176234853 case-study

Wal-Mart Strategic Audit
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STRATEGIC AUDIT OF
WAL-MART STORES, INC.

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Prepared by:
AQUINO, ANALIZA DOCTOR
BERNARDO, BERGA GASMEN
DACUMOS, SUNSHINE NARAG
IBIS, MONIQUE ACEBEDO
PASCUAL, KRISHA ULEP
SIBAL, MARIEFLOR PAMITTAN
VILLON, JHON MARK SANTOS
Submitted to:
MARY GRACE T. DELELIS
OVERVIEW1
Wal-Mart was founded in 1962 by a man named Samuel Moore Walton. He was
considered “one of the most influential retailers of the century” (Wheelen & Hunger, 740). Sam
Walton started his retail career in management in 1940 with J.C. Penney Co. His training and
hard work at J.C. Penney Co. led him to his great Wal-Mart idea. He decided that small town
populations would welcome, and make profitable, large discount shopping stores. When Sam
Walton created Wal-Mart in 1962, he declared that three policy goals would define his business:
“respect for the individual, service to customers, and striving for excellence”
Wal-Mart stores “sold nationally advertised, well-known-brand merchandise at low
prices in austere surroundings” (Wheelen & Hunger, 738). The 1970’s marked significant
growth for Wal-Mart with its first Wal-Mart Distribution Center as well as the Wal-Mart Home
Office. By the end of 1979, there were 276 Wal-Mart stores in 11 states and in 1991, the firm
had 1,573 stores in 35 states to include the international market. Wal-Mart sales growth
continued into the 1980s. Wal-Mart was divided into three business segments: Wal-Mart stores,
Sam’s Clubs, and the International Division.
In 1983 the company opened its first three Sam's Wholesale Clubs and began its
expansion into bigger city markets. Wal-Mart Supercenters were large combination stores that
included a full-line grocery center, a general merchandise discount store, banks and some even
1
Wheelen, Thomas L., and J. David Hunger. Strategic Management and Business Policy.
Upper Saddle River: Prentice, 2010. Print.

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offered a food court of restaurants. Wal-Mart’s international expansion accelerated
management’s plans for expansion and notoriety. In 2000, Fortune magazine named it as one of
the “100 Best Places to Work” and in 2002, “Wal-Mart officially became the world’s largest
company based on its $245 billion in sales”
Wal-Mart’s winning strategy in the United States was based on selling brand products at
low cost while still offering the customer a quality product. Wal-Mart is in the business of
selling everything customers need in their everyday lives. This includes the consumer goods
listed above as well as food-service items.
Wal-Mart took pride in its domestic strategies and programs that were based on a set of
two priorities:
1) “Customers would be provided with what they want, when they want it, all at a value”.
2) “Treating each other as we would hope to be treated, acknowledging our total dependency on
our Associate-partners to sustain our success”
In the year ending January 31, 2006, Wal-Mart’s financials reflected the following:
(all dollar amounts are in millions)
 Total revenue - $315, 654
 Net income - $11,231
 Total assets - $138,187
 Total liabilities - $48,826
 Total shareholder’s equity - $53,171.
According to the 2006 consolidated balance sheets total liabilities and shareholders’ equity
equaled $138,187 not just totals shareholders’ equity as previously shown.
I. CURRENT SITUATION
A. Current Performance
Wal-Mart is divided into three business segments: Wal-Mart Stores, Sam's Club, and the
International Division. In 2002, “WM officially became the world’s largest company based
on its $245 billion in sales.” As of January 31, 2006, the company had over 6,100 stores
worldwide, bought products from 70 countries, and 20% of its business was generated
outside of the United States.
In its 2006 fiscal year sales, it yields $312.4 billion, a 9.5% year over year increase
which resulted to a $11.2 billion net income, up 9.4% to $2.68 per share. The stock price is
$46.11, down from $56.98 on January 31, 2002. These results are due to better competition
and future expected growth slowdown.
B. Strategic Posture
1. Mission
Wal-Mart Stores, Inc. is a global retailer committed to improving the standard of
living for our customers throughout the world (Annual Report 2006). Wal-Mart’s advertised
mission statement and its advertising slogan are the same:

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“We save people money so they can live better.”
In addition to this mission statement, the company looks to its founder, Sam Walton
for a company “purpose”:
“If we work together, we’ll lower the cost of living for everyone...we’ll give the world an
opportunity to see what it’s like to save and have a better life.”
2. Objectives
 Comparative store sales is a measure which indicates the performance of our existing
stores by measuring the growth in sales for such stores for a particular period over the
corresponding period in the prior year.
 Operating income growth greater than net sales growth has long been a measure of
success for us.
 Inventory growth at a rate less than that of net sales is a key measure of our
efficiency.
 With an asset base as large as ours, we are focused on continuing to make certain our
assets are productive. It is important for us to sustain our return on assets (Annual
Report 2006).
3. Strategies
 We have developed several initiatives to help mitigate this pressure and to grow
comparable store sales through becoming more relevant to the customer by creating a
better store shopping experience, continual improvement in product assortment and
an aggressive store upgrade program to be instituted over the next 18 months.
 Our expansion programs consist of opening new units, converting discount stores to
supercenters, relocations that result in more square footage, as well as expansions of
existing stores.
 Sam’s Club - We believe that a greater focus on providing a quality in-club
experience for our members will improve overall sales, including sales in these
categories.
 International – A shift in the mix of products sold toward general merchandise
categories which carry a higher margin (Annual Report 2006).
4. Policies
 We earn the trust of our customers every day by providing a broad assortment of
quality merchandise and services at everyday low prices (“EDLP”) while fostering a
culture that rewards and embraces mutual respect, integrity and diversity. Putting Our
Customers First.
 EDLP is our pricing philosophy under which we price items at a low price every day
so that our customers trust that our prices will not change erratically under frequent
promotional activity.
 Our focus for SAM’S CLUB is to provide exceptional value on brand-name
merchandise at “members only” prices for both business and personal use.
Internationally, we operate with similar philosophies (Annual Report 2006).

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II. CORPORATE GOVERNANCE
A. Board of Directors
The Board is composed of 13 members, four are affiliated with the company, nine are
independent, three women, two African Americans, two Hispanic Americans. The Chairman
of the Board is S. Robson Walton, son of the founder.
B. Top Management
 Eduardo Castro-Wright Executive Vice President, President and Chief Executive Officer,
Wal-Mart Stores Division U.S.
 M. Susan Chambers Executive Vice President, People Division
 Patricia A. Curran Executive Vice President, Store Operations, Wal-Mart Stores Division
U.S.
 Douglas J. Degn Executive Vice President, Food, Consumables, and Hardlines, Wal-Mart
Stores Division U.S.
 Linda M. Dillman Executive Vice President, Risk Management and Benefits
Administration
 Johnnie Dobbs Executive Vice President, Logistics and Supply Chain
 Michael T. Duke Vice Chairman, Responsible for Wal-Mart International
 Joseph J. Fitzsimmons Senior Vice President, Treasurer
 John E. Fleming Executive Vice President, Chief Marketing Officer, Wal-Mart Stores
Division U.S.

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 Rollin L. Ford Executive Vice President and Chief Information Officer
 David D. Glass Chairman of the Executive Committee of the Board of Directors
 Mark D. Goodman Executive Vice President, Marketing, Membership and E-commerce,
SAM’S CLUB
 Craig R. Herkert Executive Vice President, President and Chief Executive Officer, The
Americas, Wal-Mart International
 Charles M. Holley, Jr. Senior Vice President, Finance
 Thomas D. Hyde Executive Vice President and Corporate Secretary
 Lawrence V. Jackson Executive Vice President, President and Chief Executive Officer,
Global Procurement
 Gregory L. Johnston Executive Vice President, Club Operations, SAM’S CLUB
 C. Douglas McMillon Executive Vice President, President and Chief Executive Officer,
SAM’S CLUB
 John B. Menzer Vice Chairman, Responsible for U.S.
 Thomas M. Schoewe Executive Vice President and Chief Financial Officer
 H. Lee Scott, Jr. President and Chief Executive Officer
 Gregory E. Spragg Executive Vice President, Merchandising and Replenishment, SAM’S
CLUB
 S. Robson Walton Chairman of the Board of Directors
 Claire A. Watts Executive Vice President, Product Development, Apparel and Home
Merchandising, Wal-Mart Stores Division U.S.
 Eric S. Zorn Executive Vice President, Wal-Mart Realty (Annual Report 2006).
III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREAT (SWOT)
A. Natural Environment
 Raw materials availability.(O)
 Land availability. (O)
 Electricity usage. (T)
 Oil and Gas usage. (T)
 Water scarcity. (T)
 Hazardous waste storage, transportation and disposal. (T?)
B. Societal Economy
1. Economic
 Interest rate increases may signal end of economic expansion (T).
 Economic deterioration may mean more frugal shopping habits. (O)
 Increasing commodity costs. (T)
 Increasing transportation costs. (T)
 Currency fluctuations. (T)
 Slowing national economy (T)
2. Technology
 Increased usage of RFID for inventory management. (O)
 Internet presence allows for customer options. (O)
 Information technology increasingly important. (O)
3. Political-Legal
 Regional trade pacts are making free trade available between countries. (O)

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 Differing laws between countries may evoke compliance issues. (T)
 Potential unionization of workforce. (T)
 The Company is involved in a number of legal proceedings. In accordance with
Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies,”
the Company has made accruals with respect to these matters, where appropriate,
which are reflected in the Company’s consolidated financial statements (Annual
Report 2006). (T)
 The Company is a defendant in numerous cases containing class action allegations in
which the plaintiffs have brought claims under the Fair Labor Standards Act
(“FLSA”), corresponding state statutes, or other laws (Annual Report 2006). (T)
4. Sociocultural
 Aging U.S. demographics. (O)
 Slowing U.S. population growth. (T)
 Wal-Mart seen as a reason for closing of mom and pop stores. (T)
 International cultural differences. (T)
 Green environmental movement. (O)
C. Task Environment
 United States market saturation. (T)
 Expansion into Europe, China, South America, Canada, and Mexico. (O)
 Rivalry High. Target, Sears, K-Mart (T)
 Chance of new entrants low. (O)
 Purchasing power high. (O)
 Substitute power high. (T)
 Government regulations power medium. (T)
IV. INTERNAL ENVIRONMENT
A. Corporate Structure
Wal-Mart Stores, Inc. was structured into three business units, namely: Wal-Mart Stores
USA, Sam’s Club, and Wal-Mart International. Wal-Mart Stores unit had 3,289 locations and
included the company’s supercenters, discount stores, Neighborhood Markets in the US, and
walmart.com. Sam’s Club unit had 567 locations and included the warehouse membership clubs
in the US plus samsclub.com. Wal-Mart International had 2,285 locations in 10 countries. The
International total was increased in February 2006 by purchasing a majority control of CARHCO
with 360 locations in five Central American countries.
The organizational structure outlines the responsibilities and duties of the top leaders.
Individual store managers were given considerable decision-making authority in relation to
product range, product positioning within stores, and pricing. This differed from most other
discount chains where decisions over pricing and merchandising were made either at head office
or at regional offices. Decentralized decision-making power was also apparent within stores,
where the managers of individual departments (for example, toys, health and beauty, consumer
electronics) were expected to develop and implement their own ideas for increasing sales and
reducing costs. Purchasing is centralized. All dealing with U.S. suppliers takes place at Wal-
Mart’s Bentonville headquarters.
Organizational structure may be defined as the system of relations that subsist among a
variety of positions and position holders. Formal structure is a blueprint of relations that has been

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knowingly deliberated and put into action. It includes a formal chain of command of power as
well as policies and procedures and other premeditated attempts to control conduct.2
Wal-Mart’s organizational structure consists of a divisional structure. A divisional
structure has three different categories in which are product structure, market structure, and
geographic structure. Wal-Mart falls under market structure. This is where groups function by
types of customers so that each division contains the functions it needs to service a specific
segment of the market (p.514, George, Jones). For example Wal-Mart offers vision, pharmacy,
haircuts, grocery, crafts, clothes, electronics, house wares and etc.
Comparing Wal-Mart and K Mart as retail companies, both of companies have different
strategy to reach competitive advantages. Base on study, the types of competition between Wal-
Mart and K mart is Monopoly competition. Wal-Mart provides the customer with low price and
products differentiation, whereas, K mart does not only focus on cost leadership but also in
product differentiation. They provide products with different quality and brand compare to
competitor. For Organization Structure, Wal-Mart is better than K mart, Wal-Mart has good
reorganization system and also has good quality to maintain organization structure.3
We have found that both Wal-Mart and K-mart has developed their resources to improve
their value, their competitive advantages and promote their brands as well. By resources
improvement, they have gained the competition among competitors. When doing this, they can
increase the capability of manufacturing and supplying products to market. Internal analysis
helps both Wal-Mart and K-mart to increase their competitive advantages and extend their
market share in order to improve their business performance. Regarding business level strategy
both of them (Wal-Mart and K-Mart). Actually they have similarity business level strategy but
Wal-Mart more specific in Cost leadership. Wal-Mart has more acquisition and merger than K
Mart, Wal-Mart was doing acquisition to open new market share, get more profit. But for K Mart
only make acquisition with Sears.
B. Corporate Culture
As Wal-Mart continues to grow into new areas, their success will always be attributed to
their culture. Whether customers walk into a Wal-Mart store in their home town or one across
the country while on vacation, they can always be assured of getting low prices and that genuine
customer service they expect. They’ll feel at home in any department of any store…that’s their
culture.
Sam Walton’s Three Basic Beliefs4
Sam Walton built Wal-Mart on the revolutionary philosophies of excellence in the
workplace, customer service and always having the lowest prices. We have always stayed true to
the Three Basic Beliefs Mr. Sam established in 1962:
Respect the Individual
“Our people make the difference” is not a meaningless slogan—it’s a reality at Wal-Mart.
We are a group of dedicated, hardworking, ordinary people who have teamed together to
accomplish extraordinary things. We have very different backgrounds, different colors and
2 http://www.writework.com/essay/wal-marts-organizational-structure-consists-divisional-str
3 http://www.studymode.com/essays/Ilham-Wal-Mart-1009709.html
4 https://www.inkling.com/read/contemporary-strategy-analysis-grant-7th/case-5/appendix-the-wal-mart-culture

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different beliefs, but we do believe that every individual deserves to be treated with respect and
dignity. (Don Soderquist, Senior Vice Chairman, Wal-Mart Stores, Inc.)
Service to Our Customers
We want our customers to trust in our pricing philosophy and to always be able to find
the lowest prices with the best possible service. We’re nothing without our customers.
Wal-Mart’s culture has always stressed the importance of Customer Service. Our Associate base
across the country is as diverse as the communities in which we have Wal-Mart stores. This
allows us to provide the Customer Service expected from each individual customer that walks
into our stores. (Tom Coughlin, President and Chief Executive Officer, Wal-Mart Stores
division.)
Strive for Excellence
New ideas and goals make us reach further than ever before. We try to find new and
innovative ways to push our boundaries and constantly improve. “Sam was never satisfied that
prices were as low as they needed to be or that our product’s quality was as high as they
deserved—he believed in the concept of striving for excellence before it became a fashionable
concept.” (Lee Scott, President and CEO.)
Sam’s Rules for Building a Business
People often ask, “What is Wal-Mart’s secret to success?” In response to this ever-present
question, in his 1992 book Made in America, Sam Walton compiled a list of ten key factors that
unlock the mystery. These factors are known as “Sam’s Rules for Building a Business.”
Rule 1. Commit to your business.
Rule 2. Share your profits with all your Associates, and treat them as partners.
Rule 3. Motivate your partners. Money and ownership alone aren’t enough.
Rule 4. Communicate everything you possibly can to your partners.
Rule 5. Appreciate everything your Associates do for the business.
Rule 6. Celebrate your successes. Find some humor in your failures.
Rule 7. Listen to everyone in your company. And figure out ways to get them talking.
Rule 8. Exceed your customers’ expectations.
Rule 9. Control your expenses better than your competition.
Rule 10. Swim upstream. Go the other way. Ignore the conventional wisdom.
In order to fulfil its mission, Wal-Mart has developed some unique policies, principles,
rules, processes and procedures, the sum total of which form Wal-Mart Stores corporate culture5:
Open Door Policy - Managers' doors are open to employees at all levels
Sundown Rule - Answering employee, customer, and supplier questions on the same
day the questions are received.
Grass Roots Process - Capturing suggestions and ideas from the sales floor and front lines
3 Basic Beliefs & Values - Respect for the Individual, Service to our Customers, Striving for
Excellence
5 http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Wal-Mart-Mission-
Statement.htm

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10-Foot Rule - Making eye contact, greeting, and offering help to customers who
come within 10 feet.
Servant Leadership - Leaders are in service to their team
Wal-Mart Cheer - An actual structured chant that was created by founder Sam Walton
to lift morale every morning.
Sustainability Goals6
Environmental sustainability has become an essential ingredient to doing business
responsibly and successfully. As the world's largest retailer, their actions have the potential to
save our customers money and help ensure a better world for generations to come. We've set
three sustainability goals:
 To be supplied 100% by renewable energy
 To create zero waste.
 To sell products that sustain people and the environment.
Cultural Emphasis
In many ways, Wal-Mart’s corporate culture was a reflection of the values of its founder, Sam
Walton, in its emphasis on everyday low prices, corporate growth, concern for people and
loyalty to the company. The company’s cultural roots have been considered by some to be both a
key strength and a serious weakness. But the strong emphasis on Wal-Mart values offended
some employees with different backgrounds.
C. Corporate Resources
1. Marketing
Wal-Mart had been founded on Sam Walton’s belief that: “There is only one boss: the
customer.” For Wal-Mart, the essence of customer service was low prices. Hence, Wal-Mart’s
marketing strategy was built upon its slogan “Everyday Low Prices”: Wal-Mart’s customer
appeal was as a price leader across its entire product range, all the time—it did not engage in
promotional price cutting.
The centrality of “Everyday Low Prices” to Wal-Mart’s relationship with its customers had
important implications for its marketing activities. Wal-Mart was able to rely on word-of-mouth
communication of its merits and was able to spend comparatively little on advertising and other
forms of promotion. Advertising typically involved one home-delivered advertisement circular
per month by each store and some television advertising. As a result, Wal-Mart’s
advertising/sales ratio during the past three financial years was 0.55%—most of its rivals had
advertising/sales ratios of between 1.5% and 3.0%. Nevertheless, with an advertising budget of
over $2 billion, Wal-Mart was among the world’s biggest advertisers.
Beyond its emphasis on serving customers by providing unbeatable value-for-money, the
values that Wal-Mart projected were traditional American virtues of hard work, thrift,
individualism, opportunity, and community. This identification with core American values was
buttressed by a strong emphasis on patriotism and national causes.
However, as Wal-Mart increasingly became a target for politicians and pressure groups,
former CEO Lee Scott initiated a major shift in the image that Wal-Mart projected to the world.
6 http://corporate.walmart.com/global-responsibility/environment-sustainability

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In 2004, Wal-Mart issued its first annual report on ethical sourcing where it published results of
its audit of suppliers’ adherence to its code of conduct. In November 2005, Scott committed
Wal-Mart to a program of environmental sustainability and set ambitious targets for renewable
energy, the elimination of waste and a shift in product mix towards environmentally friendly
products. Two years later, Wal-Mart published the first of its annual sustainability reports.
Commitment to social and environmental responsibility can be seen as part of a wider effort
by Wal-Mart to broaden its consumer appeal and counter the attempts by activist groups to
characterize Wal-Mart as a heartless corporate giant whose success was built upon exploitation
and oppression. Wal-Mart broadened its customer base to include more upper income consumers
and expanded its geographical base into the more politically liberal parts of the U.S. (for
example, the west coast and New England) and beyond U.S. borders, so building an appeal that
extended beyond “everyday low prices.”
In 2008, Wal-Mart launched a company-wide image makeover that involved a new
corporate logo and a redesign of its stores. The new logo replaced upper-case characters by
lower-case, eliminated the star-hyphen (“Wal*Mart”), and added a “sunburst” design. According
to branding consultant, Marty Neumeier: “The new “sunburst” looks organic. My sense is they
are trying to say, ‘we’re an eco-aware company,’” Tobias Frere-Jones, a professor of
typography, observed that lower case letters tend to be interpreted as more casual and
approachable. The new logo coincided with a program of store redesign that included wider
aisles, improved lighting, and lower shelves.
2. Finance7
In the midst of tough competition of these large companies, you might have wondered
what makes a company a successful in their chosen field of the industry and what makes other
companies go down on the deep abyss of failure.
Success and failure of companies cannot be attributed to a sense of luck. In the world of
commercialism, it seems that luck has no room in it, but it is a financial strategy that can make
and unmake a company. Financial Strategy is being employed by each company in order for its
company to successfully place itself on top of the competition.
Success of a company can be traced on how it had carefully planned and executed their
business strategy. Financial analyst had been making intensified research in order to come out
with a financial strategy that can be suited to that particular company. Without a sound
investment strategy, company can go astray as it tries to compete with their competitors. Hence,
the success behind the battle in the world of commercialism is a financial strategy. A company
needs to be armed with a financial strategy before it can go out in the field and compete.
The world’s largest retailer is Wal-Mart had also armed itself with a financial strategy in
order to ensure that it will continuously wave the flag of supremacy in the sector of retail
business in almost 27 countries. Financial Strategy at Wal-Mart is now having its focus on
existing market.
Top executives of the company believe that merger and acquisition should be based on
existing market. This strategy will mean that Wal-Mart will first focus on those countries of
7 http://financial-management-slides.com/financial-strategy-at-walmart/#sthash.hQa5mKju.dpuf

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which they are already in operation rather than to venture on a different region. Their attention is
not to expand fair market but to concentrate on their existing market.
Financial Strategy at Wal-Mart will give priority on the area of which they are already in,
although, there are still new areas of which Wal-Mart could venture, but the company believes
that it will focus first on the area that it had its operation. But the company is still open to
different areas when an opportunity will present itself.
As to the strategy of merger and acquisition of existing market, Wal-Mart has an eye in
acquiring assets in Japan such as the Japanese retailer Aeon Co. Wal-Mart had been open on the
idea of acquiring an asset in Japan. This is considered as part of Financial Strategy at Wal-Mart.
Wal-Mart is driven by the mission, and that is to save people money and to help people
live better lives. This could be the driving force behind the Financial Strategy at Wal-Mart, and
that is for the company to fully concentrate on their existing market.
This will ensure that what they will give to their consumers their full attention that can
mean that consumers will get products that are low in prices and geared to improve their lives.
By having a focus on the areas of which they are already in operation will give an assurance that
Wal-Mart will give to their customers the value of their money.
5. Human Resource Management
Wal-Mart’s human-resource practices in 2009 were based upon Sam Walton’s beliefs about
relations between the company and its employees and between employees and customers. All
employees—from executive-level personnel to checkout clerks—were known as “associates.”
Wal-Mart’s relations with its associates were to be founded on respect, high expectations, close
communication and clear incentives.
Wal-Mart’s employees received relatively low pay—the median rates for hourly paid retail
workers in 2009 was between $8.46 and $12 an hour. However, these rates were, on average,
slightly above those paid in the retail trade generally. Employee benefits included a company
health plan that covered 94% of Wal-Mart employees and a retirement scheme, which covered
all employees with a year or more of service.
A key feature of Wal-Mart’s compensation system was its profit incentives, which extended
to hourly employees. A stock purchase plan was also available to employees. Wal-Mart retirees
included a large number of millionaires—not all of whom were managers: in 1989, the first
millionaire hourly associate retired from the company.
Wal-Mart resisted the unionization of its employees in the belief that union membership
created a barrier between the management and the employees in furthering the success of the
company and its members. Despite strenuous efforts by unions to recruit Wal-Mart employees,
union penetration remained low. Between 2000 and 2008, the United Food and Commercial
Workers union together with AFL-CIO fought a concerted campaign to recruit Wal-Mart
workers, but to little effect.
Associates enjoyed a high degree of autonomy and received continuous communication
about their company’s performance and about store operations. Every aspect of company
operations and strategy was seen as depending on the close collaboration of managers and shop-
floor employees. To control “shrinkage” (theft), the company instituted a system whereby a

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store’s cost savings from reduced shrinkage were shared between the company and the store’s
employees. Wal-Mart’s shrinkage was estimated to be just above 1%, versus an industry average
of 2%.
Wal-Mart’s approach to employee involvement made heavy use of orchestrated
demonstration of enthusiasm and commitment. The central feature of Wal-Mart meetings from
corporate to store level was the “Wal-Mart Cheer”—devised by Sam Walton after a visit to
Korea. The call and response ritual (“Give me a W!” “Give me an A!”…) included the “Wal-
Mart squiggly,” which involved employees shaking their backsides in unison.
Fortune suggested that the Wal-Mart Cheer’s mixture of homespun and corporate themes
provided an apt metaphor for what it called “the Wal-Mart paradox”:
The paradox is that Wal-Mart stands for both Main Street values and the efficiencies of the huge
corporation, aw-shucks hokeyness and terabytes of minute-by-minute sales data, fried-chicken
luncheons at the Waltons’ Arkansas home and the demands of Wall Street.
Critics of Wal-Mart call the homespun stuff a fraud, a calculated strategy to put a human
face on a relentlessly profit-minded corporation. What is paradoxical and suspect to people
outside Wal-Mart, however, is perfectly normal to the people who work there. It reflects a deal
that Sam Walton, Wal-Mart’s founder, made with the people who worked for him.
The deal was a lot more than just a matter of the occasional visit from Mr. Sam. Wal-Mart
demonstrated its concern for workers in many ways that were small but specific: time-and-a-half
for work on Sundays, an “open-door” policy that let workers bring concerns to managers at any
level, the real chance of promotion (about 70% of store managers started as hourly associates).27
The paradox of Wal-Mart’s human resource practices continues. The enthusiasm it
generates among employees supports a level of involvement and empowerment that is unique
among large retail organizations. At the same time, the intense pressure for cost reduction and
sales growth frequently results in cases of employee abuse. Wal-Mart suffered reversals in class
action lawsuits by current and former employees. In a series of adverse court decisions, Wal-
Mart was forced to compensate current and former employees for unpaid overtime work, for
failure to ensure that workers received legally mandated rest breaks, and for systematically
discriminating against women in pay and promotion.
6. Information Technology
Wal-Mart was a pioneer in applying information and communications technology to support
decision making and promote efficiency and customer responsiveness. During the 1970s, Wal-
Mart was among the first retailers to use computers for inventory control, to initiate EDI with its
vendors, and to introduce bar code scanning for point-of-sale and inventory control. To link
stores and cash register sales with supply chain management and inventory control, Wal-Mart
invested $24 million in its own satellite in 1984. By 1990, Wal-Mart’s satellite system was the
largest two-way, fully integrated private satellite network in the world, providing two-way
interactive voice and video capability, data transmission for inventory control, credit card
authorization, and enhanced EDI.
During the 1990s Wal-Mart was pioneering the use of data-mining for retail merchandising:
At Wal-Mart, information technology gives us that knowledge in the most direct way: by
collecting and analyzing our own internal information on exactly what any given shopping cart

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contains. The popular term is “data-mining,” and Wal-Mart has been doing it since about 1990.
The result, by now, is an enormous database of purchasing information that enables us to place
the right item in the right store at the right price. Our computer system receives 8.4 million
updates every minute on the items that customers take home—and the relationship between the
items in each basket.
Data analysis allows Wal-Mart to forecast, replenish, and merchandise on a product-by-
product, store-by-store level. For example, with years of sales data and information on weather,
school schedules and other pertinent variables, Wal-Mart can predict daily sales of Gatorade at a
specific store and automatically adjust store deliveries accordingly.
Point-of-sale data analysis also assisted in planning store layout:
There are some obvious purchasing patterns among the register receipts of families with infants
and small children. Well-thought-out product placement not only simplifies the shopping trip for
these customers—with baby aisles that include infant clothes and children’s medicine alongside
diapers, baby food and formula—but at the same time places higher-margin products among the
staples…Customers who buy suitcases are likely to be looking for other items they might need
for travelling too—such as travel alarms and irons, which now, logically enough, can be found
displayed alongside luggage at many Wal-Mart stores.
The common thread is simple: We are here to serve the customer; and customers tend to
buy from us when we make it easy for them. That sounds like a simple idea. But first you must
understand the customer’s needs. And that’s where information comes in.
The role of IT was most important in linking and integrating the whole of Wal-Mart’s value
chain:
Wal-Mart’s web of information systems extends far beyond the walls of any one store.
Starting from the basic information compiled at the checkout stand, at the shelves, and gathered
by associates equipped with hand-held computer monitors, Wal-Mart works to manage its
supplies and inventories not only in the stores, but all the way back to the original source. Wal-
Mart has given suppliers access to some of our systems, which enables them to know exactly
what is selling, and to plan their production accordingly. This not only helps us keep inventories
under control, but also helps the supplier deliver the lowest-cost product to the customer. With
sales and in-stock information transmitted between Wal-Mart and our supplier-partners in
seconds over the internet, buyers and suppliers are privy to the same facts and negotiate based on
a shared understanding—saving a significant amount of time and energy over more traditional,
low-tech systems.
Our buyer benefits from the supplier’s product knowledge, while the supplier benefits from
Wal-Mart’s experience in the market. Combine these information systems with our logistics—
our hub-and-spoke system in which distribution centers are placed within a day’s truck run of the
stores—and all the pieces fall into place for the ability to respond to the needs of our customers,
before they are even in the store. In today’s retailing world, speed is a crucial competitive
advantage. And when it comes to turning information into improved merchandising and service
to the customer, Wal-Mart is out in front and gaining speed. In the words of Randy Mott, Senior
Vice President and Chief Information Officer, “The surest way to predict the future is to invent
it.”

15
A. Corporate Resources
1. Marketing
 Advertising costs are expensed as incurred and were $1.6 billion in 2006. Advertising
costs consist primarily of print and television advertisements (Annual Report 2006).
 Buy American campaign. (S)
 Green marketing offers the option of buying products which were better for
environment. (S)
 Offers quality brand names at lower-than-competitive prices (Wheelen and Hunger
19-19). (S)
 Introduced a “Value Plan” benefits plan to its employees at premiums ranging from
$11 to $65 a month. (S)
2. Finance
 $312.6 billion in annual sales. (S)
 $11.2 billion net income. (S)
 $2.68 earnings per share. (S)
 8.9% return on assets. (S)
 11.4% increase in sales and operating income for the international business (Wheelen
and Hunger 19-24). (S)
3. R&D
 More involved with the development side. (W)
 Focusing on expansion and development of already established business model. (W)
4. Operations
 Wal-Mart USA. We are intent on driving comparative store sales by being relevant to
our broad customer base and by improving our cost structure and inventory flow to
strengthen return on investment. (S)
 Sam’s Club. We remain committed to serving the needs of our members – where
pennies matter – by leveraging productivity improvements and lowering expenses, so
that we can provide the products and services they want at the lowest prices in the
industry. (S)
 Wal-Mart International. Our approach to ensuring continued profitable growth
includes three dimensions – new markets with multiple formats, new store growth in
existing markets and increasing sales at existing stores (Annual Report 2006). (S)
5. Human Resources

16
 Employees are called associates. (S)
 Employee stock ownership and profit-sharing program. (S)
 Decentralized approach to retail management development. (S)
 Utilizes the Total Quality Management approach. (S)
 Discourages unionization (Wheelen and Hunger 19-23). (W)
6. Information Systems
 Leader in RFID technology. (S)
 Good internet presence. (S)
 Utilizes satellite communications, data centers, and handheld devices. (S)
V. ANALYSIS OF STRATEGIC FACTORS
A. Situational Analysis
1. Strengths
 International brand name.
 Financial position.
 Market leadership.
2. Weaknesses
 Market saturation.
 Public opinion.
 Adjustment to cultural differences after entering a foreign market.
 Supplier alienation.
 Past employee discrimination.
 Employee health benefits.
 International supplier employee violations.
3. Opportunities
 International expansion.
 Environmental leadership.
 Worker’s rights leadership.
 Community involvement.
 Social initiatives.
4. Threats
 Strong U.S. competition.
 Changing demographics.
 Economic uncertainty.
 Current litigation.
 Employee unionization.
B. Review of Current Mission and Objectives
 .
 .
VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
 .
B. Recommended Strategy

17
 . 12. PORTER ANALYSIS 
LOWBargaining power of Suppliers:
Forging relationships with suppliers is
essential to Wal-Mart’s business.
Without timely inventory deliveries,
Wal-Mart could not maintain its full
shelves and would lose customers. For
this reason, the company engages in
contractual agreements with its
suppliers. This arrangement is beneficial
for both parties, as the supplier makes
sure it will have constant access to-
retailers with large market share. This
way, suppliers have a guaranteed buyer
for the supplies and can arrange specific
prices. Wal-Mart benefits by
guaranteeing the cost of their
merchandise and the timely deliveries,
which will ultimately benefit consumers.
Consumers will receive lower prices and
an assortment of products.
 13. PORTER ANALYSIS 
LOWBargaining power of Buyers:
Consumers today are searching for the
best deals possible. They are waiting for
discounts and sales to bulk up on
products. Discount retailers like Wal-
Mart are creating huge supercenter
stores because they want their stores to
become a one-stop trip. This was most
beneficial in 2007 as the high oil prices
led consumers to shop less frequently to
save gas. Instead of traveling from store
to store in search for a variety of
products, consumers can find them all in
one location. Customers know what they
want and how far they are willing to
search for the item. Retailers must
maintain high inventory levels to retain
customers and their market share.
 14. PORTER ANALYSIS  LOW
Being that the retail industry is aThreats
of New Entrants: highly saturated
market, new entrants would face
difficulty succeeding in this industry. In
fact, it is highly difficult for discount
retailers to penetrate other markets as
Wal-Mart tried to enter Germany and
South Korea. The company was

18
unsuccessful and had to pull out because
of its unprofitability
 15. PORTER ANALYSIS  MEDIUM
Substitute products are products that can
be used asTHREAT OF SUBSTITUTE
replacements for other products to
satisfy the same necessity. Wal-Mart
benefits from this idea as discounters
have lower prices than department stores
and consumers go for higher quality
product with the lowest prices. Macys
and PRODUCTS: Wal-Mart may both
sell apparel and bedding products but
there is a major price difference between
the two. When consumers are trying to
save, they will substitute pricier Macy’s
items with lower priced Wal-Mart items.
In making substitutions, consumers may
have to forgot certain features such as
the quality of the product, brand or even
the service the store provides. Wal-Mart
is working on providing the best
customer service possible but as a high-
traffic store, it is generally impossible to
provide one-on-one service.
 16. PORTER ANALYSIS  HIGH The
retail business is a highly competitive
industry. Wal-Mart faces a number of
competitors in all segments of their
business. After being the first in the
industry to build the first supercenter,
Kmart and Target built supercenters as
well. Discount stores were generally
thought of as shopping centers for low-
income consumers but this idea has
changed. AsRivalry: retailers expanded
their product lines, they included
products for different customer incomes.
Target, in particular, has generally been
thought of as an upscale discount store
as the company tends to target medium
income consumers but their prices are
usually higher than Wal-Mart’s.
 17. • Customers loyalty • High Brand
value • Good inventory control SystemS
• • Good reputation on Quality and low
price Emphasis in Human Resource
management and development • Much of
the same merchandise • Low reaction to

19
changes in market • Insistence on doing
things “the Wal-mart way”W • • Low
current ratio Low market research in
foreign countries • Strategic Alliances
and merger • Increase Demand •
Technological developmentsO • • New
retail formats Customers concern about
environment • Cultural differences in
new markets • Countries economic
problems • Local regulationsT • •
Antitrust issues Intense competitive
conditions
 18. IFE - MATRIX
 19. EFE - MATRIX
 20. THE INTERNALEXTERNAL
MATRIX
 21. SPACE MATRIX Internal Strategic
Position External Strategic Position
FINANCIAL (FS) ENVIRONMENTAL
(ES) +6 best, +1 worst -1 Best, -6 Worst
(+6) Net Sales (-1) TechnologyY(+3)
Current Ratio (-2) Demand Increase (+6)
Revenues (-5) Barriers to entry (+5) Net
Income (-6) Competitive pressure (+6)
Comparative store sales Increase (-3)
Antitrust Issues Avg. = 5.2 Avg. = -3.4
COMPETITIVE (CA) INDUSTRY (IS)
-1 best, -6 worst +6 best, +1 worst (-1)
Costumers loyalty (+5) Growth
potentialX Brand value (-1) (+5) Profit
potential (-2) Product Quality (+5)
Developments in technology (-1) Human
resource management (+6)
Consolidation (-1) Inventory Control
System (+2) Easy to entry Avg. = -1.2
Avg. = 4.6 Y= 5.2 + (-3.4) = 1.8 X= -1.2
+ (4.6) = 3.4
 22. FINANCIAL RATIOS
 23. SUMARY SPACETOWS IFE-EFE
MATRIXInvest on marketing and
publicity The Internal – External Matrix
Wal-Mart should pursue an Increase the
satisfaction to get shows that Wal-Mart
is a strong aggressive strategy. The
mouth advertisement company in the
retail industry company needs to use its
and the analysis recommended strengths
and opportunities to Sell innovative
merchandise that Wal-Mart should
pursue increase their sales, keep their

20
Improve investment on research the
strategy of grow and build brand value
and get a and development in foreign to
reach the gold of increase successful
penetration in markets sales and profits.
foreign markets.
 24. ALTERNATIVE 1•Increase the
investment on research and development
tounderstand the foreign markets before
enter to them. PROS CONS Reduce the
effect of the High cost of R & D cultural
differences Increase sales and profits
Perfect penetration in new markets
 25. ALTERNATIVE 2•Increase the
satisfaction of customers and give
tothem more benefits like promotions
and gift tomaintain the loyalty and
increase the mouthadvertising. PROS
CONS Increase sales and profits High
cost of investment Costumers loyalty
High cost of R & D Increase the mouth
advertising. Increase brand value
Increase top of mind on consumers
 26. ALTERNATIVE 3Make alliances
with successful companies that
haveexperiences on the new markets and
do the things “ontheir successful way” in
that market. PROS CONS Avoid the
reject of potential High investment
customers to the brand Risk of merger
Increase sales on foreign markets Lose a
little of the “Wal-Mart Way” Learn new
retail models Increase the brand value
Increase sales and profits
 27. RECOMENDATION Lee Scott,
new Wal-Mart’s CEO should pursue the
third alternative to keep Wal-Mart as the
world’s biggest retailer and keep
increasing sales and profits into the
future. It means that Lee Scott should
look for successful companies around
the world that can bring benefits and
which working’s philosophy resembles
Wal-Mart philosophy. This alternative
has several cons but its pros are better
and reach the gold. Wal-Mart has to
keep growing and increase their
investment on marketing to raise its top

21
of mind and keep it above the
competitors.

o .
VII. Implementation
 Management needs to be open to change regarding clashes with “grass-roots”
movements that push to keep new construction of Wal-Mart stores in rural America.
While many residents welcome a new Wal-Mart, there will always be opposition and
by developing ways to appease those that oppose the giant retailer, they will be more
welcome to the neighborhood.
 Wal-Mart has been steadily reaching into every corner of the earth, but not always
with successful results. Upper management is making the assumption that every
culture will welcome box stores and the American culture that Wal-Mart is known
for. As has been proven time and again, this is not always true. There need to be
committees established that can perform thorough research before just barging onto
foreign land.
 Several lawsuits have been filed regarding the treatment of employees. Wal-Mart
needs to get involved with developing a way to ensure employees are getting the right
benefits that is equal to the retail industry’s average worker.
VII. Evaluation and Control
 .
 .
 .

22
EFAS (External Factor Analysis Summary)
Key Internal Factors Weight Rating Weighted
Scores
Comments
Opportunities
International expansion
Environmental leadership
Worker’s rights
leadership
Community involvement
Social initiatives
Threats
Strong U.S. competition
Changing demographics
Economic uncertainty
Current litigation
Employee unionization
Total Scores 1.0
IFAS (Internal Factor Analysis Summary)
Key Internal Factors Weight Rating Weighted
Scores
Comments
Strengths
International brand name
Financial position
Market Leadership
Weakness
Market saturation
Public opinion
Adjustment to cultural
differences
Supplier alienation
Past employee discrimination
Employee health benefits
International supplier employee
violation
Total Scores 1.0

23
SFAS (Strategic Factor Analysis Summary)
Key Strategic Factors Weight Rating Weighted
Score
Duration
S I L
Comments
X X X
X X X
X X
X X X
X X X
X X X
X X X
TOTAL SCORES 1.00 2.95

24
Works Cited
Wheelen, Thomas L., and J. David Hunger. Strategic Management and Business Policy:
Achieving Sustainability. Upper Saddle River: Prentice, 2010. Print.
I. CURRENT SITUATION
A. Current Performance
Management uses a number of metrics to assess the Company’s performance including:
• comparable store sales,
• operating income growth greater than net sales growth,
• inventory growth less than net sales growth and
• return on average assets.
5
Comparable store sales is a measure which indicates the performance of our existing stores by
measuring the growth in sales for such stores for a particular period over the corresponding
period in the prior year. Our Wal-Mart Stores segment’s comparable store sales were 1.9% for
fiscal 2007 versus 3.0% for fiscal 2006. Our Sam’s Club segment’s comparable club sales were
2.5% in fiscal 2007 versus 5.0% in fiscal 2006, including the impact of fuel sales.
Operating income growth greater than net sales growth has long been a measure of success for
us. For fiscal 2007, our operating income increased by 9.5% when compared to fiscal 2006,
while net sales increased by 11.7% over the same period. Our Wal-Mart Stores and Sam’s Club
segments met this target; however, the International segment did not due to the impact of the
newly acquired and consolidated entities.
Inventory growth at a rate less than that of net sales is a key measure of our efficiency. Total
inventories at January 31, 2007, were up 5.6% over levels at January 31, 2006, and net sales
were up 11.7% when comparing fiscal 2007 with fiscal 2006.
With an asset base as large as ours, we are focused on continuing to make certain our assets are
productive. It is important for us to sustain our return on assets. Return on assets is defined as
income from continuing operations before minority interest divided by average total assets from

25
continuing operations. Return on assets for fiscal 2007, 2006 and 2005 was 8.8%, 9.3% and
9.8%, respectively. Return on assets in fiscal 2007 and 2006 was impacted by acquisition and
consolidation of entities with lower asset returns.
This excerpt taken from the WMT 10-K filed Mar 29, 2006.
Company Performance Measures
Management uses a number of metrics to assess the Company’s performance. The following are
the more frequently used metrics:
• Comparative store sales is a measure which indicates the performance of our existing
stores by measuring the growth in sales for such stores for a particular period over the
corresponding period in the prior year. Our Wal-Mart Stores segment’s comparative store
sales were 3.0% for fiscal 2006 versus 2.9% for fiscal 2005. Our SAM’S CLUB
segment’s comparative club sales were 5.0% in fiscal 2006 versus 5.8% in fiscal 2005.
• Operating income growth greater than net sales growth has long been a measure of
success for us. For fiscal 2006, our operating income increased by 8.4% when compared
to fiscal 2005, while net sales increased by 9.5% over the same period. Our SAM’S
CLUB segment met this target; however, the Wal-Mart Stores segment fell short of the
target, while the International segment grew operating income at the same rate as net
sales.
• Inventory growth at a rate less than that of net sales is a key measure of our efficiency.
However, our increased purchases of imported merchandise and recent acquisition activity
impact this measure. Total inventories at January 31, 2006, were up 8.2% over levels at
January 31, 2005, and net sales were up 9.5% when comparing fiscal 2006 with fiscal
2005. Approximately 150 basis points of the fiscal 2006 increase in inventory was from
increased levels of imported merchandise, which carries a longer lead time, and an
additional 170 basis points was from the consolidation of The Seiyu, Ltd. and the
purchase of Sonae Distribução Brasil S.A.
• With an asset base as large as ours, we are focused on continuing to make certain our
assets are productive. It is important for us to sustain our return on assets. Return on assets
is defined as income from continuing operations before minority interest divided by
average total assets. Return on assets for fiscal 2006, 2005 and 2004 was 8.9%, 9.3% and
9.2%, respectively. Return on assets in fiscal 2006 was impacted by acquisition activity in
the fourth quarter.
This excerpt taken from the WMT 10-K filed Mar 31, 2005.
Company Performance Measures
Management uses a number of metrics to assess its performance. The following are the more
frequently discussed metrics:
• Comparative store sales is a measure which indicates whether our existing stores
continue to gain market share by measuring the growth in sales for such stores for a
particular period over the corresponding period in the prior year. Our Wal-Mart Stores

26
segment’s comparative store sales were 2.9% for fiscal 2005 versus 3.9% for fiscal 2004.
The lower comparative store sales growth in fiscal 2005 is generally reflective of the
softer economy in fiscal 2005, including the impact of higher fuel and utility costs on our
customers. Our SAM’S CLUB segment’s comparative club sales were 5.8% in fiscal
2005 compared to 5.3% in fiscal 2004. The more favorable growth in fiscal 2005 resulted
from our continued focus on the business member.
• Operating income growth greater than net sales growth has long been a measure of
success for us. For fiscal 2005 our operating income increased by 13.8% when compared
to fiscal 2004, while net sales increased by 11.3% over the same period. Both
International and SAM’S CLUB segments met this target; however, the Wal-Mart Stores
segment fell slightly short.
• Inventory growth at a rate less than half of sales growth is a key measure of our
efficiency. Total inventories at January 31, 2005, were up 10.7% over levels at January
31, 2004, and sales were up 11.3% when comparing fiscal 2005 with fiscal 2004. This
ratio was affected in fiscal 2005 by sales which were weaker than anticipated, as well as
by increased levels of imported merchandise, which carries a longer lead time.
• With an asset base as large as ours, we are focused on continuing to make certain our
assets are productive. It is important for us to sustain our return on assets at its current
level. Return on assets is defined as income from continuing operations before minority
interest divided by average total assets. Return on assets for fiscal 2005, 2004 and 2003
was 9.3%, 9.2 % and 9.2%, respectively.

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