Walmart Case Study

Chapter 1& 2 Module 1 Wal-Mart Case Study Shannan Haynes St Gregory’s University Give a short account of the history of the company, and trace the evolution of its strategy. Try to determine whether the strategies evolution of your company is the product of intended strategies, emergent strategies, or some combination of the two. The Wal-Mart story began in 1962 when Sam Walton opened the first discount store in Rogers, AR. In 1970 Wal-Mart experienced significant growth and made huge advancements In1970 Wal-Mart opened its first distribution center and the Wal-Mart Home Office in Bentonville, AR. By 1970 Wal-Mart employed 1,500 associates and had 38 stores with sales of $44. 2 million. In 1970 Wal-Mart also began selling shares over the counter as a publicly-held company. In 1971 Wal-Mart’s stock had is first 100 percent split. At that time Wal-Mart had stores operating in five states. By 1975 Wal-Mart employed more than 7,500 associates and had 125 stores. By 1977 Wal-Mart was operating in 10 states and opened Wal-Mart Pharmacy. Their growth continued into 1980, when Wal-Mart stock split 100 percent for the fourth time. That year Wal-Mart opened the largest distribution center in Palestine Texas. In the late 1990’s, Wal-Mart became the largest private employer in the world. They employed 1,140,000 employees. In 2000 Wal-Mart appointed H. Lee Scott as its CEO. That year Fortune magazine ranked the company fifth in its â€Å"global Most Admired All-Stars† list and named Wal-Mart the third most admired company in America. Wal-Mart made a commitment to bring environmental sustainability into its business in 2005. They opened a store in McKinney, Texas that saved energy and conserved natural resources, and reduced pollution. They were also active in conserving critical wildlife habitats. By 2005 Wal-Mart employed more than 1. 6 million employees and had more than 6200 stores. By 2006, the number of employees grew to more than 176 million and 6779 locations. In February 2007 Wal-Mart helped launch Better Health Care Together, Later that year, Wal-Mart expanded its successful 4 dollar generic program. By 2007 Wal-Mart had save their customers more than $396 million on prescription drug costs. On February 1, 2007, Mike Duke took over as CEO. (Pereira, 2002) Sam Walton built Wal-Mart on Respect for the Individual, Service to the Customer, and he always strived for Excellence. He respected his employees and was committed to his customers. With commitment to his customers came low prices. Wal-Mart strategy is an intended strategy. It is clear and direct. It was put into place in the 1960's by Sam Walton, and refined over the decades. The company is proud of its strategy and even incorporates it within its moniker â€Å"Always Low prices, Always. † (Pereira, 2002) Identify the mission and major goals of the company. Saving people money was Sam Walton’s goal when he opened his first store 40 years ago. Wal-Mart still has the same goal today. Wal-Mart has expanded their savings to energy, prescription drugs and has partnered with suppliers and stakeholders to create a competitive advantage. Wal-Mart mission is to do well as a business but to also do good. (Walmart, 2009) Do a preliminary analysis of the internal strengths and weaknesses of the company and the opportunities and threats that it faces in its environment. On the basis of this analysis, identify the strategies that you think the company should pursue. Wal-Mart is the number one retailer in the United States. Wal-Mart has a reputation for low prices, convenience and a large selection of products. Wal-Mart has invested into technology and an international logistics system. Wal-Mart is global but has a presence in relatively few countries. Wal-Mart has invested in human resources and retention of their staff but still have extensive labor relation problems. Wal-Mart has been cited by labor groups for wage issues, shift scheduling, and workplace abuses. Wal-Mart has been accused by community groups of destroying the local retail environment in the downtowns of small towns. (Marketing Teacher , 2000) Wal-Mart still has many opportunities to merge, or form alliances with other global retailers. Wal-Mart can do more to call attention to its good deeds to help with their image issues. Wal-Mart can continue to expand its supercenters into large cities. (Avila, 2009) Who is the CEO of the company? Evaluate the CEO’s leadership capabilities. On February 1, 2007, Mike Duke took over as CEO of Wal-Mart. On June 5, 2009, Mike Duke announced that Wal-Mart was up 6 percent to $3. 35 per share and that 7. 3 billion dollars were returned to shareholders. He also said that sales surpassed 400 billion for the first time. Wal-Mart has strong balance sheets and access to capital markets. Mike Duke has enhanced training and development of Wal-Mart’s global workforce. He has also reiterated Wal-Mart’s commitment to low prices. Based on profits and the commitments he has outlined, I would say that Mike Duke leadership capabilities as CEO are very promising. (Walmart, 2009)+ Apply the five forces model to the industry in which your company is based. What does this model tell you about the nature of competition in the industry? Potential Competitors: Medium pressure Grocers could potentially enter into the retail side. Entry barriers are relatively high, as Wal-Mart has an outstanding distribution systems, locations, brand name, and financial capital to fend off competitors. Wal -mart often has an absolute cost advantage over other competitors. Rivalry Among Established Companies: Medium Pressure Currently, there are three main incumbent companies that exist in the same market as Wal-Mart: Sears, K Mart, and Target. Target is the strongest of the three in relation to retail. Target has experienced tremendous growth in their domestic markets and has defined their niche quit effectively. Sears and K-Mart seem to be drifting and have not challenged Wal-Mart in sometime. Mature industry life cycle. The Bargaining Power of Buyers: Low pressure The individual buyer has little to no pressure on Wal-Mart. Consumer advocate groups have complained about Wal-Mart’s pricing techniques. Consumer could shop at a competitor who offers comparable products at comparable prices, but the convenience is lost. Bargaining Power of Suppliers: Low to Medium pressure Since Wal-Mart holds so much of the market share, they offer a lot of business to manufacturers and wholesalers. This gives Wal-Mart a lot of ower because by Wal-Mart threatening to switch to a different supplier would create a scare tactic to the suppliers. Wal-Mart could vertically integrate. Wal-Mart does deal with some large suppliers like Proctor & Gamble, Coca-Cola who have more bargaining power than small suppliers. Threat of substitutes-Low pressure The market is crowded but Wal-Mart has the lowest costs, prices , profits, and market share Wal-Mart is able to negotiate for pricing. This analysis tells me that Wal-Mart does not have to worry about threat to new entrants because it has the capacity to produce more in order to lower the cost. There are high barriers of entry for companies trying to come into the retail industry because of the resources that Wal-Mart has. Are any changes taking place in the macro environment that might have an impact, positive or negative, on the industry in which your company is based? If so, what are these changes, and how might they affect the industry? Wal-Mart has received some bad press in the past and is making great commitments to helping the health and well-being of our nation. In 2005 Wal-Mart made a commitment to become more environmentally friendly. Wall-mart adopted an approach they call â€Å"Sustainability 360†. This approach looks for ways to reduce their environmental impact. In 2008, they announced a new set of clearly defined environmentally and socially responsible practices into their supply chain, â€Å"where goods are made in a way that protects our planet. †(Walmart, 2009) The economy has affected many companies recently however Wal-Mart's overall sales aren't rising dramatically, but they are raising, even as the economy grinds to a halt. (Gross, 2008) I believe Wal-Mart’s macro enviroment is affecting them both positvely and negatively. Identify any strategic groups that might exist in the industry. How does the intensity of competition differ across these strategic groups? Walmart’s closest competitors are those in its strategic group. Included in this group are Wal-Mart, Kmart, Target, and Fred Meyer. Wal-Mart is looking to grow. Their latest initiative, â€Å"Project Impact,† aims to make stores easier and quicker to navigate, improve customer service, and to move in on competitors' territory as much as possible. Project Impact calls for remodeling about 70% of Wal-Mart’s in the next five years, and improving sales in major competitors' fields, such as toys and crafts. Wal-Mart has more staying power and is able to dominate its competitors. Target is Wal-Mart’s closet competitor. Target is positioned well and has some staying power but Kmart was forced into bankruptcy. The implication of this on Wal-Mart’s competitors is bigger, more pleasant Wal-Marts. (Avila, 2009) How dynamic is the industry in which your company is based? Is there any evidence that innovation is reshaping competition or has done so in the recent past? The retail industry is dynamic with the previous innovation being department stores, mail order retailing and chain variety stores. However, shopping has changed. Big-box stores like Wal-Mart was influential in the evolution of retail trade, providing – among other innovative features – a one-stop convenience with low prices that many consumers seem to appreciate. (Emerald, 2006) In what stage of its life cycle is the industry in which your company is based? What are the implications of this for the intensity of competition both now and in the future? The Supercenter’s and Big Box stores are in their growth lifecycle. Led by Wal-Mart, the industry has displayed exceptional growth over the last 10 to 15 years, mostly at the expense of other retailers. What makes this unique is that the discount department store industry was perceived as being at maturity. There are signs that the industry is approaching saturation level. However, the industry is expected to do well through the recession. (Emerald, 2006) Is your company based in an industry that is becoming more global? If so, what are the implications of this changed for competitive intensity? Yes, the retail industry has become more global. Wal-Mart's international operations currently comprise 2,980 stores in 14 countries outside the United States. According to Wal-Mart's 2006 Annual Report, the International division accounted for about 20. 1% of sales. [ Wal-Mart has inventory management system that no other company is apt to come even close to competing with. This enables it to vary its inventory from store to store and across cultures Wal-Mart has gone global with its buying strategy, and it now puts Chinese suppliers in competition with suppliers from Mexico, Indonesia, Sri Lanka, as well as the United States. Globalization has changed everything by making technology and methods of production mobile, and by lowering business coordination costs. The big box discount retailers have changed the nature of global competition. (Palley, 2008) Analyze the impact of national context as it pertains to the industry in which your company is based. Does national context help or hinder your company in achieving a competitive advantage in the global marketplace? Wal-Mart has a strong economic affect in any area of the world. Wal-Mart has built an empire on a low-cost model but at the same time, Wal-Mart has faced criticism for labor practices and indirect burdens on our social and welfare programs. Some of the business practices of Wal-Mart like the employees’ wage-benefits package, and the underemployment of women and minorities are the subject of ongoing debate at the national level. Wal-Mart continues to work on its image and faces the same criticism globally as they do nationally. The reputation that Wal-Mart has here in the U. S. may hinder international expansion, but will not stop it. (USA Today, 2009) References Avila, J. D. (2009). How Wal-Mart Will Save Wal-Mart. Retrieved April 15, 2010, from B-Net Today: http://www. bnet. com/2403-13241_23-158179. html Emerald. (2006). Retrieved April 17, 2010, from Globalization's winners and losers: Lessons : http://www. emeraldinsight. com/Insight/viewContentItem. do? contentType=Article&hdAction=lnkhtml&contentId=1563323 Gross, D. ( 2008, Febuary 26). Slate. Retrieved from The Wal-Mart Puzzle: http://www. slate. com/id/2185221/ Marketing Teacher . (2000). Retrieved April 15, 2010, from SWOT Analysis Wal-Mart: http://marketingteacher. com/SWOT/walmart_swot. htm Palley, T. (2008). Manufacturing meets Wal-Mart: The Economics of Global Out-sourcing. Retrieved April 17, 2010, from Economics for Democratic and Open Societies: http://www. homaspalley. com/? p=19 Pereira, M. (2002, April ). Mike Pereira – Written Works and Opinions . Retrieved April 15, 2010, from A Case Study on Wal-Mart Stores Inc. : http://www. mike-pereira. com/subpage/docs/walmartcs. htm#ii2 USA Today. (2009). Retrieved April 17, 2010, from Wal-mart Watch: www. usatoday. com/money/†¦ /2003-11-10-walmart_x. htm Walmart. (2009). Retrieve d April 15, 15, from Our Mission: Saving people money so they can live better. : http://walmartstores. com/sites/sustainabilityreport/2009/ec_overview. html