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March 19

WAL-MART
IRSA JAVED SHUMILA ALI RABIA MEHMOOD HINA BASHIR SABBA ABBAS 08 02 33 15 27

BS 8TH (2008-2012)

PESTLE ANALYSIS OF WAL-MART STORES, Inc.


POLITICAL:
Wal-Mart has response to the hurricane was lauded even by its critics: it donated more than $20million worth of merchandise, including food for 100,000 meals, and it promised jobs for all of its displaced workers. The first supply truck to arrive at the Superdome after the hurricane came from Walmart, not from FEMA. The administrative particulars of Wal-Mart has response to the hurricane, detailed in a study by Steven Horwitz, are both fascinating and inspiring. Wal-Mart has existing distribution chain was and is able to deliver needed goods faster and more efficiently than a government agency, which (besides being inept) had no existing infrastructure to respond to the disaster. Regardless of its reputation or its value to society, Walmart is here to stay. Consumption drives our daily lives and accounts for some 70% of Americas GDP. As long as Walmart continues to increase the accessibility and quality of consumption, it will remain Americas top retailer and continue to grow. Whether or not you choose to shop at Walmart , everyone should appreciate it. Wal-Mart is the leader in retailing industry with fiscal revenue of $244.52 billion in 2003 making it the world's largest corporation. Mike reports that Wal-Mart as of 2002 had 1,283,000 employees growing at 11.2%. The above data explains that strategy of Wal-Mart is extraordinary which manages and operates over 4150 retail facilities globally. The key components of Wal-Mart (The Value Chain), which offers cheap prices than its competitors includes firm infrastructure like frugal culture, no regional offices and pleasant environment to work.

ECONOMIC:
An opportunity available to the industry is the free trade zone. When the government enters into new trade agreements with foreign countries, businesses in the United States have the ability to offer products from these countries in their stores. This simply increases the markets available to retailers. In 2009, Walmart awarded approximately $2 billion to U.S. hourly associates through financial incentives, including bonuses, profit sharing and 401(k) contributions, and hundreds of millions of dollars in merchandise discounts and contributions to the associate stock purchase plan. Walmart is the worlds largest retailer with $405 billion in sales for the fiscal year ending Jan. 31, 2010. In the U.S., Wal-Mart Stores, Inc. operates more than 4,300 facilities including Walmart supercenters, discount stores, Neighborhood Markets and Sams Club warehouses. Despite the general weakness in the world economy and the uncertain environment that prevailed, Walmart had reported sales growth of 11%, amounting to $6.4 billion. The company's associates were indeed doing the Walmart cheer in faraway places like Germany,

South Korea, China and United Kingdom. In three decades, it had grown from its rural Arkansas roots to become the world's largest company, and quite possibly the most powerful retailer .

SOCIO-CULTURAL:
Walmart stores were geared toward the low-income customer segment; headquarters were reflective of the company's tendency to be tightfisted as they were housed in warehouse style buildings with minimalist decor. Frugality was a central tenet at the company, and every associate was expected to fully adopt this value in all its manifestations. It was also said that the company is homogenizing the marketplace by letting smaller towns dictate popular culture.

TECHNOLOGICAL:
Walmart was a leader in the use of technology to maximize operational efficiency. Very early on, the company realized the value of proactive investments in technology and deployed a private satellite network. Walmart also managed much of its own logistics through a central hub-and-spoke system of warehouses and distribution centers. It was estimated that the corporate logistics handled over million loads each year. The company has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement. Customers shop at Walmart to get the best value for their money. When it comes to sustainability, they are dedicated to providing them with that same value. For Walmart, selling sustainable merchandise involves examining the entire life span of the product from the materials used in making them, to the factories or farms where they were made, to how they are used as an end-product. By bringing products like affordable organic produce, fair trade coffee, Seventh Generation, and compact fluorescent light bulbs within their each of the 176 million customers who shop in Walmart stores, It believes that it can play a powerful role in protecting our environment and our earths natural resources - and in shifting the behavior of the marketplace.

LEGAL:
Wal-Mart faces 38 state and federal lawsuits filed by hourly workers in 30 states, accusing the company of systematically forcing them to work long hours off the clock. A July 2000 internal audit of 128 Wal-Mart stores found 127 was "not in compliance" with company policies concerning workers not taking breaks. Another common complaint among corporate watch dog organizations and social responsibility organizations is that Wal-Mart discriminates against women employees. It has been reported that 65% of the company's hourly employees are women, but these workers earn 37 cents an hour less than male hourly employees for the same work. Women working at Wal-Mart make

on average 4.5 to 5.6 percent less than men for the same work. Male management trainees make an average of $23,175 a year, compared with $22,371 for women trainees. The average male senior vice president at Wal-Mart makes$419,435 a year, while the four women senior vice presidents earn an average of $279,772.Wal-Mart was ordered to pay $765,000 in fines for violating state petroleum storage tank laws at its automobile service centers in Florida. The Florida Department of Environmental Protection said Wednesday that the world's largest retailer failed to register its aboveground fuel tanks with the state and didn't install devices that prevent overflows, among other problems.

ENVIRONMENTAL:
An opportunity facing the industry is that customers want ease of shopping. To provide the ease of shopping the industry is guaranteeing that the customers will find what they want when they want it. This is supported by convenient presentation and the right level of service every time the customer shops. A threat is customer theft. Manufacturers are fighting back against customer theft by embedding paper clip sized antitheft tags, called electronic article surveillance labels, inside products and packaging called source tagging, the process offers several major benefits .For one, merchandise tagged on the factory floor during manufacture or packaging lets retail employees spend less time in the storeroom applying labels and more time on the show floor helping customers. Also, high-theft merchandise previously displayed behind glass can now sit out in the open, boosting sales significantly. Another social, cultural, demographic, and environmental threat is employee theft. Along with antitheft labels there are radio-frequency circuits that are hidden in packages and go un noticed. The only time they will go off is when the bar code scanner does not deactivate the circuit, which means they stole it. This helps to prevent the two forms of employee theft, which are sweat hearting and sliding. Sweat hearting is when the employee charges the customer less than the actual price and sliding is when the employee covers the barcode at the point of sale. Wal-Mart has been known for their customer oriented approach. Wal-Mart maintains one of the best satisfaction guaranteed programs, which promotes customer goodwill. One can return virtually any product to Wal-Mart without any problems. They simply take the product back and promptly refund the price of the product, nearly no questions asked. Perhaps the strongest aspect of Wal-Mart is in its access to distribution networks. Wal-Mart uses a system known as cross-docking. This is simply the process of continuously delivering goods to warehouses where they are sorted and distributed to their stores within one day. This enables Wal-Mart to take advantage of economies of scale with shipping trucks with full loads. This also gives Wal-Mart the ability to increase the speed of deliveries, a faster response to market demands, and a low inventory. This system has allowed Wal-Mart to decrease its sales cost by 2 to 3 percent over the industry.

It is very aggressive with respect to technology (one of the support activities) and was the first retailer to use bar codes. It uses satellite linkages to communicate with all its stores. It has integrated its POS, inventory-control, RFID, and other logistical technologies to speed product delivery, improve security (including merchandise shrinkage), and reduce costs. It has developed regional procurement centers in addition to its legendary center in Bentonville, Arkansas (known as Vendor Ville). It even has one just outside Shenzhen, China. Suppliers set up satellite offices next door to the most convenient procurement center. For example, Procter and Gamble, Wal-Marts largest supplier, has 300 employees fulltime in Bentonville. It focuses on the complete customer experience having someone welcome each customer to the store, helping them find what they are looking for, taking returns, and carrying merchandise to the customers car.

Because Wal-Mart is a retailer, not a manufacturer, its external value chain is extremely simple. It deals with a variety of vendors and sells to customers. But the secret to discovering what makes Wal-Mart great lies in examining its internal value chain. What is Wal-Marts strategy? It is the low-cost leader among mass merchandisers and operates on a scale that dwarfs its competitors. It continues to expand internationally. Its strategic activities include (1) aggressive deployment of systems and technologies that help it reduce shrinkage and internal costs, (2) its relationships with suppliers and the enormous economies of scale it achieves through hard bargaining and purchasing in large quantities, and (3) enhancing its customers experience in the store.

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