1) Walmart began as a single discount store founded by Sam Walton in 1962 and grew to become the largest retailer in the world through a strategy of low prices, efficient supply chain management, and expansion into new store formats like Sam's Club warehouses and Supercenters. 2) By 1994, Walmart had over 1,900 discount stores and was expanding aggressively into new markets, with Supercenters and Sam's Clubs becoming major drivers of growth. 3) Walmart's low-cost business model and ability to pressure suppliers on price gave it a strong competitive advantage over rivals in the retail industry.

1. Sam’s Clubs GLOBAL INDUSTRY ANALYSIS - CASE STUDY Wal*Mart Stores, Inc. a presentation Anthony, Crystal, Sandy From YZU university

2. WAL  MART Background Sam Walton Founder of Wal*Mart Stores, Inc. Performance of Wal*Mart 20-year average return on equity of 33% Compound average sales growth of 35% Market value = $57.5 billion Wal*Mart Industry average Sales per square foot $300 $210

3. WAL  MART Background Year 1988 CEO: David Glass COO: Don Soderquist How to sustain the company’s phenomenal performance? 1987 1993 Net sales 15,959 67,345 Net Income 628 2,333 Number Of Stores Discount Stores 1,114 1,953 Sam’s Wholesale Clubs 84 419 Supercenters N.A. 68

4. WAL  MART Background Number of Stores (1994)

5. WAL  MART Discount Retailing Where Emerged in the U.S. When Mid-1950s Top 10 discounters in 1962 Wal*Mart remained only The industry became more concentrated Discount store companies operated 5 or more stores accounted for 62%

6. WAL  MART Discount Retailing

7. WAL  MART Discount Retailing Comparative Pricing Study, 1993

8. WAL  MART Discount Retailing Overall Performance of Discounters

9. WAL  MART Wal*Mart’s Discount Stores and History of Growth Year 1945 Ben Franklin franchise store In 1950s 15 stores Year 1962 Wal*Mart Discount City store Year 1969 18 Wal*Mart stores 15 Ben Franklin franchise stores

10. WAL  MART Wal*Mart’s Discount Stores and History of Growth Year 1970 30 discount stores in rural states South and Midwest Cost of good sold Build its own warehouse Buy in volume at attractive prices Store the merchandise Year 1972 Took the company public Raised $3.3 million

11. WAL  MART Wal*Mart’s Discount Stores and History of Growth Year 1993 West coast and northeastern states Year 1994 Operated in 47 states

13. WAL  MART Wal*Mart’s Discount Stores and History of Growth Key strategies for growing Locate store in isolated rural areas and small towns (population 5000~25000) Pattern of expansion Always push from inside out Mid-1980s One third were located in areas that were not served by any of its competitors

14. WAL  MART Wal*Mart’s Discount Stores and History of Growth Year 1993 Wal*Mart faced 55% (Kmart), 23% (Target) Kmart 82%, Target 85% from Wal*Mart

15. WAL  MART Wal*Mart’s Discount Stores and Sam’s Legacy Philosophy Keep prices below everybody else Trip expenses can’t exceed 1% of the purchases Spent lots of time in his own store and observe competitors Culture Do not show off buying luxury goods Success The way it treated its associates

16. WAL  MART Wal*Mart’s Discount Stores and Sam’s Legacy Management style Maintain an open-door policy Empowering associates Maintain technology superiority Build loyalty among associates, customers, and suppliers

18. WAL  MART Wal*Mart’s Discount Stores and Merchandising Tailor to individual market or individual store Information system A process which indexed product movements in the store to over a thousand store and market traits Using inventory and sales data

20. WAL  MART Wal*Mart’s Discount Stores and Merchandising Promotional strategy Everyday-low-prices Few promotions 13 major circulars per year 1993 Satisfaction guaranteed policy

21. WAL  MART Wal*Mart’s Discount Stores and Merchandising Marketing slogan Lower price Store managers set up prices 2-4% pricing differential between Wal*Mart and its best competitors in most markets in early 1990s

22. Transportation cost 圖

23. WAL  MART Wal*Mart’s Discount Stores and Merchandising National brand strategy Private label apparel 25% of apparel sales Other private label 26% price advantage Also sold in Sam’s Clubs and supercenters “ Buy American” program

24. WAL  MART Wal*Mart’s Discount Stores and SWOT Analysis Strength Weakness Cost advantage Low price & customer-oriented Strong supply chain People are key to success Ignore store decoration Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors. Opportunity Threat Build its own brand Put efforts on social welfare  better image New locations and store types Overseas markets Other competitors Intense price competition

25. WAL  MART Wal*Mart’s Discount Stores and Store Operation

26. WAL  MART Wal*Mart’s Discount Stores and Store Operation

27. WAL  MART Wal*Mart’s Discount Stores and Store Operation Electronic scanning of uniform product code (UPC) at the POS Ensure accurate pricing Improve efficiency Reduce Shrinkage Improve communications

28. WAL  MART Wal*Mart’s Discount Stores and Store Operation Satellite system Data collected and analyzed Observing Merchandise flow, overstock, discount Video transmissions, credit card authorizations, and inventory control

29. WAL  MART Wal*Mart’s Discount Stores and Distribution Phenomenal distribution network Two step hub-and-spoke

30. WAL  MART Wal*Mart’s Discount Stores and Distribution Phenomenal distribution network Cross-docking technique

31. WAL  MART Wal*Mart’s Discount Stores and Distribution Phenomenal distribution network Distribution center Cost advantage Stable price

32. WAL  MART Wal*Mart’s Discount Stores and Distribution Phenomenal distribution network Computerized pick to light system

33. WAL  MART Wal*Mart’s Discount Stores and Distribution

34. WAL  MART Wal*Mart’s Discount Stores and Vendor Relationships Backward integration No nonsense negotiator Economies of scale Maintain long term relationship with supplier, as powerful partner (RSP)

35. WAL  MART Wal*Mart’s Discount Stores and Vendor Relationships

36. WAL  MART Wal*Mart’s Discount Stores and Vendor Relationships Backward integration Electronic data interchange (EDI) CPFR Forecasting Planning Replenishing Shipping applications

37. The CPFR Process Buyer Seller FRONT END AGREEMENT JOINT BUSINESS PLAN Collaborative Planning CREATE SALES FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Collaborative Forecasting CREATE ORDER FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Collaborative Replenishment GENERATE ORDER

38. WAL  MART Wal*Mart’s Discount Stores and Vendor Relationships Backward integration Vendor-managed inventory (VMI) system Wrangler GE

39. WAL  MART Wal*Mart’s Discount Stores and Vendor Relationships Backward integration From EDI to Retail link

40. WAL  MART Wal*Mart’s Discount Stores and Vendor Relationships Whole Supply chain Economies of scale Cost leadership competitive advantage JIT inventor POS and retail link CRS & VMI EDI CPFR

42. WAL  MART Wal*Mart’s Discount Stores and Human Resource Management Non-unionized Decentralized: full autonomy Profit sharing program Yes we can Sam Store within store Shrink incentive Stock sharing Administrative style Frugality No hierarchy in organization

43. WAL  MART Wal*Mart’s Discount Stores and Value Chain Non-unionized, Full autonomy to associates, Decentralized, profit sharing program, Job rotation, Stock purchase plan UPC at POS, EDI, Information system, VMI ,Cross ducking , Satellite system, CPFR Maintain long-term relationship, No single supplier accounting for more than 2.4%, Selective suppliers ( P&G & GE), NO nonsense policy Inferior fixtures standardization, Trucks, Average store size 84,000 square feat Everyday low price Always low price, always Self service Cash and carry Save money, live better credit card, Layaway plan Outbound Logistics Marketing & Sales After Sales Service Inbound Logistics Primary Activities Firm Infrastructure Human Resource Management Technology Development Procurement VMI system Retail link EDI CPFR Six days a week(9~21) Monday (12:30~17:30) Two step hub and spoke distributing system ECR Satisfaction guarantee policy Quick response (QR) Operations Margin

44. WAL  MART Diversification Historical Time Series Wal*Mart opened the first three Sam’s clubs in 1983 Sam’s sales surpassed Price Club’s, making it the largest wholesale club in 1987 In 1987, Wal*Mart introduced its first supercenter In 1991, Wal*Mart acquired “The Wholesale Club” with 28 outlets in the Midwest

45. WAL  MART Diversification In 1993, Sales at Sam’s Club rose 19.5% as the highest in national warehouse club chains, which Sam’s was nearly twice the size of Price Club Sam’s Club acquired 99 of Kmart’s 113 “Pace club” in 1993

46. WAL  MART Diversification Comparison

47. WAL  MART Diversification Backward Integration Acquire “McLane Company” Texas retail grocery supplier To service both Sam’s Clubs and supercenters

48. WAL  MART Diversification and Sam’s Clubs Warehouse clubs

49. Operating philosophy To offer a limited number of SKUs in pallet-size quantities in a no-frills, warehouse-type building Location Often locate next to a Wal*Mart Sam’s chose to cannibalize its own sales rather than give competitors any openings WAL  MART Diversification and Sam’s Clubs

50. WAL  MART Diversification and Sam’s Clubs Payment Discover card Cash- and-carry Membership Free $25 annually Business Hour Seven days a week Supply Direct shipment from supplier - 70% Company’s distribution centers - 30%

51. WAL  MART Diversification and Sam’s Clubs Top Warehouse Clubs by 1993

52. WAL  MART Diversification and Supercenters Motivation Operating margins within the industry were extremely low- a typical supermarkets was lucky to squeeze out a 2 % profit margin. Industry trend

53. WAL  MART Diversification and Supercenters Definition A supercenter is a combination supermarket and discount store averaging 120,000 to 130,000 square feet in size It contains bakeries, delis and convenience shops

54. WAL  MART Diversification and Supercenters Familiarity Low-price image Operating Philosophy

55. WAL  MART Diversification and Supercenters Layout

56. WAL  MART Diversification and Supercenters Staff 450 associates Full-time - 70% Part-time - 30%

57. WAL  MART Diversification and Supercenters 24 hours Seven days a week

58. WAL  MART Diversification and Supercenters

59. 1994, March Acquire 122 Woolco stores Woolworth Corp. WAL  MART Diversification and International Expansion

60. Year 1992 Joint venture Cifra S.A. (Mexico’s largest retailer) 63 stores (22 Sam’s Clubs, 11 Wal*Mart supercenters) WAL  MART Diversification and International Expansion

61. South America Plan to enter in 1995 Brazil & Argentina WAL  MART Diversification and International Expansion

62. WAL  MART Diversification and Five Force Analysis Discount Store Kmart Target Caldor Warehouse Clubs Price Club Costco Pace Supercenter Meijer Fred Meyer Competitors High degree of concentration High industry growth Have excess capacity Cost structure of firms: sensitive to cost Buyer’s switching cost is low Firm can adjust prices quickly Price elasticity of demand

63. WAL  MART Diversification and Five Force Analysis Supermarket Kroger Safeway Stores Potential Entrant They have distribution channels Access to raw materials Allocate favorable locations

64. WAL  MART Diversification and Five Force Analysis Key players Procter & Gamble GE Wrangler Suppliers Industry is concentrated Many suppliers No-nonsense

65. WAL  MART Diversification and Five Force Analysis Target Market ?????? Customers Low switching cost Transportation cost