CHRONOLOGY1960s Retail RevolutionSam Waltons strategy was built on anunshakeable foundation: The LowestPrices Anytime, Anywhere. 1970s Walmart Goes National In the 1970s, a decade of incredible growth, "Mr. Sam" began to take Walmart national, proving his visions widespread appeal.1980s Decade of FirstsIn the 1980s, the first Sams Club opened,serving small businesses and individuals, andthe first Walmart Supercenter opened,combining a supermarket with generalmerchandise.
CHRONOLOGY1990´sAmerica’s Top RetailerBy 1990, Walmart was the nationsnumber-one retailer. As the WalmartSupercenter redefined convenience andone-stop shopping, Every Day Low Priceswent international. 2000s New Millennium Walmart entered the new millennium dedicated to offering customers a seamless shopping experience, whether they are online, in a store or on a mobile device. H. Lee Scott, Jr. succeeded David Glass as CEO.
MISION We save people money so they can live better VISION Be the retailer of choice for consumers
FRAMING KEY QUESTIONWhat should Lee Scott do as Wal-Mart’s new CEO to keep Wal-Mart as the world’s biggest retailer and keep increasing sales and profits into the future? FLIPPING AND SKIMMING Wal-Mart Stores Inc. Strategies for Dominance in the New Millennium Autor: James W. Camerius, Northern Michigan University. Number of Pages: 18 Case’s Content: The Sam Walton Spirit Marketing concepts The external environment Domestic Corporate Strategies Decisionmaking in a Market Oriented Firm The Growth challenge 3 Exhibit 4 Appendix
FRAMING BEGINNING OF THE CASEAt the beginning of 1991, the firm had 1573Wal-Mart stores in thirty-five states, withexpansion planned for adjacent states. ENDING OF THE CASE In 2000, Wal- Mart Store, Inc, Bentonville,Arkansas, operated mass merchandisingretail stores under various names and retailformats including Wal-Mart discountdepartment stores.
LABELING GENERAL ENVIRONMENT-Wal-Mart the largest wholesaler in the world minority.-Opened its first headquarters and distribution center in Bentonville.-Soon be joining the New York Stock Exchange.-Outside the United States, the company operates in 14 countries.INDUSTRY- Retail-Walton argues that the essence of successful discount retailer to reduce the price ofan item where possible, reducing the profit margin, and profit on increased salesvolume.-Currently the company employs more than 1.3 million employees, a million in theU.S. alone-The Company owns more than 4,000 stores worldwide.-The company serves over 100 million customers a week.
LABELING COMPETITION Target Corporation Kmart Corporation Costco Wholesale Corporation The Kroger Co. Albertsons, Inc. Walgreen Co. CVS Corporation Carrefour SA Royal Ahold N.V. Toys R Us, Inc.
LABELING ECONOMICAL-The chambers of commerce supported Wal-Mart because they believed that thecompany helps the local economy.-The retail sector has become highly competitive-While the economy weakened by inflation.-Wal-Marts strategy was to compete with rivals and reduce overhead. LEGAL-U.S. based multinational company.-Had to withdraw from Germany and South Korea for failing to adapt to the tastes ofthese markets. TECHNOLOGYSmart labels or "tags" (a sticker with an embedded microchip) is the technologyused and to store information about each product, but large-scale, large suppliersbenefit take full advantage to maintain a more thorough inspection of themerchandise produced, shipped and sold.
SYNTHESIZING Wal-Mart is a strong company that has grown using aggressive strategies with great stability in the market because of its competitive advantages. The directors of Wal-Mart have achieved a really good economic environment and have managed to gain acceptance from consumers, government and suppliers. The inventory control systems, concern for customer satisfaction, concern for the community and increasing demand have been part of their success.
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.
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.
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 unsuccessful and had to pull out because of its unprofitability
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.
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.
• 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 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
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 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.
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
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
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
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 of mind and keep it above the competitors.