Walmart

Dr M Manjunath Shettigar
 How to transfer core
competencies to other
countries?
 Outline
History Overview
- Vision, Mission and Goals

Interna & External Analysis

-Value Chain
-SWOT & Pestel Analysis
-5 Forces Model
-Main Competitors

Internationalization
-Driving Forces
-Entry decisions
-Examples of success and failure

Suggestions
 History Overview
1962: Walten Brothers opened fist Walmart in
Arkansas
1970: Walmart became public
1990: 1st National retailer
1991: International Expansion
1993: Creation of Great Value
2003: Largest corporation in the world
2012: 50th Anniversary
Mission Statement, Vision, Goals, & Purpose
Mission Statement:
To help people save money so they can
live better

Goal:
Becoming in an international brand

Vision:
If we work together, well lower the Advertising slogans:
cost of living for everyonewell give
Save Money. Live better
the world an opportunity to see what
its like to save and have a better life.
 Customer Target
Wal-Mart's targeted demographic:
Modest incomes
Shoppers interested in prices
But the customer base is changing
Internal & External
Analysis
 Firms Value Chain

General administration

Human resource management

Technology development

Procurement

Inbound Outbound Marketing

Operations Service
logistics logistics and sales
 Support Activities
Firms infrasctructure: close connection between headquarter and local stores.

Human resources:
- Based on Interaction practices between company and employees
-Low pay but other benefits (health care plans, retirement plans, or promotion opportunities)
-2.2 million associates globally.
-Every time we open a supercenter, we provide roughly 300 jobs
-Women57% of our U.S. workforce, 27% of corporate officers, and 20% of our Board of directors.

Techonology development: It is the key factor of the company. It constitutes a competitive advantage against
competitors.
- Computer-based technology
POS (Point of sales) system
Satellite System
Procurement:
-Wal-Mart deals directly with manufacturers, by passing all intermediaries.
- EDI : Electronic data interchange

MANUFACTURER WALMART - CUSTOMERS

 Primary Activities
Inbound Operations Outbound Marketing and Service
Logistics Logistics sales

-VMI system 3 business segments: -Hub and spoke - Word of mouth -accepting returned
distribution system. communication. goods
(Vendor managed
a)WalMart stores
inventory) - Super centers - CROSS DOCKING: -focuses on everyday -Satisfaction
- Discount centers logistic technique to low prices guarantee
continuous make the
- Neighborhood
replenishment markets distribution process Save money, live - Opening
more efficient better hours(24/7)
-EDI (Electronic b) SAMS Club
-Sales are on a self-
Data Interchange c)WalMart service, cash-and-carry
international basis.
 Business Formats
1) Walmart Stores
Walmart Discount Stores 629 in the US

Walmart Supercenter: Walmart Discount Stores + Full Service

Supermarket. 3,029 in the US.

Walmart Market: Previously branded as Walmart Neighborhood

Market. 199 in the US.

2) Sams Club. Buy in large quantities. 611 opened

in the US.
Walmart in the US
 Distribution Channels
Saturation Strategy
The company owns a fleet of more than 3,000 trucks and
12,000 trailers.
The Wal-Mart Way Cross Docking.
 Resource - Based View Of The Firm
Difficult to Difficult to
Competency Valuable Rare imitate substitute Conclusion

Integrated technology of supply chain Yes Yes Yes Yes Sustainable Compt. adv

Ability to generate large sales volume Yes No No Yes Comp. Parity

Superior logistics system Yes Yes Yes Yes Sustainable comp. adv

Operation decentralization Yes Yes Yes No Temp. comp. adv

Strong culture Yes Yes Yes Yes Sustainable comp. adv

Human resources (management team and

employee autonomy) Yes Yes Yes No Temp. comp. adv
 SW
Helpful Harmful
INTERNAL FACTORS

STRENGTHS WEAKNESSES
Diversity in products & services
Brand image-weak
Convenient prices & locations
reputation
Strong market presence
Low global presence
Customer loyalty
Behind rivals in e-
Strong financial performance
commerce
Cost and pricing advantages over
rivals
Good supply chain
EXTERNAL FACTORS

Global Expansion: new geographic Intense Competition

areas Laws and Regulations:
Increasing online sales Trade policy
Strategic alliances Cultural barriers
Acquiring rival firms Current economy
Slow market growth
Transport of distinctive
comptency
OPPORTUNITIES THREATS
 PESTEL Analysis
Political: Policies on economy, trading
agreements (NAFTA) .
Economical: Unemployment Rate, slightly
increase in consumption.
Socio Cultural: Faster pace of live- Efficiency is
key.
Technological: Use of IT technologies. Online
shopping.
Environmental: Recycling, Contamination issues.
Legal: More laws and more complex.
The Five Forces Model
1. Bargaining Power of
Customers: Low
I. Customers usually make small purchases.
II. A large number of customers.
III. Wal-Marts main customers are
individuals.
2. Bargaining Power of Suppliers:
Medium-Low
I. Wal-Mart purchases huge quantities of
products from its suppliers.
II. Low switching costs from one supplier to
another.
III. Products have a lot of substitutes.
IV. Almost all the products are not critical for
Wal-Mart.
 The Five Forces Model
3. Potential entrants / Barriers to entry:
Medium-High
I. Economies of scale.
II. High capital requirements.
III. Customers mainly look for products with low prices and
standard quality.
IV. Low switching costs among companies for customers.
V. Requires a precise distribution system.
4. Power of Substitutes: High
I. Prices and quality of substitute products are very competitive.
II. Performance of substitute products are similar.
III. Consumer switching costs are low.
 The Five Forces Model
5. Potential Competitors/ Rivalry: High
I. Wal-Mart represents the 25% share of the U.S. Supermarket
business.
II. Competitors have similar sizes.
III. Industry growth is slow.
IV. Exit barriers are high.
V. There is a high production capacity

WAL-MART main competitors:

Retailer Industry: Supermarket Industry:

Target Dollar General
K-Mart Lowes Food.
 Strategic Group Map
High
Customer service/ Price

Low

Low Number of Product Categories High

 Main Competitors
Retailer Industry: Target Supermarket Industry:
Dollar General
I. Target is the main competitor of Walmart I. One of the main competitors, pursuing
low prices.
II. ranked #33 in the Fortune 500.
II. Good location in smaller communities is
III. Target offers very similar products.
the main competence advantage.
IV. Target went abroad in January 2011.
III. Strategy: Save time, save money
IV. Many items per $1

Mission: to Make Target your preferred

shopping destination in all channels by
delivering outstanding value, continuous Mission: to best serve others by keeping it real
innovation and exceptional guest experiences. and simple.
 Business-Level Strategy:
Combined Strategy
Walmart combines a Cost-Leadership
and Differentiation strategies because:

I. Allowed to achieve a large scale and an

efficient supply chain.
II. Has its own low-cost brands, like Great Value.
III. A unique cost structure that allows Walmart to
establish the lowest prices and achieve
competitive advantage. (best value/price
combination )
IV. Present in many different industries and
markets with efficient distribution channels.
V. Very difficult strategy to imitate by offering a
broad quantity of products at a low price.
Internationalization
 Internationalization
Reasons for expanding abroad
Risks
International Strategy
Success
Key issues
 Forces Favoring Globalization
3 main reasons
Saturated domestic market
United States represents only 4% of worlds
population (missing of 96% of potential customers)
Emerging Markets with lower disposable income offer
huge platforms for growth in discount retailer.
Economies of Scale
Growth
Revenues
Reduce political risk
 Risks of Expanding Abroad
Management Risk
Culture, language, customer preferences,
distribution systems.
High investment

Political and Economic risks

Exchange Rates risk

 Entry Decisions
Important decisions any company needs to
face when going international:

What markets to enter, when and what size.

What strategy to follow.
What mode of entry.
 What markets to enter?

Europe:
Mature Markets

High Rivalry

Lack of strong
costumer relationship
What markets to enter?
Asia:
Most distant
geographically

Most different culturally

and logistically

Required high financial

and managerial resources
 What markets to enter?
Latin America:
Closest markets

Large population

Emerging Markets
Walmart International
What Strategy to follow

Trans
Global
National

Inter Multi
national domestic

Low High
Local Responsiveness
Mode of entry of International Expansion
 Mode of entry of International Expansion
Year Country Mode of Entry
1991 Mexico 50% Joint Venture Cifra
1994 Brazil 60% Joint Venture Lojas Americana
1994 Canada Acquisition Woolco (weak player)
1995 Argentina Wholly owned Susbidiary
1996 China New opening, JV, Acquisition
1998 South Korea Adquisition
1999 U.K. Acquisition of ASDA
2002 Japan Acquisition Seiyu
2002 Germany Acquisition of Wertkauf and Spar
2007 India Joint Venture
2011 Southern African Countries Acquisition of Massmart Holding Limited
 Examples of International Success
Mexico:
Largest Walmarts foreign presence (68%)
38% Retail Market Share in Mexico
Canada
One of the most successful international expansion
Acquired Woolco Stores and changed structure

Both countries are close and were exposed to

Walmart.
 Examples of International Success
China:
Most populous country
Lower income in middle-class families
Adaptation to market
85% of products from local suppliers.
 Examples of International Failure
Germany
Walmart was not able to benefit from economies of scale
Unable to become cost leader
Mode of entry:
Wertkauf (right move)
Spar (wrong move)
Culture differences
Low profitability market
Lost $1 Billion
 Examples of International Failure
India
Political and legal barriers:
Foreign companies are not allowed to set up big stores
unless they sell only one brand.

South Korea
Very demanding customers
Did not customized to market
Big companies also fail in South Korea
 Key Success Factors
A supply chain with integrated technology

An ability to generate large sales volume (economies of scale)

Every Day Low Prices

Superior logistics systems

Decentralized operations

A strong and unique culture (in U.S.)

Suggestions
 Think local, act global
Locally leveraged:
Shared knowledge between units.

Worldwide learning:
Advantages of interconnected economies.

Adaptation:
To locally customize processes and services
Questions & Answers