May Lagdan / Emily Ebuna

Case 4: Walmart
Submitted by: Lagdan, May Ebuna, Emily

Submitted to: Professor Regina Dy

Submitted on October 29, 2013

Marketing Strategy & Practice

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May Lagdan / Emily Ebuna

Background
Wal-Mart Stores, Inc. operates retail stores in various formats in the United States and Internationally. It has two segments: The Wal-Mart Stores and The Sam's Club. The Wal-Mart Stores segment includes Discount Stores, Supercenters, and Neighborhood Markets in the United States, as well as Walmart.com. It offers apparel for women, girls, men, boys, and infants. They also offer hardware, electronics, home furnishings, small appliances, automotive accessories, sporting goods, toys, pet food, cameras, health and beauty aids, pharmaceuticals, jewelry, optical department and photo processing services. The Neighborhood Markets include dry grocery, meat, produce, deli, bakery, frozen foods, pharmaceuticals, photo processing, health and beauty aids, household chemicals, general merchandise, and a pet supplies departments. The Sam's Club segment comprises the warehouse membership clubs in the United States and samsclub.com. It offers electronics, jewelry, sporting goods, toys, tires, books, grocery items, and selected private labels. The company operates various retail formats in Argentina, Brazil, Canada, Germany, Mexico, Puerto Rico, South Korea, and the United Kingdom. It operates 261 Canadian Wal-Mart stores and Sam's Clubs, 11 units in Argentina, 150 units in Brazil, 88 units in Germany, 16 units in South Korea, 697 units in Mexico, 54 units in Puerto Rico, and 292 units in the United Kingdom, as well as 48 units in China under joint venture agreements.

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May Lagdan / Emily Ebuna

Wal-Mart's vision statement is, "To become the worldwide leader in retailing". Sam Walton followed this statement to become the largest retailer in the United States. He accomplished this feat by understanding what the most important aspect in selling is, the customer.

Statement of the Problem

What does Wal-Mart needs to do in order to achieve their self imposed target of holding inventory growth to half level of sales growth and to ensure that their supply chain will remain a key competitive advantage in their market segment?

Objectives
Wal-Mart will achieve an Inventory growth at a rate less than half of sales growth which is a key measure of their efficiency and continuously be advantageous in the supply chain arena as one of their key competitive edge in their market segment.

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Areas of Consideration

Strengths
Cost advantage Low price & customer-oriented Strong supply chain People are key to success

Weaknesses
Ignore store decoration Since Wal-Mart sells products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.

Opportunities
Build its own brand Put efforts on social welfare better image New locations and store types Overseas markets

Threats
Other competitors Intense price competition

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Framework

Porters Five Forces

Potential Entrants: ~Wal-Mart does not have to worry about threat to new entrants because of high barriers of entry for companies aspiring to come into the retail industry. - They have distribution channels - Access to raw materials - Allocate favorable locations Bargaining power of buyers: ~ Buyers do not have to bargain with Wal-Mart for low prices and higher quality or more services because WalMart has already established the low prices, higher quality and more services philosophy. - Every Day Low Price - Rollback - Special Buy Bargaining power of Suppliers: ~ Wal-Mart hand picks its suppliers and has a good and long standing relationship in order to maintain their pricing philosophies, every day low prices, rollback and special buy.
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Wal-Marts suppliers also know that they supply have to be good quality products. Also suppliers are put into tight spots where they have to play by the rules set up by Wal-Mart or lose their contracts they are forced to redesign everything from packaging to even sometimes telling them what it will pay for their goods. Threat of substitute products and services: ~ The ability of Wal-Mart to offer the cheapest products that meet both quality and its standards ensures that it will incur the threat of substitute products from its rival's cause they are able to meet the customer product satisfaction. Wal-Mart has an excellent customer service. - respect for individual - Excellence in the workplace - customer service - always having the lowest prices The intensity of rivalry among competitors in an industry: ~ Due to Wal-Marts size, domination in its industry there is no intensity of rivalry among Wal-Mart and its competitors in the retail industry because WalMart excels in this sector and the other like Kmart seem to be struggling to stay afloat, Target is not even half the size of Wal-mart so they dont seem to be having that big threat by their rivals.

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Alternative Course of Action

Alternative Course of Action (ACA) 1: Wal-Mart to aggressively promote RFID & CPFR adoption. Pros RFID & CPFR would reduce the instances of stock-outs at the stores. Reduce its supply chain management costs and enhance efficiency. Cons Would impose a heavy expense burden on its suppliers. Alternative Course of Action (ACA) 2: Wal-Mart to expand business overseas despite challenges Pros Foreign operations will increase Wal-Mart's growth in operating income by sales growth Cons Wal-Mart will be spending more to make International acquisitions Alternative Course of Action (ACA) 3: Offer cheaper price especially in Grocery Store. Pros: More consumers will go to the suopermarket Cons Mall can get low earnings
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Recommendation
The group recommends that Wal-Mart do the first alternative course of action. Aside from the fact that the advantages will result an increase in supply chain improvement and efficiency to Wal-Mart thus, an increase sales growth can be expected although not all suppliers, especially those small scale suppliers can adapt to these changes. The group further recommends the following: Growth remains the name of the game for Wal-Mart as the world's largest retail company prepares to achieve new levels of sales and profits in the U.S. and abroad through their expansion program. Wal-Mart should focus on building more stores, uncover more new sales opportunities and find ways to reduce expenses. This growth will take place because of their dominant market position and their deep pockets. So, by increasing organization expansion, Wal-Mart will see their profits soar. Wal-Mart is expected to achieve higher returns, not by raising prices, but through better merchandising and expense control. Wal-Mart's international operation is one of the fastest growing segments. Taking advantage of these opportunities is essential for Wal-Mart's long-term growth. The above expansion project is over the next five years. The overall world economic situation will determine WalMart's growth during that time.

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