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Table of Contents

1.0 VISION AND MISSION ................................................................................................................... 3

1.1 VISION EVALUATION .............................................................................................................................. 3

1.2 MISSION EVALUATION ............................................................................................................................ 3

1.3 OTHER COMPETITORS’ MISSION ANALYSIS ............................................................................................... 4

1.4 CONCLUSION ......................................................................................................................................... 4

2.0 EXTERNAL ANALYSIS .................................................................................................................. 5

2.1 PEST ANALYSIS .................................................................................................................................... 5 2.1.1 Economical Forces .............................................................................................................................. 5 2.1.2 Social, Culture, Demographic Environnent Forces ........................................................................... 5 2.1.3 Political, governmental and legal Forces ........................................................................................... 5 2.1.4 Technological Forces .......................................................................................................................... 5

2.2 ENVIRONMENT ANALYSIS SUMMARY ....................................................................................................... 6

3.0 COMPETITIVE ANALYSIS ............................................................................................................ 6

3.1 COMPETITIVE FORCES ............................................................................................................................ 6

4.0 INDUSTRY ANALYSIS .................................................................................................................... 8

4.1 DESCRIPTION OF INDUSTRY ..................................................................................................................... 8

4.2 PORTER’S FIVE FORCES .......................................................................................................................... 9 4.2.1 Competitive pressure among Rivalry .................................................................................................. 9 4.2.2 Competitive Pressure associated with New Entrant ......................................................................... 11 4.2.3 Competitive Pressure from the Substitute Products ......................................................................... 11 4.2.4 Competitive Pressure from the Suppliers’ Bargaining Power ......................................................... 12 4.2.5 Competitive Pressure from Buyers’ Bargaining Power ................................................................... 12

5.0 CONCLUSION OF THE INDUSTRY ANALYSIS .......................................................................... 12

6.0 KEY SUCCESS FACTORS OF THE INDUSTRY .......................................................................... 13

7.0 OPPORTUNITIES AND THREATS ............................................................................................... 13

7.1 LIST OF OPPORTUNITIES AND THREATS ................................................................................................... 13 7.1.1 opportunities ...................................................................................................................................... 13 7.1.2 Threats ............................................................................................................................................... 14

8.0 EXTERNAL FACTOR EVALUATION (EFE) MATRIX ................................................................ 15

9.0 COMPETITIVE PROFILE MATRIX (CPM) ................................................................................. 17

10.0 INTERNAL ENVIRONMENT ................................................................................................... 18

10.1 CULTURAL FACTORS ............................................................................................................................ 18

10.2 MANAGEMENT FUNCTIONS ................................................................................................................... 18 10.2.1 Planning ............................................................................................................................................. 18 10.2.2 Organizing ......................................................................................................................................... 20 10.2.3 Motivating .......................................................................................................................................... 20 10.2.4 Staffing ............................................................................................................................................... 21

10.2.5 controlling .......................................................................................................................................... 22

11.0 MARKETING STRATEGY ....................................................................................................... 23

11.1 CUSTOMER ANALYSIS .......................................................................................................................... 23

11.2 PROMOTION PROGRAMS ........................................................................................................................ 23

11.3 PRODUCT AND SERVICE PLANNING......................................................................................................... 24

11.4 PRICING .............................................................................................................................................. 24

11.5 DISTRIBUTION ..................................................................................................................................... 26

11.6 MARKETING RESEARCH ........................................................................................................................ 27

12.0 FINANCIAL ANALYSIS ........................................................................................................... 28

12.1 RATIO ANALYSIS ................................................................................................................................. 28

13.0 PRODUCTION AND OPERATION ........................................................................................... 30

13.1 PROCESS ............................................................................................................................................. 30

13.2 CAPACITY ........................................................................................................................................... 30

13.3 INVENTORY ......................................................................................................................................... 31

13.4 WORKFORCE ....................................................................................................................................... 31

13.5 QUALITY ............................................................................................................................................ 32

14.0 RESEARCH AND DEVELOPMENT ......................................................................................... 32

15.0 MANAGEMENT INFORMATION SYSTEMS .......................................................................... 32

16.0 VALUE CHAIN ANALYSIS (VCA) ........................................................................................... 33

16.1 MAIN ACTIVITY .................................................................................................................................... 33

16.2 SUPPORTING ACTIVITY ........................................................................................................................ 34

16.3 SUPPLIER COSTS ................................................................................................................................ 36

16.4 PRODUCTION COSTS ............................................................................................................................. 37

16.5 DISTRIBUTION COSTS ........................................................................................................................... 37

16.6 SALES AND MARKETING COSTS ............................................................................................................. 37

16.7 CUSTOMER SERVICE COSTS ................................................................................................................... 38

16.8 MANAGEMENT COSTS .......................................................................................................................... 38

17.0 STRENGTHS AND WEAKNESSES .......................................................................................... 39

17.1 LIST OF STRENGHS AND WEAKNESSES ..................................................................................................... 39 17.1.1 Strengths ............................................................................................................................................ 39 17.1.2 Weaknesses ........................................................................................................................................ 46

17.2 INTERNAL FACTOR EVALUATION (IFE) MATRIX ......................................................................................... 47

18.0 OBJECTIVES AND STRATEGIES ........................................................................................... 49

18.1 LONG-TERM OBJECTIVES ...................................................................................................................... 49 18.1.1 Strategic Long-term Objectives ......................................................................................................... 49 18.1.2 Financial Long-term Objectives ........................................................................................................ 50

18.2 OBJECTIVES ......................................................................................................................................... 50 18.2.1 Strategic Objectives ........................................................................................................................... 50 18.2.2 Financial Objectives .......................................................................................................................... 53

18.3 CORPORATE LEVEL STRATEGIES ............................................................................................................ 53

18.4 BUSINESS LEVEL STRATEGIES ............................................................................................................... 55

18.5 THE COMPANY’S EXISTING STRATEGIES ................................................................................................. 56

19.0 SWOT ........................................................................................................................................ 57

19.1 SWOT MATRIX ................................................................................................................................... 57

19.2 LIST OF ALTERNATIVE STRATEGIES....................................................................................................... 61

19.3 SWOT ANALYSIS DIAGRAM ................................................................................................................. 62

19.4 CONVERTING INTO STRATEGIC TERMS .................................................................................................. 63 19.4.1 Corporate Level Strategies ................................................................................................................ 63 19.4.2 Business Level Strategies .................................................................................................................. 63

20.0 SPACE ....................................................................................................................................... 65

CONCLUSION: ............................................................................................................................................... 66

20.1 CONCLUSION ...................................................................................................................................... 66

21.0 BCG MATRIX ............................................................................................................................ 67

22.0 IE MATRIX ................................................................................................................................ 67

23.0 GRAND STRATEGY MATRIX .................................................................................................. 68

24.0 QSPM (QUANTITATIVE STRATEGIC PLANNING MATRIX) .................................................. 69

24.1 SELECTING STRATEGIES ...................................................................................................................... 69

24.2 CONCLUSION ...................................................................................................................................... 70

24.3 QSPM ............................................................................................................................................... 70

25.0 MANAGEMENT AND OPERATION ISSUES ........................................................................... 73

25.1 COMPARING NEW STRATEGY WITH EXISTING ONES ............................................................................... 73

25.2 OBJECTIVES ....................................................................................................................................... 74

25.3 MANAGEMENT ISSUES ......................................................................................................................... 78

25.4 PRODUCTION AND OPERATION .............................................................................................................. 79

25.5 RESEARCH AND DEVELOPMENT ............................................................................................................ 80

25.6 MANAGEMENT INFORMATION SYSTEMS .................................................................................................. 80

25.7 VALUE CHAIN ANALYSIS (VCA) ............................................................................................................. 81

26.0 FINANCE AND MARKETING ISSUES ..................................................................................... 82

26.1 MARKETING ISSUES ............................................................................................................................. 82

26.2 PRODUCTS/ SERVICES POSITIONING ..................................................................................................... 83

26.3 FINANCE ............................................................................................................................................. 84

26.4 FIGURE OF ALL EXISTING AND NEW STRATEGIES ................................................................................... 90

3

1.0 VISION AND MISSION

1.1 VISION EVALUATION

Vision Statement

Wal-Mart case lacks vision statement.

1.2 MISSION EVALUATION

In the case, it is written that there is no formal mission statement but according to Kim Ellis, Public Relations Coordinator, if the company is supposed to have a formal mission statement, there would be as follows: “To provide quality products at an everyday low price and with extended customer service ... always”

Characteristics of Mission Statement Direct Statement Broad in scope × Inspiring × Less than 250 words 15 words Identify the utility of a firm’s products × Reveal that the firm is socially responsible quality products ... always Reveal that the firm is environmentally responsible × Includes most of the 9 components in mission statement

× Lacks majority of components (7 items out of 9 items are missed)

Customers extended customer service

Products/ Services To provide quality products

Markets ×

Technology ×

Concern for survival, growth, profitability ×

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4

Philosophy ×

Self-concept ×

Concern for public image ×

Concern for employees ×

Reconciliatory × Enduring ×

1.3 OTHER COMPETITORS’ MISSION ANALYSIS

No Mission statement is written for other competitors.

1.4 CONCLUSION

Data is not available for all competitors’ mission and vision statement. However, for Wal-Mart, there are three issues for mission and vision statement:

1. There is no vision statement for the company, even as informal or indirect. 2. Mission statement of the company is not announced formally and in public (it is only indicated as a reply to the question via Public

Relation Coordinator) 3. Although mission statement of the company is not precise and complete and it seems that the company did not try to make a

structured mission statement, the good point about the mission statement of Wal-Mart is that it is very brief and concise. This criterion makes the mission acceptable and suitable.


5

2.0 EXTERNAL ANALYSIS

2.1 PEST ANALYSIS

2.1.1 ECONOMICAL FORCES

Case Issues Findings Opportunities Threats

In 2008-2009, a recession happened in the economy (p.293)

2.1.2 SOCIAL, CULTURE, DEMOGRAPHIC ENVIRONNENT FORCES


Environmentalists in Vermont say the rural character of the state is endangered by "sprawl-mart development." (p.293)

Kmart, have operated in Vermont for years, so some residents are mystified by the current controversy. (p.293)

2.1.3 POLITICAL, GOVERNMENTAL AND LEGAL FORCES


The U.S. Chamber of Commerce has actively fought against legislation of providing health insurance to all employees for several years. (p.293)

2.1.4 TECHNOLOGICAL FORCES


The Internet has interesting aspects and will definitely serve a growing market throughout the 21st century. (p.303)

Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303)


6

2.2 ENVIRONMENT ANALYSIS SUMMARY

No. Environnemental Analysis Opportunity Threat 1 Economical Forces 0 1 2 Social, Cultural, Demographic, and Environmental Forces 1 1 3 Political, Governmental, and Legal Forces 0 1 4 Technological Forces 0 0 Total 1 3

3.0 COMPETITIVE ANALYSIS

3.1 COMPETITIVE FORCES

Forces Case Issues Opportunities Threats

Major

competitors

The case lacks enough information about the competitors. Only in some sentences and in one section it is mentioned about Target as the main competitor, Kmart as second and Costco as Wal-Mart’ Sam’s Club competitor (306). However, I suppose to have these three competitors as main competitors.

Competitors’

Strength

Kmart, have operated in Vermont for years (p.293)

Target has now become a fierce competitor of Wal-Mart (p.306)

Target is ranked second among discount retailers (p.306)

Target has sales of nearly $65 billion with 366,000 employees (p.306)

Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306)

Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306)


7

Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306)

Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306)

Costco competes with the Sam's Club segment (p.306)

Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306)

Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306)

Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306)

Competitors’

Weaknesses

Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306)

During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306)

No. Competitors Opportunity Threat 1 Target 0 5 2 Kmart 2 3 3 Costco 0 4 Total 2 12


8

4.0 INDUSTRY ANALYSIS

4.1 DESCRIPTION OF INDUSTRY

Industry Competitors Description (case issue) Market share Share price

Retailing Industry

Target Target is ranked second among discount retailers (p.306)

NA NA

Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306)


Kmart Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306)

NA NA


NA NA


NA NA

Costco Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) NA NA

Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) NA NA

Financial Status

Target Target has sales of nearly $65 billion with 366,000 employees (p.306) NA NA

Kmart Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) NA NA

Costco Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) NA NA

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10

employees (p.306) Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306)


Kmart

Kmart, have operated in Vermont for years (p.293)

Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306)

Costco

Costco competes with the Sam's Club segment (p.306)

Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306)


Wal-Mart

In July 2009, Wal-Mart broke ranks with most other large corporations by announcing support for legislation that would require employers to provide health


11

insurance to employees (p.293) During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 (p.301)

the company has gained market share more quickly than planned (p.301) The company's broad assortments and everyday low prices are very compelling (p.301) Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution.

With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302)

According to the Chronicle of Philanthropy, the Wal-Mart Foundation is the largest corporate cash contributor in America (p.305)

4.2.2 COMPETITIVE PRESSURE ASSOCIATED WITH NEW ENTRANT

4.2.3 COMPETITIVE PRESSURE FROM THE SUBSTITUTE PRODUCTS

Case Issues Opportunities Threats Competitive Force Strong Moderate Weak

Case Issues Opportunities Threats Competitive Force

Strong Moderate Weak

NA - - - - -


12

Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a

reputation for inexpensive, chic merchandise (p.306)

4.2.4 COMPETITIVE PRESSURE FROM THE SUPPLIERS’ BARGAINING POWER


NA - - - - -

4.2.5 COMPETITIVE PRESSURE FROM BUYERS’ BARGAINING POWER

5.0 CONCLUSION OF THE INDUSTRY ANALYSIS

No Key Variables Competitive Force Strong Moderate Weak

1 Competitive pressure among rivalry 10 11 2

2 Competitive pressure associated with new entrant 0 0 0 3 Competitive pressure from the substitute products 1 0 0 4 Competitive pressure from supplier’s bargaining power 0 0 0 5 Competitive pressure from buyer’s bargaining power 0 0 0 Total Sum 11 11 2

Conclusion:

Table above depicts that the most competitive pressure is on the moderate and strong levels for the company. Therefore it can be concluded that the industry is not attractive for both new entrants and existing rivals.


NA - - - - -


13

6.0 KEY SUCCESS FACTORS OF THE INDUSTRY

Key success factors Case Issues Market Share Target is ranked second among discount retailers (p.306)

Kmart follows Target in third place among discount retailers (p.306) Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306)

Financial Position Target has sales of nearly $65 billion (p.306) Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306)

Number of Stores Target had 1,681 domestic Target stores including 239 Super Targets (p.306) During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306)

Conclusion: In my point of view, in retailing industry, market share, financial position and number of stores are key success factors of the industry for all competitors.

7.0 OPPORTUNITIES AND THREATS

7.1 LIST OF OPPORTUNITIES AND THREATS

Before writing down the opportunities and threats, I want to mention that the overlapped items are not omitted but have been highlighted through adding the phrase “overlapped item” in brackets. As an example in the table below, item number 2 and 4 are overlapped. Consequently, I have added the phrase to the end of both items. At the end for selecting the EFE items, I selected number 2 in order to avoid duplication.

7.1.1 OPPORTUNITIES

No. Items

1 Kmart, have operated in Vermont for years, so some residents are mystified by the current controversy. 2 Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) [Overlapped Item] 3 During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) [Overlapped Item]

4 Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) [Overlapped Item]

5 During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306) [Overlapped Item]


14

6 In July 2009, Wal-Mart broke ranks with most other large corporations by announcing support for legislation that would require employers to provide health insurance to employees (p.293)

7 During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) 8 Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) 9 Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 (p.301) 10 the company has gained market share more quickly than planned (p.301) 11 The company's broad assortments and everyday low prices are very compelling (p.301) 12 Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution.

13 With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302)

14 According to the Chronicle of Philanthropy, the Wal-Mart Foundation is the largest corporate cash contributor in America (p.305) 15 The Internet has interesting aspects and will definitely serve a growing market throughout the 21st century. (p.303)

7.1.2 THREATS

No. Items

1 In 2008-2009, a recession happened in the economy (p.293) 2 Environmentalists in Vermont say the rural character of the state is endangered by "sprawl-mart development." (p.293) 3 Kmart, have operated in Vermont for years (p.293) [Overlapped Item]

4 Target has now become a fierce competitor of Wal-Mart (p.306) [Overlapped Item]

5 Target is ranked second among discount retailers (p.306) [Overlapped Item] 6 Target has sales of nearly $65 billion with 366,000 employees (p.306) [Overlapped Item] 7 Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306) [Overlapped Item]

8 Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) [Overlapped Item]

9 Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) [Overlapped Item] 10 Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) [Overlapped Item] 11 Costco competes with the Sam's Club segment (p.306) [Overlapped Item] 12 Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) [Overlapped Item] 13 Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) [Overlapped Item]


15

14 Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) [Overlapped Item]

15 Target has now become a fierce competitor of Wal-Mart (p.306) [Overlapped Item] 16 Target is ranked second among discount retailers (p.306) [Overlapped Item] 17 Target has sales of nearly $65 billion with 366,000 employees (p.306) [Overlapped Item] 18 Target had 1,681 domestic Target stores including 239 Super Targets and ranks 28th on the Fortunes 500 list (p.306) [Overlapped Item]

19 Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306) [Overlapped Item]

20 Kmart, have operated in Vermont for years (p.293) [Overlapped Item] 21 Kmart's stock increased dramatically in 2004, which allowed it to buy Sears for $11 billion (p.306) [Overlapped Item] 22 Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306) [Overlapped Item] 23 Costco competes with the Sam's Club segment (p.306) [Overlapped Item] 24 Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) [Overlapped Item] 25 Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306) [Overlapped Item]

26 Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306) [Overlapped Item]

27 Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for

inexpensive, chic merchandise (p.306) [Overlapped Item]

28 The U.S. Chamber of Commerce has actively fought against legislation of providing health insurance to all employees for several years.

(p.293)

29 Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303)

8.0 EXTERNAL FACTOR EVALUATION (EFE) MATRIX

According to the book (p.112), total items selected for EFE (both opportunities and threats) should be between 15-20 items. Therefore, I have selected 18 items that seemed more important than other items.

No Opportunities Weight Rating Weighted Score

1 During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) 0.08 4 0.32


16

2 Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306) 0.06 3 0.18

3 During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306)

0.05 3 0.15

4 The company's broad assortments and everyday low prices are very compelling (p.301) 0.05 4 0.2

5 Wal-Mart has gained market share more quickly than planned (p.301) 0.07 4 0.28

6 Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298)

0.08 4 0.32

7 Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution.

0.07 4 0.28


0.06 4 0.24

No Threats Weight Rating Weighted Score

1 In 2008-2009, a recession happened in the economy (p.293) 0.06 3 0.18

2 Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306)

0.04 2 0.08

3 Target has now become a fierce competitor of Wal-Mart (p.306)

0.04 2 0.08

4 Target is ranked second among discount retailers (p.306) 0.05 2 0.1 5 Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) 0.06 2 0.12 6 Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in 0.05 1 0.05

7 Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306)

0.05 1 0.05

8 Kmart, have operated in Vermont for years (p.293) 0.04 2 0.08


17

Conclusion: Total weighted score of 2.93 shows that Wal-Mart is doing well as its score is above industry average (2.50). Besides, it depicts that Wal-Mart is capable of acquiring and using opportunities and avoiding threats.

9.0 COMPETITIVE PROFILE MATRIX (CPM)

CRITICAL SUCCESS FACTORS Weight Wal-Mart Target Kmart Costco

Rating Score Rating Score Rating Score Rating Score

Market Share 0.28 4 1.12 3 0.84 1 0.28 2 0.56

Financial Position 0.34

3 1.02 3 1.02 2 0.68 3 1.02

Number of Stores 0.38 4 1.52 3 1.14 3 1.14 3 1.14

TOTAL: 1.00 3.66 3 2.1 2.72

Conclusion: According to the results of CPM matrix, Wal-Mart is the first among major competitors and has the highest point (3.66). Target is its fierce competitor and its point is nearer in comparison to other competitors.


0.05 2 0.1

10 Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to 0.04 3 0.12 TOTAL 1.00 2.93


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10.0 INTERNAL ENVIRONMENT

10.1 CULTURAL FACTORS

Wal-Mart Target Kmart Costco Strength Weakness

You'll feel at home in any department of any store ... that's our culture (p.293)

NA NA NA

The Wal-Mart culture is based on three basic beliefs or Sam Walton: 1) respect for the individual, 2) service to our customers and 3) strive for excellence (p.293)

NA NA NA

Store policies forbid employees from dating other employees without the prior approval of the executive committee (p.304)

NA NA NA

According to CEO Mike Duke, "Sustainability is an important part of our culture (p.305)

NA NA NA

10.2 MANAGEMENT FUNCTIONS

10.2.1 PLANNING


In May 2009, Wal-Mart began revamping the electronics departments in its 3,500 U.S. stores to make them much more interactive and roomier (p.293)

NA NA NA

The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293)

NA NA NA

In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293)

NA NA NA

Wal-Mart desires to level the playing field with its rival firms because it already provides health insurance to all its employees (p.293)

NA NA NA

In 2003, Wal-Mart grouped its smaller discount stores, such as the one in Bennington, Vermont, into a new Hometown USA

NA NA NA


19

program (p.298) The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298)

NA NA NA

Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299)

NA NA NA

Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299)

NA NA NA

Wal-Mart is working hard to expand its food distribution capabilities.

NA NA NA

Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store (p.301)

NA NA NA

Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town." (p.301)

NA NA NA

In 2009, Wal-Mart pledged to double its use of solar energy in California (p.305)

NA NA NA

in February 2009, Wal-Mart Foundation announced it will donate $5.7 million for the creation of green jobs in the United States (p.305)

NA NA NA

Opening of several new stores in the near future in Mexico is planned (p.302)

NA NA NA

In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302)

NA NA NA

In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302)

NA NA NA

. In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303)

NA NA NA


20

10.2.2 ORGANIZING


Exhibit 4 shows Wal-Mart's organizational chart. It is well-structured. (p.299)

NA NA NA

Wal-Mart has strongly opposed unions in its stores. They argue that the company is structured so that employees derive the most benefit and best conditions by working directly with Wal-Mart, as opposed to through a union (p.302)

NA NA NA

Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303)

NA NA NA

Executives spend one week each year in hourly jobs in various stores. (p.303)

NA NA NA

Women are rarely found in management positions (p.303) NA NA NA Walmart.com will have a separate management team and board of directors (p.303)

NA NA NA

Promotions have recently been made so there are now women in senior officer positions. (p.304)

NA NA NA

10.2.3 MOTIVATING


The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303)

NA NA NA

Employees who do better than average get rewarded with raises, bonuses, and personal recognition. (p.303)

NA NA NA

All employees (referred to as "associates") have a stake in the NA NA NA


21

financial performance of the company. (p.303) Wal-Mart encourages employee stock purchases. During fiscal 2008, participants could contribute up to 50 percent of their pretax earnings, but not more than statutory limits. (p.303)

NA NA NA

Promotions have recently been made so there are now women in senior officer positions. (p.304)

NA NA NA

Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities (p.305)

NA NA NA

A mentoring program encompassing more than 750 women and minority managers (p.305)

NA NA NA

A women's leadership group, in partnership with Herman Miller and ServiceMaster, to develop opportunities for high-potential female managers (p.305)

NA NA NA

Store internships during the summer for college students between their junior and senior years, with 70 percent of them for women or minorities. (p.305)

NA NA NA

Expansion of its business with minority- and women-owned companies by more than 25 percent in 2008 (p.305)

NA NA NA

Creation of a Hispanic scholarship fund for Hispanic high school students (p.305)

NA NA NA

10.2.4 STAFFING


Wal-Mart already provides health insurance to all its employees (p.293)

NA NA NA

Wal-Mart has strongly opposed unions in its stores. (p.302) NA NA NA Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303)

NA NA NA

Wal-Mart management takes pride in the ongoing development NA NA NA


22

of its people. (p.303) If employment with the company is terminated because of retirement, death, or permanent disability, the company contribution is fully vested (meaning the entire amount is non-forfeitable). If termination of employment occurs for any other reason, the amount that is non-forfeitable depends on the number of years of service with the company. (p.303)

NA NA NA

Wal-Mart is an Equal Employment Opportunity/Affirmative Action (EEO/AA) employer . (p.304)

NA NA NA

10.2.5 CONTROLLING


This back-haul rate averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302)

NA NA NA

Extensive advertising is not needed for Supercenters and this represents an enormous saving over the competition(p.301)

NA NA NA

As Supercenters move more into food distribution, they gain a major cost advantage over Super Kmart and Super Target. (p.301)

NA NA NA

In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302)

NA NA NA

The company avoids spending money on consultants and marketing experts. (p.306)

NA NA NA


23

11.0 MARKETING STRATEGY

11.1 CUSTOMER ANALYSIS


Wal-Mart de Mexico is strengthened by strong customer support (p.302)

NA NA NA

Supercenters provide mart carts and are all one-story buildings, making the stores handicapped accessible (p.301)

NA NA NA

They are usually equipped with a customer service desk and scanning registers to provide more efficient checkout procedures. (p.301)

NA NA NA

11.2 PROMOTION PROGRAMS


Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads.

NA NA NA

Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306)

NA NA NA

Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306)

NA NA NA

Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306)

NA NA NA

In addition to Discover Card, Sam's have also recently started accepting MasterCards for payments.

NA NA NA

The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy

NA NA NA


24

discounts. (p.301) Supercenters provide mart carts NA NA NA Walmart.com provides easy access 24/7/365 to more than a million products (p.303)

NA NA NA

11.3 PRODUCT AND SERVICE PLANNING



NA NA NA


NA NA NA

The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298)

NA NA NA


NA NA NA


NA NA NA

In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303)

NA NA NA

Wal-Mart now carries more sophisticated electronics products such as Research in Motion Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu-ray disc players (p.293)

NA NA NA

11.4 PRICING


Three independent pharmacies in Conway, Arkansas, filed a NA NA NA


25

suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304) Wal-Mart argued that it priced products below cost not to harm competitors but to meet or beat rivals' prices (p.304)

NA NA NA

Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304)

NA NA NA

The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304)

NA NA NA

It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304)

NA NA NA

The stated purpose of Wal-Mart's pricing policy is to “meet or beat" the retail prices contemporaneously charged by competitors for highly competitive, price-sensitive merchandise; to maintain "low-price leadership" in the local marketplace; and to "attract a disproportionate number of customers into a store to increase traffic." (p.304)

NA NA NA

The store's pricing practices with regard to specific articles did not violate the Arkansas Unfair Practices Act section prohibiting vendors from selling at or below their cost (p.304)

NA NA NA

Whether you walk into a Wal-Mart store in your hometown or one across the country while you're on vacation, you can always be assured you're getting low prices and genuine customer service that you've come to expect from us (p.293)

NA NA NA

The company's broad assortments and everyday low prices are very compelling (p.293)

NA NA NA


26

11.5 DISTRIBUTION


Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301)

NA NA NA

Wal-Mart has distribution centers nationwide. Some of them are grocery distribution centers and also a small number are import distribution centers. (p.302)

NA NA NA

Wal-Mart's distribution operations are highly automated. (p.302)

NA NA NA

A typical Wal-Mart Discount Store has more than 70,000 standard items in stock (p.302)

NA NA NA

Supercenters carry more than 20,000 additional grocery items , including perishables (p.302)

NA NA NA

Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302)

NA NA NA

Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302)

NA NA NA

After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302)

NA NA NA

Wal-Mart laid claim to having stores in all 50 states (p.293)

NA NA NA

Wal-Mart, Inc. currently operates domestically 891 Wal-Mart discount stores, 2,612 Supercenters, 602 Sam's Clubs, and 153

As of February 2, 2009, Target had 1,681 domestic Target stores

including 239 Super Targets

NA NA (total

number


27

Neighborhood Markets. (p.298) (p.306) of Wal-Mar

stores exceeds Target)

At the end of fiscal 2009, Wal-Mart had a total of 602 domestic Sam's Clubs in operation. (p.301)

Costco currently has 550 warehouses, 403 in the United

States and the rest dispersed from Canada to Japan. (p.306)

NA NA (total

number of Wal-

Mar stores

exceeds Costco)

For fiscal 2009, the company had 318 Wal-Mart brands in Canada, 1,197 in Mexico, and 56 in Puerto Rico (p.302)

NA NA NA

The company operated over 3,600 Wal-Mart brand stores internationally (p.302)

NA NA NA

Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303)

NA NA NA

11.6 MARKETING RESEARCH



NA NA NA


NA NA NA


28

12.0 FINANCIAL ANALYSIS

12.1 RATIO ANALYSIS

Ratio Analysis

Ratios Wal-Mart Target Kmart Costco

S W

2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009

Liquidity Ratio

Current Ratio NA 0.82 0.88 NA NA NA NA NA NA NA NA NA

Quick Ratio NA 0.21 0.26 NA NA NA NA NA NA NA NA NA

Leverage Ratio

Debt to total asset ratio NA 1.13% 1.16% NA NA NA NA NA NA NA NA NA

Debt to Equity ratio NA 2.83% 2.90% NA NA NA NA NA NA NA NA NA

Long term debt to equity ratio

NA 30% 31% NA NA NA NA NA NA NA NA NA

Times interest earned ratio

12.40 11.23 10.99 NA NA NA NA NA NA NA NA NA

Activity Ratio

Inventory turnover NA 10.64 11.62 NA NA NA NA NA NA NA NA NA

Fixed assets turnover NA 3.99 4.32 NA NA NA NA NA NA NA NA NA

Total asset turnover NA 2.28 2.45 NA NA NA NA NA NA NA NA NA

Accounts receivable turnover

NA NA NA NA NA NA NA NA NA NA NA NA

- -


29

Average collection period

NA NA NA NA NA NA NA NA NA NA NA NA

- -

Profitability Ratio

Gross profit margin 0.234 0.234 0.236 NA NA NA NA NA NA NA NA NA

Operating profit margin 0.055 0.053 0.052 NA NA NA NA NA NA NA NA NA

Net profit margin 0.032 0.034 0.033 NA NA NA NA NA NA NA NA NA

Return on Total Assets (ROA)

NA 0.078 0.081 NA NA NA NA NA NA NA NA NA

Return on Stockholders’ Equity (ROE)

NA 0.198 0.205 NA NA NA NA NA NA NA NA NA

Earnings per share NA 3.204 3.414 NA NA NA NA NA NA NA NA NA

Price earnings ratio NA NA NA NA NA NA NA NA NA NA NA NA

- -

Growth Ratios

Sales NA 8.5% 7.1% NA NA NA NA NA NA NA NA NA

Net Income NA 12.82% 5.25% NA NA NA NA NA NA NA NA NA

Earnings Per Share NA NA NA NA NA NA NA NA NA NA NA NA

- -

Dividends Per Share NA NA NA NA NA NA NA NA NA NA NA NA

- -


30

13.0 PRODUCTION AND OPERATION

13.1 PROCESS


Associates use handheld computers that are linked by radio-frequency network to area stores for distribution (p.302)

NA NA NA

To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder (p.302)

NA NA NA

Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker (p.302)

NA NA NA

Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302)

NA NA NA

With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology (p.302)

NA NA NA

Walmart.com provides easy access 24/7/365 to more than a million products (p.303)

NA NA NA


NA NA NA

13.2 CAPACITY


Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store, whereas food has tended to build slowly (p.301)

NA NA NA

Wal-Mart likes to locate Supercenters near the strongest food NA NA NA


31

retailers so their facilities will "either get better or be run out of town (p.301) The one-stop convenience aspect of the stores has such broad appeal that it is drawing a larger customer audience on a regular basis. (p.301)

NA NA NA

13.3 INVENTORY


Sam's Clubs usually offer over 3,500 items, which are used most often by the consumers they serve. (p.301)

NA NA NA

In Sam’s Clubs, because the number of items is limited to around 2,000 for the wholesale part of the business and between 1,000 and 1,500 for personal and individual use, it is very important for the items to be appropriate for the location. (p.301)

NA NA NA

In Sam’s Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301)

NA NA NA

Neighborhood Markets provide about 28,000 items to customers (p.302)

NA NA NA

13.4 WORKFORCE


Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303)

NA NA NA


32

The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303)

NA NA NA

13.5 QUALITY


Wal-Mart expanded into the international markets so that customers everywhere will associate their name with low cost, best value, greatest selection of quality merchandise and highest standards of customer service (p.302)

NA NA NA


NA NA NA

The merchandise is carefully selected to ensure quality and must be made in the United States. (p.299)

NA NA NA

'To provide quality products at an everyday low price and with extended customer service ... always (p.293)

NA NA NA

14.0 RESEARCH AND DEVELOPMENT


NA NA NA NA - -

15.0 MANAGEMENT INFORMATION SYSTEMS


NA NA NA NA - -


33

16.0 VALUE CHAIN ANALYSIS (VCA)

16.1 MAIN ACTIVITY

Company Activity


Purchase Merchandise from Manufacturers


NA NA NA

Distribution to Stores

Associates use handheld computers that are linked by radio-frequency network to area stores. (p.302)

NA NA NA

To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder. (p.302)

NA NA NA

Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker. (p.302)

NA NA NA

Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution (p.302)

NA NA NA

Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302)

NA NA NA

Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed. (p.302)

NA NA NA

Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301)

NA NA NA

Marketing the Products Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. (p.306)

NA NA NA


34


NA NA NA


NA NA NA


NA NA NA

Selling the Products


NA NA NA

Wal-Mart's Supercenters combine groceries with general merchandise, giving customers one-stop shopping (p.301)

NA NA NA

After-sales Service NA NA NA NA

- -

16.2 SUPPORTING ACTIVITY

Company Activity


Management

We have an exceptionally strong management team, able to execute our strategy, perform every single day, and deliver results." (p.298)

NA NA NA

The company was able to attract a top retail management talent in Jeanne Jackson as the CEO of Walmart.com (p.303)

NA NA NA

Walmart.com will have a separate management team and board of directors (p.303)

NA NA NA


35

Wal-Mart managers stay current with new developments and needed changes (p.303)

NA NA NA

It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304)

NA NA NA

Promotions have recently been made so there are now women in senior officer positions (p.304)

NA NA NA

decisions are made based on the intuitive judgments of managers and employees (p.306)

NA NA NA

The Walton family and management (as insiders) own nearly 44 percent of Wal-Mart stock. These holdings are worth nearly $28 billion today. (p.303)

NA NA NA

Financial

Wal-Mart's 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. (p.293)

Target

has sales

of nearly

$65

billion

(p.306)

Kmart

has sales

of $17

billion

(p.306)

Costco finished

the year at just over

$72 billion (p.306)

(Wal-Mart’s

sales is

higher than

all

competitors)

When it initially went public, 100 shares of Wal-Mart stock would have cost $1,650. Now, those 100 shares are worth over $6 million (p.298)

NA NA NA

Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298)

NA NA NA


36

Sam’s is a $46.8 billion business that is starting to grow again (p.301)

NA NA Costco finished

the year at just over

$72 billion while the

Sam's Club

division of Wal-Mart brought in over $44 billion in net sales (p.306)

(Totally Sam’s

business is highly

profitable but by

comparing to Costco, it

is highly below

Costco’s sales)

Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008

NA NA NA

The fact that the International segment has grown to nearly $100 billion in sales shows the potential of this market (p.302)

NA NA NA

16.3 SUPPLIER COSTS



NA NA NA

Wal-Mart owns a fleet of truck-tractors that they frequently pick up merchandise from manufacturers on the way back to the distribution center. (p.302)

NA NA NA


37

16.4 PRODUCTION COSTS


NA NA NA NA - -

16.5 DISTRIBUTION COSTS


Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301)

NA NA NA

Wal-Mart's distribution operations are highly automated. (p.302) NA NA NA

Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302)

NA NA NA

Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302)

NA NA NA

After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302)

NA NA NA


NA NA NA

16.6 SALES AND MARKETING COSTS



NA NA NA


38

Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads.

NA NA NA


NA NA NA


NA NA NA


NA NA NA

The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy discounts. (p.301)

NA NA NA


NA NA NA

16.7 CUSTOMER SERVICE COSTS


NA NA NA NA - -

16.8 MANAGEMENT COSTS


Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304)

NA NA NA


39

17.0 STRENGTHS AND WEAKNESSES

17.1 LIST OF STRENGHS AND WEAKNESSES

Same as opportunities and threats, in the list of strengths and weaknesses, overlapped items are not omitted but have been highlighted through adding the phrase “overlapped item” in brackets.

17.1.1 STRENGTHS

No. Items

1 You'll feel at home in any department of any store ... that's our culture (p.293)

2 The Wal-Mart culture is based on three basic beliefs or Sam Walton: 1) respect for the individual, 2) service to our customers and 3) strive for excellence (p.293)

3 According to CEO Mike Duke, "Sustainability is an important part of our culture (p.305)

4 In May 2009, Wal-Mart began revamping the electronics departments in its 3,500 U.S. stores to make them much more interactive and roomier (p.293)

5 The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293) [Overlapped Item]

6 In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) [Overlapped Item] 7 Wal-Mart desires to level the playing field with its rival firms because it already provides health insurance to all its employees (p.293)

8 In 2003, Wal-Mart grouped its smaller discount stores, such as the one in Bennington, Vermont, into a new Hometown USA program (p.298)

9 The idea is to enable Hometown USA stores to develop locally and with a different mix from the large prototypes (p.298) [Overlapped Item]

10 Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) [Overlapped Item]

11 Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) [Overlapped Item]

12 Wal-Mart is working hard to expand its food distribution capabilities.

13 Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store (p.301) [Overlapped Item]

14 Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town." (p.301) [Overlapped Item]

15 In 2009, Wal-Mart pledged to double its use of solar energy in California (p.305)


40

16 in February 2009, Wal-Mart Foundation announced it will donate $5.7 million for the creation of green jobs in the United States (p.305)

17 Opening of several new stores in the near future in Mexico is planned (p.302)

18 In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302)

19 In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302) [Overlapped Item]

20 . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) [Overlapped Item] 21 Exhibit 4 shows Wal-Mart's organizational chart. It is well-structured. (p.299)

22 Wal-Mart has strongly opposed unions in its stores. They argue that the company is structured so that employees derive the most benefit and best conditions by working directly with Wal-Mart, as opposed to through a union (p.302)

23 Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303) [Overlapped Item]

24 Executives spend one week each year in hourly jobs in various stores. (p.303) 25 Walmart.com will have a separate management team and board of directors (p.303) [Overlapped Item] 26 Promotions have recently been made so there are now women in senior officer positions. (p.304) [Overlapped Item]

27 The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303) [Overlapped Item]

28 Employees who do better than average get rewarded with raises, bonuses, and personal recognition. (p.303) 29 All employees (referred to as "associates") have a stake in the financial performance of the company. (p.303)

30 Wal-Mart encourages employee stock purchases. During fiscal 2008, participants could contribute up to 50 percent of their pretax earnings, but not more than statutory limits. (p.303)

31 Promotions have recently been made so there are now women in senior officer positions. (p.304) [Overlapped Item] 32 Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities (p.305) 33 A mentoring program encompassing more than 750 women and minority managers (p.305)

34 A women's leadership group, in partnership with Herman Miller and ServiceMaster, to develop opportunities for high-potential female managers (p.305)

35 Store internships during the summer for college students between their junior and senior years, with 70 percent of them for women or minorities. (p.305)

36 Expansion of its business with minority- and women-owned companies by more than 25 percent in 2008 (p.305) 37 Creation of a Hispanic scholarship fund for Hispanic high school students (p.305)


41

38 Wal-Mart already provides health insurance to all its employees (p.293)


40 Wal-Mart management takes pride in the ongoing development of its people. (p.303)

41 If employment with the company is terminated because of retirement, death, or permanent disability, the company contribution is fully vested (meaning the entire amount is non-forfeitable). If termination of employment occurs for any other reason, the amount that is non-forfeitable depends on the number of years of service with the company. (p.303)

42 Wal-Mart is an Equal Employment Opportunity/Affirmative Action (EEO/AA) employer . (p.304)

43 This back-haul rate averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302) 44 Extensive advertising is not needed for Supercenters and this represents an enormous saving over the competition(p.301) 45 As Supercenters move more into food distribution, they gain a major cost advantage over Super Kmart and Super Target. (p.301)

46 In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302) [Overlapped Item]

47 The company avoids spending money on consultants and marketing experts. (p.306) 48 Wal-Mart de Mexico is strengthened by strong customer support (p.302) 49 Supercenters provide mart carts and are all one-story buildings, making the stores handicapped accessible (p.301)

50 They are usually equipped with a customer service desk and scanning registers to provide more efficient checkout procedures. (p.301)

51 Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. [Overlapped Item]

52 Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.306) [Overlapped Item] 53 Radio is used to a lesser degree to promote specific products that are usually in high demand. (p.306) [Overlapped Item]

54 Newspaper advertisements and monthly circulars are major contributors to the program, emphasizing deeply discounted items, and they are effective at luring customers into the stores. (p.306) [Overlapped Item]

55 In addition to Discover Card, Sam's have also recently started accepting MasterCards for payments.

56 The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy discounts. (p.301) [Overlapped Item]

57 Supercenters provide mart carts (p.301) 58 Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item]



42

60 In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) [Overlapped Item]



63 Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299) [Overlapped Item]

64 In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303) [Overlapped Item]

65 Wal-Mart now carries more sophisticated electronics products such as Research in Motion Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu-ray disc players (p.293)

66 Wal-Mart argued that it priced products below cost not to harm competitors but to meet or beat rivals' prices (p.304)

67 It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) [Overlapped Item]

68 The stated purpose of Wal-Mart's pricing policy is to “meet or beat" the retail prices contemporaneously charged by competitors for highly competitive, price-sensitive merchandise; to maintain "low-price leadership" in the local marketplace; and to "attract a disproportionate number of customers into a store to increase traffic." (p.304)

69 The store's pricing practices with regard to specific articles did not violate the Arkansas Unfair Practices Act section prohibiting vendors from selling at or below their cost (p.304)

70 Whether you walk into a Wal-Mart store in your hometown or one across the country while you're on vacation, you can always be assured you're getting low prices and genuine customer service that you've come to expect from us (p.293)

71 The company's broad assortments and everyday low prices are very compelling (p.293) 72 Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.293) [Overlapped Item]

73 Wal-Mart has distribution centers nationwide. Some of them are grocery distribution centers and also a small number are import distribution centers. (p.302)

74 Wal-Mart's distribution operations are highly automated. (p.302) [Overlapped Item] 75 A typical Wal-Mart Discount Store has more than 70,000 standard items in stock (p.302) 76 Supercenters carry more than 20,000 additional grocery items , including perishables (p.302)

77 Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302) [Overlapped Item]

78 Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302) [Overlapped Item]

79 After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302) [Overlapped Item]


43

80 Wal-Mart laid claim to having stores in all 50 states (p.293)

81 Wal-Mart, Inc. currently operates domestically 891 Wal-Mart discount stores, 2,612 Supercenters, 602 Sam's Clubs, and 153 Neighborhood Markets. (p.298)

82 At the end of fiscal 2009, Wal-Mart had a total of 602 domestic Sam's Clubs in operation. (p.301) 83 For fiscal 2009, the company had 318 Wal-Mart brands in Canada, 1,197 in Mexico, and 56 in Puerto Rico (p.302) 84 The company operated over 3,600 Wal-Mart brand stores internationally (p.302)

85 Items ordered online can be shipped to the customer's homes for a modest fee or free shipping to the customer's nearest Wal-Mart store (p.303) [Overlapped Item]



88 Higher Current Ratio 89 Higher Quick Ratio 90 Higher Times interest earned ratio 91 Higher Inventory turnover 92 Higher Fixed assets turnover 93 Higher Total asset turnover 94 Higher Gross profit margin 95 Higher Net profit margin 96 Higher Return on Total Assets (ROA) 97 Higher Return on Stockholders’ Equity (ROE) 98 Higher Earnings per share

99 Associates use handheld computers that are linked by radio-frequency network to area stores for distribution (p.302) [Overlapped Item]

100 To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder (p.302) [Overlapped Item]

101 Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker (p.302) [Overlapped Item] 102 Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302) [Overlapped Item]

103 With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology (p.302) [Overlapped Item]

104 Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item]


44


106 Most of the Supercenters replace Wal-Mart stores, so they have a jump-start on the general merchandise side of the store, whereas food has tended to build slowly (p.301) [Overlapped Item]

107 Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town (p.301) [Overlapped Item]

108 The one-stop convenience aspect of the stores has such broad appeal that it is drawing a larger customer audience on a regular basis. (p.301)

109 Sam's Clubs usually offer over 3,500 items, which are used most often by the consumers they serve. (p.301)

110 In Sam’s Clubs, because the number of items is limited to around 2,000 for the wholesale part of the business and between 1,000 and 1,500 for personal and individual use, it is very important for the items to be appropriate for the location. (p.301)

111 Neighborhood Markets provide about 28,000 items to customers (p.302)


113 The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303) [Overlapped Item]

114 Wal-Mart expanded into the international markets so that customers everywhere will associate their name with low cost, best value, greatest selection of quality merchandise and highest standards of customer service (p.302)

115 Television advertising is used to convey an image of everyday low prices and quality merchandise. (p.302) [Overlapped Item] 116 The merchandise is carefully selected to ensure quality and must be made in the United States. (p.299) 117 'To provide quality products at an everyday low price and with extended customer service ... always (p.293)

118 With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) [Overlapped Item]

119 Associates use handheld computers that are linked by radio-frequency network to area stores. (p.302) [Overlapped Item]

120 To place orders, each store wires merchandise requests to warehouses, which in turn either ship immediately or reorder. (p.302) [Overlapped Item]

121 Wal-Mart computers are linked directly to over 200 vendors, making deliveries quicker. (p.302) [Overlapped Item]

122 Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution (p.302) [Overlapped Item]

123 Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302) [Overlapped Item] 124 Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed. (p.302)


45

[Overlapped Item]

125 Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. (p.306) [Overlapped Item]



129 Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item] 130 Wal-Mart's Supercenters combine groceries with general merchandise, giving customers one-stop shopping (p.301)

131 We have an exceptionally strong management team, able to execute our strategy, perform every single day, and deliver results." (p.298)

132 The company was able to attract a top retail management talent in Jeanne Jackson as the CEO of Walmart.com (p.303) 133 Walmart.com will have a separate management team and board of directors (p.303) [Overlapped Item] 134 Wal-Mart managers stay current with new developments and needed changes (p.303)

135 It is Wal-Mart's policy that its store managers monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304) [Overlapped Item]

136 Promotions have recently been made so there are now women in senior officer positions (p.304) [Overlapped Item] 137 decisions are made based on the intuitive judgments of managers and employees (p.306)

138 The Walton family and management (as insiders) own nearly 44 percent of Wal-Mart stock. These holdings are worth nearly $28 billion today. (p.303)

139 Wal-Mart's 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. (p.293)

140 When it initially went public, 100 shares of Wal-Mart stock would have cost $1,650. Now, those 100 shares are worth over $6 million (p.298)

141 Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298) 142 Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008 143 The fact that the International segment has grown to nearly $100 billion in sales shows the potential of this market (p.302)

144 With an information systems staff of 1,200 and system links with about 5,000 manufacturers, Wal-Mart leads the industry in information technology. (p.302) [Overlapped Item]

145 Wal-Mart owns a fleet of truck-tractors that they frequently pick up merchandise from manufacturers on the way back to the distribution center. (p.302) [Overlapped Item]

146 Wal-Mart's distribution operations are highly automated. (p.302) [Overlapped Item]


46

147 Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution. (p.302) [Overlapped Item]

148 Wal-Mart owns a fleet of truck-tractors that can deliver goods to any store in 38 to 48 hours from the time the order is placed . (p.302) [Overlapped Item]

149 After trucks drop off merchandise, they frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302) [Overlapped Item]



152 Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. [Overlapped Item]



156 The Advantage Plus Program offers additional benefits and services such as automotive extended service contracts, roadside assistance, home improvement, auto brokering, and pharmacy discounts. (p.301) [Overlapped Item]

157 Walmart.com provides easy access 24/7/365 to more than a million products (p.303) [Overlapped Item]

17.1.2 WEAKNESSES

No. Items

1 Store policies forbid employees from dating other employees without the prior approval of the executive committee (p.304) 2 Women are rarely found in management positions (p.303) 3 Wal-Mart has strongly opposed unions in its stores. (p.302)

4 Three independent pharmacies in Conway, Arkansas, filed a suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304)

5 Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304)

6 The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304)


47

7 Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301) [Overlapped Item]

8 Higher Debt to total asset ratio 9 Higher Debt to Equity ratio 10 Higher Long term debt to equity ratio 11 Lower Operating profit margin 12 Lower Sales 13 Lower Net Income

14 In Sam’s Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301)

15 Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301) [Overlapped Item]

16 Having lower sales in comparison to Costco: Sam’s is a $46.8 billion business that is starting to grow again (p.301)

17 Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301) [Overlapped Item]

18 Increase in expense in comparison to previous years: Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304)

17.2 INTERNAL FACTOR EVALUATION (IFE) MATRIX

According to the book (p.154), total items selected for IFE (both strengths and weaknesses) should be between 10-20 items. Therefore, I have selected 19 items that seemed more important than other items.

No Strengths Weight Rating Weighted Score

1 Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's Choice. (p.299) 0.04 3 0.12

2 The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293)

0.05 3 0.15

3 In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) 0.05 3 0.15

4 Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299)

0.04 3 0.12


48

5 Opening of several new stores in the near future in Mexico is planned 0.07 4 0.28 6 In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store

market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302) 0.08 4 0.32

7 In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea. (p.302)

0.07 4 0.28

8 . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303)

0.06 3 0.18

9 Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008

0.09 4 0.36

10 Higher Return on Total Assets (ROA) 0.07 4 0.28

No Weaknesses Weight Rating Weighted Score

1 Having lower sales in comparison to Costco: Sam’s is a $46.8 billion business that is starting to grow again (p.301)

0.06 2 0.12

2 Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301)

0.03 2 0.06


0.05 2 0.1

4 Lower Net Income 0.06 2 0.12

5 Lower Sales 0.06 1 0.06


0.04 1 0.04

7 Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304)

0.04 1 0.04

8 The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304) 0.02 1 0.04


49

Conclusion: In IFE matrix, weighted scored of the company is 2.82 which is above the industry average (2.50). It shows that the company has strong internal strengths to compete with its major competitors which are Costco and Target and it seems it is able to reduce its weaknesses.

18.0 OBJECTIVES AND STRATEGIES

18.1 LONG-TERM OBJECTIVES

18.1.1 STRATEGIC LONG-TERM OBJECTIVES

Strategic Long-term Objectives Type of Objective Case Facts Achieved/ Not achieved

1. Business expansion a. The company wants all the business that Circuit City's failure left and also wants Best

Buy and Amazon's business. (p.293)

Not achieved

2. Increasing employee benefits

a. Wal‐Mart desires to level the playing field with its rival firms because it already provides

health insurance to all its employees. (p.293)

Not achieved

b. Wal‐Mart has instituted several initiatives to increase the recruitment and promotion of

women and minorities (p.305)

3. Accelerating distribution system

a. Wal‐Mart is working hard to expand its food distribution capabilities. (p.301) Not achieved

4. Focusing on food retailing a. Wal‐Mart likes to locate Supercenters near the strongest food retailers so their facilities

will "either get better or be run out of town." (p.301)

Not achieved

5. Market development a. Wal‐Mart de Mexico is strengthened by strong customer support, and the opening of Not achieved


0.02 1 2.82

Total: 1


50

several new stores in the near future is planned. (p.302)

b. In May 2009, company indicated it will observe the performance of these pilot stores in

China and determine whether to expand this idea. (p.302)

c. Wal‐Mart looks at Internet retailing as another store with possibility, but without walls.

(p.302)

6. Attaining sustainability a. Its initiative, "Sustainability 360°," is a companywide effort to take sustainability beyond

Wal‐Mart's direct footprint to encompass Wal‐Mart's associates, suppliers, communities

and customers. (p.305)

Achieved

7. Social responsibility a. "Wal‐Mart's environmental goals are to be supplied 100 percent by renewable energy;

to create zero waste; and to sell products that sustain our resources and the

environment." (p.305)

Not achieved

18.1.2 FINANCIAL LONG-TERM OBJECTIVES

Financial Long-term Objectives Type of Objective Case Facts Achieved/ Not achieved

NA

18.2 OBJECTIVES

18.2.1 STRATEGIC OBJECTIVES

Strategic Objectives Type of Objective Case Facts Achieved/ Not achieved

1. Renewing the stores a. In May 2009, Wal‐Mart began revamping the electronics departments in its 3,500 U.S.

stores to make them much more interactive and roomier. (p.293)

Achieved


51

2. Increasing product variability

a. Wal‐Mart now carries more sophisticated electronics products such as Research in

Motion Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu‐ray disc

players. (p.293)

Achieved

b. In June 2009, Wal‐Mart began selling Dell Inc.'s new Studio One 19 touch‐screen

computers. (p.293)

c. Wal‐Mart has also developed new apparel lines, such as the Kathie Lee career

sportswear and dress collection, Basic Equipment sportswear, and McKids children's

clothing. (p.299)

3. Increasing customer satisfaction through improving service quality

a. In 2003, Wal‐Mart grouped its smaller discount stores, such as the one in Bennington,

Vermont, into a new Hometown USA program. This strategy allows the company to give

special attention to customers in smaller markets in rural America (p.298)

Achieved

b. Hometown USA consists of the stores are less than 50,000 square feet and are under

one regional manager. The idea is to enable these stores to develop locally and with a

different mix from the large prototypes. (p.298)

c. Wal‐Mart has installed point‐of‐sale bar code scanning in all of its stores. (p.302)

d. This WalMart.com venture’s distinct purpose is to provide consumers with a convenient

and rewarding online shopping experience. (p.303)

4. Marketing the product a. Wal‐Mart has begun marketing limited lines of merchandise under the brand name

Sam's Choice. (p.299)

Achieved

5. Market share a. However, the company has gained market share more quickly than planned. (p.301) Achieved

6. Opening small stores in China

a. In December 2008, although known for its megastores, Wal‐Mart launched a pilot

program in China and entered the convenience store market under the name "Smart

Achieved


52

Choice" or Hui Xuan in Chinese. (p.302)

7. Developing new services a. Wal‐Mart is developing new services such as music downloads and 1‐hour photos.

(p.303)

Not achieved

8. Lower the retailing prices a. It is Wal‐Mart's policy that its store managers monitor the retail prices charged by

competitors in their respective market areas and lower prices for highly competitive

merchandise without regard to the cost of individual items. (p.304)

Achieved

b. The stated purpose of Wal‐Mart's pricing policy is to “meet or beat" the retail prices

contemporaneously charged by competitors for highly competitive, price‐sensitive

merchandise; to maintain "low‐price leadership" in the local marketplace; and to

"attract a disproportionate number of customers into a store to increase traffic." (p.304)

c. The company's broad assortments and everyday low prices are very compelling;

extensive advertising is not needed. (p.301)

9. Social responsibility a. In 2009, Wal‐Mart pledged to double its use of solar energy in California. (p.305) Achieved

b. In addition, in February 2009, Wal‐Mart Foundation announced it will donate $5.7

million for the creation of green jobs in the United States. (p.305)

10. Cost control a. Supercenters move more into food distribution, they gain a major cost advantage over

Super Kmart and Super Target. (p.301)

Achieved

b. In delivering goods to stores: This back‐haul rate averages over 60 percent and is yet

another way Wal‐Mart cuts costs. (p.302)

c. The company avoids spending money on consultants and marketing experts. Instead,

decisions are made based on the intuitive judgments of managers and employees and

on the assessment of strategies of other retail chains. (p.306)


53

18.2.2 FINANCIAL OBJECTIVES

Financial Objectives Type of Objective Case Facts Achieved/ Not achieved

1. Increasing the sales of all stores

a. Wal‐Mart's 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. (p.293)

Achieved

2. Increasing the sales of specific stores

a. International sales accounted for approximately 24.6 percent of total company sales in

fiscal 2009. (p.293)

Achieved

b. Most of Wal‐Mart's $405.6 billion in fiscal 2009 sales came from Wal‐Mart stores and

Supercenters. (p.293)

c. Sales for the Wal‐Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009,

compared to fiscal 2008. (p.301)

3. Higher earning per share a. When it initially went public, 100 shares of Wal‐Mart stock would have cost $1,650.

Now, those 100 shares are worth over $6 million. (p.298)

Achieved

18.3 CORPORATE LEVEL STRATEGIES

Since I could not put all of the strategies that are used above in corporate or business level strategies (strategies like increasing employee benefits), so I put those strategies that could be categorized under these two level strategies.

Corporate Level Strategies No. Case Facts Type of Strategy Successful/UnsuccessfulA 1. The company wants all the business that Circuit City's failure left and also wants Best

Buy and Amazon's business. (p.293) Market Penetration Successful

2. Its initiative, "Sustainability 360°," is a companywide effort to take sustainability beyond Wal‐Mart's direct footprint to encompass Wal‐Mart's associates, suppliers, communities and customers. (p.305)


54

3. "Wal‐Mart's environmental goals are to be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain our resources and the environment." (p.305)

4. However, the company has gained market share more quickly than planned. (p.301)

5. In 2009, Wal‐Mart pledged to double its use of solar energy in California. (p.305)

6. In addition, in February 2009, Wal‐Mart Foundation announced it will donate $5.7 million for the creation of green jobs in the United States. (p.305)

7. Wal‐Mart desires to level the playing field with its rival firms because it already provides health insurance to all its employees. (p.293)

8. Wal‐Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities (p.305)

B 1. Wal‐Mart likes to locate Supercenters near the strongest food retailers so their

facilities will "either get better or be run out of town." (p.301)

Product Development (Service Development)

Successful

2. Wal‐Mart is working hard to expand its food distribution capabilities. (p.301)

3. In May 2009, Wal‐Mart began revamping the electronics departments in its 3,500 U.S. stores

to make them much more interactive and roomier. (p.293)

4. Wal‐Mart now carries more sophisticated electronics products such as Research in Motion

Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu‐ray disc players. (p.293)

5. In June 2009, Wal‐Mart began selling Dell Inc.'s new Studio One 19 touch‐screen computers.

(p.293)

6. Wal‐Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and

dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299)

7. In 2003, Wal‐Mart grouped its smaller discount stores, such as the one in Bennington,

Vermont, into a new Hometown USA program. This strategy allows the company to give special

attention to customers in smaller markets in rural America (p.298)


55

8. Hometown USA consists of the stores are less than 50,000 square feet and are under one

regional manager. The idea is to enable these stores to develop locally and with a different mix

from the large prototypes. (p.298)

9. Wal‐Mart has installed point‐of‐sale bar code scanning in all of its stores. (p.302)

10. This WalMart.com venture’s distinct purpose is to provide consumers with a convenient and

rewarding online shopping experience. (p.303)

11. Wal‐Mart has begun marketing limited lines of merchandise under the brand name Sam's

Choice. (p.299)

12. Wal‐Mart is developing new services such as music downloads and 1‐hour photos. (p.303)

C 1. Wal‐Mart de Mexico is strengthened by strong customer support, and the opening of several

new stores in the near future is planned. (p.302) Market Development

Successful

2. In May 2009, company indicated it will observe the performance of these pilot stores in China

and determine whether to expand this idea. (p.302)

3. Wal‐Mart looks at Internet retailing as another store with possibility, but without walls. (p.302)

4. In December 2008, although known for its megastores, Wal‐Mart launched a pilot program in

China and entered the convenience store market under the name "Smart Choice" or Hui Xuan

in Chinese. (p.302)

18.4 BUSINESS LEVEL STRATEGIES

Business Level Strategies No. Case Facts Type of Strategy Successful/Unsuccessful

W

56

A

1

Wal‐MartStores‐

A 1. It is W

in thei

regard

2. The st

contem

merch

dispro

3. The co

advert

18.5 THE COM

2009(MajidSha

Wal‐Mart's policy t

ir respective mar

d to the cost of in

ated purpose of

mporaneously ch

handise; to maint

oportionate numb

ompany's broad a

tising is not need

MPANY’S EXIST

amsNosrati)

that its store ma

rket areas and low

ndividual items. (

Wal‐Mart's prici

harged by compe

tain "low‐price le

ber of customers

assortments and

ded. (p.301)

TING STRATEGI

nagers monitor t

wer prices for hig

p.304)

ng policy is to “m

etitors for highly

eadership" in the

s into a store to i

everyday low pr

IES

the retail prices c

ghly competitive

meet or beat" the

competitive, pric

local marketplac

ncrease traffic."

rices are very com

charged by comp

e merchandise wi

e retail prices

ce‐sensitive

ce; and to "attrac

(p.304)

mpelling; extensi

petitors

ithout

Cost L(Type

ct a

ive

Leadership e 1)

Successful


57

19.0 SWOT

19.1 SWOT MATRIX

Items selected in SWOT are all those items which are used in IFE and EFE.

Strengths Weaknesses 1 Wal-Mart has begun marketing limited lines of merchandise

under the brand name Sam's Choice. (p.299) 1 Having lower sales in comparison to

Costco: Sam’s is a $46.8 billion business that is starting to grow again (p.301)

2 The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business (p.293)

2 Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301)

3 In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293)


4 Wal-Mart has also developed new apparel lines, such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299)

4 Lower Net Income

5 Opening of several new stores in the near future in Mexico is planned

5 Lower Sales

6 In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302)


7 In May 2009, company indicated it will observe the performance of these pilot stores and determine whether to expand this idea.

7 Chancery Court Judge David L. Reynolds on October 11, 1996, found


58

(p.302) Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304)

8 . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303)

8 The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304)

9 Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008


10 Higher Return on Total Assets (ROA)

Opportunities SO Strategies WO Strategies 1 During the recession of 2008-2009,

Wal-Mart was the Dow's top performer (p.293)

1 Keep introducing new products and services in order to keep the market share high (S1,S3,S4,S8,O5)

1 Keep the prices low in order to gain higher sales (W1,W5,O4,O6)

2 Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306)

2 Continue opening stores in Mexico and China (S5,S6,S7,O2,O3)

2 Try to avoid predatory pricing and as an alternative to use compelling pricing (W7,W8,O4)

3 During 2002 Kmart shut down 600 stores in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands (p.306)

3 Acquiring other competitors (walmart.com competitors) to gain more market share (S2,O1,O5)

3 Using latest technologies in order to facilitate distribution system (W2,O7)

4 The company's broad assortments and everyday low prices are very compelling (p.301)

4 Keep the ROA high through using the latest technologies (S10,O7,O8)


59

5 Wal-Mart has gained market share more quickly than planned (p.301)

5 Keep the prices low in order to keep sales high (S9,O4,O6)

6 Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298)

7 Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution.


Threats ST Strategies WT Strategies 1 In 2008-2009, a recession happened

in the economy (p.293) 1 Keep the sales high in the economic recession

(S9,T1) 1 Increase sales in order to avoid the

effects of economic recession on the company (W1,W5,T1)

2 Kmart follows Target in third place among discount retailers with sales of $17 billion (p.306)

2 Keep the sales high to beat the competitors out of market (S9,T2,T3,T4)

2 Decrease the expenses to overcome Costco in sales increase (W2,T5,T6,T10)

3 Target has now become a fierce competitor of Wal-Mart (p.306)

3 Keep introducing new products and services for Sam’s clubs in order to overcome Costco (S1,T5,T6, T10)

3 Increase net income through reducing the issues of internet selling and increase in sales of walmart.com (W4,T9)


60

4 Target is ranked second among discount retailers (p.306)

4 Adding new products and services to compete with Target (S3,S4,S8,T7)

5 Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306)

6 Costco finished the year at just over $72 billion while the Sam's Club division of Wal-Mart brought in over $44 billion in net sales (p.306)

7 Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306)

8 Kmart, have operated in Vermont for years (p.293)


10 Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306)


61

19.2 LIST OF ALTERNATIVE STRATEGIES

SO Alternative Strategies WO Alternative Strategies 1. Product Development: Keep introducing new products and services in

order to keep the market share high (S1,S3,S4,S8,O5)

1. Cost leadership (type 1): Keep the prices low in order to gain higher sales

(W1,W5,O4,O6)

2. Market Development: Continue opening stores in Mexico and China

(S5,S6,S7,O2,O3)

2. Cost leadership (type 1): Try to avoid predatory pricing and as an

alternative to use compelling pricing (W7,W8,O4)

3. Horizontal integration: Acquiring other competitors (walmart.com

competitors) to gain more market share (S2,O1,O5)

3. Product Development: Using latest technologies in order to facilitate

distribution system (W2,O7)

4. Cost leadership (type 1): Keep the ROA high through using the latest

technologies (S10,O7,O8)

5. Cost leadership (type 1): Keep the prices low in order to keep sales high

(S9,O4,O6)

ST Alternative Strategies WT Alternative Strategies 1. Market Penetration: Keep the sales high in the economic recession (S9,T1) 1. Market Penetration: Increase sales in order to avoid the effects of

economic recession on the company (W1,W5,T1)

2. Market Penetration: Keep the sales high to beat the competitors out of

market (S9,T2,T3,T4)

2. Cost Leadership (type 1): Decrease the expenses to overcome Costco in

sales increase (W2,T5,T6,T10)

3. Product development: Keep introducing new products and services for

Sam’s clubs in order to overcome Costco (S1,T5,T6, T10)

3. Cost Leadership (type 1): Increase net income through reducing the issues

of internet selling and increase in sales of walmart.com (W4,T9)

4. Product development: Adding new products and services to compete with

Target (S3,S4,S8,T7)


62

19.3 SWOT ANALYSIS DIAGRAM

Three strategies that seem suitable according to the current situation of the industry are as follows: 1. Market Development

2. Product Development

3. Market Penetration

Cell 1: Supports an aggressive strategy

Numerous environmental opportunities

Major environmental threats

Critical internal weaknesses

Substantial internal weaknesses


63

19.4 CONVERTING INTO STRATEGIC TERMS

19.4.1 CORPORATE LEVEL STRATEGIES

No. Alternative Strategies Type of Strategy A a. SO‐1 Product Development

b. WO‐3

c. ST‐3

d. ST‐4

B a. SO‐2 Market Development

C a. ST‐1 Market Penetration

b. ST‐2

c. WT‐1

19.4.2 BUSINESS LEVEL STRATEGIES

No. Alternative Strategies Type of Strategy A a. SO‐4 Cost Leadership (Type 1)

b. SO‐5

c. WO‐1

d. WO‐2

e. WT‐2


64

f. WT‐3

Level of Strategy Original Alternative Strategy Given CodeBusiness Level Strategy Cost Leadership (Type 1) Keep the prices low in order to gain higher sales WO-1 Corporate level Strategies Market Penetration Keep the sales high to beat the competitors out of market ST-2 Product Development Keep introducing new products and services in order to keep the market share high SO-1 Market Development Continue opening stores in Mexico and China SO-2

Cost Leadership (Type 1)

Market Penetration

Product Development

Market Development


65

20.0 SPACE

Strategy Position Rating

Financial Position(FP) Gross profit margin of the company increased from 0.234 to 0.236 from 2008 to 2009. (financial analysis) 4 Earnings per share increased from 3.204 to 3.414 from 2008 to 2009. (financial analysis) 4 Current Ratio increased from 0.82 to 0.88 from 2008 to 2009. (financial analysis) 4 Sales decreased from 8.5% to 7.1% in 2009 in comparison to previous year increase. (financial analysis) 2

Total: 14

Industry Strength(IP) Environmentalists in Vermont say the rural character of the state is endangered by "sprawl-mart development." (p.293) 5

Kmart, have operated in Vermont for years, so some residents are mystified by the current controversy. (p.293) 5 The U.S. Chamber of Commerce has actively fought against legislation of providing health insurance to all employees for several years. (p.293) 5

Total: 15

Stability Position (SP) In 2008-2009, a recession happened in the economy (p.293) -3 The Internet has interesting aspects and will definitely serve a growing market throughout the 21st century. (p.303) -5 Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306) -2

Total: -10

Competitive Position(CP) Wal-Mart has gained market share more quickly than planned (p.301) -3

W

66

T

W

T

C

F IP S C D x y

2

AW

Wal‐MartStores‐

The merchandise

Wal-Mart leads

Total:

CONCLUSION:

FP Average: 3.5

P Average: 5

SP Average: -4.3

CP Average: -2.

Directional Vect

x – axis = 2.33

y – axis = - 0.83

20.1 CONCLU

According to theWal-Mart has m

2009(MajidSha

e is carefully se

the industry in

0

33

66

tor Coordinate:

USION

e above results, major competitiv

amsNosrati)

elected to ensure

information tec

Wal-Mart is inve advantages in

e quality and m

chnology. (p.302

n the competitiven a high-growth

CP

must be made in

2)

e quadrant. Refh industry.

the United State

ferring to the bo

es. (p.299)

ook (p.215), as t

FP

SP

the vector is nea

Competitiv

Competitive

arer to right x-a

ve

e

-3

-2

-8

xis (IP),

IP


67

To conclude, the company can select one of the strategies of this quadrant. I selected market development and product development as the best strategies according to the result of SPACE Matrix.

21.0 BCG MATRIX

BCG matrix is used for multi-divisional companies. It seems that Wal-Mart’s Sam’s Clubs and International segment has the same business with U.S. segment of Wal-Mart. Therefore, I supposed all as one division which are working relatively a same business rather than doing related or unrelated business. Consequently, it is not possible to draw BCG matrix for Wal-Mart.

22.0 IE MATRIX

Revenue ($ in

Millions) Revenue (%)

Profit ($ in Millions)

Profit (%) IFE EFE

Wal-Mart 405,607 100 13,400 100 2.82 2.93

Total: 405,607 100 13,400 100 2.82 2.93


68

The IFE Total Weighted Score Strong 3.0-4.0 Average 2.0-2.99 Weak 1.0-1.99 4.0 3.0 2.0 1.0

The

EF

E T

otal

Wei

ghte

d S

core

High 3.0-4.0

3.0

Medium 2.0-2.99

2.0

IFE= 2.26

Wal-Mart EFE= 2.00

Low 1.0-1.99

1.0

Conclusion:

According to data available and IE matrix analysis, Wal-Mart Company is in hold and maintain cell. Therefore, the selected strategy for Wal-Mart is product development.

23.0 GRAND STRATEGY MATRIX

It is not mentioned about market (industry) growth in the case. But from other competitors high sales (such as Costco and Target in page 306) and Wal-Mart’s high sales (p.293), I concluded that the industry growth is somehow high in the current situation. And for competitive position of the firm, there is enough information. For example in CPM, I concluded that the firm is on top. Or in items like being leader in information technology (p.302), number of stores (p.298), sales and food distribution advantages (p.301) I concluded that among major competitors Wal-Mart is the best in the industry. Consequently, I put the company in quadrant I in which the market growth is high and Wal-Mart has strong competitive position. In this quadrant I selected market development and product development.

W

69

2

2

Wal‐MartStores‐

24.0 QSPM (

24.1 SELECTI

SWSP

B

GT

2009(MajidSha

(QUANTITA

ING STRATEGIE

WOT PACE BCG

IE GSM Total

amsNosrati)

ATIVE STRAT

ES

Pr

TEGIC PLAN

oduct Develop - 4

NNING MAT

ment

RIX)

Market DDevelopment - - 3

MMarket Penetrat - - - - 1

tion


70

24.2 CONCLUSION

According to the above table, I gathered all previous strategies from all matrixes. From the total number of strategies, it is depicted that two strategies are selected in more items than the other strategy. Besides, I concluded that 2 strategies are sufficient to implement for the company since it makes it difficult for the company to implement more than two. Moreover, the more strategies selected, it is more difficult to focus on all of them precisely. Finally, I selected product development and market development for Wal-Mart to evaluate QSPM and making the last decision and selecting the best strategy.

24.3 QSPM

Key factors Weight Market Development (1)

Product Development (2)

AS TAS AS TAS

Opportunities During the recession of 2008-2009, Wal-Mart was the Dow's top performer (p.293) 0.08 - 0 - 0

Kmart used to be the main competitor for Wal-Mart, but in 2001 it declared bankruptcy (p.306)

0.06 - 0 - 0


0.05 3 0.15 - 0

The company's broad assortments and everyday low prices are very compelling (p.301) 0.05 - 0 3 0.15

Wal-Mart has gained market share more quickly than planned (p.301) 0.07 2 0.14 3 0.21

Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.298)

0.08 3 0.24 4 0.32

Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution.

0.07 - 0 3 0.21


0.06 - 0 3 0.18

Threats

In 2008-2009, a recession happened in the economy (p.293) 0.06 - 0 - 0


0.04 - 0 - 0


71

Target has now become a fierce competitor of Wal-Mart (p.306) 0.04 - 0 - 0

Target is ranked second among discount retailers (p.306) 0.05 0 0

Costco has the largest wholesale club operator in the United States, just ahead of Sam's (p.306)

0.06 2 0.12 2 0.12


0.05 2 0.1 2 0.1


0.05 1 0.05 2 0.1

Kmart, have operated in Vermont for years (p.293) 0.04 2 0.08 - 0

Profits are not easily made over the Internet, and issues of cost of delivery, merchandise returns, and data security are top concerns prior to building business over the Internet. (p.303)

0.05 - 0 - 0

Costco currently has 550 warehouses, 403 in the United States and the rest dispersed from Canada to Japan (p.306)

0.04 2 0.08 0

TOTAL 1.00

Strengths


0.04 - 0 4 0.16


0.05 - 0 3 0.15


0.05 - 0 3 0.15


0.04 - 0 3 0.12

Opening of several new stores in the near future in Mexico is planned 0.07 3 0.21 - 0

In December 2008, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302)

0.08 3 0.24 - 0

In May 2009, company indicated it will observe the performance of these pilot stores 0.07 2 0.14 - 0


72

and determine whether to expand this idea. (p.302) . In addition Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303)

0.06 - 0 4 0.24

Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008

0.09 - 0 - 0

Higher Return on Total Assets (ROA) 0.07 - 0 - 0

Weaknesses

Having lower sales in comparison to Costco: Sam’s is a $46.8 billion business that is starting to grow again (p.301)

0.06 - 0 - 0

Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities (p.301)

0.03 - 0 1 0.03

Increase in expense in comparison to previous years: Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304)

0.05 - 0 - 0

Lower Net Income 0.06 - 0 - 0

Lower Sales 0.06 - 0 - 0

Three independent pharmacies in Conway, Arkansas, filed a suit, claiming Wal-Mart was deliberately pricing products below cost to kill competition (p.304)

0.04 0 - 0

Chancery Court Judge David L. Reynolds on October 11, 1996, found Wal-Mart guilty of predatory pricing and ordered the company to pay the pharmacies $286,407 in damages (p.304)

0.04 - 0 - 0

The judge also forbade Wal-Mart from selling products below cost in Conway in the future. (p.304)

0.02 - 0 - 0

In Sam’s Clubs, also, the items have to come and go seasonally, so continuity by category is not appropriate. Thus, there is a problem for buyers who are item merchants and compete for space in the clubs. (p.301)

0.02 - 0 2 0.04

TOTAL 1.00 1.55 2.28 TOTAL ATTRACTIVENESS SCORE

Conclusion: The most attractive strategy is product development for Wal-Mart because it has gained the highest rate (2.28) and is the most attractive strategy for this company.


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25.0 MANAGEMENT AND OPERATION ISSUES

25.1 COMPARING NEW STRATEGY WITH EXISTING ONES

Existing Strategies New Strategies

From the drawing above, it seems that the new strategies are in line with the existing ones. Cost leadership (type 1) in new strategy which is a business level strategy was taken from SWOT analysis and product development and market development are taken from QSPM selected strategies that are corporate level strategies. The existing strategies are those strategies which are taken from Objectives and Strategies chapter. In the table below, the new strategies implementation are the results of using the new developed strategy in the existing ones. However, as it was impossible to use all three strategies (cost leadership (type 1), Product Development and Market Development) in implementing in all new strategies, I manipulated as much strategy as possible. For example, in the item “In May 2009, company indicated it will observe the performance of these pilot stores in China and determine whether to expand this idea. (p.302)”, I used cost leadership (type 1) and market development that resulted in writing down the sentence “Adding convenient stores in China and selling low-cost products” because my focus for implementing this strategy was developing the market and selling inexpensive products. In this case, although providing high quality products (product development) is necessary and useful, I wanted the company to focus more on adding stores in China with low cost products rather than providing high quality products.

Market Development

Product Development

Market Penetration


Market Development

Product Development



74

Other issue to mention is that in corporate level strategy, I did not find any match for service development for service industry. Therefore, I supposed product development as service development as in service industry, service should be developed rather than product and goods. As an example, when Wal-Mart brings new products to its stores like Dell laptops, I called this product (service) development.

25.2 OBJECTIVES

Strategic Long-term Objectives Type of

Objective Existing Strategy New Strategies New Strategies Implementation

Business expansion

The company wants all the business that Circuit City's failure left and also wants Best Buy and Amazon's business. (p.293)

Merchandizing the same products that Circuit City, Best Buy and Amazon are selling with low prices.

Accelerating distribution system

Wal-Mart is working hard to expand its food distribution capabilities. (p.301)

Providing low cost and high quality foods to stores and improving the distribution system.

Focusing on food retailing

Wal-Mart likes to locate Supercenters near the strongest food retailers so their facilities will "either get better or be run out of town." (p.301)

Proving high quality foods with low price to beat the food retailers out in the market

Market development

Wal-Mart de Mexico is strengthened by strong customer support, and the opening of several new stores in the near future is planned. (p.302)

Adding international Wal-Mart stores in Mexico while keeping the customer support in a high quality condition and using low cost strategy

In May 2009, company indicated it will observe the performance of these pilot stores in China and determine whether to expand this idea. (p.302)

Adding convenient stores in China and selling low-cost products

Wal-Mart looks at Internet retailing as another store with possibility, but without walls. (p.302)

Expanding distribution of internet selling to expand its market and lowering the cost of delivery

Attaining sustainability

Its initiative, "Sustainability 360°," is a companywide effort to take sustainability beyond Wal-Mart's direct footprint to encompass Wal-Mart's associates, suppliers, communities and customers. (p.305)

Providing high quality products to make the customers loyal and gain more sustainability

Market Development

Product Development

C. L. (T.1)


75

Social responsibility

"Wal-Mart's environmental goals are to be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain our resources and the environment." (p.305)

Providing recyclable handbags for customers to carry their purchased products

Financial Long-term Objectives Type of


NA NA

NA

Strategic Objectives Type of


Renewing the stores

In May 2009, Wal-Mart began revamping the electronics departments in its 3,500 U.S. stores to make them much more interactive and roomier. (p.293)

Continue renewing the stores to attract new customers. As a result, new customers would find low-cost products in Wal-Mart stores

Increasing product variability

Wal-Mart now carries more sophisticated electronics products such as Research in Motion Ltd.'s Blackberry smart phones, Palm Inc.'s Pre small phone, and Blu-ray disc players. (p.293)

Developing (providing) new products to attract customers to select Wal-Mart as a store that they can find anything they need.

In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers. (p.293) Wal-Mart has also developed new apparel lines,

Market Development

Product Development

C. L. (T.1)

Market Development

Product Development

C. L. (T.1)


76

such as the Kathie Lee career sportswear and dress collection, Basic Equipment sportswear, and McKids children's clothing. (p.299)

Increasing customer satisfaction through improving service quality

In 2003, Wal-Mart grouped its smaller discount stores, such as the one in Bennington, Vermont, into a new Hometown USA program. This strategy allows the company to give special attention to customers in smaller markets in rural America (p.298)

Adding more discount stores that provides variable products with low price products

Hometown USA consists of the stores are less than 50,000 square feet and are under one regional manager. The idea is to enable these stores to develop locally and with a different mix from the large prototypes. (p.298) Wal-Mart has installed point-of-sale bar code scanning in all of its stores. (p.302)

Improving the facilities for customers in order to attract more customers

This WalMart.com venture’s distinct purpose is to provide consumers with a convenient and rewarding online shopping experience. (p.303)

Marketing the product


Manufacturing every-day consumable products like cheap cakes and sweets in the name of Wal-Mart or Sam’s Club.

Market share However, the company has gained market share more quickly than planned. (p.301)

Continue providing low-cost products to gain more market share

Opening small stores in China

In December 2008, although known for its megastores, Wal-Mart launched a pilot program in China and entered the convenience store market under the name "Smart Choice" or Hui Xuan in Chinese. (p.302)

Adding 3 convenient stores in China to develop market in this high population area

Developing new services

Wal-Mart is developing new services such as music downloads and 1-hour photos. (p.303)

Providing other service like tiny fast food restaurants inside stores.

Lower the It is Wal-Mart's policy that its store managers Attracting more customers through lowering the


77

retailing prices monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304)

prices by controlling the cost of distribution system.

The stated purpose of Wal-Mart's pricing policy is to “meet or beat" the retail prices contemporaneously charged by competitors for highly competitive, price-sensitive merchandise; to maintain "low-price leadership" in the local marketplace; and to "attract a disproportionate number of customers into a store to increase traffic." (p.304) The company's broad assortments and everyday low prices are very compelling; extensive advertising is not needed. (p.301)

Social responsibility

In 2009, Wal-Mart pledged to double its use of solar energy in California. (p.305)

Gain more market penetration through taking care of environmental responsibility.

In addition, in February 2009, Wal-Mart Foundation announced it will donate $5.7 million for the creation of green jobs in the United States. (p.305)

Cost control Supercenters move more into food distribution, they gain a major cost advantage over Super Kmart and Super Target. (p.301)

Reducing cost of distribution and transportation system to gain more advantage in selling the products lower than the other retailers’ selling price. In delivering goods to stores: This back-haul rate

averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302) The company avoids spending money on consultants and marketing experts. Instead, decisions are made based on the intuitive judgments of managers and employees and on the assessment of strategies of other retail


78

chains. (p.306)

Financial Objectives Type of


Increasing the sales of all stores

Wal-Mart's 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. (p.293)

Selling low-cost products to gain more increase in sales

Increasing the sales of specific stores

International sales accounted for approximately 24.6 percent of total company sales in fiscal 2009. (p.293)

Focusing more on Supercenters, Sam’s Clubs and International segment rather than ordinary stores.

Most of Wal-Mart's $405.6 billion in fiscal 2009 sales came from Wal-Mart stores and Supercenters. (p.293) Sales for the Wal-Mart's Sam's Clubs segment increased by 5.6 percent in fiscal 2009, compared to fiscal 2008. (p.301)

Higher earning per share

When it initially went public, 100 shares of Wal-Mart stock would have cost $1,650. Now, those 100 shares are worth over $6 million. (p.298)

Providing new products to gain more value for company’s shares

25.3 MANAGEMENT ISSUES

In this section, I am going to put the new strategies in the existing strategies. In management issues in my case analysis, there are more than 150 items from management issues to marketing research except finance section, I thought that it would be illogical to have strategies for all these items (according to the slide 11 of sample, we were supposed to “Write down all issues stated in Chapter – 4 COMPLETELY”). Therefore, I combined those strategies that were similar in structure and wrote down a unique new strategy for similar items. As an example, “Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities” had more than 5 items related to this in Motivation Section. So I used the main sentence as the symbol of this item.

Market Development

Product Development

C. L. (T.1)


79

Management Audit Management Issue Existing Strategy New Strategies New Strategies Implementation Planning In May 2009, Wal-Mart began revamping the

electronics departments in its 3,500 U.S. stores to make them much more interactive and roomier (p.293)

Continue renewing the stores to attract new customers. As a result, new customers would find low-cost products in Wal-Mart stores


Merchandizing the same products that Circuit City, Best Buy and Amazon are selling with low prices.


Developing (providing) new products to attract customers to select Wal-Mart as a store that they can find anything they need.

Organizing Training is seen as critical to outstanding performance, and new programs are often implemented in all areas of the company (p.303)

To train new employees for recruiting them in new convenient stores in China according to the culture of Chinese people

Motivating Wal-Mart has instituted several initiatives to increase the recruitment and promotion of women and minorities (p.305)

To increase the promotion of employees for better serving of the customers and developing better services

Staffing Wal-Mart already provides health insurance to all its employees (p.293)

To keep the employees satisfied in order to make them serving the customers better and developing better services

controlling This back-haul rate averages over 60 percent and is yet another way Wal-Mart cuts costs. (p.302)

Attracting more customers through lowering the prices by controlling the cost of distribution system.

25.4 PRODUCTION AND OPERATION

Production and operation Process With an information systems staff of 1,200 and

system links with about 5,000 manufacturers, Wal-Mart leads the industry in information

Using the latest technology to make the Just-in-Time process quicker.

Market Development

Product Development

C. L. (T.1)

C. L. (T.1)


80

technology (p.302)

Capacity The one-stop convenience aspect of the stores

has such broad appeal that it is drawing a larger customer audience on a regular basis. (p.301)

Adding 3 convenient stores in China to develop market in this high population area since these stores are very popular and profitable

Inventory Sam's Clubs usually offer over 3,500 items, which are used most often by the consumers they serve. (p.301)

Providing more variable and fashionable products beside higher quality services in Sam’s Clubs to take over Target

Workforce The combination of grassroots meetings, the open-door policy, videos, printed material, classroom and home study, year-end management meetings, and on-the-job training has enabled employees to prepare themselves for advancement and added responsibilities (p.303)

To train new employees for recruiting them in new convenient stores in China according to the culture of Chinese people

Quality The merchandise is carefully selected to ensure quality and must be made in the United States. (p.299)

Continue observation on selecting high quality products to gain loyal customers that can trust on the products that Wal-Mart provides in its stores

25.5 RESEARCH AND DEVELOPMENT

Research and development NA NA NA NA

25.6 MANAGEMENT INFORMATION SYSTEMS

Management information systems NA NA NA NA

Market Development

Product Development


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25.7 VALUE CHAIN ANALYSIS (VCA)

Value chain Analysis (VCA) Main Activity Purchase Merchandise from Manufacturers



Distribution to Stores

Wal-Mart has one of the world's largest private satellite communication systems, which enables it to control distribution (p.302)

Reducing cost of distribution and transportation system to gain more advantage in selling the products lower than the other retailers’ selling price.

Marketing the Products

Wal-Mart draws customers into the store by radio and television advertising , monthly circulars, and weekly newspaper ads. (p.306)

Expanding advertisement through internet advertisement in popular websites like Yahoo and Google to advertise its internet selling services and to introduce its low cost products

Selling the Products


Expand introducing its internet selling through advertising “Delivering Low-cost Products as Fast as Possible”

After-sales Service NA NA

Supporting Activity Management The company was able to attract a top retail

management talent in Jeanne Jackson as the CEO of Walmart.com (p.303)

Using this existing strategy for recruiting talented managers for new stores in China

Financial Wal-Mart's 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. (p.293)

Focusing more on Supercenters, Sam’s Clubs and International segment rather than ordinary stores which can bring higher sales

Market Development

Product Development

C. L. (T.1)

Market Development

Product Development

C. L. (T.1)


82

Supplier Costs Wal-Mart owns a fleet of truck-tractors that they frequently pick up merchandise from manufacturers on the way back to the distribution center. (p.302)

Reducing cost transportation system to gain more advantage in selling the products lower than the other retailers’ selling price.

Production Costs NA

NA Distribution Costs After trucks drop off merchandise, they

frequently pick up merchandise from manufacturers on the way back to the distribution center (p.302)

Reducing cost transportation system to gain more advantage in selling the products lower than the other retailers’ selling price.

Sales and Marketing Costs


Manufacturing every-day consumable products like cheap cakes and sweets in the name of Wal-Mart or Sam’s Club.

Customer Service Costs

NA NA

Management Costs

Expense associated with employees plans (401k) was $945 million, $890 million, and $827 million in fiscal 2008, 2007, and 2006, respectively (p.304)

To keep the employees satisfied in order to make them serving the customers better and developing better services

26.0 FINANCE AND MARKETING ISSUES

26.1 MARKETING ISSUES

Marketing Strategy Customer Analysis

Supercenters provide mart carts and are all one-story buildings, making the stores handicapped accessible (p.301)

Increasing popularity through providing better services to parents for keeping their children while shopping by providing disposable toys

Promotion Programs

In addition to Discover Card, Sam's have also recently started accepting MasterCards for payments.

Increasing the services quality in in Sam’s Clubs to take over Target

Product and Service Planning

In addition Wal-Mart is developing new services such as music downloads and 1-hour

Providing other service like tiny fast food restaurants inside stores.

Market Development

Product Development

C. L. (T.1)

Market Development

Product Development

C. L. (T.1)


83

photos. (p.303) Pricing It is Wal-Mart's policy that its store managers

monitor the retail prices charged by competitors in their respective market areas and lower prices for highly competitive merchandise without regard to the cost of individual items. (p.304)

Monitor competitors prices through collecting customers’ feedback for prices and asking them to define what store (of competitor) provides lower price

Distribution Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food distribution capabilities . (p.301)

Me of

Marketing Research


Providing more variable and fashionable products beside higher quality services in Hometown USA stores

26.2 PRODUCTS/ SERVICES POSITIONING

Two criteria for retailing stores that seem more important are price and variability of products. In the left, I put existing position of Wal-Mart according to the items pricing section and inventory/ capacity section in internal analysis. Besides, I considered CPM to put other competitors as there wasn’t enough information about price and product variability of products of competitors except Target’s case that says “Target has created a niche for itself by offering more upscale, fashionable merchandise than that of Wal-Mart and has earned a reputation for inexpensive, chic merchandise (p.306)”. In the right I considered the implementation of new strategy (Cost leadership (T.1), Market development and Product development) which causes the company to provide low-price products, variable and fashionable products and services and add stores in China (as I explained all items in chapter 7). Therefore, the right map is the result of implementation of new strategies. Consequently, Wal-Mart will reach Target in providing fashionable and upscale products.

K for Kmart

C for Costco

W for Wal-Mart

T for Target


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26.3 FINANCE

According to the new strategies that I have used in chapter 7, for financing for the next year, I concluded that the company needs to add 3 new convenient stores in China, improving the product and service through, for instance, manufacturing every-day consumable products like cheap cakes and sweets in the name of Wal-Mart or Sam’s Club or providing other service like tiny fast food restaurants inside stores and reducing the cost of delivering the goods to stores to sell the low-cost products via for example reducing cost transportation system to gain more advantage in selling the products lower than the other retailers’ selling price or using the latest technology to make distribution quicker and less costly. Therefore, for implementing these strategies, firstly, I need enough capital. The instructor of this course, prof. Bambang has given us the following assumption:

1. Capital Needed (Million): 10,000

2. Interest rate: %

3. Tax rate : 6 %

4. Low condition of EBIT : 12,000

5. High Condition of EBIT (Million): 35,000

6. Normal Condition of EBIT (Million): 22,798 (from ex. 1)

7. Use the 3 alternative selection :

1) First : 100 % STOCK

K

T

Fashionable and variable products

Old and repeated products

High price Low price W C

W T

C

K

Fashionable and variable products

Old and repeated products

Low price High price


85

2) Second : 100 % Debt

3) 20 % Debt, 80 % Equity

It seems that interest rate is missed because at first I supposed that interest rate may be given zero but then I found that if interest rate is zero, then borrowing this $10,000 M from debt financing would be very attractive. But how it is possible that a credit company gives this much money without any interest? So I supposed 5% for interest rate for this case. After that for determining which financing is best choice to select I needed number of shares for both common stock financing and debt financing. Number of shares for debt financing is written in ex.2 (balance sheet). It is 3,925. From this, I calculated number of shares for common stock financing: (capital needed / stock price) + number of shares As it is shown in the table below, it was concluded that best financing is 100% debt financing in all three conditions of recession, normal and boom because it gains highest earning per share (2.48, 4.84 and 7.49).

100% Stock 100% Debt 20% Debt 80% Equity Low Normal High Low Normal High Low Normal High

EBIT 12,000 22,798 35,000 12,000 22,798 35,000 12,000 22,798 35,000 Interest 5%

0 0 0 600 600 600 120 120 120

EBT 12,000 22,798 35,000 11,400 22,198 34,400 11,880 22,678 34,880 Taxes 6% 720 1,368 2,100 684 1,332 2,064 713 1,361 2,093 EAT 11,280 21,430 32,900 10,716 20,866 32,336 11,167 21,317 32,787 # Shares 13,487 13,487 13,487 4,313 4,313 4,313 11,652 11,652 11,652 EPS 0.83 1.58 2.43 2.48 4.84 7.49 0.95 1.82 2.81

As I have explained, I want to raise this capital for adding 3 stores in China (market development), improving the product and service through (product/ service development) and selling low-cost products via reducing the costs (cost-leadership: type 1). Besides, I just supposed that by implementing these three strategies, sales will grow by 50% in the next year 2010. Therefore, as it is shown in the below income statement, I calculated all these increases in sales and other items according to the information from previous years and given information. In remarks column I have explained how the number is calculated.


86

Income Statement

Year of 2009 Projected year of 2010

Remarks

Revenues: Net sales $401,244 481492 Membership and other income 4,363 5236 $405,607 486728 20% of increase Costs and Expenses: Cost of sales 306,158 365,046 75% of sales Operating, selling, general and administrative expenses

76,651 87,611 18% of sales

Operating income 22,798 29,204 6% of sales Interest: Debt 1,896 2,085 10% increase in debt Capital leases 288 317 Interest income (284.00) (312) Interest, net 1,900 2,090 Income from continuing operations before income taxes and minority interest

20,898 27,114

Provision for Income Taxes: Current 6,564 Deferred 581 7,145 7,502 4% increase in tax Income from continuing operations before minority interest

13,753 19,612

Minority interest (499) (594) Income from continuing operations 13,254 19,018 Income (loss) from discontinued operations, net of tax

146 192


87

Net income 13,400 19,210 Net Income per Common Share: Basic income per common share from continuing operations

$ 3.36 5.02$

Basic income (loss) per common share from discontinued operations

0.04 0.05

Basic net income per common share $ 3.40 5.07$ 4.96 Diluted income per common share from continuing operations

$ 3.35 0.08

5.04$ Diluted incon1e (loss) per common share from discontinued operations

0.04 5.02$

0.05 Diluted net income per common share $ 3.39 5.07$ Weighted Average Number of Common Shares: Basic 3,939 3,802 Diluted 3,951 3805 Dividends declared per common share $ 0.95 1.09$

The new income of the year 2010 is defined now. It is $19,210 M. Now I will calculate the dividends of previous years 2008 and 2009 and decide the dividend of year 2010. The way I calculated the dividends are as follows: Number of share of the year × dividends declared per common share From previous years I found that the company increased the dividends and decreased number of shared issued from 2007 to 2009. So with the percentage decrease in number of shares, I decided that the dividend that should be paid is as follows:


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Year Number of Share Dividend 2008 3,973 3,496 2009 3,925 3,729 2010 3,847 4,193

Now it is possible to calculate the retained earnings of year 2010 and build new balance sheet. But before calculating dividend I found that RE of 2009 in balance sheet of Wal-Mart is written wrong. It should be 63,660 instead of 3,660 because it is the total of previous year which is accumulated with the new year. So I supposed it as 63,660. RE for this case is calculated as follows: RE (2010) = Income (2010) – dividends (2010) + RE of 2009 RE = 15,390 Therefore, I have two capitals to put in my balance sheet. One from debt financing (10,000 M) and one from RE (15,390). As it is shown in the below balance sheet, for projected year of 2010, I put 5% of capital in inventories, 40% in land, 5% in buildings and improvements and 50% in transportation equipment. Besides, I put 5000 of RE as cash for emergency cases (like need of cash or purchasing merchandise) and the remaining (10,390) in land. As I selected 100% debt financing, I put all 10,000 M in long term debt in balance sheet.

Balance Sheet

Year of 2009 Projected year of 2010

Remarks

ASSETS Current Assets: Cash and cash equivalents $ 7,275 $ 17,275 5,000 of RE (total: 15390) Receivables 3,905 3,905 Inventories 34,511 35,011 5% of capital (500 M) to provide upscale

and fashionable merchandise for stores to acquire the niche market of Target

Prepaid expenses and other 3,063 3,063 Current assets of discontinued operations. 195 195 Total Current Assets $ 48,949 $ 48,949


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Property and Equipment, at Cost: Land 19,852 34,242 40% of capital + remaining of RE (totally

14,390 M) to add 3 convenient stores in China

Buildings and improvements 73,810 74,310 5% of capital (500 M) to renew the existing stores in U.S. segment to attract more customers

Fixtures and equipment 29,851 29,851 Transportation equipment 2,307 7,307 50% of capital (5,000 M) in order to

speed up the distribution system and reducing the cost of distribution to sell the low cost products

Property and equipment, at cost 125,820 125,820 Less accumulated depreciation (32,964) (32,964) Property and equipment, net 92,856 92,856 Property under Capital Lease: Property under capital lease: 5,341 5,341 Less accumulated depreciation (2,544) (2,544) Property under capital lease 2,797 2,797 Goodwill 15,260 15,260 Other assets and deferred charges 3,567 3,567 Total Assets $ 163,429 $ 187,955 $10,000 increase in the total Assets LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities: Commercial paper $ 1,506 $ 1,506 Accounts payable 28,849 28,849 Accrued liabilities 18,112 18,112 Accrued incon1e taxes 677 677


90

Long-term debt due within one year 5,848 5,848 Obligations under capital leases due within one year

315 315

Current liabilities of discontinued operations 83 83 Total current liabilities $ 55,390 $ 55,390 Long-term debt 31,349 41,349 As the preferred financing was

determined as 100% debt financing, I put all capital of 10,000 M in long-term debt that this money could be borrowed from credit companies

Long-term obligations under capital leases 3,200 3,200 Deferred income taxes and other 6,014 6,014 Minority interest 2,191 2,191 Commitment and contingencies Shareholders' Equity: Preferred stock($0.10 par value; 100 shares authorized, none issued

-

Common stock ($0.1 0; 1 1,000 shares authorized, 3,925 and 3973 issued and outstanding at January 31, 2009, and January 31, 2008, respectively)

393 382 3820 × 0.1 = 382

Capital in excess of par value 3,920 3,820 Retained earnings 3,660 79,050 Accumulated other comprehensive (loss) income (2,688) (3,441) Total Shareholders' Equity 65, 285 79,811 Total Liabilities and Shareholders' Equity $163,429 187,955 $

26.4 FIGURE OF ALL EXISTING AND NEW STRATEGIES


91

Chapter IV Existing Management Issues (A)

New Management Issues (A+B)

New Strategies : (B)

Product

In June 2009, Wal-Mart began selling Dell Inc.'s new Studio One 19 touch-screen computers.

Developing (providing) new products to attract customers to select Wal-Mart as a store that

they can find anything they need.

The one-stop convenience aspect of the stores has such broad appeal that it is drawing a larger

Adding 3 convenient stores in China to develop market in this high population area since these

NA NA

NA NA

Wal-Mart leads the industry in information technology. (p.302)


Chapter IV Existing Management Issues (A’) Management Issues (NEW)

(A’+B) (Dividend)

R/E = NI‐Div Start with

I/S

B/S

I/S (New)

B/S

Chapter ‐ 8 Chapter ‐ 8Wal-Mart is working hard to expand

its food distribution capabilities. (p.301)

Wal-Mart has begun marketing limited lines of merchandise under the brand name Sam's

Choice. (p.299)

Providing low cost and high quality foods to stores and improving the

distribution system.

Manufacturing every-day consumable products like cheap cakes and sweets in the

name of Wal-Mart or Sam’s Club.

Currently, the limitation is distribution , and Wal-Mart is working hard to expand its food

di t ib ti biliti ( 301)

Net income of 13,400

Cost Leadership (Type 1) Cost Leadership

(Type 1)

Using the latest technology to make distribution quicker and less costly

Net income of 19,210

Corporate Level Strategies (Existing)

New Corporate Level Strategies

Market Penetration

Product Development

Market Development

NA

Product Development

Market Development

NA

NA

Given by the Case

majid shams nosrati wal mart stores 2009

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