wal-
Mart has successfully sold the concept to the customers, that it sells its products at
the lowest prices, everyday. This is one of the most interesting attributes of Wal-Mart.
Service
Wal-Mart’s aggressive yet subtle ‘People Greeters’ and in its own fashionable and
proud way ‘Aggressive Hospitality’ are the foundations for Wal-Mart’s success in the
highly competitive market.
Infrastructure
Wal-Mart maintains its own fleet of 2000 plus trucks which have scheduled deliveries
between warehouses to stores minimizing delays and over reliance from suppliers.
Human Resource Management
Wal-Mart is the only retailer to be in Fortune’s 100 Best Places to Work. Wal-Mart’s
empowerment of Associates is laudable with instances such as allowing its Associates
to get on the network and lower its prices, nationwide if its found to be higher than its
competitors, all this done without any consultation or permission requests from
superiors.
Technology Development
Wal-Mart’s technology and inventory management systems and software are better
than the best in the world and also the lifeline of the organization. Wal-Mart’s early
innovations and experimentation apart from investments light-years ahead of its time
into VSAT capabilities have boosted its success.

P.E.S.T. ANALYSIS
Political Influences
The political influences in this industry is probably the most burning concern with
organizations going global and many countries restricting the growth of companies by
many countries. European Customs and Regulations heavily hamper expansion plans.
FDI in many countries are still heavily regulated and global companies are yet to set
foot into emerging markets like India.
Economic Influences
The recent financial crisis has had a negative impact on consumer spending and
outlook. Disproportionate levels of income and consumer spending in developing
countries like India and China will impact growth of global companies. Exchange rates
affect global sourcing and pricing policies on a day to day basis.
Social Influences
Developing countries are not used to push type marketing and aggressive selling.
Bulk buying patterns predominantly present in USA, is non-existent in Asian countries.
Language and cultural factors is a barrier to globalization. Anti-Globalization
movements in the recent past has affected growth of global companies, especially
companies originated USA.
Technological Influences
Development in technology and satellite systems has given a boost to Wal-Mart. Basic
infrastructure still lacks for effective warehousing and distribution, the lifeline of a
retail chain.
Cost leadership
Analysis of the value adding activities supporting the generic strategy shows clear
elements of cost focus. Low cost leadership helps the firm above average returns in
the industry despite strong competitive forces. Traces of cost leadership are
noticeable in the value chain. Wal-Mart saves costs by holding stocks for less than 48
hours in its inventory. Wal-Mart is known to negotiate with suppliers for the lowest
cost of the product without any frills and marketing expenses which adds to the cost
later. Wal-Mart’s purchase by the truckload saves costs again by bulk purchasing.
Wal-Mart’s inventory handling and logistics distribution with its own fleet of 2000 plus
trucks help attain a cost effective distribution channel than relying on unreliable
suppliers networks which costs in delays.
Differentiation
Wal-Mart appears to have a differentiation strategy. The differentiation strategy is one
of differentiating the product or service offering of the firm, creating something that is
perceived industry-wide as being unique. It can be design or brand image, technology,
features, customer service, dealer network or other dimensions. High degree of
customer service with store greeters and ’10 foot attitude’ policies reaffirms Wal-
Mart’s differentiation from its competitors.
Focus
The third generic strategy advocated by Porter is the focus strategy. The focus
strategy is focusing on a particular buyer group, segment of the product line or
geographic market as with differentiation, focus may take many forms. Wal-Mart right
from its foundation located its stores to out of town areas with small populations. This
was a segment ignore by its competitors giving Wal-Mart an edge over competition by
locating itself in a low competitive environment before it creates competition. Wal-
Mart’s focus on the segment of people targeted as well as its location of stores, does
give it an attribute of the focus strategy. Effective implementation of any of these
generic strategies usually requires total commitment and supporting organizational
arrangements that are diluted if there is more than one primary target. Arguably
Porter termed organizations attempting cost leadership and differentiation together as
‘stuck-in-the-middle’ and it does not lead to competitive advantage and its
sustainability.
Summary: -
Wal-Mart needs to successfully compete globally to sustain its leadership in the
retail industry. Its current international division is nowhere near as profitable as the
domestic division. The domestic success is primarily due to Wal-Mart’s excellent
customer service, supply chain management, and brand recognition. Wal-Mart has not
successfully adapted to foreign markets and this is why their customer service and
brand recognition is not very strong in foreign countries.
Implementation:-
Wal-Mart needs to obtain a transnational strategy because it will help Wal-Mart to deal
with the pressures to adapt locally and keep prices low. This international strategy will
allow Wal-Mart to obtain economies of scale, adapt to local markets, locate activities
in optimal locations, and increase knowledge flows and learning. Wal-Mart’s
knowledge and learning of foreign markets is very important if it wants to have
excellent customer and community service in foreign countries

Q2) Try to symbolize Wal-Mart with a suitable analogy and justify your
symbolism in about 100 words?
Thinking globally. Serving locally.
Wal-mart international stores offer working families the things they need at prices
they can afford, and offer the customer service and convenience they’re famous for.
In each of their international markets, they use their strength as a global company to
meet the local needs of our customers, and provide help for their communities.
Saving People Money so they can live better.
Saving people money to help them live better was the goal that Sam Walton
envisioned when he opened the doors to the first Wal-Mart. Today, more than 40
years later with operations in 16 markets worldwide, Wal-mart continue to deliver that
promise to families around the globe. It’s the focus that underlies everything they do
at Wal-Mart. And for the millions of customers who shop at Wal-mart stores and clubs
around the world each week, it means a lot.
‘Saving money — good news in any language’
“Every Day Low Price” is a epicenter of the Wal-mart marketing
strategy.
From the various factors analysed such as good supply chain management,low
procuring cost, well defined distribution channel, good customer understanding,
Walmart has got the cost advantage over it’s other competitors by which it has
achived to serve people at low price so I will symbolize Wallmart as a low priced
shopping destination where every strata of people belonging to various economic
classes are invited.