3/26/2015

Case Study Analysis

Walmart Stores Inc.

Case Analysis - Nitrofix Ghana, Inc.

Binus Business School,
MM Executive Batch 20
Presented by Group I
Alexander Christian
Dina Sandri Fani
Puntin Kulmongkon
1
Companys Overview

Founded in Operates in
1962 by Sam 16 countries
Walton globally

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Ranked top 3 in

Case Analysis - Nitrofix Ghana, Inc.

Forbes and Fortune
500 for past 5 years

Largest Largest global

market share corporation
of total global by revenues
retail
2
History of Walmart
1960s
Retail Revolution
Sam Walton's strategy was
built on an unshakeable
foundation: The Lowest Prices
Anytime, Anywhere
1962
On July 2, 1962, the first
Walmart store in Rogers, Ark.
1969
The company officially
incorporated as Wal-Mart
Stores, Inc.
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1970s
Case Analysis - Nitrofix Ghana, Inc.
Walmart Goes National
In the 1970s, a decade of incredible growth, "Mr. Sam" began
to take Walmart national, proving his vision's widespread
appeal.
1970
Walmart became a publicly traded company. The first stock
was sold at $16.50 per share.
1971
The first distribution center and Home Office opened in
Bentonville, Ark. 3
1972
Walmart was listed on the New York Stock Exchange (WMT).
With 51 stores, Walmart recorded sales of $78 million
 History of Walmart
1980s
Decade of Firsts
In the 1980s, the first Sam's Club
opened, serving small businesses
and individuals, and the first
Walmart Supercenter opened,
combining a supermarket with
general
1980
Walmart reached $1 billion in
annual sales
1983
The first Sams Club opened in
Midwest City, Okla.
1990s
Americas Top Retailer
By 1990, Walmart was the
nation's number-one retailer.
As the Walmart Supercenter
redefined convenience and
one-stop shopping, Every Day
Low Prices went international.
1991
1st international stores in
Mexico City (Sams Club Store)
1993
Walmart celebrated its first $1
billion sales week.
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2000s
Case Analysis - Nitrofix Ghana, Inc.
New Millennium
Implementation of omni-channel
strategy to provide seamless
shopping experience for its
customers
2002
Topped the Fortune 500 ranking of
America's largest companies for
the 1st time
2014
Doug McMillon succeeded Mike
Duke as CEO. 2.2 million 4
associates worldwide; serves
>200 million customers each
week at >11,000 stores in 27
countries
Vision and Mission

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Our vision is to provide the good quality

Case Analysis - Nitrofix Ghana, Inc.

and service to our customers, while
remaining the market leader and striving
daily to be the most admired company

To improve the quality of life for everyday

people around the world. 5
Walmart Business Challenges Is it possible for Walmart
to sustain its accustomed
high growth rates?
01 External Factors
Is it necessary for
Maturing market in its core business Walmart to find new
business to continue its
Target for critics on social issues: pushing production historic success?

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from the U.S. to low-wage overseas producers resulted
to a depressed wage growth in the U.S.

02 Internal Factors

Case Analysis - Nitrofix Ghana, Inc.

Might reach saturation point so unable to sustain high
year on year growth rate
Prodigious rate in stores growth lead to sales
cannibalization
Sams Club warehouse stores performance is much
lower than leading store Costco
Shifting away from its original target market, i.e. low
income customer which focuses in low price
Hard time in international operations due to inability to 6
respond local markets
Imbalanced Chinese relation
External Analysis
Porter Five Forces Analysis High
The retail business is a highly
competitive industry. Wal-Mart faces a
number of competitors in all segments of
their business.
Potential
Entrants Exit barriers are high

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Slow industry growth
Have excess capacity
Cost structure of firms: sensitive to

Case Analysis - Nitrofix Ghana, Inc.

cost
Buyers switching cost is low
Suppliers Rivalry Customers Competitors have similar sizes
Price elasticity of demand
Discount Store
Kmart
Target
Caldor
Warehouse Clubs
Substitutes Price Club
Costco
Pace
7
Supercenter
Meijer
Fred Meyer
External Analysis
Porter Five Forces Analysis

Potential
Entrants

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Low

Case Analysis - Nitrofix Ghana, Inc.

Being that the retail industry is a
Suppliers Rivalry Customers highly saturated market, new
entrants would face difficulty
succeeding in this industry. In fact, it
is highly difficult for discount
retailers to penetrate other markets
as Wal-Mart tried to enter Germany
Substitutes and South Korea. The company was
unsuccessful and had to pull out
because of its unprofitability 8
External Analysis
Porter Five Forces Analysis

Potential
Entrants

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High

Case Analysis - Nitrofix Ghana, Inc.

Consumers today are searching for the
Suppliers Rivalry Customers best deals possible. They are waiting
for discounts and sales to bulk up on
products. Customers know what they
want and how far they are willing to
search for the item. Thus, switching
cost is low. Retailers must maintain
Substitutes high inventory levels to retain
customers and their market share.
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External Analysis
Porter Five Forces Analysis

Potential
Entrants

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Medium
Substitute products are products that can
be used as replacements for other

Case Analysis - Nitrofix Ghana, Inc.

products to satisfy the same necessity.
Wal-Mart benefits from this idea as
Suppliers Rivalry Customers discounters have lower prices than
department stores and consumers go for
higher quality product with the lowest
prices.

Prices and quality of substitute

Substitutes products are very competitive.
Performance of substitute products are
similar. 10
Consumer switching costs are low.
External Analysis
Porter Five Forces Analysis

Potential
Entrants Medium-Low

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Forging relationships with suppliers is
essential to Wal-Marts business. Without

Case Analysis - Nitrofix Ghana, Inc.

timely inventory deliveries, Wal-Mart could
not maintain its full shelves and would lose
Suppliers Rivalry Customers customers.
Wal-Mart purchases huge quantities of
products from its suppliers.
Low switching costs from one supplier to
another.
Products have a lot of substitutes.
Substitutes Almost all the products are not critical for
Wal-Mart.
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External Analysis
Knowing Walmarts competitors

COMPETITION
Target Corporation

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Kmart Corporation
Costco Wholesale Corporation
The Kroger Co.

Case Analysis - Nitrofix Ghana, Inc.

Albertson's, Inc.
Walgreen Co.
CVS Corporation
Carrefour SA
Royal Ahold N.V.
Toys 'R' Us, Inc.

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External Analysis
Knowing Walmarts competitors

01 Retailer Industry: Target

Ranked #33 in the Fortune 500.

Target offers very similar products.

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Target went abroad in January 2011

Case Analysis - Nitrofix Ghana, Inc.

02 Supermarket Industry: Dollar General

One of the main competitors, pursuing low

prices.
Good location in smaller communities is the
main competence advantage.
Strategy: Save time, save money
Many items per $1

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Internal Analysis
Combined Strategy: Cost Leadership & Differentiation Strategies

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Case Analysis - Nitrofix Ghana, Inc.
Allowed to achieve a large scale and an
efficient supply chain.
Has its own low-cost brands, like Great Value.
A unique cost structure that allows Walmart to
establish the lowest prices and achieve
competitive advantage. (best value/price
combination )
Present in many different industries and
markets with efficient distribution channels.
Very difficult strategy to imitate by offering a
broad quantity of products at a low price. 14
 Internal Analysis
Walmart SWOT Analysis

Strengths Weaknesses

S W
Customers loyalty Much of the same
High Brand value merchandise

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Good inventory control Low reaction to changes in
system market
Good reputation on quality Insistence on doing things
and low price the Wal-mart way

Case Analysis - Nitrofix Ghana, Inc.

Emphasis in Human Low current ratio
Resource management and Low market research in
development foreign countrie

Opportunities Threats

O T
Strategic Alliances and Cultural differences in new
merger markets
Increase Demand Countries economic
Technological developments problems
New retail formats Local regulations
Customers concern about Antitrust issues
environment Intense competitive 15
conditions
Internal Analysis
Walmart Key Success Factor

Philosophy
Keep prices below everybody else

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Trip expenses cant exceed 1% of the purchases
Spent lots of time in his own store and

Case Analysis - Nitrofix Ghana, Inc.

observe competitors
Culture
Do not show off buying luxury goods
Success
The way it treated its associates

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Internal Analysis
Walmart Key Success Factor

Management style

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Maintain an open-door policy
Empowering associates
Maintain technology superiority

Case Analysis - Nitrofix Ghana, Inc.

Build loyalty among associates,
customers, and suppliers

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Internal Analysis
Walmart Key Success Factor

Tailor to individual market or individual

store

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Information system
A process which indexed product

Case Analysis - Nitrofix Ghana, Inc.

movements in the store to over a thousand
store and market traits
Using inventory and sales data

18
Internal Analysis
Walmart Key Success Factor

Lower price

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Promotional strategy
Everyday-low-prices
Maximize sales

Case Analysis - Nitrofix Ghana, Inc.

Few promotions Minimize
expenses
volume
and industry
13 major circulars per year turnover

Satisfaction guaranteed policy

Marketing slogan
Lower price
Store managers set up prices
2-4% pricing differential between Wal*Mart and its best
competitors in most markets in early 1990s
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Internal Analysis
Internalization as key strategy to keep growing

01 Saturated domestic market

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United States represents only 4% Why
02 of worlds population (missing of Internalization?
96% of potential customers)

Case Analysis - Nitrofix Ghana, Inc.

Emerging Markets with lower
03 disposable income offer huge
platforms for growth in discount
retailer.

To keep growth in revenues by

04 creating economies of scale
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Internal Analysis
Internalization as key strategy to keep growing

Management Risk (culture,

01 language, customer preferences,
distribution systems)

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Risk Factors?

02 High investment

Case Analysis - Nitrofix Ghana, Inc.

03 Political and Economic risks

04 Exchange Rates risk

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Internal Analysis
Internalization as key strategy to keep growing

Not able to benefit from economies of

01 scale, e.g. Germany

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02 Unable to become cost leader Reasons of
Failure?

Case Analysis - Nitrofix Ghana, Inc.

03 Culture differences

04 Low profitability market

Political & legal barriers (India)

05 Foreign companies are not allowed to set
up big stores

Fail to understand the market (South Korea) 22

05 Very demanding customers and did not
customize to market
 TOWS Strategies
Recommendation

Case Analysis - Nitrofix Ghana, Inc. 3/26/2015

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 Recommendation
Other key proposed strategies for Walmarts consideration
Fine tuning business
Strategies
Back to basic and shifting
position back to price
leader to gain customer
trust
Consider to sell Sams
Club warehouse store
business as no clear
selling point
Consider to raise employee
wage to reduce turnover
rate
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Case Analysis - Nitrofix Ghana, Inc.
Continue Internalization Refresh its supply chain
with a better approaches strategies
Consider to expand to Reduce dependent level of
developing countries as production from China
most people will go for a especially garment
cheaper product. Potential products. Such as:
countries to be considered Bangladesh
include Indonesia,
Vietnam, & Philippines
Adjust international
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business strategy to match
with local condition
 Case Analysis - Nitrofix Ghana, Inc. 3/26/2015
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