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STRATEGI MANAGEMENT

CASE STUDY: WALMART STORES

PREPARED BY: AHMED HASSAN HADI (A101190313)


Page | 1

PREPARED FOR: DrTengku

EXCUTIVE SUMMARY
This report involves analysis of Wal-Mart Stores, and how it has changed over
the years. In the following report, a brief introduction and a brief background
will be given for the company and the report will then go on to take into
account various matrixes that will help us identify which strategies need to
be

adopted

by

Wal-Mart

Stores.Furthermore,the

vision

and

mission

statement for the company has also been identified; in addition, the
objectives and strategies have also been put forward. Moreover, as
mentioned already, matrixes such as external factor evaluation matrix,
internal factor evaluation matrix, competitive profile matrix, SWOTmatrix,
Page | 2

BCG matrix, IE matrix, SPACE matrix and the Grand Strategy matrix have all
been identified. Finally, the report will express alternate strategies for WalMart Stores and evaluate in order to find out which strategy is suitable for
Wal-Mart Stores in order to be effective and success in the future.

1.0 INTRODUCTION
Wal-Mart Stores, Inc is an American public corporation that runs a chain of large discount
department stores and a chain of warehouse stores. In 2009 and 2010 it was the world's largest
public corporation by revenue, according to the Forbes Global. The company was founded by
Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York
Stock Exchange in 1972. Wal-Mart, headquartered in Bentonville, Arkansas, is the largest
majority private employer and the largest grocery retailer in the United States. In 2009, it
Page | 3

generated 51% of its US$258 billion sales in the U.S. from grocery business. It also owns and
operates the Sam's Club retail warehouses in North America. Wal-Mart has 8500 stores in 15
countries, with 55 different names.
The company operates under its own name in the United States, including the 50 states. It also
operates under its own name in Puerto Rico. Wal-Mart operates in Mexico as Walmex, in the
United Kingdom as Asda and Japan as Seiyu,. It has wholly-owned operations in Argentina,
Brazil, and Canada. Wal-Mart's investments outside North America have had mixed results: its
operations in the United Kingdom, South America and China are highly successful, while it was
forced to pull out of Germany and South Korea when ventures there were unsuccessful.
1.1 BACKGROUND
No word better describes Wal-Mart than growth. In 1945, Sam Walton opened his first Ben
Franklin franchise in Newport, Arkansas. Living in rural Bentonville, Arkansas, at the time,
Walton, his wife Helen, and his brother Bud operated the nations most successful Ben Franklin
franchises. We were a small chain, said Walton of his 16 store operation. Things were running
so smoothly that we even had time for our families. What more could a man want? A great deal
as it turned out.
Sam and Bud Walton could see that the variety store was gradually dying because supermarkets
and discounters were developing. Far from being secure, Walton knew that he was under siege
and decided to counter attack. He first tried to convince the people in top management of Ben
Franklin to enter discounting. After their refusal, Sam Walton made a quick trip around the
country in search of ideas. He then began opening his own discount stores in small Arkansas
towns like Bentonville and Rogers.
The company opened its first discount department stores (Wal-Mart) in November 1962. The
early stores had bare tile floors and pipe racks. Wal-Mart did not begin to revamp its image
significantly until the mid- 1970s, and growth in the early years was slow. However, once the
company went public in 1970s, sales began to increase rapidly. When it initially went public, 100
shares of Wal-Mart stock would have cost $1,650. Now, those 100 shares are worth over
$6million.

Page | 4

Such retailers as Target, Venture, and Kmart provided the examples that Wal-Mart sought to
emulate in its growth. The old Wal-Mart store colors, dark and white (too harsh), were dumped
in favor of a three- tone combination of light beige, soft blue, and burnt orange. Carpeting, which
had long been discarded on apparel sales floors, was put back. New racks were put into use that
displayed the entire garment instead of only an outer edge.
Sam Walton died in 1992. Bud Walton died in 1995. Wal-Marts 1995 annual report was
dedicated to Bud. Sam Walton once said about Bud, Of course, my number-one retail partner
has been my brother, Bud. Buds wise counsel and guidance kept us from many a mistake. Often,
Bud would advice taking a different direction or may be changing the timing. I soon learned to
listen to him because he has exceptional judgment and a great deal of common sense.
In 2000, H. Lee Scott was named president and CEO of Wal-Mart. In February 2009, Mike Duke
became the new president and CEO when Scott retired from the position. According to duke,
our company is so well positioned for todays difficult economy and tomorrows changing
world. We have an exceptionally strong management team, able to execute our strategy, perform
every single day, and deliver results.

1.3 VISION STATEMENT


"Promotion of ownership of ethical culture"
1.4 MISSION STATEMENT

Page | 5

Wal-Mart does not officially have a mission statement according to the case study but nowadays
they officially published this mission statement.
We save people money so they can live better.

1.5 THE COMPANYS BUSINESS STRATEGY


The Business strategies Wal-Mart uses and how they differentiate their services/products. There
are 3 generic business strategies and they consist of the Focus strategy, the Differentiation
strategy, and Overall Cost leadership
1.5.1 Focus strategies
Focus strategy is usually defined as focusing on offering products and services to a particular
market segment or buyer group, within a segment of a product line, and/ or to a specific
geographic market.
1.5.2 The Differentiation strategy:
The Differentiation strategy is defined as offering a product or service that is perceived as unique
in the marketplace.
1.5.3 Overall Cost leadership:
Wal-Marts strategy is Overall Cost Leadership, offering their customers great quality service
and products at a lower price than their competition. Overall Cost Leadership is defined as
offering the same or better quality product or service at a price that is less than what any of the
competition is able to do

1.6 COMPETITORS
Wal-Mart's primary competition includes department stores like Kmart, and Target
Corporation. Competitor of Wal-Mart's Sam's Club division is Costco Wholesale.

Page | 6

1.6.1 Target Corporation


Target Corporation, originally the Dayton Dry Goods Company and later the Dayton
Hudson Corporation, is an American retailing company, founded in 1902 and headquartered in
Minneapolis, Minnesota. It is the second-largest discount retailer in the United States, preceded
by Wal-Mart. The company is ranked at number 38 on the Fortune 500 as of 2012 and is a
component of the Standard & Poor's 500 index. Its bulls eye trademark is licensed to
Wesfarmers, owners of the separate Target Australia chain which is unrelated to Target
Corporation.
The first Target store was opened in 1962 in nearby Roseville, Minnesota. Target grew and
eventually became the largest division of Dayton Hudson Corporation, culminating in the
company being renamed as Target Corporation in August 2000. On January 13, 2011, Target
announced its expansion into Canada. Target Canada will operate 100 to 150 stores by 2013,
through its purchase of leaseholds from the Canadian chain Zellers.
1.6.2 Kmart
Kmar is an American chain of discount stores headquartered in the United States. The
chain purchased Sears in 2005, forming a new corporation under the name Sears Holdings
Corporation. The company was founded in 1962 and is the third largest discount store chain in
the world, behind Wal-Mart and Target, with stores in the United States, Puerto Rico, the U.S.
Virgin Islands, and Guam (which houses the world's largest Kmart). As of January 29, 2011,
Kmart operated a total of 1,307 (6 closing by early 2011) Kmart stores across 49 states, Guam,
Puerto Rico, and the U.S. Virgin Islands. This store count included 1,278 discount stores,
averaging 93,000 sqft (8,600 m2), and 29 Super Centers, averaging 169,000 sqft (15,700 m).

Kmart became known for its "Blue Light Specials." They occurred at surprise moments when a
store worker would light up a mobile police light and offer a discount in a specific department of
the store. At the height of Kmart's popularity, the phrase "attention Kmart shoppers" also entered
into the American pop psyche, appearing in films and other media such as Troop Beverly Hills,
Six Days Seven Nights, Rain Man, Beetle juice, and Dawn of the Dead.
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Kmart's world headquarters was located in Troy, Michigan, but since the purchase of Sears, has
been relocated to Hoffman Estates, Illinois. Kmart also exists in Australia and New Zealand (see
Kmart Australia), although it now has no relation to the American stores except in name, after
U.S. equity in the Australian business was purchased in the late 1970s.
1.6.3 Costco Wholesale
Costco Wholesale Corporation is a membership-only warehouse club that provides a
wide selection of merchandise. As of July 2012, it is the second largest retailer in the United
States, the seventh largest retailer in the world and the largest membership warehouse club chain
in the United States.
Costco is headquartered in Issaquah, Washington, United States] and was founded in 1976 in San
Diego,CAwith its first warehouse in Seattle. Today Costco has a total of 626 locations in the
UK (23), Australia (3), Canada (85), Mexico (33), Taiwan (9), South Korea (9), Japan (15), and
the United States(449).

2.0 FINANCIAL RATIO ANALYSIS


Financial ratios are computed from an organizations income statement
and balance sheet. Computing financial ratios is like taking a picture because
the results reflect a situation at just one point in time. Comparing ratios over
time and to industry average is more likely to result in meaningful statistics
that can be used to identify and evaluate strengths and weaknesses.

Key

financial ratios can be classified into the following five types:


Page | 8

2.1 LIQUIDITY RATIOS


Liquidity ratios measure a firms ability to meet maturing short-term
obligations. Liquidity ratios consist of two parts one is called current ratio
and the one is called quick or acid-test ratio.
Ratio
Current Ratio

Formula
Current assets /

2008
48020/ 58478

2009
48949/ 55390

current liabilities

= 0.82

= 0.88

From the above calculation we can conclude that the company capability for
every $ 1 of current liability, the company ability $ 0.82 of its current assets
which means the company is recommended to increase its current ratio in
the fiscal year 2008 . However, in year 2009 the above calculation indicated
that the company capability for every $ 1 of current liability, the company
ability $ 0.88 of its current assets which means the company is
recommended to increase its current ratio.
Ratio
Quick Ratio

Formula
Current assets
-inventory /
current liabilities

2008
48020-35159/
58478
= 0.22

2009
48949-34511/
55390
= 0.26

Based on the above table, the quick ratio in 2008 implies that the company
might have overstocking problem because the quick ratio is less than one
and also less than the current ratio. Whereas, in 2009, there is a slightly
difference between quick ratio of the company in 2008 and 2009. Meaning
that, the company might have overstocking problem because the quick ratio
is less than one and also less than the current ratio.
2.2 LEVERAGE RATIOS
Leverage ratios measure the extent to which a firm has been financed
by debt. Such as debt-to total-assets ratio, debt-to-equity ratio, long-term
Page | 9

debt-to-equity ratio, long-term debt-to-equity ratio, and time-interest-earned


(or coverage) ratio.
Ratio
Debt-to-Total-

Formula
Total debt / Total

Assets Ratio

assets

2008
29799+ 3603/
163514
= 0.20

2009
31349+ 3200/
163429
= 0.21

The above ratio for the year 2008 and the year 2009 indicates that the
company is confidence to gain the trust from its creditors because the debt
ratio is low.
Ratio
Debt-to-Equity

Formula

Ratio

stockholders

Total debt/ Total


Equity

2008
29799+ 3603/
64608
= 0.52

2009
31349+ 3200/
65285
= 0.53

Regarding to the above the table it is clear to said that the company uses
less borrowing as the source of financing.

When the company use less

borrowing it is implied that the company is well dependable to creates its


financing to operate its business by its own resources.
Ratio
Long-term debt-

Formula
Long-term Debt /

in Equity Ratio

Total

2008
29799/ 64608
= 0.46

2009
31349 / 65285
= 0.48

stockholders
Equity

The above ratio stated that the company relies on its stockholders equity
rather than long term debt. In this sense the company prefer to ignoring to
take long term debt when its stockholders fulfills its needs meaning that the
company use its own sources of financing in the efficient way.
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Ratio
Time-interest-

Formula
Profits before

earned

interest and

2008
20159 / 1794

2009
20898 / 1900

= 11.23

= 11

taxes ( PBIT)/
Total interest
charges

Based in the above calculation of the time interest earned it can be said that
Wal-Mart have good ability to fulfills interest obligations. Because the time
interest earned measure the firms ability to cover its interest charges out of
its operating profits. Based on this concept the higher the ratio the higher is
the firms ability to fulfill interest obligations.
Ratio
Time-interest-

Formula
Profits

earned

interest
taxes
Total

2008
before
20159 / 1794
and

2009
20898 / 1900

= 11.23

= 11

PBIT)/
interest

charges

2.3 ACTIVITY RATIOS


Activity ratios measure how effectively a firm is using its resources. Activity
ratios involve inventory turnover, fixed assets turnover, total assets turnover,
accounts receivable turnover, and the average collection period.
Ratio
Inventory

Formula
2008
Sales / Inventory 374307 / 35159

2009
401244 / 34511

turnover

of finished goods

= 11.63

= 10.65

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The above ratio determines that (360/11.63) takes around 31 days to turn its
stock into sales. In other words there is a slightly improvement in regards of
inventory turnover than 2008. This ratio determines that (360/10.65) takes
around 34 days to turn its stock into sales.
Ratio
Fixed
Turnover

Formula
Assets Sales
/

2008
Fixed 374307 / 93725

Assets

2009
401 244 / 92856

= 3.99

= 4.32

The above ratio indicates that the utilization of the companys fixed assets is
approximately 4 times of its sales. The above ratio indicates that the
utilization of the companys fixed assets is more than 4 times of its sales.
Ratio
Total
Turnover

Formula
Assets Sales
/

Total

2008
374307 / 163514

2009
401244 / 163429

= 2.29

= 2.46

Assets

The above figure determines that the company total assets turnover is more
than 2 of utilization of its total assets. The company is recommended to
increase its total assets turnover. This figure determines that the company
total assets turnover is more than 2 of utilization of its total assets. The
company is recommended to increase its total assets turnover.
Ratio
Accounts

Formula
Annual

receivable

Sales / Accounts

Turnover

Receivable

credit

2008
374307 / 3642
= 102.78

2009
401244 / 3905
= 102.75

On the above table, the company account receivable turnover is 102, which
express that the company is recommended to reduce this ratio and improve
it to collect its debts from its customers from shorter time rather than collect
its debts from its customer on 102 days.

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Ratio
Average

Formula
Accounts

2008
3642 /

collection period

receivable / Total 365

2009
374307/ 3905 /

days

3.6 365

credit sales / 365 days

401244/

days

3.6

days

days
Based on the above table , we can say that the company has a very good
average collection period which is only around 3.6 days only and it is highly
efficient that the Wal-Mart stores collect its money from its account
receivable or its customers in a short time of period which means that the
company absolutely doing well.
2.4 PROFATIBILITY RATIOS
Profitability ratios measure managements overall effectiveness as shown by
the returns generated on sales and investment. Profitability ratios include the
following:

Gross profit margin, Operating profit margin, Net profit margin,

Return on total assets (ROA), Return on stockholders equity (ROE), Earnings


per share (EPS), and Price-earnings ratio.
Ratio
Gross profit
margin

Formula
2008
Sales- cost of
374307- 286350 /
goods sold / Sales 374307
= 0.23 100=23
%

2009
401244- 306158 /
401244
= 0.24 100=24
%

From the above illustration we can conclude that the ratio of the gross profit
margin in 2009 indicated that how much the company has gained for every $
1 sale made. From this ratio the company shows the efficiency of the
company in controlling its costs of goods sold. A Wal-Mart store is a profitable
company.
Ratio
Operating profit
margin

Formula
Earnings before
interest and

2008
21952 / 374307
= 0.034 x

2009
13400 / 401244
= 0.033
Page | 13

taxes ( EBIT)
/Sales

100=3.4 %

x100=3.3 %

Regarding to the above table Wal-Mart stores have gotten a very low
operating profit margin because the industry average for operating profit
margin suppose to be 17% . From the above calculation it is clear the gap is
big between the average industry and Wal-Mart stores. So that, Wal-Mart is
recommended to increase its operating profit margin. Since the operating
profit margin is derived after deducting all cost and expenses perhaps the
company has to look which kind of expenses can be eliminated.
Ratio
Price earnings
ratio

Formula
Market price per
share / earnings
per share

2008
0.10 / 1.61
= 0.06

2009
0.10 / 1.70
= 0.06

Based on the above mentioned, the price earnings ratio is the tool that used
on the financial ratio that show how much investors are willing to pay the
companys shares. This ratio measures the confidence in the firms future
prospective. Based on the above ratio for Wal-Mart

stores for the two

executives years 2008 and 2009 the company price earnings ratio cannot
motivate the investors to buy Wal-Mart shares because the earning is very
low and it does not show the confidence of the investors.
2.5

GROWTH RATIOS

Growth ratios measure the firms ability to maintain its economic position in
the growth of economy and industry. Growth ratio involves the following
functions: Sales, Net income, Earnings per share and Dividends per share.
Ratio
Sales

Formula
Annual
percentage
growth in total
sales

2008
374307- 344759 /
344759
= 0.086x100=
8.6%

2009
401244- 374
307 / 374307
= 0.072
x100=7.2%

Page | 14

The above table expresses the growth in total sales for Wal-Mart Company in
two consecutive years. However in 2009 Wal-Mart has slightly little bit
difference than 2009. On the overall the company has gotten a good sales
ratio in the both years. As well as, the company has to improve its ratio in
the next coming years.

Ratio
Net income

Formula
Annual
percentage
growth

2008
12731-11284 /
11284
= 0.04 x100 =
4%

2009
13400- 12731 /
12731
=
0.05x100%=5%

The above net income ratio is measuring the firms growth rate in profits. In
regards of net income for Wal-Mart Company, the figures above indicted that
the company got a good net income in the two consecutive years.
Ratio
Earnings per
share

Formula
Annual
percentage
growth in EPS

2008
1.61 1.43 / 1.43
= 0.13

2009
1.70- 1.61 / 1.61
= 0.06

The above Earnings per share is one of the most widely ratios concerning
common stock. As we can see from the above figure there was a decreasing
for the earning per share for Wal-Mart stores which implies that Wal-Mart
should look what is the reason for the earning per share to be decreased in
2009 and the company have to improve its earnings per share because a
higher value indicates a higher profits per share . Since Wal-Mart company is
profit oriented so it must concerned about this aspect.

Page | 15

3.0 INTERNAL FACTOR EVALUATION MATRIX (IFE)


IFE Matrix is a strategic management tool for auditing or evaluating major strengths and
weaknesses in functional areas of a business.
Strengths:
1. Wal-Mart focuses on low cost, best value, greatest selection of quality merchandise and
highest standards of customer service. (page. 242, paragraph 3, line1, 2, and 3).
2. Wal-Mart operated internationally in 13 countries and Puerto rico, with 762 discount
stores and 436 supercenters. (Page 238, paragraph 7, line 9 and 10).
3. Wal-Mart has one the worlds largest private satellite communication systems, which
enables it to control distribution. (Page 242, paragraph 6, line 9 and 10)
4. Wal-Marts sales rose from $374.3 billion in fiscal year 2008 to $401.2 billion in 2009
while net income rose from $12.7 billion to $13.4 billion. (Page 233, paragraph 3, line 2
and 3).
Weaknesses:
1. Wal-Mart does not have a formal mission statement. (Page 233, paragraph 5, line 1).
2. Although these stores represent Wal-Marts heritage, they had become lost in the shuffle
as the company opened 120,000 to 150,000 square- foot stores. (Page 238, paragraph 8,
line 6 and 7).
Page | 16

3. The company avoids spending money on consultants and marketing experts.(page 246.
Paragraph 2, line 3 and 4)
4. Sam's clubs were never designed to sell merchandise categories, but rather items. (Page
241, paragraph 3, line 1 and 2).

INTERNAL FACTOR EVALUATION MATRIX (IFE)


Key Internal factors

Weight

Strength
Wal-Mart focuses on low cost, best value,

Rating

Weighted Score

0.20

0.80

0.09

0.27

0.15

0.60

0.10

0.30

greatest selection of quality merchandise


and highest standards of customer service.
(page. 302, paragraph 3, line 2, 3 and 4).
Wal-Mart operated internationally in 13
countries and Puerto rico, with 762
discount stores and 436 supercenters.
(Page 298, paragraph 7, line 9 and 10).
Wal-Mart
largestprivate

has

one

satellite

the

worlds

communication

systems, which enables it to control


distribution. (Page
Wal-Marts sales rose from $374.3 billion
in fiscal year 2008 to $401.2 billion in
2009 while net income rose from $12.7
billion to $13.4 billion. (Page 293,

Page | 17

paragraph 3, line 2 and 3).

Weaknesses
Wal-Mart does not have a formal mission

0.07

0.14

0.16

0.16

0.13

0.13

0.10

0.20

statement. (Page 293, paragraph 5, line 1).


Although these stores represent Wal-Marts
heritage, they had become lost in the
shuffle as the company opened 120,000 to
150,000 square- foot stores. (Page 298,
paragraph 8, line 6 and 7).
The company avoids spending money on
consultants and marketing experts.
Sam's clubs were never designed to
sell merchandise categories, but rather
items. (page301, paragraph 3, line 1
and 2).
Total

2.60

After conducted the calculation for the internal analysis, the total weighted score is 2.60 which
means the company has good internal strength and weakness because it is above the ideal value.
4.0EXTERNAL FACTOR EVALUATION MATRIX (EFE)
EFE matrix is a strategic-management tool often used for assessment of current business
conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats
that a business is facing.
Opportunity:

Page | 18

1. Wal-Marts community involvement year after year is phenomenal. According to the


chronicle of philanthropy, the Wal-Mart foundation is the largest corporate cash
contributor in America. (Page 2465, paragraph 5, line 1, 2, and 3).
2. Wal-Mart maintains a strategic competitive focus on global positioning. (Page242,
paragraph 3, line 1).
3. Wal-Mart is in the retail business, which also includes Internet E-tailing (page 243,
paragraph 1, line 1)
Threats:
1. Nationally and internationally, Wal-Mart has been faced with the United Food and
Commercial workers Union, trying to persuade employees to become part of the union
(Page 242, paragraph 5, line 1 and 2).
2. Target has now become a fierce competitor of Wal-Mart and is ranked second among
discount retailers with sales of nearly $65 billion with 366,000 employees. (page 246,
paragraph 4, line 1 and 2)
3. Most recent comparisons show that while the Sams club division of Wal-Mart brought in
over $44billion in net sales while Costco finished the year at just over $72 billion.(246,
paragraph 6, line 4 and 5)

Page | 19

5.0 EXTERNAL FACTOR EVALUATION MATRIX (EFE)


Key external factors

Weight

Rating

Weighted Score

Opportunity
Wal-Marts community involvement year
after year is phenomenal. According to the

0.22

0.88

0.21

0.84

0.17

0.51

chronicle of philanthropy, the Wal-Mart


foundation is the largest corporate cash
contributor

in

America.

(Page

305,

paragraph 5, line 1, 2, and 3).


Wal-Mart maintains a strategic competitive
focus on global positioning. (Page 302,
paragraph 3, line 1).
Wal-Mart is in the retail business, which
also includes Internet E-tailing (page 303,
paragraph 2, line1).
Threats

Page | 20

Nationally and internationally, Wal-Mart


has been faced with the United Food and
Commercial workers Union, trying to

0.18

0.54

0.13

0.26

persuade employees to become part of the


union (Page 302, paragraph 5, line 1 and
2).
Target has now become a fierce competitor
of Wal-Mart and is ranked second among
discount retailers with sales of nearly $65
billion with 366,000 employees.

Most recent comparisons show that while


the Sams club division of Wal-Mart
brought in over $44billion in net sales
while Costco finished the year at just over
$72 billion.

Total

0.09

0.09

3.12

According to the above analysis we can conclude that the company is very good because the total
weight score is higher than 2.50. The total score is 3.12 that mean the company can overcome its
threats and can come across its opportunities.

Page | 21

6.0 COMPETITIVE PROFILE MATRIX (CPM)


Wal-Mart

Critical success
factors
Financial position
Price competitiveness
Advertisement
Global expansion
Total

Weight
0.30
0.25
0.20
0.25

Rati
ng
3
4
3
3

1.00

score
0.90
1.00
0.60
0.75

Costco
Wholesale2
Ratin Score
g
2
0.60
3
0.75
2
0.40
2
0.50

3.25

Target4

Rating

Score

3
4
3
1

0.90
1.00
0.60
0.25

2.25

2.75

1http://en.wikipedia.org/wiki/Costco
2http://www.managementparadise.com/forums/marketing-management/209222marketing-strategy-costco.html
3http://media.corporate-ir.net/media_files/irol/65/65828/AP_Hi.pdf
4http://en.wikipedia.org/wiki/Target_Corporation
Page | 22

The competitive profile matrix for Wal-Mart Stores classifies the companys
top competitors such as Costco Wholesale and Target. Companies are then
evaluated on the basis of significant success factors. And the success factors
are weighed from (0.0, not important to 1.0 very important) and the ratings
pass on to the strengths and weaknesses by 4being the major strength, to
1 for major weaknesses. According to the CPM table Wal-Mart Stores is the
highest top performer with value of 3.25. Meanwhile, Target Corporation is
the second top performer with value of 2.75 and Costco is third performer
with value of 2.25.

7.0 SWOT MATRIX ANALYSIS


SWOT Matrix Is a systematic approach used to identify strengths, weaknesses, opportunities and
threats (SWOT) to assist the strategic planning process.

Page | 23

STRENGTHS

WEAKNESSES

1). Wal-Mart focuses on low cost, best

1. Wal-Mart does not hav

value, greatest selection of quality

formal mission statement


2. Although
these
st

merchandise and highest standards of

represent

customer service.

Wal-M

heritage, they had bec

2).Wal-Mart operated internationally

lost in the shuffle as

in 13 countries and Puerto rico, with

company opened 120,00

762 discount stores and 436

150,000 square- foot stor


3. The
company
av

supercenters.
3). Wal-Mart has one the worlds

spending

largest private satellite communication

money

consultants and marke

systems, which enables it to control

experts.
4. Sam's clubs were ne

distribution.
4). Wal-Marts sales rose from $374.3

designed

to

billion in fiscal year 2008 to $401.2

merchandise

categor

billion in 2009 while net income rose

but rather items.

from $12.7 billion to $13.4 billion.


OPPORTUNITIES

SO STRATEGIES

Wal-Marts

WO STRATEGIES

community 1). Maintain low cost leadership to


involvement year after year improve strategic competitiveness and
business E-tailing.
is phenomenal. According (S1, 02, 03) Product development
to
the
chronicle
of

1).

Spending

philanthropy, the Wal-Mart

competitiveness.

more

money

consultants and marketing exper

order to improve business E- tai


and

to

gain

strat

foundation is the largest

(W3, 02, 03)

corporate cash contributor

Market Penetration strategy

in America.
Wal-Mart maintains

strategic competitive focus

2). Develop business E-tailing by

getting the benefit of private satellite


on global positioning.
Wal-Mart is in the retail communication in order to maintain
business,
which
also strategic competiveness.
Page | 24

includes Internet E-tailing

(S3, 02, 03)


Product development strategy

THREATS

ST STRATEGIES

Nationally

WT STRATEGIES

and 1). Increase salary both nationally and 1). Create formal mission statem

internationally,

Wal-Mart internationally for the employees in to increase net sales.

has been faced with the order to prevent united food and
United

Food

Commercial

W1, T3)

and commercial workers union.


workers

Union, trying to persuade


employees to become part
of the union
Target has now become a

(Market Penetration)

(S3, T1)
(Horizontal Integration)

2). Add merchandise category

compete effectively with Targe


order to increase market share.

fierce competitor of Wal-

(W4, T2)
(Market penetration)

Mart and is ranked second


among discount retailers
with sales of nearly $65
billion

with

366,000

employees.
Most recent comparisons
show that while the Sams
club division of Wal-Mart
brought in over $44billion
in net sales while Costco
finished the year at just
over $72 billion.

8.0 STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX


The SPACE matrix evaluates different variables and assigns them a score considering how
important they are for the situation of the company. It analyzes four different areas (two internal
to the company and two external) that will represent four quadrants in a graphic. The purpose of
this matrix is to situate the company in one of these four quadrants and give a suggestion.

Page | 25

Financial Position (FP)

1.
2.
3.
4.

Stability Position (SP)


+3

Liquidity
operating income
Inventory turnover ratio
Working capital

+1
+5

1.
2.
3.
4.

Competitive pressure
Barriers to entry into market
Ease of exit from market
Technological changes

+2

Total

+11
2.75

Average

Competitive Position (CP)

1.
2.
3.
4.

-1
-3
-3
-2

Total

-9
Average

-2.25

Industry Position (IP)

Market share
product Quality
Technological Skill
Customer loyalty

-2
-3
-1
-4

Total

1.
2.
3.
4.

Growth Potential
Profit potential
Financial Stability
Ease of entry into market

Total

-10
Average

-2.5

+6
+5
+6
+7
+24

Average

+6

Calculation:
X = IP+CP = 6 + (-2.5) = 3.5
Y= FP+CP= 2.75 + (-2.5) = 0.5

FP

Page | 26

CONSERVATIVE

+7

AGGRESSIVE

+6
+5
+4
+3

(3.5, 0.5)

+2
+1
-8 CP
-7 -6 -5 -4 -3 -2 -1

+ 1 +2 +3 +4 +5 +6 +7 +8 +9

IP

-1
-2
-3
-4
-5
-6
DEFENSIVE-7

COMPETITIVE

-8

SP

According to the above graph we can see that the company have aggressive
stretagy which contains backward, forward, horizental integration, market
penetration, market development, product development and diversification
(related/ unrelated).
9.0 BOSTON CONSULTING GROUP (BSG) MATRIX
The BCG matrix, invented by the Boston Consulting Group, is a tool that
allows to classify and evaluate the products and services of a business. It is
Page | 27

a decision making tool in order to balance the activities of a

company

among those which make profits, those who ensure growth, those which
constitute the future of

the firm or those who are its heritage. The BCG

matrix is divided into four types of circumstances and they are the stars,
cash, cows, dogs and questions marks.
Company
Wal-Mart
Costco
Target

Sales in 2009
401,244
69,889
65,357

Sales in 2008
374,307
70,977
64,948

Relative Market Share


Wal-Mart sales in 2009 = 401,244
Target sales in 2009

= 65,357

Market share

= 65,357/401,244
= 0.16

Company

Sales

in Sales

in Calculation

Average

2009

2008

Wal-Mart

401,244

374,307

401,244

Costco

69,889

70,977

374,307/374,307=
69,889 70977/70977

(1.5%)

Target

65,357

64,948

=
65,357-64,948/ 64,948

0.63

Growth
-

Rate
7.2%

=
Total

6.33

Industry Growth = 6.33/3 = 2.11%


Relative market share

Page | 28

High

Medum

Low
1
0.16

0.50

0.0
High

Industry
Growth

STARS

+20

QUESTION MARK

2.11
Meduim

CASH COWS

DOGS

Low

- 20

In the above BCG Matrix express the relative market share and the industry
growth rate of Wal-Mart. The relative market share of Wal-Mart is 0.16%
while the industry growth rate of 2.11% and the position lies in the first cell
question mark which represents the strategies of market penetration,
market development, product developmet and divestiture. Last but not least,
the company has low relative market share but high industry growth rate.

10.0 INTERNAL- EXTERNAL (IE) MATRIX

Page | 29

The Internal external (IE) Matrix is a strategic management tool used to


analyze working conditions and strategic position of a business. The Internal
External Matrix or short IE matrix is based on an analysis of internal and
external business factors which are combined into one suggestive model.The
IE matrix is based on the following two criteria: Score from the EFE matrix
-this score is plotted on the y-axis, and Score from the IFE matrix -- plotted
on the x-axis.

THE IFE TOTAL WEIGHTED SCORES


Strong
3.0 to 4.0
4.0

Average
2.0 to 2.99
3.0

2.0

Weak
1.0to 1.99
1.0 2.60
II

IV

Grow and
build
III EFE TOTAL
WEIGHTED
SCORE
3.0

V1

2.0
VII

VIII

IX

1.0

1. IFE Total weighted score: 2.60


2. EFE Total weighted score: 3.12

Page | 30

3.1

As mentioned in the above diagram, the total IFE weighted score of 2.60falls
in X axis and the Total EFE weighted score of 3.12 falls in the Y axis.
According to the IE matrix below, Wal-Mart stores falls in the second cell and
so as they should follow the strategy of grow and build. This strategy
containsbackward, forward, horizental integration, market penetration,
market development, product development
11.0 GRAND STRATEGY MATRIX
The grand strategy is a useful tool for creating different and alternative
strategies for an organization. Grand matrix has four quadrants; each
quadrant contains different sets of strategies and the entire firms along with
their respective divisions must fall in one of the quadrant. This matrix has
two dimentions competitive position and market growth. The following
daigram is walmarts grand strategy matrix.
Quadrant IIQuadrant I

RAPID MARKET
GROWTH

Quadrant IIIQuadrant IV

STRONG
COMPETIT
IVE

Page | 31

SLOW MARKET
GROWTH
According to the Grand Strategy Matrix, the position of Wal-Mart Stores lies
in the first quadrant which reveals that the company has a strong
competitive position among the competitive market and very rapid market
growth as the annual growth in sales exceeds above 5%.Furthermore, the
strategies recommended are market development, market penetration,
product development, forward integration, backward integration, horizontal
integration, and related diversification.

12.0 THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)


The quantitive strategic planning matrix is a strategic tool that allows
strategists to evaluate an alternative strategies objectivly, based on
previously identified external and internal critical success factors.
THE PREVIOUS STRATEGIES IN SWOT MATRIX
SO Strategies:
1. Maintain low cost leadership to improve strategic competitiveness and business E-tailing.
2. Develop business E-tailing by getting the benefit of private satellite communication in
order to maintain strategic competiveness.
WO Strategies:
1. Spending more money on consultants and marketing experts in order to improve business
E- tailing and to gain strategic competitiveness.
ST Strategies:
1. Increase salary both nationally and internationally for the employees in order to prevent
united food and commercial workers union.
WT Stragies:
Page | 32

1. Create formal mission statement to increase net sales.


2. Expand the merchandise category in the market to compete effectively with Target in
order to increase market share.

Matching the new alternative strategy


1. Maintain lowcost leadership and spend more money to marketing
experts in order to increase net sales (product development).
2. addmerchandise category to compete effectively with Target in order to increase market
share.(Market Penetration)
The quantitative strategic planning matrix (qspm):
Maintain lowcost
leadership
spend

and

Addmerchandise category in the

more

storesto compete effectively with

to

Target in order to increase

money
marketing

market share.

experts in order
to increase net

(Market Penetration)

sales.(product
development)
Strengths

Weight

AS

TAS

AS

TAS

0.20

0.80

0.60

0.09

0.18

0.27

Page | 33

0.15

1. Wal-Marts sales rose from

--

---

--

--

0.10

0.40

0.30

0.07

0.21

0.07

0.16

----

-----

-----

-----

0.13

0.52

0.39

0.10

0.20

0.40

0.44

0.22

$374.3 billion in fiscal year


2008 to $401.2 billion in 2009
while net income rose from
$12.7 billion to $13.4 billion.
Weakness

1. Wal-Mart does not have a


formal mission statement.
2. Although these stores represent
Wal-Marts heritage, they had
become lost in the shuffle as
the company opened 120,000
to 150,000 square- foot stores.
3. The company avoids spending
money on

consultants

and

marketing experts.
4. Sam's

clubs were never


designed to sell merchandise
categories, but rather items.

TOTAL

1.00

Opportunities

1. Wal-Marts

community

0.22

involvement year after year is


Page | 34

phenomenal. According to the


chronicle of philanthropy, the
Wal-Mart foundation is the
largest

corporate

cash

contributor in America.
2. Wal-Mart maintains a strategic

0.21

0.42

0.63

0.17

0.51

0.34

0.18

-------

-------

--------

-------

0.13

0.52

0.39

0.09

0.18

0.27

competitive focus on global


positioning.

3. Wal-Mart

is

in

the

retail

business, which also includes


Internet E-tailing
Threat

1. Nationally and internationally,


Wal-Mart has been faced with
the

United

Food

and

Commercial workers Union,


trying to persuade employees
to become part of the union.
2. Target has now become

a fierce competitor of
Wal-Mart and is ranked
second among discount
retailers with sales of
nearly $65 billion with
366,000 employees
Most recent comparisons show
that while the Sams club
division of Wal-Mart brought
Page | 35

in over $44billion in net sales


while Costco finished the year
at just over $72 billion.
Total

1.00

4.38

3.88

According to the above table, the total attractive score of QSPM of Wal-Mart stores, the first
strategy, Maintain lowcost leadership and spend more money to marketing
experts in order to increase net sales.(product development) express that
4.38. whese as the second strategy which is Addmerchandise category in the stores
to compete effectively with Target in order to increase market share. (Market Penetration) have
3.88 total attractive score. So we can conclude that the first strategy has been chosen as the best
strategy for Wal-Mart Stores to overcome its problems and succeed in the industry.

CONCLUSION
Page | 36

In conclusion , Wal-Mart is consieded as the largest retaliers company over


the world. In regards of its financial ratio , the company has gain a good ratio
which experss how the stronger the company is. Furthemore, in the internal
factors, the company has many strengthes comparing to its weaknesses. And
its net sales increasing year by year both domestically and internationally. In
addition, Wal-Marts external factors, according to its opportuninites Wal-Mart
foundation

is the largest corporate cash contibutor in America and it is

community involvement is phonomenal compare to its threats is United food


and commercial workers union trying to persuade emplyees to become part
of the unoin .
On the other hand, Wal-Marts competitive profile matrix (CPM) one of its
majorest competitors are Target corporation, Kmart, and Costco Whole Sales.
According to the CPM matrix Wal-Mart is the top performed compare to its
competotors .
In addition, Wal-Marts Space Matrix its strategy aggressive stretagy which
contains backward, forward, horizental integration, market penetration,
market development, product development and diversification (related/
unrelated).Meanwhile , Wal-Marts grand matrix lies in the first quadrant
which means the company has an excellent strategy position and also tells
that the company has a strong competitive position among the competitive
market and very rapid market growth as the annual growth in sales exceeds
above 5%.
According to the IE matrix, Wal-Mart stores falls in the second cell and so as
they should follow the strategy of grow and build. This strategy contains
backward, forward, horizental integration, market penetration, market
development. Meanwhile the BCG Matrix of Wal-Mart Stores lies in the
Question mark which means low relative market share but high industry
growth rate.

Page | 37

Lastly. Wal-Mart inoder to move forward, we recommended that Wal-mart


uses product development strategy which comes out from the QSPM matrix.
All in all in order to move forward Wal-Mart should apply this solid strategy in
order to beat its competitors and increase its market share.

Page | 38