Case Study on Wal-Mart
Table of Content
Introduction
This
report is regarding case study about Wal-Mart, the retail giant and one of the
biggest companies in the world list in Fortune 500 list as number 1
Wal-Mart
is more than just the world's largest retailer. It is an economic force, a
cultural phenomenon and a lightning rod for controversy. It all started with a
simple philosophy from founder Sam Walton: Offer shoppers lower prices than
they get anywhere else. That basic strategy has shaped Wal-Mart's culture and
driven the company's growth.
Now
that Wal-Mart is so huge, it has unprecedented power to shape labor markets
globally and change the way entire industries operate. In this article, you
will learn the key reasons that Wal-Mart has been able to keep its prices low
-- cutting-edge technology, a frugal corporate culture and a push to make
suppliers sell merchandise at cheaper and cheaper prices. We'll also take a
look at the scope of Wal-Mart's impact on the economy and the controversies
surrounding Wal-Mart, as well as the future of the company.
Sam
Walton opened first Wal-Mart in 1962 at Bentonville Arkansas, and the firm is
headquarter there since then
History of the Case
Wal-Mart
is big and is bigger than the second number retailer France Carrefour , 138
million shoppers visit Wal-Mart’s 4750 stores Wal-Mart is the largest company
in the world, the market it caters is mass market and this company is the most
admired companies of all Fortune 500 companies list, its revenues in 2003 are
$245 billion
Wal-Mart
is established by Sam-Walton in 1949, with a vision to provide customers with
low cost high quality products
Now
Wal-Mart is such a big and massive company that it had produce an effect on the
economy of USA, which economist called as “Wal-Mart Effect”
The
company has adopted such policies that it deemed are ethical in nature, it had
make many magazines that it thinks as inappropriate off the shelf such as
maxim, don’t offer a drug named Prevent for sale to customer though the drug is
for pregnancy prevention and not for abortion
Wal-Mart
is expanding its business both in US and also abroad through many means, one of
which is termed as supercenters which is a combination of supermarket and
discount store
Due
to the fact that wall-mart is become a giant in retail industry surpassing the
second big retailer France Carrefour, it has also attracted many negative
criticism and also legal actions which are as many as 40 at one times,
including a women discrimination case in which women who worked at Wal-Mart are
of the view that the company discriminates with them when it comes to men’s job
fairness vs. women’s job fairness
Many
critics are also of the view that the net effect of wall-mart on a community is
zero, because on the one hand it decimated the jobs because many small
endeavors gets closed due to customers shifting to wall-mart for shopping, on
the other hand it also created some jobs
Wal-Mart
simplest strategy is “Every Day Low Prices” which is more than slogan and also
acts as a driving force for the whole company; the idea is that any savings
which are generated by the SCM activities are transferred to customers as
savings in their spending, the innovative strategy by Wal-Mart is that it
eliminates the middle men who takes up a major portion of cost for example Wal-Mart
eliminates the middle men in procuring the Jeans brand George whose price
reduced from $26.67 to a mere $7.85 and that’s the job of increasing customer
value
SWOT Analysis
Strengths
·
Wal-Mart is a powerful retail brand. It
has a reputation for value for money, convenience and a wide range of products
all in one store.
·
Wal-Mart has grown substantially over
recent years, and has experienced global expansion (for example its purchase of
the United Kingdom based retailer ASDA).
·
A focused strategy is in place for human
resource management and development. People are key to Wal-Mart's business and
it invests time and money in training people, and retaining a developing them.
Weaknesses
·
Wal-Mart is the World's largest grocery
retailer and control of its empire, despite its IT advantages, could leave it
weak in some areas due to the huge span of control.
·
Since Wal-Mart sell products across many
sectors (such as clothing, food, or stationary), it may not have the
flexibility of some of its more focused competitors.
·
The company is global, but has a
presence in relatively few countries Worldwide.
Opportunities
·
To take over, merge with, or form
strategic alliances with other global retailers, focusing on specific markets
such as Europe or the Greater China Region.
·
The stores are currently only trade in a
relatively small number of countries. Therefore there are tremendous
opportunities for future business in expanding consumer markets, such as China
and India.
·
New locations and store types offer
Wal-Mart opportunities to exploit market development. They diversified from
large super centers, to local and mall-based sites.
·
Opportunities exist for Wal-Mart to
continue with its current strategy of large, super centers.
Threats
·
Being number one means that you are the
target of competition, locally and globally.
·
Being a global retailer means that you
are exposed to political problems in the countries that you operate in.
·
The cost of producing many consumer
products tends to have fallen because of lower manufacturing costs.
Manufacturing cost has fallen due to outsourcing to low-cost regions of the
World. This has lead to price competition, resulting in price deflation in some
ranges. Intense price competition is a threat.
Strategic Corporate Objectives
·
Providing customers what they want, when
they want it, all at a value.
·
Treating each other as we would hope to
be treated, acknowledging our total dependency on our associates-partners to
sustain our success.
·
Wal-Mart objective is to continuously
expand into different, new markets
Market – Driven Strategy Objectives
Wal-Mart
has one objective that its slogan that is the king pin in its market driven
strategy
·
Every Day Low Prices so that customers
save money and live better.
Market Driven Strategy
Our Strategy: Offering a broad assortment with even lower prices
Wal-Mart
U.S. achieved positive comparable store sales for fiscal 2012, having posted an
increase in customer traffic for the fourth quarter. Net sales surpassed $264
billion, increasing 1.5 percent, while operating income grew to $20.4 billion,
a 2.2 percent increase from the prior year. We improved our
Performance
by aligning our strategy with the needs of today’s customer and by operating
more efficiently. The expanded merchandise assortment and improved in-stock
levels, coupled with strong price leadership and service from our associates,
continues to resonate with customers.
Our Strategy: Meeting local needs and leveraging global resources
Wal-Mart International
is focused on a key objective – driving aggressive growth, while improving
return on investment. Net sales, including currency and acquisitions, increased
15.2 percent to $125.9 billion for fiscal 2012. Operating income was $6.2
billion, increasing 10.8 percent from the prior year. In fiscal 2012, we opened
a record 612 new stores through organic growth. Including acquisitions, we added
1,094 stores and 42.2 million square feet around the world.
Our Strategy: Leveraging Member insights to deliver value and quality
After two consecutive years of quality results,
Sam’s Club has strong momentum that sets the stage for continued growth in the
warehouse club segment. Fiscal 2012 net sales increased 8.8 percent to $53.8
billion, while operating income grew 9.0 percent to $1.9 billion. Members are
shopping more frequently, shopping more categories and spending a greater share
of their wallet with Sam’s Club.
Product Structure Analysis
Wal-Mart is the largest
retailer in the world, and its headquarters is located in Bentonville,
Arkansas. The group includes Wal-Mart discount stores, Wal-Mart Super Centers,
Bud's Discount City stores and Sam's Club stores.
The enormous Wal-Mart
discount stores are large stores that offer a huge range of products at floor
prices, such as household goods, clothing, appliances, sports equipment, tools,
garden utensils, automotive products, pharmaceuticals and nutrition. Sometimes
you'll also find gasoline, a hairdresser or even an optician...
The Wal-Mart
Supercenters combine the advantages of traditional discount stores with the
extended service of a supermarket. Bud's Discount City stores are large
department stores that provide about three quarters of the total Wal-Mart
range. The remaining 25% consists of sellout lots, overstocks and slightly
damaged items, all of them with a substantial discount.
Sam's Clubs are a
combination of high storage capacity in a huge warehouse, and retail trade.
Customers purchase a Sam's Club membership card, and can then buy larger
quantities and more expensive equipment than in a regular Wal-Mart, but at even
lower prices.
Wal-Mart Discount
In 1962, he opened his
own store with his brother James "Bud" Walton, the Wal-Mart Discount
City in Rogers, Arkansas. By 1969 they already had eighteen Wal-Mart Discount
City stores (now simply called Wal-Mart), besides the original fifteen Ben
Franklin stores! Sam Walton founded the new company Wal-Mart Stores, Inc. One
year later it opened its first distribution center in Bentonville, and also
established its headquarters there.
In 1970, Wal-Mart
appeared on the stock market. Whoever bought 100 shares at $ 16.75 each or
1,675 $ at that time, would now obtain 12.2 million dollars for those same 100
shares!
Because Wal-Mart
manages its own storage, the company was able to buy large stocks, and
therefore negotiate very low prices. They developed a very progressive stock
management and distribution system, by using the most recent Information
technology, and new centers were always built near a distribution center.
Sam Walton's philosophy
was to offer a very wide range of products at very low prices. Advertising
costs were kept to a minimum, which is unusual in the States, and continuously
new stores were opened in smaller towns, where local residents didn't have much
of a range to choose from.
The success in these
smaller towns led to a severe criticism of the entire group, since the local
middle class was completely undermined. Nevertheless, the company succeeded in
selling its image as a friendly and local shop.
Sam Walton always
strictly insisted that all of his staff should be friendly and helpful to the
customer. It is not unusual to be greeted upon entering the store, and at the
least hesitation, the customer is asked if he can be helped.
Wal-Mart always
maintains a local accent, by also selling local products. Next to this, the
chain is quite active in scholarship grants, whereby promising but
less-well-funded youngsters are supported in their expensive studies.
Furthermore, the stores regularly organize collections for charity and sponsor
local events.
In the 1990's, the Wal-Mart
group became so influential that it began to weigh on public opinion. After
some record companies stuck a sticker to records with a potentially offensive
text, Wal-Mart refused to sell these. Since then the record companies also turn
out "sanitized" versions of these records... After all, Wal-Mart has
a large influence in the music world, since about 10% of all US records are
sold in a Wal-Mart.
In 1996, the company
worked with the DEA (Drug Enforcement Administration), to prevent the sale of
substances that allow the making of methamphetamine. Many Americans welcomed
this step, but others argued that it is not up to a commercial company to
impose moral values.
Sam's Club and Supercenter
In 1983 Wal-Mart
introduced its "Sam's Wholesale Clubs discount membership warehouse
stores", better known under the name "Sam's Clubs". In 1987 the
company started the "Hyper Mart USA" stores, together with Colum
Companies, a chain of supermarkets from Dallas, Texas.
These Hyper Marts
united groceries and large department stores with restaurants, banks, video
rentals and other products, all located in the same building. Just one year
later, however, these Hyper Marts were renamed to Wal-Mart Supercenters.
In 1988, at the age of
seventy, Sam Walton retired as CEO of Wal-Mart. He was succeeded by David
Glass, the man who organized the exceptionally profitable automation of the
inventory and distribution in the 1970's and 1980's.
In 1990 the first Bud's
Discount City store was founded in Franklin, Tennessee and the company acquired
the McLane Company, a national distributor of fruit and vegetables. Thereby
they instantly acquired more than 50 additional distribution centers!
In 1991, it purchased
the Wholesale Club, Inc., and brought its 28 department stores into its network
of Sam's Clubs. The same year Wal-Mart signed an agreement with CIFRA, the
largest Mexican chain of supermarkets, and it developed drew several Wal-Mart’s
and Sam's Clubs in Mexico.
In 1992 Sam Walton died
of bone cancer. In 1993 Wal-Mart bought 99 stores from its dying competitor
K-Mart, and further expanded the company internationally to Canada, Brazil,
Argentina, Indonesia, Germany and China. In 1994, the company acquired 122 Woollcott
department stores in Canada and rebuilt them into Wal-Mart’s.
This extraordinary
growth has been uninterrupted, and in 2004, the group had 1,353 Wal-Mart
stores, 1,713 Supercenters, 551 Sam's Clubs, 85 Neighborhood Markets, 1,603
international stores and 110 distribution centers in the United States.
Wal-Mart has its own
communications satellite, and is continuously connected to all of its centers.
It employs more than 1.5 million people
Competitive space Analysis
In North America,
Wal-Mart's primary competition includes department stores like Kmart, Target,
ShopKo and Meijer, Canada's Zellers, The Real Canadian Superstore and Giant
Tiger, and Mexico's Commercial Mexicana and Soriano. Competitors of Wal-Mart's
Sam's Club division are Costco, and the smaller BJ's Wholesale Club chain
operating mainly in the eastern US. Wal-Mart's move into the grocery business
in the late 1990s also set it against major supermarket chains in both the
United States and Canada. Several smaller retailers, primarily dollar stores,
such as Family Dollar and Dollar General, have been able to find a small niche
market and compete successfully against Wal-Mart for home consumer sales
The major
competitors of Wal-Mart in international markets are UK’s Tesco, France
Carrefour and Metro
Tesco is giving Wal-Mart
a hard time in US after it had opened a Fresh & Easy store, and it is
expected that it will surpass Carrefour in near future
Segmentation
Wal-Mart segments the
market on demographic basis, opening stores in close proximity of the mass
localities, it has created four different store formats with newer ones coming
in near future, and these four types are
·
Discount stores
·
Sam’ Club
·
Bud’ Club
·
Supercenter
In addition to these Wal-Mart
also ships products directly to customers on mail order plus walmart.com is
developed in order to facilitate new tech savvy customers who don’t want to
take the hassle of physical buying goods
Overall Market Driven Strategy
The market driven strategy that Wal-Mart is
following places customers at the center and as the founder Sam Walton
envisioned that the savings of the whole supply chain must confer to the
customer
In this way the overall market driven strategy is Every Day Low Prices or EDLP
Recommendations
Wal-Mart is a
retail giant it had to make following things
·
They
have to be equal opportunity employer and do not discriminate as they did in
the past in gender related matter which gets great media attention
·
Offer
better quality products, because most affluent buyers thinks that low prices
are attached to low quality and they corner away from Wal-Mart
·
Give
employment to the supermarket employees who gets jobless due to opening up of
its stores in a community
·
Adopt
sustainability marketing in which there are three concerns people, profit and
planet
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