The document discusses Walmart's business strategy and options for addressing challenges it faces. It analyzes Walmart's value chain and competitive advantages. It considers options like expanding globally, diversifying into other businesses, or moving into other retail formats. It recommends the supercenter format as the best option to pursue more frequent customer visits and higher margins from specialty departments.

1. Ramamurthy

2. Industry AnalysisThreat from New EntrantsEconomies of Scale - relatively high

3. Entry Barrier - relatively high

4. Exit Barrier - relatively highMODERATEBargaining Power SuppliersAvailability of substitutes – internal & external - high

5. Forward integration

6. Backward integration

7. High volumes, high negotiating powerLOWBuying Powers CustomersLess bargaining power

8. Ease of Switching Cost, no cost

9. Lack of differentiation

10. Ample substitutesLOWIndustry RivalryFierce Competition, Mature Industry

11. Lack of differentiation

12. Volume, price game

13. Low switching cost for buyersHIGHThreat of SubstitutesDiverse Formats Influence- Food Supermarkets, local grocery stores, departmental stores, specialty stores, online stores, direct sales channels - Medium

14. Demographic Influence – Low to highMEDIUM

15. Wal-Mart: Value Chain (1)InfrastructureDiscount Stores, Superstores, Warehouse ClubsHuman ResourcesRecruiting, Training, incentives, employee feedbackTechnology DevelopmentInventory System EDI, Satellite system at HQ Return PolicyProcurementMerchandise Forecasting/Planning Shipping Services MediaInbound Shipment of itemsDistribution CentersElectronic InvoicingHub & Spoke NetworkOwn Fleet of TrucksLimited Yearly campaignsReturned Items,Customer FeedbackProcurementOutbound LogisticsMarketing & SalesOperationsService

16. Wal-Mart: Value Chain (2)Traditional Supply ChainWholesalerManufacturerRetailerCustomerWal-Mart Supply ChainWal-MartCustomerManufacturerDistributionWeekly RoutinesStore OperationsTechnology, ITMarketingPurchasingFrugal, led by Sam Walton

17. Market Analysis

18. Business Level StrategyWalmart is a broad cost leaderWalmart( MS = 35.8%, RoE = 26.6%)RoEKe= 4%Market Share

19. RBV Analysis – Tangible Resources

20. RBV Analysis – Intangible Resources

21. RBV Analysis – Organizational Capabilities

22. Wal-Mart's key sources of Competitive AdvantageBased on RBV Analysis all these competencies are pretty much sustainable over the long term.

23. What’s Wal-Mart’s problem?Revenue GrowthSince Wal-Mart hadn't had significant competition in rural markets, it was able to price its products at a considerably higher price. These markets have saturated in 1994, consequently slowing down Walmart’s growth.

24. Overcapacity had generated intense competition in the wholesale club market. This resulted in Sam’s clubs cannibalizing their own sales resulting in poor top line growth.Profit MarginsBy 1993, 55% of Walmart faced direct competition from Kmart and 23% from Target. This forced Walmart to price their goods at 7.6% to 10.4% less, which hit the company’s bottom line.

25. Supercenters face direct competition from supermarkets that sustain on narrow margins. This too impacts Wal-Mart's bottom line.Wal-Mart's options

27. Expanding into global marketsProsWal-Mart’s cost leadership is a good fit in developing countries with a sizeable middle class.

28. The satellite-based forecasting & communication system can be easily replicated in other countries

29. Wal-Mart’s global procurement strategy, vendor relationships and supplier integration will enable it to compete effectively in other markets as well.ConsBuilding the “Everyday Low Prices” reputation in new markets could be time consuming.

30. Setting up its cutting edge distribution system in new markets could entails a huge investment upfront.

31. Promoting Wal-Mart’s unique corporate culture in a transnational setting may prove difficult Diversifying into other businessesProsWal-Mart’s state-of-the-art distribution system can be easily leveraged to support other businesses.

32. The satellite-based forecasting & communication system can be easily adapted to other businesses.

33. Wal-Mart’s global procurement strategy, vendor relationships and supplier integration enable it to compete effectively in other businesses as well.ConsStarting a new business (such as pharmacy) as a separate entity could cannibalize Wal-Mart’s business

34. Wal-Mart’s cost leadership strategy wont be a good match for expensive, “value” products

35. New businesses entail huge investmentsMoving into other retail formatsProsThe satellite-based forecasting & communication system can be easily adapted to other formats.

36. Wal-Mart’s global procurement strategy, vendor relationships and supplier integration enable it to compete effectively in other formats as well.

37. Wal-Mart’s state-of-the-art distribution system can be easily leveraged to support new formats in current Wal-Mart strongholdsConsDue to saturation of rural markets, any further expansion can happen only in urban areas. Distribution in urban areas could prove costlier due to expensive rentals of stores & warehouses and problems like traffic congestion. This could create problems for Wal-Mart to sustain its “Everyday Low Prices” Which format?Discount Stores Selling products at low prices

38. Average store size – 84,000 Sq. Ft

39. General Merchandise, Groceries, Pharmacy, Optical Center, Tire & Lube, Fast food Super Centers One stop shopping

40. Average store size – 173,000 Sq. Ft.

41. Super market, Deli, Meat & Poultry, Bakery, Sports, Frozen foods, Diary, Garden, Produce, Seafood, Unisex, Nails, Video rental, Dunkins, Pet shop, Garden Center + Discount StoreSam’s ClubsDeep discounts at wholesale quantities

42. Average store size – 120,000 Sq. Ft.Thumbs up for Super Centers! Due to availability of Deli & other food items, customers visit Super Centers more frequently.Specialty departments like bakery offer margins of 35% - 40%

43. High revenue & profit per square feet

44. Discount centers are under margin pressure

45. High competition in warehouse club business is causing Sam’s clubs cannabalizing on its own stores

46. Recommendations

47. Thank youQuestions?