Sams Club Case Analysis

Sams Club Case AnalysisGroup members:DIEN Truong 12894905. pham minh duc 1357001Luu thi van 6. pham quang huy - 1314116Nguyen thi thuy trang 1357299 7. ly nhu - 1356979Phan hoang anh - 1273205

1ContentsI. Key IssuesII. Sams club current strategy and its effectivenessIII. External AnalysisIV. Internal AnalysisV. SWOT AnalysisVI. ConclusionVII. RecommendationVIII. Implementation issues

2How can Sams club maintain its competitive advantage and captivate more market shares in the tough competition with strong direct and indirect competitors ?I. Key IssueII. Current strategy and its effectivenessLow-cost leadership strategyAccept lower profit margin to lower prices for its membersMission: to make saving simple for member by providing them with exciting, quality merchandise and superior shopping experience, all at a great value4Create a very good position in customers mindAchieve the second biggest market shareGain loyal customers: 41 million membership cardsCreate a perception of their products in customers mind with unbelievable cheap price with medium to excellent qualityII. Current strategy and its effectiveness 5III. External Analysis Macro environmentPorter five forcesDriving forcesKey success factors61. Macro environmentEconomic trend:The global economic recession at the end of 2007-> gain customers -> annual growth rate increased 1.2% in 2008-2009

7TechnologyPoint-of-sale systemSupply chain systemInventory management1. Macro environment81. Macro environmentDemographicgender, personal average income, population, education and culture.-> Strategies, target and segment audience9Rivalry among firms a strong competition forcesthe rivalry among Costco, Sam and BJ is vigorousswitching costs are low2. Porter five forces10Threat of substitute productsa strong competition forcethe range of merchandise selection and the number of convenient store locations of substitute retailer are much greater. 2. Porter five forces11Bargaining power of suppliersmoderate

Threat of new entrants a weak competition forceBargaining power of buyersa weak competition force2. Porter five forces123. Driving forcesTechnologyusing throughout supply chainretailers collect data at the point of sale

Per capita disposable incomechange in disposable income cause change in warehouse saleCustomers trendunderstanding the cost of opportunity of customers to deliver superior value4. Key success factorsEconomies of ScaleHelp the industry lower the cost of doing business

Control of distributionHaving better control of distribution facilities into lower priceAbility to control stock on handOperators need to have stringent control measures to ensure that all the items are availableHaving a wide and expanding product rangeRange of products must be wider than others.IV. Internal Analysis1. 4Ps2. Operation analysis3. Financial analysis1. 4PsPricesell merchandise at a very low profit margins-> low price for members

$12 cheaper than Costco on 38 typical grocery items

40% lower in price compared to a traditional grocery store(Cheapism.com)1. 4PsPlacemore than 600 locations across the U.S98 warehouses in Mexico, 9 wareshouse in Puerto Rico3 warehouse in China.7th most valuable retain brandadjacent to Walmart super centres1. 4PsProductsstocks brand-name merchandise such as Members Mark, Baker & Chefs, Sams club.carries software, electronics, jewellery, sporting goods, toys, tires, batteries, office suppliers and fresh-food departments.One-stop shopping: Sams caf, self-service gasoline pumps.1. 4PsPromotion$35 primary membership card with a spouse card available at no additional cost in every yearhas lower membership price than BJ with $55 and Costco with $55minimize on advertising and focus on customer serviceprovide excellent service for delivery, installation and technical support. 1. 4PsFindingsgood price and intensive locationsunderstand how compatible it would be to other competitorsthe high focused- customer service and well design, spacious warehouse increase the customer experiences when customers come to visit the stores.2. Operation analysisInventory management

Sams club operates on a perpetual inventory system.

Sams club use SKU (Stock keeping unit) model.

Sams club use P and Q system.

2. Operation analysisLogisticsThe division at the companys core, keeping the business moving and keeping millions of the products arriving.At Sams club, nonfuel merchandise from Wal-marts grocery distribution.Its all designed to pass on savings to our customers and communities. Some of distribution facilities of Sams club:+ Greenfield, in 46140-3057. Phone: (317) 467-0495+ Distribution Ctr 1911 Continental Blvd Charlotte, NC 28273. Phone (704) 588-5240Sams club use cross docking techniques.

2. Operation analysisRetail Technology

Technology is a key of all activities in supply chain of Sams club

Because of Walmart, Sams club also possesses the largest information technology infrastructure.

3. Financial analysis

Net sales of Sams club increased 8.8% in 2011 to 2012 and growth 4.9% in 2012 to 2013.

_ In gross profit rate was flat in fiscal 2013 when compared to fiscal 2012.

_ The fiscal 2013 of operating expenses decrease was due to improved wage management.

_Sams Club leveraged operating expenses during fiscal 2013 and 2012, operating income was $2.0 billion, $1.8 billion and $1.7 billion for fiscal 2013, 2012 and 2011.3. Financial analysisFindingsSams club has a healthy financial performance through the year. This is a positive sign for all other aspects of the company because healthy financial performance will be able to support funding for other activities.V. SWOT analysis1. StrengthsFirst mover in retail technology Supports workflow integration Logistic Effective & efficient logistic Operating expenses shipment, delivery Worldwide private distribution networks Number of locations

Leverage Walmart

Effective marketingMember cardGold key programLower priceVariety product range2nd biggest market share in US41M members

V. SWOT analysis2. WeaknessesSKU management Difficult collect, delivery

Limited global stores Focus on US marketOnly one market in Asia

Overlap with Walmart LocationConsumers confusedPotential customers narrow

3. OpportunityTechnology BenefitsDevelopment of E-commerce Online trade AppGrowth in popularity of warehouse clubs A chance expand market, loyalty customers, rise profit Per capita disposable income Economy recovers

V. SWOT analysisV. SWOT analysis4. ThreatsStrong competition direct and indirectMacro economy increasing priceRegulation Policy changeTax/tariff - different price

ExternalOpportunitiesThreatsStrengthsS 0 Comparisons

Strong logistics + new technology Strengthen logistics to keep the core competency of the company

S - T Comparisons

Strong competitor Costco Make good use of its two biggest strengths : information technology infrastructure and logistics To maintain the market shareWeaknessesW - O ComparisonsNot excellent in SKU=> Turn this weakness into strength by the support of new technologyW - T Comparisons

Costcos SKU is much more productive than Sams club SKU=> Support SKU by new technology internalVI. ConclusionWarehouse Industry is a billion dollar segment of retailing industry, has grown strongly. Costco, Sams club and BJ.

Demographic influences planning and building strategies.

Growth of technology supports inventory managementLow price with many benefits for members.

4 key success factors: economies of scale, control of distribution, ability to control stock on hand; wide and expanding product rangeVI. Conclusionreduces operation cost => lower price

provides better memberships benefits

has stable and supportive financial performance

Competitive advantagehas largest distribution network is first mover in retail technology

enhances the core logistic , (KFSs)

Workflow IntegrationStrategic alternativesinvests in Information System (IS)

improves inventory management

opens new store in foreign countryrefreshes product offerings

Enhances completive advantage, capture more market sharesReduces assortment, lower employment costVII. Recommendationshould keep current strategy

Invests more on (IS) and improves inventory managementVI. Recommendationextremely strong Costco rivalbe more efficient thanks to retail technology

bases on strengths and opportunities to maintain competitive advantage

Has more unique management softwares, IS based device better trackingbetter logistic system

VI. Recommendationprovides different function management software in one systemhelps integrate all the related tasksenhances competitive advantage more efficient and effective in operatingcheaper product pricemore market shares

VI. Recommendationreduces assortment lower employee costBetter chance to attract E-comerce

VII. Implementationfit with internal and external environment

healthy financial support

easy to do

time constraint