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Wal-Marts Strategic Plan



Presented By
Samantha Akkad, Tina Chelune, Christina Coppola,
Serina Lacey and Amanda Sentelle

BMGT495-7380
University of Maryland; University College
Professor Christian Berger
November 22, 2011






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Table of Contents
Company Background 3
Vision & Mission Statement 3
Industry Analysis 4
Competitive Analysis 5
Financial Analysis 6
SWOT & QSPM Analysis 6
Strategy Recommendation 7
Action Plan 9
Conclusion 10
Appendix One- External Factor Evaluation Matrix for Walmart 11
Appendix Two- Internal Factor Evaluation Matrix for Walmart 12
Appendix Three- Walmarts Competitive Profile Matrix (CPM) 13
Appendix Four- Financial Ratios 2010 Fiscal Year 14
Appendix Five- Walmart SWOT Matrix 15
Appendix Six- Porter Five Forces Model 16
Appendix Seven-Action Plan 17
References 18

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Company Background
Wal-Mart was founded in 1962 by Sam Walton with the first store opening in Rogers,
Arkansas. Incorporated on October 31, 1969 and became publicly traded in 1972. What Sam
Walton set out to accomplish when opening the first Wal-Mart store in 1962 was to save people
money and to help them live better. Wal-Mart serves customers more than 200 million times per
week at over 9,800 retail outlets located in 28 countries (Walmart, 2011). Retail outlets offer a
wide variety of products, with stores having over 30 departments of general merchandise and full
service grocery outlets. This has made Wal-Mart a leader in the general merchandise industry as
well as a top competitor in the grocery industry.
Vision & Mission Statement
The mission statement of Wal-Mart reflects the purpose that Sam Walton set out to
accomplish in 1962. Wal-Marts mission statement is simple and straight forward: Saving
people money to help them live better was the goal that Sam Walton envisioned when he opened
the doors to the first Walmart

. This focus drives everything we do at Walmart. And, for the


millions of customers who shop in our stores around the world each week, it means they can
trust that our brand means we have everyday low prices. (Walmart, 2011).
According to essential components of a mission statement, there are minor changes that
could be made to enhance the current mission statement. Below is the enhanced mission
statement, followed by reasons for some of the changes recommended.
To save people money so they can live better by becoming a one-stop shop for all their
needs. Improving customers shopping experience with up-to-date technology while
reinvesting our profits for future growth and prosperity. Creating inspired employees and
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offering a wide variety of quality products at low prices; all while being environmentally
friendly and supporting the communities we are located in.
Wal-Marts current mission statement is simple and mentions nothing about what is sold or
offered to customers. An improvement would be: by becoming a one-stop shop for all their
needs. Wal-Mart addresses nothing about technology but should include improving customers
shopping experience with up-to-date technology. Once more, Wal-Marts mission statement
lacks concerns for growth and profitability; so another change is: reinvesting our profits for
future growth and prosperity. Wal-Marts mission statement lacks concern for public image, so
the following is proposed: all while being environmentally friendly and supporting the
communities we are located in. The company does not currently have a vision statement, but the
mission statement can effectively guide employee behavior and decision making to integrate
company values into all aspects of the business.
Industry Analysis
Wal-Mart has many internal and external factors that are key to being successful. The
three important opportunities effecting Walmart are to increase online sales, open new
stores/supercenters and offer a wider variety of items. Without opening new stores, Wal-Mart
stands to lose market share. Increased demand for lower prices and product variety has driven
consumers to internet shopping. Wal-Mart needs to focus on marketing to these customers in
order to retain business from consumers not visiting retail stores. Wal-Mart also needs to focus
on converting regular stores to supercenters to provide more product variety. Some threats that
Wal-Mart faces: fierce competition from competitors. Increases in raw material prices pose a
threat to Wal-Mart as products rise in price if raw materials increase. Wal-Mart faces the threat
of government intervention in trade. This could affect the relationship with suppliers and cause
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higher prices if tariffs are imposed. Depressed economies have caused lower consumer spending.
With less spending, consumers are substituting brand name products with cheaper products. The
external factor evaluation for Wal-Mart shows that strategists need to focus on many of the
opportunities that could increase sales and need to be aware and manage external threats.
There are also internal factors that help executives make the best decisions about projects.
First, the income and sales figures increasing is a central factor. Without increased revenues, the
company will not have funding to expand or convert outlets into superstores. The strong global
supply chain that Wal-Mart has is also vital; without these relationships Wal-Mart would not be
able to provide low priced products. Limited access to international markets is a weakness that
Wal-Mart faces because currently most of the market share is centered in the US. Another
weakness is high turnover rate of employees which causes gaps in customer service and loss of
customers. High inventory levels cause large amounts of cash to be tied up, which prevents
expansion. Therefore, Wal-Mart has many strengths and weaknesses that can help strategists
plan for current and future business ventures.
Competitive Analysis
The Porter Five Forces model indicates several areas of high level concern. Rivalry
among competing firms, potential for substitute products, and bargaining power of consumers
are all high. Entry of new competitors is an area of lesser concern due to high barriers entering
the industry. Suppliers are a midlevel concern due to competition and risk when dealing with
suppliers abroad. Upon studying the competitive profile matrix, Wal-Mart has the highest
weighted score when compared to competitors. Wal-Mart leads the way in the most important
factors, including advertising and global expansion. Target is a large competitor that should be
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followed closely. In product quality, Target appears to be the highest, but Wal-Mart has the best
score in market share (See Appendix 3).
Financial Analysis
Many of Wal-Marts financial ratios can forecast the companys future performance. (See
Appendix 4). The quick and current ratios show some concern that Wal-Mart will not be able to
meet all short term obligations. With low ratios in these areas the company shows that it cannot
meet short term obligations without depending on constant sales of inventories. The assets and
liabilities to net worth ratios show that while Wal-Mart is only slightly higher than desired, it
could put the companys creditors at risk in a situation where sales fall. The assets to sales ratio
shows that Wal-Mart is moving their inventory at a normal speed compared to the industry
average. Low percentage in the accounts payable to sales ratio shows Wal-Mart is not using
suppliers to finance operations. With low return numbers in the profitability ratios, Wal-Mart is
not in a position to handle downturns in sales without running the risk of financial trouble.
Overall, Wal-Marts financials and ratios show the company has increased profits over
the last ten years, there is still work needed to improve their financial position. If these changes
are not made, any recessionary periods could cause Wal-Mart to breakdown financially and
default on payments. Wal-Mart needs to develop new strategies to increase sales.
SWOT & QSPM Analysis
Wal-Mart represents powerful retail brand as noted in the SWOT Analysis in Appendix
Five. Their strong brand presence, customer loyalty, and drive to expand globally can help the
company to grow. Because Wal-Mart is trying to obtain an international presence, the focus on
improving their internal weaknesses so that opportunities do not bypass them is vital. To do this,
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increasing the online presence should offset their high inventory. Wal-Mart could penetrate the
international market with their discount retail chain.
Wal-Mart can take advantage of their strengths in order to reduce the impact of external
threats. The company could use their brand image and low prices to market to different segments
of consumers. They could look at backward integration to get even lower prices on goods for its
customers. As a part of the WT strategy, they could look into products that are being made in the
U.S. to provide more jobs to Americans and to avoid unethical labor laws abroad. Lastly, they
could offer those living in small towns better jobs and benefits in order to gain their approval of
entering their community with new retail outlets.
According to the QSPM analysis, Wal-Mart should focus on backward integration in
order to better control their suppliers. By doing so, Wal-Mart could reduce the cost of producing
goods to consumers. Consumers will get more for their money as reduced manufacturing costs
reflect prices in stores. Also, Wal-Mart can use backward integration in order to build
relationships with suppliers who manufacture higher quality goods. Consumers today want low
prices, but also want quality products that will last.
Strategy Recommendation
For Wal-Mart to maintain its title as a retail leader, it must constantly develop and
implement new strategies to address present and future obstacles. CNN Money recently stated
that Wal-Marts, chief rival Target has been beating Wal-Marts prices on some groceries and
household products (Kavilanz, 2011). This intense competition illustrates the need for Wal-
Mart to develop alternative strategies, in areas of integration, intensity, and diversification.
Integration strategies allow Wal-Mart to gain capable suppliers, acquire mergers and
acquisitions, and remain competitive amongst their rivals. Wal-Mart should consider both
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backward integration and a horizontal integration. A backward integration allows Wal-Mart to
increase control of the firms suppliers. This benefits the organization by reducing costs,
increasing quality, and gaining greater control of suppliers. Horizontal integration allows Wal-
Mart to benefit from mergers and acquisitions.
Wal-Mart can benefit from intensive strategies through the use of market penetration,
market development, and product development. Wal-Mart has an edge over its competitors
through market penetration by running marketing ads and offering discounts or rollbacks.
Market development can benefit Wal-Mart through entrance into emerging markets. Lastly, Wal-
Mart can focus its effort in product development to increase the quality of its products. Next,
Wal-Mart should consider related and unrelated diversification to continue its mission to be a
one-stop-shop for customers. These approaches allow Wal-Mart to remain competitive by
offering a wider variety of products, brands, and services. A greater variety of options available
in one location offers convenience to customers and increases revenues.
Strategy selection must be based on the incorporation of several factors. The financial
analysis gives a picture that Wal-Mart should better position itself to address financial
obligations and work to increase sales. This is supported by the fact that, Wal-Mart has
struggled with seven straight quarters of sales declines in its stores. (Kavilanz, 2011) Thus,
when determining a strategy, the organization must consider its financial flexibility and the
effects it faces in sales from the economic recession.
Wal-Mart can benefit from opportunities such as increasing online shopping, opening
new stores and supercenters, and offering a wide variety of products. Therefore, Wal-Mart
should focus on further expansion of its online shopping and greater entrance into new markets.
Wal-Marts products can be enhanced through greater availability with online shopping. The
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website currently offers over, 1,000,000 products, plus easy-to-use music downloads, and one
hour photo service. (Walmart, 2011) Wal-Mart should seek opportunities for mergers and
acquisitions with retailers in markets such as India or China. Wal-Mart has only 352 retail units
in China and 9 in India. (Walmart, 2011) This is minimal when compared to over 30,000
locations in the US. Wal-Mart must utilize strategies of horizontal and backward integration,
market development, and product development. The objective is to offer a variety of low priced
consumer goods to global markets, both in store and online, and reduce dependence on only a
few markets areas.
Action Plan
Wal-Mart will continue to refine the e-commerce website by adding products daily, as
well as include new services like online books and movies. The forecasted sales from these
services range from $25 to $45 billion. Wal-Mart should invest in training managers to be sent
overseas to work with international suppliers. This would bridge the gap in communication with
leadership and provide greater efficiency, decreases in excess inventory, and increased profits.
These profits are achieved by clearer communication, less error in product development, reduced
manufacturing costs, and hands on information about production processes (Zager, 2009). These
changes have a combined net profit of over $10.5 billion dollars and should take about three
years from application to evaluation. The risks include the costs of making new online products
and services available, and the threat of increased taxes and tariffs. The plan is to mitigate these
risks first by ensuring R&D provides detailed information about the potential profits from adding
the new products and services. By conducting thorough research on the countrys business
standards and confirming that the benefits outweigh the costs, additional risks will be minimized.
Building a good rapport with manufacturing countries and their management will avoid risks. To
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determine the timeline of events, task assignments, specific metrics, risk and risk mitigation
please refer to Appendix Seven.
Conclusion
While developing a strategic plan to address Wal-Marts objectives for the future, several
factors must be considered. These include financial constraints, growing competition, economic
downturn, and growing threats of government interventions in trade. Despite this, the
organization must work to seize opportunities in the areas of online shopping, new global stores
and supercenters, and offering an increased variety of products online. Therefore, collaboration
of the two strategies of backward integration and related diversification of products must be
used. The related diversification strategy allows Wal-Mart to provide more services and products
on their website which increases on-line sales. Similarly, backward integration, allows Wal-
Mart to develop stronger relationships with suppliers in an effort to reduce costs.
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Appendix One
External Factor Evaluation Matrix for Walmart
Key External Factors Weight Rating Weighted
Score
Opportunities
1. Increase online shopping .10 3 .3
2. Economic conditions cause greater demand for
low priced products
.07 2 .14
3. Increased use of mobile/social marketing to
increase purchasing by consumers
.05 2 .10
4. Growth plan to open new supercenters in US &
abroad
.10 4 .40
5. Conversion of regular stores into Supercenters .08 3 .24
6. Wide variety of products available to consumers .10 3 .3
7. Decline in consumer loyalty to one store for
needs based purchases
.05 2 .10

Threats
8. Increased competition from online retailers .07 4 .28
9. Product substitution .05 2 .10
10. Economic Downtown-lower consumer spending .07 2 .14
11. Raw material increases can cause product price
increases
.07 3 .21
12. Government regulations on trade/importing .04 2 .08
13. Political problems in foreign governments .04 2 .08
14. Currency Fluctuation .04 2 .08
15. Consumer opposition to opening new stores in
small towns
.07 1 .07

Total 1.0 2.62


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Appendix Two
Internal Factor Evaluation Matrix for Walmart
Key Internal Factors Weight Rating Weighted
Score
Strengths
1. Powerful Retail Brand .08 4 .32
2. Diverse Workforce .05 3 .15
3. Competitive Benefits Package .05 4 .20
4. Provide thousands with first job/skills training
each year
.03 3 .09
5. 75% of store managers were promoted from
within
.05 3 .15
6. Sales and Net Income increased over past 10
years
.10 4 .40
7. Strong buyback program for stock with over 1
million shares being purchased back each year
.07 4 .28
8. Strong Global Supply Chain .09 4 .36

Weaknesses
9. High levels of inventory .07 1 .07
10. Sell products manufactured in countries with
unethical labor laws
.04 2 .08
11. Strong consumer dislike for putting smaller
community retailers out of business
.05 1 .05
12. Many part time staff not receiving benefits .04 2 .08
13. Standardized approach for each country .04 1 .04
14. Sensitive to government trade regulations .06 1 .06
15. Limited access to international markets .09 1 .09
16. High employee turnover rates .09 1 .09

Total 1.0 2.51


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Appendix Three
Walmarts Competitive Profile Matrix (CPM)

Walmart Target K-Mart
Critical Success
Factors
Weight Rating Weighted
Score
Rating Weighted
Score
Rating Weighted
Score
Advertising 0.20 4 0.80 3 0.60 2 0.40
Product Quality 0.10 2 0.20 4 0.40 3 0.30
Price
Competitiveness
0.10 1 0.10 1 0.10 1 0.10
Management 0.50 3 0.15 4 0.20 3 0.15
Financial
Position
0.10 4 0.40 3 0.30 2 0.20
Customer
Loyalty
0.10 4 0.40 3 0.30 1 0.10
Global
Expansion
0.10 4 0.40 1 0.10 2 0.20
Inventory
Systems
0.10 3 0.30 3 0.30 3 0.30
Market Share 0.05 4 0.20 3 0.15 2 0.10
Customer
Service
0.10 3 0.30 4 0.40 3 0.30
TOTAL 1.00 3.25 2.85 2.15


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Appendix Four
Financial Ratios 2010 Fiscal Year
Ratios Walmart Industry
Quick Ratio .2 .7
Current Ratio .9 2.9
Current Liabilities to Net Worth 31.2% 34.9%
Total Liabilities to Net Worth 59.9% 53.7%
Fixed Assets to Net Worth 82.5% 26.1%
Collection Period Days 4 Days 4.8 Days
Sales to Inventory Ratio 11.62 5.1
Assets to Sales Ratio 42.8% 45.2%
Sales to Net Working Capital 64.00 5.1
Accounts Payable to Sales Ratio 7.9% 4.9%
Return on Sales Ratio 4.0% 2.2%
Return on Assets Ratio 9.4% 5.3%
Return on Net Worth Ratio 24.8% 9.3%
(Forbes.com, 2011)


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Appendix Five
SWOT Matrix
Strengths Weaknesses
1.Powerful Retail Brand 1. High levels of inventory
2. Diverse Workforce 2. Sell products
manufactured in
countries w/ unethical
labor laws
3. Competitive Benefit Package 3. Putting smaller retailers
out of business
4. Provides thousands of jobs 4. Standardized approach
and skills training
5. 75% of store managers 5. Sensitive to government
promoted from within trade regulations
6. Sales & Net Income 6. Limited access to int'l
increased over past 10 yrs. Markets
7. Strong global supply chain 7. High employee
turnover rate

Opportunities SO Strategies WO Strategies
1. Increase online shopping 1. Mergers and acquisitions 1. Increase online
presence to offset high
inventory
2. Demand for low price 2. Use social media to increase 2. Open new stores
products brand image and loyalty globally
3. Increased use of social 3. Use benefit package to
marketing to reach consumers facilitate growth in market
4. Growth plan for supercenters in
U.S. and abroad
5. Conversion of regular stores
into supercenters
6. Wide variety of products
7. Decline in consumer loyalty
to one store for necessities

Threats ST Strategies WT Strategies
1. Increased competition from 1. Use brand and "rollback" 1. Manufacture more in
online retailers to bring in customers the U.S.
2. Product substitution 2. Use backward integration 2. Create a more sound
to reduce costs market globally
3. Economic downturn-lower 3. Supply jobs to small towns
consumer spending to gain loyalty to brand
4. Raw material increase can
cause product price increase
5. Political problems in foreign
governments
6. Currency fluctuation
7. Opposition of new stores in small
Towns
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Appendix Six
Porter Five Forces Model


Rivalry among
competing firms

Potential entry of new competitors:
We should always be on the lookout for new
companies entering the market. Barriers to this
industry are low due to many on-line stores that can
reach out to a very broad audience. Some on-line
grocery stores deliver directly to peoples homes
which can be a potential threat to Wal-Mart.
Potential development of substitute
products:
Although Wal-Mart has cheaper
products, we can easily have items
substituted by other stores; therefore,
potential threat of substitutes is
relatively high. Wal-Mart offers name
brand clothing in our stores for less than
other retail stores. In contrast, many
retail stores are now offering rewards to
shop. Consumers may just substitute
Wal-Marts prices to get the rewards
from other stores.
Bargaining power of consumers:
This is very high because of the current state of the economy.
Consumers are shopping around more in hopes to find the same
items for less. Consumers can easily compare item pricing on-line
or from their phone. This can hurt store loyalty but the consumer
wants the best prices available to them.
Bargaining power of suppliers:
Wal-Mart should be working hand in
hand with their suppliers in an effort to
benefit both Wal-Mart and the supplier.
Wal-Mart can shop around for suppliers
who meet their standards, but this may
not be easy to come by especially since
they need many different suppliers due
to their wide variety of merchandising.
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Appendix Seven
Action Plan
Metrics Related Diversification (Expanding Online Shopping Services)
Sales over 18 month period should range from
$25,000,000 to $450,000,000
Industry averages on similar sales during the
same 18 month period
Backward Integration
Supply costs decrease 10% in first year
Reduce error in product development to 2%
Reduced manufacturing costs by 9%
Overall product price decrease 6%
Excess inventory decrease by 11%
Risks &
Corresponding
Risk Mitigation
Plan
Risks
Costs of making
new online
products/services
available
Threat of increase
taxes and tariffs for
moving
management
overseas
Corresponding Risk Mitigation Plan
Ensure R&Ds projected profits for
adding new products/services
outweigh costs
Conduct thorough research on the
countries business standards for such
a move of American workers and
ensuring benefits outweigh the costs,
as well as build good rapport with
manufacturing countries and leaders

Year 1 Year 2 Year 3
R&D to start on new online services and find requirements
for sending Management overseas (18 m.)

Seek contracts with publishers and
movie studios to offer books and
movies online. (18 m.)

HR to hire/select employees to work with suppliers
overseas and determine whether to contract training or
create it (1 yr.).
Web designers post new products/
services online (18 m.)
Begin training overseas management
(18 m.)

HR to relocate management
to global suppliers (1 y.)
Finance measures growth
to forecasts and reports to
CEO (1yr.)
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References
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period=qtr
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