WAL-MART STORES INC.

CASE ANALYSIS

Team: Gyan Niwas

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Case Analysis: Wal-Mart Stores Inc.

Wal-Marts Strategy
Essentially low-cost, high volume strategy Aims at customer satisfaction through low prices and good customer service. Lower operating expenses than the industry average through superior Low cost distribution capability High Volume Volume-based growth through increased market share. Low prices, advanced data management and extremely motivated Customer employees (10 feet rule, sundown rule) result in superior customer Satisfaction experience. A one-stop solution by offering a wide range of products

Competitive Advantage

Advanced Distribution Capabilities Including cross-docking Wal-Marts own distribution centres Inside-out location strategy Economies of scale favour volume-based strategy Benefits Cost savings from lower inventory levels Needs heavy investment Trade-off Requires sophisticated IT EDLP (Everyday Low Pricing) Lower costs because of lesser advertising. Benefits Higher customer satisfaction Allows for volume-based strategy Trade-off Requires heavy investment in supply chain & IT Supplier Relationship Integrated supplier partnerships, who are considered as stakeholders Lowered distribution cost due to improved supply chain Benefits Preferential treatment by suppliers Trade-off Access to supplier sales & inventory data Advanced Customer Buying Pattern analysis Collection & usage of customer purchase behaviour More accurate forecasting of demand Benefits Lower costs through reduced inventory Useful data for suppliers Trade-off High cost involved. Workforce Culture Customer-oriented mindset of workforce Loyal customers Benefits Mindset of continuously improving customer experience Trade-off Requires strong higher management involvement

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Core Business issues

Expansion into multiple segments has forced it to compete on broader front with competitors Competitor are more stylish, quality focussed ,service oriented and have more diversified product range. Facing heat on discount retailing front Gross profit margins down to 24.30% vis-a-vis competitors margins of 30% Company facing stiff competition on warehousing front Inventory turnover figures of 11.5% taking a beating from nearest rival's 12.06% Company does not have a consistent strategic approach to different international markets resulting into uneven profitability across geographies. Challenge for company's Arkansas driven management style and culture as it has transformed into global MNC. Image makeover challenge with increasing pressure of unionization Activism from environmentalists, anti-globalization activists, women and children rights advocates

Recommendations for future growth

Improve store productivity by remodelling discount stores into supercentres Higher revenue per store and higher operating profit/sq ft reported by supercentres New smaller formats in urban markets Current Space constraints Limitations Busy schedules limit many customers from driving to a supercentre Occupy less space Cost less Retailers Run more efficiently small stores Positive Effect: Profitable format economics; Preserves Wal-Marts cost structure Increased focus on international growth - future key growth driver Retailers revenues annual growth Stagnant US US - 1% growth International - 15% Significant scope for expansion for the retailer Huge pool of value conscious customers Emerging Proven business model Markets Overall strategy for Wal-Mart makes sense in other countries too For the most part, Wal-Marts competitive advantages can be transferred abroad

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