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Wal Mart Stores Inc

Compulsory assignment for the completion of thesis course at Carleton University\'s, Sprott School of Business. This strategic management presentation, displays understanding of the chosen corporation (Walmart), as well as its industry, and strategic objectives. Lastly, this presentation offers strategic alternatives based on weakness assessed.

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Wal Mart Stores Inc

  1. 1. Wal-Mart Stores Inc.<br />Strategic Management Final Presentation<br /> Patricia D’Amato David Chrystal Tim Hall<br />
  2. 2. The New Age of Wal-Mart<br />
  3. 3. Agenda<br />Company Overview<br />Marco Environment Overview <br /> Technological<br /> Economic<br /> Social<br /> Political<br />Industry Overview (Porter’s Five Forces)<br />Value Chain Analysis<br /> Primary Value Creating Activities<br /> Secondary Value Creating Activities<br />Corporate Strategy<br />Business Strategy<br />Recommendations<br />
  4. 4. Company Overview<br />Wal-Mart was founded in 1962 by Sam Walton<br />Largest global corporation by revenues<br />Largest market share of total global retail<br />Operates in 16 countries globally<br />Ranked top three in both Forbes and Fortune 500 for past 5 years<br />
  5. 5. Technological Environment<br />OPPORTUNITY<br />Trend One: Increasing use of Radio Frequency Identification (RFID)<br />Source: Pennsylvania State University <br />
  6. 6. Technological Environment<br />OPPORTUNITY<br />Trend Two: Increase in Online Shopping and E- Commerce<br />
  7. 7. Economic Environment<br />OPPORTUNITY<br />Trend: Decreasing Disposable Income<br /><ul><li> On Black Friday 2009, 43% of US consumers shopped at Wal-Mart</li></ul>Growth Rate of Per Capital Disposable Income<br />Source: EuroMonitor<br />
  8. 8. Socio-Cultural Environment<br />OPPORTUNITY<br />Trend: Unequal Wealth Distribution<br />
  9. 9. Political-Legal Environment<br />OPPORTUNITY<br />Trend: Strict Environmental Legislation <br />United States <br /><ul><li>Passed Legislation American Clean Energy and Security Act 2009
  10. 10. Proposed Legislation thePlastic Bag Reduction Act</li></ul>Europe<br /><ul><li>The 20/20/20 plan in Europe: Reduction of emission by 20%, 20% renewable energy and a 20% increase in energy efficiency – by 2020</li></li></ul><li>Key Trends<br />1. Economic<br />Decreasing GDP<br />Unemployment<br />Reduced Consumer Disposable and Discretionary Income<br />Increased revenue for Discount Retailers<br />2. Political Legal<br /><ul><li>Strict Environmental Legislation</li></ul>Increased costs for large discount retailers<br /><ul><li>Increasing Consumer Environmental Awareness</li></ul>Increased Revenues for firms which follow “green” movement<br />
  11. 11. Strategic Group Map USA<br />Price<br />Convenience Stores<br />Industry Annual Sales of $200B<br />Department Stores<br />Macy’s: $24,892B <br />Saks: $3,029B<br />Local Stores<br />Discount Superstores (National Brand)<br />Target Corp.:$64 948B<br />K-Mart (Sears Holding Corp): $15,901B<br />Supermarkets<br />Walgreens: $59 034B<br />Kroger Co.: $70,235B<br />Hypermarkets<br />Wal-Mart Inc: $ 239.5B<br />Super Target (Target Brand)<br />Small Discount Stores<br />Dollar General Stores Inc: $9,495B<br />Family Dollar Stores Inc: $6,984B<br />Warehouse Superstores<br />Costco Corp.: $72,483B<br />B.J’s Wholesale Club: $10, 027B<br />Product Diversity<br />Note: All Figures from Mergent Online<br />
  12. 12. Strategic Group Map Europe<br />ConvenienceStores<br />One Stop Convenience Stores – Owned by Tesco<br />Local Stores<br />RetailStores<br />Argos–£4,282million Pounds (2009)<br />Price<br />Supermarkets<br />Wm Morrison Supermarkets : £14,528 million (2008)<br />Sainsbury’s Supermarket Ltd. £18,911 million (2008)<br />Hypermarkets<br />Tesco – £54,327 million (2008)<br />Asda Wal-Mart Superstores: £24,442 million (2008)<br />Product Diversity<br />Note: All Figures from Mergent Online<br />
  13. 13. Strategic Group Map Latin America<br />Specialty StoresMilano $4.5B<br />Department StoresEl Puerto de Liverpool $38B<br />Price<br />Local Stores<br />Convenience Stores<br />OXXO $45B<br />7 Eleven $5B<br />Hypermarkets<br />Wal-Mart Supercentre $70B<br />Hypermercado Soriano $67B<br />Mega Comercial Mexicana $19B<br />Supermarkets<br />Mercado Soriana $7B<br />Comercial Mexicana $15B<br />Superama (Wal-Mart) $13B<br />Warehouse Superstores<br />Sam’s Club $65B<br />Costco $12.5B<br />Product Diversity<br />Note: All Figures from Mergent<br />
  14. 14. Rivalry 6/10<br />Source: EuroMonitor<br />
  15. 15. Rivalry 6/10<br /><ul><li>Hypermarkets are a “one-stop-shop” for consumer goods</li></li></ul><li>Rivalry 6/10<br />
  16. 16. Threat of New Entrants 2/10<br />Capital Costs Associated with Hypermarket Discount Retail<br />Source: 2008 Financial Statements, reported in millions USD<br />
  17. 17. Substitutes 3.5/10<br />Source: GMID<br />
  18. 18. Power of Suppliers 2.5/10<br />Over 100,000 global suppliers in industry<br />Large retail market share of firms results in suppliers being “price takers” <br />Suppliers dependant on revenues from large discount retailers<br />Domestic suppliers in US, powerless due to threat of switching to foreign supplier<br />The New York Times reports : <br />“Wal-Mart pressured Coca-Cola into the production of a diet soft drink sweetened with Splenda, as its customers preferred it over aspartame.”<br />
  19. 19. Power of Buyers 4.5/10<br /><ul><li>Individual buyers have little power in this industry as prices are the lowest possible
  20. 20. The switching costs to buyers is high, as they will almost always pay more at another retail outlet
  21. 21. Buyers also lose the convenience of one-stop-shop
  22. 22. Buyers with limited disposable income often do not have an option</li></li></ul><li>Summary<br />Overall Attractive Industry<br />
  23. 23. Driving Force<br />1. Globalization of the hypermarket industry<br />Industry is rapidly growing (7.6% over past 5 years)<br />Increasing rivalry in this industry <br />Supplier power further eroded<br />Substitutes becoming a lessening factor<br />
  24. 24. Supply Chain Management and Distribution<br />STRENGTH<br />Source: Mergent Online<br />
  25. 25. Supply Chain Management and Distribution<br />STRENGTH<br />Source: Mergent Online<br />
  26. 26. Supply Chain Management and Distribution<br />STRENGTH<br />Source: Mergent Online<br />
  27. 27. Operations<br />WEAKNESS<br />Source: Mergent Online<br />
  28. 28. Marketing and Sales<br />STRENGTH<br />Source: Calculated from WMT, TGT, and CARR annual statements<br />
  29. 29. Marketing and SalesStrength in Simplicity<br />STRENGTH<br /><ul><li>Promotions utilize: print, television, internet, and direct mail ads.
  30. 30. Include “real people”
  31. 31. Entirely price driven </li></ul>Source: 2009 WMT Annual Statement<br />
  32. 32. Customer Service<br />WEAKNESS<br />Source: The American Customer Satisfaction Index<br />
  33. 33. Human Resource Management<br />Weakness<br />Source: Mergent Online<br /><ul><li>Anti- Union corporate sentiment
  34. 34. High employee turnover (44% WMT vs. 17% COST)
  35. 35. Low average employee wage</li></li></ul><li>Research and Development<br />STRENGTH<br /><ul><li>R & D shown as non-applicable on financial statements for Wal-Mart and largest competitors
  36. 36. Product and Shipping R & D is responsibility of supplier</li></ul>“…they [Wal-Mart] seem quite serious about expanding their ruthless pursuit of supplier efficiency to encompass greener goals.”<br /><ul><li> Package Modeling Software used to reduce carbon footprint ($900 annually)
  37. 37. Environmentally friendly centers opening; Burlington</li></li></ul><li>Corporate Leadership<br />STRENGTH<br />
  38. 38. Corporate Leadership<br />Strength<br />Source: Mergent Online<br />
  39. 39. Summary of Value Chain<br />
  40. 40. Core Competencies<br />Corporate Leadership<br /><ul><li> Industry leader for ROA, ROI, ROE, Market Cap
  41. 41. Wal- Mart 2009 industry leader in ROIC</li></ul>WMT 13.42%, <br />COST 9.62% <br />TGT 8.6%<br />
  42. 42. Corporate Level Strategy<br />Vertical<br /><ul><li>No vertical integration strategy
  43. 43. 100,000 global suppliers for 8,000 stores eliminates need for potential integration in supply chain processes</li></ul>Horizontal<br />Expansion through acquisition is primary focus:<br /><ul><li> 1991: Foreign expansion begins in Mexico
  44. 44. 1994: Canada (Woolworth Corporation)
  45. 45. 1996: China -- Greenfield Venture
  46. 46. 1997: Germany (Wertkauf Hypermarkets)
  47. 47. 1999: UK (Asda Supermarkets)
  48. 48. 2002: Japan (Seiyu Ltd.)</li></li></ul><li>Corporate Level Strategy<br />Geographic<br />Source: WMT 2009 annual statement<br />
  49. 49. Corporate Level Strategy<br />Geographic<br /><ul><li>Wal-Mart has expanded globally into 16 nations, in the past 20 years
  50. 50. International focus targeted towards developing markets.
  51. 51. Follows a global strategy
  52. 52. Highly standardized, “Hyper American” business model</li></ul>Source:2009 WMT Annual Statement<br />
  53. 53. Problems with Current Strategy<br />American Business Model Not Successful Internationally<br /><ul><li>Failed ventures in Germany (2006) and South Korea (2006) due to inability to respond to local markets
  54. 54. Local response in Germany: “Highly bizarre corporate culture”
  55. 55. Resulted in $1 billion loss in Germany</li></ul>Imbalanced Chinese Relations <br /><ul><li>Domestically, a large portion of merchandise imported from China
  56. 56. Strength and success has grown contingent on a strong USD and cheap Yuan
  57. 57. Wal-Mart China has not earned a profit for 12 years, labour has successfully unionized, and WMT has announced mass layoffs</li></li></ul><li>Business Level Strategy<br />Cost-leadership approach<br />Efficient use of value chain to minimize cost essential<br />Business Units Include:<br /><ul><li>Wal-Mart Supercentres
  58. 58. Sam’s Club
  59. 59. Wal-Mart
  60. 60. Neighbourhood Market</li></ul>Source: 2009 WMT Annual Statement<br />
  61. 61. Business Level Strategy<br />
  62. 62. Problems with Current Strategy<br />Poor Labour Relations<br /><ul><li> Average FT Wal-Mart associate earns $10.84/hour - or an annual income of $19,165; approx. $2000 below the Federal Poverty Line (US)
  63. 63. Due to violations of labour legislation, firm settled 63 class action law suits in 2008
  64. 64. Settlement is a reported $640 million (2008)
  65. 65. Anti- Union sentiment has lead to unhealthy corporate culture</li></ul>Poor Customer Satisfaction <br /><ul><li>Index ratings suggest the worst customer satisfaction in the industry
  66. 66. Perceived lowest quality in the industry</li></li></ul><li>RecommendationsCorporate Level<br />Adopt Transnational Strategy<br /><ul><li>Divert from current ”American” model to better serve customers abroad
  67. 67. Respond and focus on local markets
  68. 68. Proper due diligence in international ventures</li></ul>Decrease Dependence on China<br />Look to other emerging markets <br /> (i.e. India) for imports <br />
  69. 69. RecommendationsCorporate Level<br />Population by Age<br />Source: GMID<br />
  70. 70. RecommendationsBusiness Level<br />Improve Corporate Social Responsibility<br />Adopt stakeholder business approach<br />Utilize “triple bottom line” means to measure success<br />Raise employee wages <br />Establish goals to employ minority groups and women<br />
  71. 71. Thank you for Listening!!<br />Any Questions??<br />