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Walmart Case Study Presentation

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  1. 1. • Walmart is more than just Earth’s largest retailer• The finances, footprint, and personnel of this behemoth dwarfs entire industries and countries• Walmart’s epic 400+ billion annual revenues eclipse the GDPs of more than 170 countries and its 2,100,000 employees would form the second largest standing army on the planet
  2. 2. How does Wal Mart compete?• Walmart went to small towns and rural areas• Walmart knows its competitors and adopts their best practices• Merchandising is tailored to individual markets and even to individual stores• Local store managers have a lot more leverage with prices inorder to maximise local sales
  3. 3. How does Wal Mart compete?• Opened discount stores at locations where they could expand in the future• They have always maintained technological superiority over their competitors• Introduced the concept of cross docking• Stores are grouped together and hence resupply by trucks is easy• Vendors also operate in Walmart territory
  4. 4. How does Wal Mart compete?• Inventory is reduced because they share point of sales data with their suppliers and that helps in quick replenishment• Profit is actively shared with employees• Shrink incentive plan• ‘Yes we can Sam’ program
  5. 5. How does Wal Mart compete?Supercenters• Limited number of brands and SKU’s• Open 24 hours a day, 7 days a week• Have salons, delis, seafood shops, photo labs, dry cleaners
  6. 6. How does it differentiate from otherretailers? Walmart• Walmart build their own warehouse & bought in volume at attractive prices• Located stores in isolated rural areas & small towns which every other retailer ignored• In mid 1980s, Walmart was located in areas which were not served by any of its competitors• Kept prices lower than everybody else’s• Walmart knew its competitors intimately & copied their best ideas Other discount stores• Other discount stores charged gross margin 10-15% lower than conventional departmental stores• But fixtures were unluxurious, in-store selling was limited, ancillary services such as delivery and credit were scarce
  7. 7. How does it differentiate from otherretailers? Merchandising• Merchandise was tailored to individual markets/stores through “traiting”• Promotional strategy of “everyday low prices”• Walmart had few promotions. Offered only 13 major circulars per year• “Satisfaction guaranteed” policy where merchandise could be returned to Walmart stores with no questions asked Store operations• Leased about 70% of Walmart stores• Rental expense was 3% of discount store sales compared to 3.3% for direct competitors• Sales per sq.ft of $300 as compared with Traget’s $209 & Kmart’s $147• Devoted 10% of its square footage to inventory as against industry average of 25%• Introduced scanning of uniform product code(UPC)
  8. 8. How does it differentiate from otherretailers?Distribution• Cross-docking transferred products directly from in-bound vehicles to store-bound vehicles without ever sitting in the inventory• Walmart used technology effectively to reduce inventory costs & increase sales• It spent 1.5% of discount store sales on information systems as compared with 1.3 % for direct competitors
  9. 9. How does it differentiate from otherretailers?Diversification Sam’s Club• Warehouse clubs used high-volume, low-cost merchandising, minimum handling cost• Limited no. of SKUs resulted in high inventory turnover rate• Sam’s club opened clubs close to one another without giving competitors any openings in many market places Supercenter• Supercenter was a combination of super markets & discount stores, which offered limited packaged sizes & brands in order to keep costs low• Walmarts Supercenter comprised of a huge grocery section along with the discount section which gave them profits of $50 per square foot Going International• Walmart entered the growing economies of the world to grow their business globally• Mexico, Canada, Argentina, Brazil, Singapore, Hong kong and China were the new centers of Walmart
  10. 10. Porter’s Five Forces
  11. 11. Porter’s Five ForcesWeak Bargaining powerLargest account for most ofthe producers Suppliers
  12. 12. Porter’s Five ForcesThreat of new entrants Threat ofis weak EntryWal-mart’s great scaleof operationsIt would take years ormay be decade to for anew player to be on thesame levelToday even big playersalso have extremedifficult time matchingthe costs and prices Wal-mart provides
  13. 13. Porter’s Five ForcesWeak bargaining powerof buyersBroad base of customersand a significant demandfor low prices Buyers
  14. 14. Porter’s Five ForcesLow threat of substituteproductWal-mart exerts a greatdeal of effort in making surethey are innovative &meeting customer demands Substitutes
  15. 15. Porter’s Five ForcesFairly weakcompetitorsEven though marketis crowded Wal-marthas the lowestcosts, prices Rivalry
  16. 16. Will it Continue?• At this time of economical crisis of unprecedented scale, concept like Wal-Marts is everybody’s delight• Wal-Mart has been aggressively trying to expand internationally, this is the right time for them• People worldwide will kill for cheaper alternatives for their daily requirements
  17. 17. Will it Continue?Success Enablers• Favourable macro-economic conditions• Absence of “direct” competitors• “Associates” v/s “Employees”• The “Wal-Mart Culture”• Operational Efficiency
  18. 18. Will it Continue?Behind Every Successful Store…• Clear Vision• Shared Dream• Sheer “Economy of Scale”• Technological Superiority
  19. 19. Will it Continue?Stumbling Blocks• Legislation• “Overly” Efficient• Brand Image:- – Annihilation of “Local Business” – Destroyer of “Way of Life / Culture” – Promoter of “Sweatshops” – Promoter of “Foreign Produced Goods”• Brand Perception:- – Low Cost v/s Quality & Buying Experience – Relation with “U.S.A. Global Image”