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STRATEGI MANAGEMENT
CASE STUDY: A!MART ST"RES
#RE#ARED $Y: AHMED HASSAN HADI %A&'&&(')&)* Page | 1
#RE#ARED +"R: DrTengk,
E-CUTIE SUMMARY
This report involves analysis of Wal-Mart Wal-Mart Stores, and how it has changed over the years. In the following report, a brief introduction and a brief background will be given for the company and the report will then go on to take into account various matries that will help us identify which strategies need to be
adop adopte ted d
by
Wal-M al-Mar artt
Stor Stores es.! .!ur urth ther ermo morre,th e,the e
visi vision on
and and
miss missio ion n
stat statem emen entt for for the the comp compan any y has has also also been been iden identi ti"e "ed# d# in addi additi tion on,, the the ob$e ob$ect ctiv ives es and and stra strate tegi gies es have have also also been been put put forw forwar ard. d. Mor Moreove eover, r, as menti mentione oned d alread already, y, matri matries es such such as eter eternal nal factor factor evalu evaluati ation on matri matri,, internal internal factor factor evaluatio evaluation n matri, matri, competitiv competitive e pro"le pro"le matri, matri, SW%Tmatri SW%Tmatri,, Page | 2
&'( matri, I) matri, S*+') matri and the (rand Strategy matri have all been identi"ed. !inally, the report will epress alternate strategies for WalMart Stores and evaluate in order to "nd out which strategy is suitable for Wal-Mart Stores in order to be eective and success in the future.
&.' INTR"DUCTI"N
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 200 it was the world!s largest public corporation b" re#enue, according to the $orbes %lobal. &he compan" was founded b" Sam Walton in 9'2, incorporated on (ctober ), 9'9, and publicl" traded on the *ew +or Stoc Stoc chang changee in 9/2. 9/2. Wal-Ma al-Mart, rt, headua headuarte rtered red in 1enton 1enton#il #ille, le, Arans Aransas, as, is the larges largestt maorit" pri#ate emplo"er and the largest grocer" retailer in the 3nited States. In 2009, it Page | 3
generated 45 of its 3S6247 billion sales in the 3.S. from grocer" business. It also owns and operates the Sam!s 8lub retail warehouses in *orth America. Wal-Mart has 7400 stores in 4 countries, with 44 different names. &he compan" operates under its own name in the 3nited States, including the 40 states. It also operates under its own name in uerto :ico. Wal-Mart operates in Meico as Walme, in the 3nited ;ingdom as Asda and
its operations in the 3nited ;ingdom, South America and 8hina are highl" successful, while it was forced to pull out of %erman" and South ;orea when #entures #en tures there were unsuccessful. &.& $ACGR"UND
*o word better describes Wal-Mart Wal-Mart than growth. In 9?4, Sam Walton Walton opened his first 1en $ranlin franchise in *ewport, Aransas. @i#ing in rural 1enton#ille, Aransas, at the time, Walton, his wife elen, and his brother 1ud operated the nationBs most successful 1en $ranlin franchises. CWe were a small chainD, said Walton Walton of his ' store operation. C&hings were running so smoothl" that we e#en had time for our families.D What more could a man wantE A great deal as it turned out. Sam and 1ud Walton could see that the #ariet" store was graduall" d"ing because supermarets and discounters discounters were de#eloping. de#eloping. $ar from being secure, Walton Walton new that he was under siege and decided to counter attac. e first tried to con#ince the people in top management of 1en $ranlin to enter discounting. After their refusal, Sam Walton made a uic trip around the countr" in search of ideas. e then began opening his own discount stores in small Aransas towns lie 1enton#ille and :ogers. &he compan" opened its first discount department stores FWal-MartG in *o#ember 9'2. &he earl" stores had bare tile floors and pipe racs. Wal-Mart did not begin to re#amp its image significantl" until the mid- 9/0s, and growth in the earl" "ears was slow. owe#er, once the compan" went public in 9/0s, sales began to increase rapidl". When it initiall" went public, 00 shares of Wal-Mart stoc would ha#e cost 6,'40. *ow, those 00 shares are worth o#er 6'million.
Page | 4
Such retailers as &arget, Henture, and ;mart pro#ided the eamples that Wal-Mart sought to emulate in its growth. &he old Wal-Mart store colors, dar and white Ftoo harshG, were dumped in fa#or of a three- tone combination of light beige, soft blue, and burnt orange. 8arpeting, which had long been discarded on apparel sales floors, was put bac. *ew racs were put into use that displa"ed the entire garment instead of onl" an outer edge. Sam Walton lton died died in 99 992. 2. 1ud Walton lton died died in 99 994. 4. Wal-Ma al-MartB rtBss 994 annual annual report report was dedicated to 1ud. Sam Walton once said about 1ud, C(f course, m" number-one retail partner has been m" brother, 1ud. 1udBs wise counsel and guidance ept us from man" a mistae. (ften, 1ud would ad#ice taing a different different direction direction or ma" be changing changing the timing. timing. I soon learned to listen to him because he has eceptional udgment and a great deal of common sense.D In 2000, . @ee Scott was named president and 8( of Wal-Mart. In $ebruar" 2009, Mie ue became the new president and 8( when Scott retired from the position. According to due, Cour compan" is so well positioned for toda"Bs difficult econom" and tomorrowBs changing world. We ha#e an eceptionall" strong management team, able to eecute our strateg", perform e#er" single da", and deli#er results.D
&.) ISI"N STATEMENT
Jromotion of ownership of ethical cultureJ &.0 MISSI"N STATEMENT
Page | 5
Wal-Mart does not officiall" ha#e a mission statement according to the case stud" but nowada"s the" officiall" published this mission statement. CWe sa#e people mone" so the" can li#e betterD.
&.1 THE C"M#ANY2S $USINESS STRATEGY
&he 1usiness strategies Wal-Mart uses and how the" differentiate their ser#icesKproducts. &here are ) generic business strategies and the" consist of the $ocus strateg", the ifferentiation strateg", and (#erall 8ost leadership &.1.& +oc,s str3tegies
$ocus strateg" is usuall" defined as focusing on offering products and ser#ices to a particular maret segment or bu"er group, within a segment of a product line, andK or to a specific geographic maret. &.1.4 T5e Di66erenti3tion str3teg7:
&he ifferentiation strateg" is defined as offering a product or ser#ice that is percei#ed as uniue in the maretplace. &.1.) "8er399 Cost 9e3ers5ip:
Wal-MartBs strateg" is (#erall 8ost @eadership, offering their customers great ualit" ser#ice and products at a lower price than their competition. (#erall 8ost @eadership is defined as offering the same or better ualit" product or ser#ice at a price that is less than what an" of the competition is able to do
&.; C"M#ETIT"RS
Wal-Ma Wal-Mart!s rt!s primar" primar" competition competition includes department department stores stores lie ;mart, ;mart, and &arget &arget 8orporation. 8ompetitor of Wal-Mart!s Wal-Mart!s Sam!s 8lub di#ision is 8ostco Wholesale.
Page | 6
&.;.& T3rget Corpor3tion
&arget 8orporation, originall" the a"ton r" %oods 8ompan" and later the a"ton udson 8orporation, 8orporation, is an American American retailing retailing compan", compan", founded in 902 and headuartere headuartered d in Minneapolis, Minnesota. It is the second-largest discount retailer in the 3nited States, preceded b" Wal-Mart. Wal-Mart. &he compan" is raned at number )7 on the $ortune 400 as of 202 and is a compo componen nentt of the the Stan Standa dard rd L oor oor!s !s 400 400 inde inde. . Its Its bull bullBBs e"e e"e trad tradem emar ar is lice licens nsed ed to Wesfarme sfarmers, rs, owners owners of the separa separate te &arget arget Aust Austral ralia ia chain chain which which is unrela unrelated ted to &arget arget 8orporation. &he first &arget store was opened in 9'2 in nearb" :ose#ille, Minnesota. &arget grew and e#entua e#entuall" ll" became became the larges largestt di#isi di#ision on of a"ton a"ton udson udson 8orpor 8orporati ation, on, culmina culminatin ting g in the compan" being renamed as &arget 8orporation in August 2000. (n
;mar is an American chain of discount stores headuartered in the 3nited States. &he chain purchased Sears in 2004, forming a new corporation under the name Sears oldings 8orporation. &he compan" was founded in 9'2 and is the third largest discount store chain in the world, behind Wal-Mart and &arget, with stores in the 3nited States, uerto :ico, the 3.S. Hirgin Islands, and %uam Fwhich houses the world!s largest ;martG. As of
;mart became nown for its J1lue @ight Specials.J &he" occurred at surprise moments when a store worer would light up a mobile police light and offer a discount in a specific department of the store. At the height of ;mart!s popularit", the phrase Jattention ;mart shoppersJ also entered into the American pop ps"che, appearing in films and other media such as &roop 1e#erl" ills, Si a"s Se#en *ights, :ain Man, 1eetle uice, and awn of the ead.
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;mart!s world headuarters was located in &ro", Michigan, but since the purchase of Sears, has been relocated to offman states, Illinois. ;mart also eists in Australia and *ew ealand Fsee ;mart AustraliaG, although it now has no relation to the American stores ecept in name, after 3.S. euit" in the Australian business was purchased in the late 9/0s. &.;.) Costco 5o9es39e
8ostco Wholesale 8orporation is a membership-onl" warehouse club that pro#ides a wide selection of merchandise. As of
4.' +INANCIA! RATI" ANA!YSIS
!inancial ratios are computed from an organiations income statement and balance sheet. 'omputing "nancial ratios is like taking a picture because the results re/ect a situation at $ust one point in time. 'omparing 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. ;e" financial ratios can be classified into the following fi#e t"pes> Page | 8
4.& !I
0i1uidity ratios measure a "rms ability to meet maturing short-term obligations. 0i1uidity ratios consist of two parts one is called current ratio and the one is called 1uick or acid-test ratio. Ratio 'urrent 2atio
Formula 'urrent assets 3
2008 456763 85495
2009 45;4;3 88<;6
current liabilities
: 6.57
: 6.55
!rom the above calculation we can conclude that the company capability for every = > of current liability, the company ability = 6.57 of its current assets which means the company is recommended to increase its current ratio in the "scal year 7665 . ?owever, in year 766; the above calculation indicated that the company capability for every = > of current liability, the company ability = 6.55 of its curr urrent assets which means ans the company is recommended recommended to increase its current ratio. Ratio @uick 2atio
Formula 'urrent assets
-inventory 3 current liabilities
2008 45676-<8>8;3 85495 : 6.77
2009 45;4;-<48>>3 88<;6 : 6.7A
&ased on the above table, the 1uick ratio in 7665 implies that the company might have overstocking problem because the 1uick ratio is less than one and also less than the current ratio. Whereas, in 766;, there is a slightly dierence between 1uick ratio of the company in 7665 and 766;. Meaning that, the company might have overstocking problem because the 1uick ratio is less than one and also less than the current ratio. ratio. 2.2 LEVERAGE RA!"#
0everage ratios measure the etent to which a "rm has been "nanced by debt. Such as debt-to total-assets ratio, debt-to-e1uity ratio, long-term Page | 9
debt-to-e1uity ratio, long-term debt-to-e1uity ratio, and time-interest-earned Bor coverageC ratio. Ratio Debt-to-Total-
+ssets 2atio
Formula Total Total debt 3 Total Total
assets
2008 7;9;;E A<8>4 : 6.76
2009 <><4;E <7663 >A<47; : 6.7>
The above ratio for the year 7665 and the year 766; indicates that the company company is con"dence con"dence to gain the trust from its creditors creditors because because the debt ratio is low. Ratio Debt-to-)1uity
2atio
Formula Total Total debt3 Total Total stockholders )1uity
2008 7;9;;E
2009 <><4;E <7663 A8758 : 6.8<
2egarding to the above the table it is clear to said that the company uses less less borro borrowin wing g as the sourc source e of "nanci "nancing. ng.
When When the compan company y use less
borrowing it is implied that the company is well dependable to creates its "nancing to operate its business by its own resources. resources. Ratio 0ong-term debt-
in )1uity 2atio
Formula 0ong-term Debt 3
Total Total
2008 7;9;;3 A4A65 : 6.4A
2009 <><4; 3 A8758 : 6.45
stockholders )1uity
The above ratio stated that the company relies on its stockholders e1uity rather than long term debt. In this sense the company prefer to ignoring to take long term debt when its stockholders ful"lls its needs meaning that the company use its own sources of "nancing in the eFcient way. Page | 10
Ratio Time-interest Time-interest-
earned
Formula *ro"ts before
2008 76>8; 3 >9;4
interest and
2009 765;5 3 >;66
: >>.7<
: >>
taes B *&ITC3 Total Total interest charges
&ased in the above calculation of the time interest earned it can be said that Wal-Mart have good ability to ful"lls interest obligations. &ecause the time interest earned measure the "rms ability to cover its interest charges out of its operating pro"ts. &ased on this concept the higher the ratio the higher is the "rms ability to ful"ll interest obligations. Ratio Time-interest Time-interest-
earned
Formula *ro"ts
interest taes Total Total
2008 before 76>8; 3 >9;4
an d B
2009 765;5 3 >;66
: >>.7<
: >>
*&ITC3 interest
charges
2.3 A$!V!% RA!"#
+ctivity ratios measure how eectively a "rm is using its resources. +ctivity ratios involve inventory turnover, "ed assets turnover, total assets turnover, accounts receivable turnover, and the average collection period. Ratio Inventory
Formula 2008 Sales Sales 3 Invent Inventory ory <94<69 3 <8>8;
2009 46>744 3 <48>>
turnover
of "nished goods
: >>.A<
: >6.A8
Page | 11
The above ratio determines that B>.A days to turn its stock into sales. In other words there is a slightly improvement in regards of inventory turnover than 7665. This ratio determines that B6.A8C takes around <4 days to turn its stock into sales. Ratio !ied
Turnover Turnover
Formula +ssets Sales 3
2008 !ied <94<69 3 ;<978
+ssets
2009 46> 744 3 ;758A
: <.;;
: 4.<7
The above ratio indicates that the utiliation of the companys "ed assets is appr appro oima imate tely ly 4 time times s of its its sales sales.. The The abov above e rati ratio o indi indica cate tes s that that the the utiliation of the companys "ed assets is more than 4 times of its sales. Ratio Total Total
Turnover Turnover
Formula +ssets Sales 3
2008 Total <94<69 3 >A<8>4
+ssets
2009 46>744 3 >A<47;
: 7.7;
: 7.4A
The above "gure determines that the company total assets turnover is more than 7 of utiliation of its total assets. The company is recommended to increase its total assets turnover. This "gure determines that the company total assets turnover is more than 7 of utiliation of its total assets. The company is recommended to increase its total assets turnover. turnover. Ratio +ccounts
Formula +nnual
2008 credit <94<69 3
receivable
Sale Sales s 3 +c +cco coun unts ts
Turnover Turnover
2eceivable
: >67.95
2009 46>744 3 <;68
: >67.98
%n the above table, the company account receivable turnover is >67, which epress 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 >67 days.
Page | 12
Ratio +verage
Formula +ccounts
2008
collection period
receivable 3 Total
2009 <94<69 <693 <;68 ;68 3
days
<.A
credit sales 3
46>744 7443
days
<.A
days
days &ased on the the above table table , we can say that that the company company has a very good good average collection period which is only around <.A days only and it is highly eFci eFcien entt that that the the Wal-M al-Mar artt stor stores es coll collec ectt its its mone money y from from its its acco accoun untt receivable or its customers in a short time of period which means that the company absolutely doing well. 2.4 PR"FA PR"FA!&!L!% RA!"# RA!"#
*ro"tability ratios measure managements overall eectiveness as shown by the returns generated on sales and investment. *ro"tability *ro"tability ratios include the followingG followingG (ross (ross pro"t margin, margin, %perating %perating pro"t margin, margin, Het pro"t margin, margin, 2eturn on total assets B2%+C, 2eturn on stockholders e1uity B2%)C, )arnings per share B)*SC, and *rice-earnings *rice-earnings ratio. Ratio (ross pro"t margin
Formula 2008 Sales- cost of <94<69- 75A<86 3 goods sold 3 Sales <94<69 : 6.7< >66:7< J
2009 46>744- <6A>85 3 46>744 : 6.74 >66:74 J
!rom the above illustration we can conclude that the ratio of the gross pro"t margin in 766; indicated that how much the company has gained ga ined for every = > sale sale made made.. !rom rom this this rati ratio o the the comp compan any y show shows s the the eFci eFcien ency cy of the the company in controlling its costs of goods sold. + Wal-Mart store is a pro"table company. Ratio %perating pro"t margin
Formula )arnings before interest and
2008 7>;87 3 <94<69 : 6.6<4
2009 ><466 3 46>744 : 6.6<< Page | 13
taes B )&ITC 3Sales
>66:<.4 J
>66:<.< J
2egar egardi ding ng to the the abov above e tabl table e Wal-M al-Mar artt stor stores es have have gott gotten en a very very low low operating pro"t margin because the industry average for operating pro"t margin suppose to be >9J . !rom !rom the above calculation 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 pro"t margin. Since the operating pro"t margin is derived after deducting all cost and epenses perhaps the company has to look which kind of epenses can be eliminated. Ratio *rice earnings ratio
Formula Market price per share 3 earnings per share
2008 6.>6 3 >.A> : 6.6A
2009 6.>6 3 >.96 : 6.6A
&ased on the above mentioned, the price earnings ratio is the tool that used on the "nancial ratio that show how much investors are willing to pay the companys shares. This ratio measures the con"dence in the "rms future prosp prospect ective ive.. &ased on the above ratio ratio for Wal-Mar al-Martt
store stores s for the two
eecutives years 7665 and 766; 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 con"dence of the investors. 2.5
GR"'( RA RA!"#
(rowth ratios measure the "rms ability to maintain its economic position in the growth of economy and industry. (rowth ratio involves the following functionsG Sales, Het income, )arnings per share and Dividends per share. Ratio Sales
Formula +nnual percentage growth in total sales
2008 <94<69- <4498; 3 <4498; : 6.65A>66: 5.AJ
2009 46>744- <94 <69 3 <94<69 : 6.697 >66:9.7J
Page | 14
The above table epresses the growth in total sales for Wal-Mart 'ompany in two consec consecuti utive ve years. years. ?oweve ?oweverr in 766; 766; Wal-Mar al-Martt has slight slightly ly littl little e bit dierence than 766;. %n the overall the company has gotten a good sales ratio in the both years. +s well as, the company has to improve its ratio in the net coming years.
Ratio Het income
Formula +nnual percentage growth
2008 >79<>->>754 3 >>754 : 6.64 >66 : 4J
2009 ><466- >79<> 3 >79<> : 6.68>66J:8J
The above net income ratio is measuring the "rms growth rate in pro"ts. In regards of net income for Wal-Mart 'ompany, the "gures above indicted that the company got a good net income in the two consecutive years. 2atio )arnings per share
!ormula +nnual percentage growth in )*S
7665 >.A> K >.4< 3 >.4< : 6.><
766; >.96- >.A> 3 >.A> : 6.6A
The above )arnings per share is one of the most widely ratios concerning common stock. +s we can see from the above "gure there was a decreasing for the earning earning per share for Wal-Mar Wal-Martt stores which which implies implies that Wal-Mar Wal-Martt should look what is the reason for the earning per share to be decreased in 766; 766; and the company company have to improve improve its earnings earnings per share share because because a higher value indicates a higher pro"ts per share . Since Wal-Mart company is pro"t oriented so it must concerned about this aspect.
Page | 15
).' INTERNA! +ACT"R EA!UATI"N MATRI- %I+E*
I$ Matri is a strategic management tool for auditing or e# aluating maor strengths and weanesses in functional areas of a business. Strengt5s:
. Wal-Ma Wal-Mart rt focuses focuses on low cost, cost, best #alue, #alue, greatest greatest selection selection of ualit" ualit" merchandise merchandise and highest standards of customer ser#ice. Fpage. 2?2, paragraph ), line, 2, and )G. 2. Wal-Ma al-Mart rt operated operated intern internati ational onall" l" in ) countries countries and uerto uerto rico, with /'2 discou discount nt stores and ?)' supercenters. Fage 2)7, paragraph /, line 9 and 0G. ). Wal-Ma al-Mart rt has one the worldBs worldBs larges largestt pri#at pri#atee satell satellite ite communica communicati tion on s"stem s"stems, s, which which enables it to control distribution. Fage 2?2, paragraph ', line 9 and 0G ?. Wal-Ma Wal-MartB rtBss sales sales rose from 6)/?.) 6)/?.) billion billion in fiscal fiscal "ear 2007 to 6?0.2 6?0.2 billion billion in 2009 while net income rose from 62./ billion to 6).? billion. Fage 2)), paragraph ), line 2 and )G. e3knesses:
. Wal-Ma Wal-Mart rt does not ha#e a formal formal mission mission statemen statement. t. Fage 2)), paragrap paragraph h 4, line G. 2. Although Although these stores stores represent represent Wal Wal-Mart -MartBs Bs herita heritage, ge, the" had become lost in the shuffl shufflee as the compan" opened opened 20,000 to 40,000 suaresuare- foot stores. Fage 2)7, paragraph paragraph 7, line ' and /G. Page | 16
). &he compan" compan" a#oids a#oids spending spending mone" on consul consultan tants ts and maretin mareting g epert eperts.F s.Fpag pagee 2?'. aragraph 2, line ) and ?G ?. Sam!s clubs clubs were ne#er ne#er designed designed to sell sell merchandise merchandise categori categories, es, but rather rather items. items. Fage Fage 2?, paragraph ), line and 2G.
INTERNA! +ACT"R EA!UATI"N MATRI- %I+E* e7 Intern39 63ctors
eig5t
Strength Wal-Mart focuses on low cost, best #alue,
R3ting
eig5te Score
0.20
?
0.70
0.09
)
0.2/
0.4
?
0.'0
0.0
)
0.)0
greatest greatest selection selection of ualit" ualit" merchandise merchandise and highest standards of customer ser#ice. Fpage. )02, paragraph ), line 2, ) and ?G.
Wal-Ma al-Mart rt operat operated ed intern internati ational onall" l" in ) coun counttries ries and and uer uertto
rico, ico, wit with
/'2 /'2
disc discoun ountt stor stores es and ?)' ?)' super superce cente nters rs.. Fage 297, paragraph /, line 9 and 0G.
Wal-Mart
has
larg larges estp tpri ri#at #atee
o ne
sate satell llit itee
the
worldBs
commu communi nicat catio ion n
s"s s"stem tems, which hich enab enablles it to cont contro roll
distribution. Fage Wal-MartBs sales rose from 6)/?.) billion in fisc fiscal al "ear "ear 2007 2007 to 6?0 6?0. .2 2 bill billio ion n in 2009 while net income rose from 62./ billion
to
6).?
billion.
Fage
29),
Page | 17
paragraph ), line 2 and )G.
Weaknesses Wal-Mart does not ha#e a formal mission
0.0/
2
0.?
0.'
0.'
0.)
0.)
0.0
2
0.20
statement. Fage 29), paragraph 4, line G. Although these stores represent Wal-MartBs Wal-MartBs heri herita tage ge,, the" the" had had beco become me lost lost in the the shuffle as the compan" opened 20,000 to 40,000 40,000 su suare are-- foot foot stores stores.. Fage Fage 297 297,,
paragraph 7, line ' and /G. &he compan" a#oids spending mone" on
consultants and mareting eperts. Sam's Sam's clubs clubs were never design designed ed to sell merchandise categories, but rather items. items. (page30 (page301, 1, paragra paragraph ph 3, line line 1 and 2).
Tot39
1
2.60
After conducted the calculation for the internal anal"sis, the total weighted score is 2.'0 which means the compan" has good internal strength and weaness because it is abo#e the ideal #alue. 0.'E-TERNA! +ACT"R EA!UATI"N MATRI- %E+E*
$ matri matri is a strate strategic gic-ma -manage nagemen mentt tool tool often often used used for assess assessmen mentt of curren currentt bus busine iness ss conditions. &he $ matri is a good tool to #isuali=e and prioriti=e the opportunities and threats that a business is facing. "pport,nit7:
Page | 18
. Wal-Ma al-MartB rtBss commun communit" it" in#ol#eme in#ol#ement nt "ear "ear after after "ear "ear is phenomenal phenomenal.. Accordin According g to the chroni chronicle cle of philan philanthr throp" op",, the Wal-Ma al-Mart rt founda foundatio tion n is the larges largestt corpor corporate ate cash cash contributor in America. Fage 2?'4, paragraph 4, line , 2, and )G. 2. Wal-Ma l-Mart rt main mainta tain inss a stra strate tegi gicc comp compet etit iti#e i#e focu focuss on glob global al pos posit itio ioni ning ng.. Fage Fage2? 2?2, 2, paragraph ), line G. ). Wal-Ma al-Mart rt is in the retail retail busines business, s, which also includes includes Intern Internet et -tailin -tailing g Fpage Fpage 2?) 2?),, paragraph , line G T5re3ts:
. *ati *ationa onall ll" " and and inte intern rnat atio ional nall" l",, Wal-Ma l-Mart rt has has been been faced faced with with the the 3nit 3nited ed $ood $ood and and 8ommercial worers 3nion, tr"ing to persuade emplo"ees to become part of the union Fage 2?2, paragraph 4, line and 2G. 2. &arg &arget et has now become become a fierce fierce competi competitor tor of WalWal-Mar Martt and is raned raned second second among among discount retailers with sales of nearl" 6'4 billion with )'',000 emplo"ees. Fpage 2?', paragraph ?, line and 2G ). Most recent recent comparisons comparisons show that that while the SamBs SamBs club di#ision di#ision of Wal Wal-Mart -Mart brought brought in o#er 6??billion in net sales while 8ostco finished the "ear at ust o#er 6/2 billion.F2?', paragraph ', line ? and 4G
Page | 19
1.' E-TERNA! +ACT"R EA!UATI"N MATRI- %E+E* e7 e=tern39 63ctors
eig5t
R3ting
eig5te Score
Opportunity
Wal-Ma Wal-MartB rtBss communit" communit" in#ol#ement in#ol#ement "ear after "ear is phenomenal. According to the
0.22
?
0.77
0.2
?
0.7?
0./
)
0.4
chronicle chronicle of philanthro philanthrop", p", the Wal-Mart al-Mart founda foundatio tion n is the larges largestt corpor corporate ate cash cash cont contri ribu buttor
in
Americ erica. a.
Fage age
)04, )04,
paragraph 4, line , 2, and )G. Wal-Mart Wal-Mart maintains a strategic competiti#e focus focus on global global pos positi itioni oning. ng. Fage Fage )02,
paragraph ), line G. Wal-Mart is in the retail business, which also includes Internet -tailing Fpage )0), paragraph 2, lineG.
Threats
Page | 20
*ationall" and internationall", Wal-Mart Wal-Mart has been faced with the 3nited $ood and 8omme 8ommerc rcia iall wor worer erss 3nion 3nion,, tr"i tr"ing ng to
0.7
)
0.4?
0.)
2
0.2'
persuade emplo"ees to become part of the union Fage )02, paragraph 4, line and
2G. &arget has now become a fierce competitor of Wal-Mart and is raned second among discount retailers with sales of nearl" 6'4 billion with )'',000 emplo"ees.
Most recent comparisons show that while the the SamB SamBss club club di#i di#isi sion on of Wal-Ma l-Mart rt brought in o#er 6??billion in net sales while 8ostco finished the "ear at ust o#er 6/2 billion.
Tot39
0.09
1
0.09
3.12
According to the abo#e anal"sis we can conclude that the compan" is #er" good because the total weight score is higher than 2.40. &he total score is ).2 that mean the compan" can o#ercome its threats and can come across its opportunities.
Page | 21
;.' C"M#ETITIE #R"+I!E MATRI- %C#M*
'al)*art Critic39 s,ccess 63ctors $inancial position rice competiti#eness Ad#ertisement %lobal epansion Tot39
eig5t
6.<6 6.78 6.76 6.78 &.''
Rati g < 4 < <
>
$o+t,o '-ole+ale2 +,ore Rati #,ore g 6.;6 7 6.A6 >.66 < 6.98 6.A6 7 6.46 6.98 7 6.86 ).41 4.41
<
arget4
Ratig
#,ore
< 4 < >
6.;6 >.66 6.A6 6.78 4.>1
>httpG33en.wikipedia.org3wiki3'ostco 7httpG33www.managementparadise.com3forums3marketing-management376;777marketing-strategy-costco.html
The competitive pro"le matri for Wal-Mart Stores classi"es the companys top competitors such as 'ostco Wholesale and Target. 'ompanies are then evaluated on the basis of signi"cant success factors. +nd the success factors are weighed from B6.6, not important to >.6 very importantC and the ratings pass on to the strengths and weaknesses by 4being the ma$or strength, to > for ma$or weaknesses. +ccording to the '*M table Wal-Mart Stores is the highest top performer with value of <.78. Meanwhile, Target 'orporation is the second top performer with value of 7.98 and 'ostco is third performer with value of 7.78.
>.' S"T MATRI- ANA!YSIS
SW(& Matri Is a s"stematic approach used to identif" strengths, weanesses, opportunities and threats FSW(&G to assist the strategic planning process.
Page | 23
STRENGTHS
EANESSES
G. Wal-Mart focuses on low cost, best
. Wal-Mart doe does not ha
#alu #alue, e, grea greate test st sele select ctio ion n of uali ualit" t"
formal mission statemen 2. Although these s
merchandise and highest standards of
represent
customer ser#ice.
Wal-
heri herita tage ge,, the" the" had had bec bec
2G.Wal-Mart 2G.Wal-Mart operated internationall"
lost ost in the shuf shufffle as
in ) countries and uerto rico, with
compan" opened 20,00
/'2 discount stores and ?)'
40,000 suare- foot stor ). &he compan" a
supercenters. )G. Wal-Mart has one the worldBs
spending
largest pri#ate satellite communication
mone"
cons consul ulta tant ntss and and
s"stems, which enables it to control
mar mar
eperts. ?. Sam' Sam's s club clubs s were ere n
distribution. ?G. Wal-MartBs sales rose from 6)/?.)
designed
to
billion in fiscal "ear 2007 to 6?0.2
merc mercha handi ndise se
cate catego go
billion in 2009 while net income rose
but rather items.
from 62./ billion to 6).? billion. "##"RTUNITIES
S" STRATEGIES
Wal-Ma l-Mart rtBBs
comm commun unit it" " G. Mainta Maintain in low cost cost leader leadershi ship p to impro#e strategic competiti#eness and in#ol#ement "ear after "ear business -tailing. is phenomenal. phenomenal. According According %S&? '4? ')* #ro,ct e8e9opment to t he chronicle of
G. G.
philanthrop", the Wal-Mart Wal-Mart
competiti#eness.
order to impro#e business - ta and
to
gain
2G. 2G. e#el e#elop op busi busine ness ss -ta -tail ilin ing g b"
getting the benefit of pri#ate satellite on global positioning. communicat cation ion in order order to mainta maintain in Wal-Ma l-Mart rt is in the the reta retail il communi business,
which
mone" one"
consultants and mareting epe
a
strategic competiti#e focus
more
stra
M3rket #enetr3tion str3teg
corporate corporate cash contributor contributor in America. Wal-Mart mainta ntains
Spendin ding
%)? '4? ')*
foun founda dati tion on is the the larg larges estt
" STRATEGIES STRATEGIES
also strategic competi#eness. Page | 24
includes Internet -tailing
%S)? '4? ')* #ro,ct e8e9opment str3teg7
THREATS
ST STRATEGIES
*ationall"
T STRATEGIES STRATEGIES
and G. Increase salar" both nationall" and G. 8reate formal mission state
internation internationall" all",,
internati ational onall" l" for the emplo" emplo"ees ees in to increase net sales. Wal-Mart al-Mart intern
orderr to pre# pre#en entt uni united food food and and has has been been face faced d with with the the orde 3nited
$ oo d
8ommercial
and commercial worers union. worers
3nion, 3nion, tr"ing tr"ing to persua persuade de
&? T)* %M3rket #enetr3tion*
%S)? T&* %Hori@ont39 Integr3tion*
2G. 2G. Add Add merc merchan handi dise se cate catego gor r
emplo"ees to become part
compete compete effecti#el effecti#el" " with &arg &arg
of the union &arget has now become a
order to increase maret share.
fierce fierce compet competito itorr of Walal-
%0? T4* %M3rket penetr3tion*
Mart and is raned second among among disc discou ount nt reta retail iler erss with with sale saless of nearl nearl" " 6'4 billion
with
)'',000
emplo"ees. Mostt recent Mos recent compari comparison sonss show that while the SamBs club di#ision of Wal-Mart brought in o#er 6??billion in net sales sales while while 8ostco 8ostco fini finish shed ed the the "ear "ear at ust ust o#er 6/2 billion.
.' STRATEGIC #"SITI"N AND ACTI"N EA!UATI"N %S#ACE* MATRI-
&he SA8 matri e#aluates different #ariables and assigns them a score considering how important the" are for the situation of the compan". It anal"=es four different areas Ftwo internal to the compan" and two eternalG that will represent four uadrants in a graphic. &he purpose of this matri is to situate the compan" in one of these four uadrants and gi#e a suggestion.
Page | 25
+in3nci39 #osition %+#*
. 2. ). ?.
St3Bi9it7 #osition %S#*
@iuid uidit" oper operat atin ing g inco income me In#e In#ent ntor" or" turn turno# o#er er rat ratio io Worin ring g cap capit ital al
) & 1
. 2. ). ?.
8ompe 8ompeti titi ti#e #e pres pressu sure re 1arrie 1arriers rs to entr" entr" into into mare marett ase ase of eit eit from from mar mare ett &echnol chnologi ogical cal chang changes es
O2
Tot39
&&
A8er3ge
Competiti8e #osition %C#*
In,str7 #osition %I#*
4 ) & 0
Tot39
. 2. ). ?.
%row %rowth th ote otent ntia iall rof rofit it pote potent ntia iall $ina $inanci ncial al Stab Stabil ilit it" " ase ase of of entr entr" " int into o mar maret et
Tot39
4.1
4.41
O' O4 O' O/ O2?
&' A8er3ge
)
(
A8er3ge
Mar Maret et shar hare prod produc uctt Pual Pualit it" " &echnol chnologi ogical cal Sil Silll 8ust 8ustom omer er lo"a lo"alt lt" "
)
4
Tot39
4.>1
. 2. ). ?.
&
A8er3ge
O'
$al,ulatio/ !P$P 6 )2.5 3.5 % FP$P 2.75 2.75 )2.5 0.5
FP
Page | 26
$"#ERVA!VE $"#ERVA!VE
7
AGGRE##!VE
6 5 4 3
3.5 0.5
2 1
)8 C# )7 )6 )5 )4 )3 )2 )1
1 2 3 4 5 6 7 8 9
I#
)1 )2 )3 )4 )5 )6 EFE#!VE)7
$"*PE!!VE
)8
#P
+ccording to the above graph we can see that the company have aggressive stretagy which contains backward, forward, horiental integration, market penetration, market development, product development and diversi"cation Brelated3 unrelatedC. 9.0 &"#" $"#L!G GR"P G *AR!
The &'( matri, invented by the &oston 'onsulting (roup, is a tool that allows to classify classify and evaluate the products and and services of a business. It is Page | 27
a decision decision making making tool tool in order order to balance balance the activit activitie ies s of a
company company
among those which make pro"ts, those who ensure growth, those which consti constitut tute e the future future of
the "rm or those who who are are its heritage heritage.. The &'(
matri is divided into four types of circumstances and they are the stars, cash, cows, dogs and 1uestions marks. $oma: Wal-Mart 'ostco Target Target
#ale+ i 2009 46>,744 A;,55; A8,<89
#ale+ i 2008 <94,<69 96,;99 A4,;45
Relati;e *ar
Wal-Mart sales in 766; : 46>,744 Target Target sales in 766; Market share
: A8,<89 : A8,<89346>,744
: 6.>A $oma:
Wal-Mart 'ostco Target Target
#ale+
i i #ale+
2009
2008
46>,744 A;,55; A8,<89
i $al,ulatio
A;erage Gro=t-
-
Rate 9.7J
<94,<69
46>,744
96,;99
<94,<69 ><94,<69: A;,55; K 96;99396;99
B>.8JC
A4,;45
: A8,<89-A4,;453 A8,<89-A4,;453 A4,;45
6.A<
: otal
6.33
!?u+tr: Gro=t- 6.33>3 2.11@ Relati;e mar
Page | 28
(ig-
*e?um
Lo= 1 0.16
0.50
0.0 (ig-
20
In,str7
#AR#
E#!" *ARB
Growt5
2.11 *e?uim
$A#( $"'#
0
"G#
Lo=
) 20
In the above &'( Matri epress the relative market share and the industry growth rate of Wal-Mart. The relative market share of Wal-Mart is 6.>AJ while the industry growth rate of 7.>>J and the position lies in the "rst cell N1uest N1uestion ion markO markO which which repre represen sents ts the strate strategie gies s of marke markett penetr penetrati ation, on, market development, development, product developmet and divestiture. 0ast but not least, the company has low relative market share but high industry growth rate.
10.0 !ERAL) EERAL !E *AR!
Page | 29
The Internal eternal BI)C Matri is a strategic management tool used to analye working conditions and strategic position of a business. The Internal )ternal Matri or short I) matri is based on an analysis of internal and eternal business factors which are combined into one suggestive model.The I) matri is based on the following two criteriaG Score from the )!) matri -this score is plotted on the y-ais, and Score from the I!) matri -- plotted on the -ais.
(E !FE "AL 'E!G(E #$"RE# #trog 3.0 to 4.0 4.0
A;erage 2.0 to 2.99 3.0
2.0
'ea< 1.0to 1.99 1.0 4.;' !!
Grow 3n B,i9 T"TA! !!! E+E T"TA!
!
EIGHTED SC"RE
3.0
!V
V
V1
2.0 V!!
V!!!
!
1.0
1. !FE otal otal =eig-te? =eig-te? +,ore/ +,ore/ 2.60 2.60 2. EFE otal otal =eig-te? =eig-te? +,ore/ 3.12
Page | 30
).&
+s mentioned in the above diagram, the total I!) weighted score of 7.A6falls in P ais ais and and the the Total otal )!) )!) weig weight hted ed scor score e of <.>7 <.>7 fall falls s in the the Q ais ais.. +ccording to the I) matri below, Wal-Mart stores falls in the second cell and so as they they shou should ld foll follow ow the the stra strate tegy gy of grow grow and and buil build. d. This This strat strateg egy y contai containsb nsback ackwar ward, d, forwar forward, d, horie horiental ntal integra integratio tion, n, marke markett penetr penetrati ation, on, market development, product development 11.0 GRA #RAEG% *AR!
The grand strategy is a useful tool for creating dierent and alternative stra strate tegi gies es for for an organ organi iat atio ion. n. (rand (rand matr matri i has has four four 1uad 1uadran rants ts## each each 1uadrant contains dierent sets of strategies and the entire "rms along with their respective divisions must fall in one of the 1uadrant. This matri has two diment dimention ions s compet competiti itive ve positi position on and marke markett growt growth. h. The follow following ing daigram is walmarts grand strategy matri. ua?rat !!ua?rat !
RAP! *ARBE
ua?rat !!!ua?rat !V
#R"G $"*PE! !VE
Page | 31
S!" MARET GR"TH
+ccording to the (rand Strategy Matri, the position of Wal-Mart Stores lies in the the "rst rst 1uad 1uadra rant nt which hich reveal veals s that that the the compa ompany ny has a str strong ong competitive position among the competitive market and very rapid market growth as the annual growth in sales eceeds above 8J.!urthermore, the strate strategie gies s recom recommen mended ded are marke markett develo developme pment, nt, marke markett penetr penetrati ation, on, product development, forward integration, backward integration, horiontal integration, and related diversi"cation.
&4.' THE
The 1uantitive strategic planning matri is a strategic tool that allows stra strate tegi gist sts s to eval evalua uate te an alte altern rnat ativ ive e stra strate tegi gies es ob$ec ob$ecti tivl vly, y, base based d on previously identi"ed eternal eternal and internal critical success factors. (E PREV!"# #RAEG!E# ! #'" *AR! #" #trategie+/ . Maintain Maintain low cost leadershi leadership p to impro#e strategic strategic competiti competiti#eness #eness and business business -tailing -tailing.. 2. e#elop e#elop business business -tailing -tailing b" getting getting the benefit benefit of pri#ate pri#ate satellit satellitee communicatio communication n in order to maintain strategic competi#eness.
'" #trategie+/ 1. Spending more mone" on consultants and mareting eperts in order to impro#e business - tailing and to gain strategic competiti#eness.
# #trategie+/ 1. Increase salar" both nationall" and internationall" for the emplo"ees in order to pre#ent united food and commercial worers union.
' #tragie+/ Page | 32
. 8reate formal formal mission mission statement statement to increase increase net sales. sales. 2. pand pand the merchan merchandis disee catego categor" r" in the maret maret to compet competee effect effecti#e i#el" l" with &arge &argett in order to increase maret share.
*at,-ig t-e e= alterati;e +trateg:
>. Main Mainta tain in lowc lowcos ostt lead leader ershi ship p and and spend spend more more mone money y to mark market etin ing g eperts in order to increase net sales Bproduct developmentC. 2. addmerchandi addmerchandise se categor" to compete compete effecti#e effecti#el" l" with &ar &arget get in order to increase increase maret maret share.FMaret enetrationG T5e ,3ntit3ti8e str3tegic p93nning m3tri= %spm*:
Maintain lowcost lead leader ersh ship ip spend
and and
Addmerchandise categor" in the
more
storesto compete effecti#el" with
money
to
marketing
&arget get
in orde orderr
to
maret share.
eper eperts ts in order order to incr increa ease se net net
FMaret enetrationG
sales.Bproduct developmentC Strengt5s
eig5t
AS
TAS
AS
TAS
0.20
?
0.70
)
0.'0
0.09
2
0.7
)
0.2/
Page | 33
incr increa ease se
0.4
l-Mart rtBBs sale saless rose rose from from >. Wal-Ma
--
---
--
--
0.0
?
0.?0
)
0.)0
0.0/
)
0.2
0.0/
0.'
----
-----
-----
-----
0.)
?
0.42
)
0.)9
0.10
2
0.20
?
0.?0
2
0.??
0.22
6)/?. 6)/ ?.) ) bill billio ion n in fisc fiscal al "ear "ear 2007 to 6?0.2 billion in 2009 while while net net incom incomee rose rose from from 62./ billion to 6).? billion. e3kness
. Wal-Mart does not ha#e a formal mission statement. 2. Althoug Although h thes thesee store storess repr represe esent nt Wal-MartBs heritage, the" had become lost in the shuffle as the compan" compan" opened opened 20,000 20,000 to 40,000 suare- foot stores. ). &h &hee comp compan an" " a#oi a#oids ds spend spendin ing g mone mo ne" "
on
cons consul ulttant ants
and and
mareting eperts.
4. Sam!s clubs were ne#er design designed ed to sell sell merchan merchandis disee categories, but rather items. T"TA!
&.''
"pport,nities
. Wal-MartBs
communit"
0.22
in#ol#ement "ear after "ear is Page | 34
phenomenal. According to the chronicle chronicle of philanthro philanthrop", p", the Wal-Ma l-Mart rt foun founda dati tion on is the the largest
corporate
cash
contributor in America. 2. Wal-M Wal-Mart art mainta maintains ins a strat strategic egic
0.2
2
0.?2
)
0.')
0./
)
0.4
2
0.)?
0.7
-------
-------
--------
-------
0.)
?
0.42
)
0.)9
0.09
2
0.7
)
0.2/
compet competit iti# i#ee focu focuss on glob global al positioning.
<. Wal-Mart is in the retail business, which also includes Internet -tailing T5re3t
. *atio *ational nall" l" and and inte intern rnat atio ional nall" l",, Wal-Mart has been faced with t he
3nited
$ood
a nd
8ommerc 8ommercial ial worer worerss 3nion, 3nion, tr"ing tr"ing to persua persuade de emplo" emplo"ees ees to become part of the union. 2. &arget has now become
a fierce fierce compet competito itorr of Wal-Mart and is raned second among discount retail retailers ers with with sales sales of nearl" 6'4 billion with )'',000 emplo"ees Most recent comparisons show that hat whil whilee the Sam SamBs club club di#ision di#ision of Wal-Mart al-Mart brought brought Page | 35
in o#er 6??billion in net sales while 8ostco finished the "ear at ust o#er 6/2 billion. Tot39
&.''
0.)
).
According to the abo#e table, the total attracti#e score of PSM of Wal-Mart stores, the first strate strateg" g",, Maintain lowcost leadership and spend more money to marketing
eperts in order to increase net sales.Bproduct developmentC epress that 4.<5. whese as the second strategy which is Addmerchandise categor" in the stores to compete effecti#el" with &arget in order to increase maret share. FMaret enetrationG ha#e ).77 total attracti#e score. So we can conclude that the first strateg" has been chosen as the best strateg" for Wal-Mart Wal-Mart Stores to o#ercome its problems and succeed in the industr".
$"$L#!" Page | 36
In conclusion , Wal-Mart Wal-Mart is consieded as as the largest retaliers retaliers company over the world. In regards of its "nancial ratio , the company has gain a good ratio which eperss how the stronger the company is. !urthemore, in the internal factors, the company has many strengthes comparing to its weaknesses. +nd its net sales increasing year by year both domestically and internationally. In addition, Wal-Marts eternal eternal factors, according to its opportuninites Wal-Mart Wal-Mart foundat foundation ion
is the largest largest corpora corporate te cash contibu contibutor tor in +merica +merica and it is
community involvement is phonomenal compare to its threats is Rnited food and commercial workers union trying to persuade emplyees to become part of the unoin . %n the other hand, Wal-Marts competitive pro"le matri B'*MC one of its ma$orest competitors are Target Target corporation, mart, and 'ostco Whole Sales. +ccording to the '*M matri Wal-Mart is the top performed compare to its competotors . In addition, Wal-Marts Wal-Marts Space Matri Matri its strategy strategy aggressive stretagy stretagy which contai contains ns backwa backward rd,, forwar forward, d, horie horiental ntal integr integrati ation, on, marke markett penetr penetrati ation, on, mark market develo developme pment, nt, produc productt develo developme pment nt and divers diversi" i"cat cation ion Brela Brelated ted33 unrela unrelated tedC.M C.Mean eanwhi while le , Wal-Mar al-Marts ts grand grand matri matri lies lies in the "rst "rst 1uadran 1uadrantt which means the company has an ecellent 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 eceeds above 8J. +ccording to the I) matri, Wal-Mart stores falls in the second cell and so as they should follow the strategy of grow and build. This strategy contains backwar backward, d, forward forward,, horie horienta ntall integr integrati ation, on, marke markett penetr penetrati ation, on, marke markett devel developm opment ent.. Meanw Meanwhil hile e the &'( &'( Matri Matri of Wal-Mart al-Mart Store Stores s lies lies in the @uestion mark which means low relative market share but high industry growth rate.
Page | 37
0astly. Wal-Mart inoder to move forward, we recommended that Wal-mart uses product development strategy which comes out from the @S*M matri. +ll 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