Walmart Case Study

Wal-Mart

Current Situation Analysis

Mission and Strategic Objectives

Wal - Mart Corporation's mission statement can be identified as follows:

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:

1. Respect for the Individual

2. Service to Our Customers

3. Strive for Excellence

Wal-Mart is the world's largest retailer, operating more than 5800 discount stores. Wal-Mart employs more than 1.5 million associates 885,000 in the United States and 225,000 internationally. Walton had a reputation for caring about his customers, his employees, and the community. In order to maintain its market position in the discount retail business, Wal-Mart executives continue to adhere to the management guidelines Sam developed. Walton was a man of simple tastes and took a keen interest in people. He believed in three guiding principles: 1.Customer value and service; 2.Partnership with its associates; 3.Community involvement.

Strategy

Wal-Mart succeeds in the United States simply by selling branded products at low cost. But that doesn't explain it all. Following is an analysis of Wal-Mart's competitive strategy.

Pricing

Wal-Mart's marketing strategy was to guarantee "everyday low prices" as a way to attract customers. The traditional discount retailer, which relies on "sales," not only has to do more advertising and promotions but also has to rely more on catalog mailing, buildup of inventory before a sale, markdowns on the unsold inventory, etc. Wal-Mart stores operate according to their "Everyday Low Price" philosophy. Wal-Mart has emerged as the industry leader because it has been better at containing its costs, which has allowed it to pass on the savings to its customers. Wal-Mart has become a capability competitor. With such low wages for those who make the Bratz dolls, Wal-Mart can profit greatly while still providing low prices to its customers. In a global labor market, it is the companies who can find the cheapest, most exploitable conditions, with little worker protection or regulations that will profit the greatest.

Distribution System

About 85 percent of all the merchandise that Wal-Mart sold was shipped through its distribution system to the stores (competitors averaged less than 50 percent). Wal-Mart used a "saturation" strategy for store expansion. The standard was to be able to drive to a store within a day from a distribution center. A distribution center was strategically placed so that it could eventually

Information System

First and most important thing about Wal-Mart's information system is precisely that the customer's needs come first. Wal-Mart had implemented a satellite network system that was used to share information between the company's network of stores, distribution centers and suppliers so orders could be consolidated, enabling the company to buy full truckloads without incurring excess inventory costs. Increase flexibility, insured 100 percent in-stock position increased store-selling space (by reducing the space required for back-room inventory storage).

Store-level data were collected, analyzed and transmitted electronically to see how a particular region, district, store, department within a store or item was performing. This eliminated stock-outs, reduced the need for markdowns on slow-moving stock and maximized inventory turnover. The benchmark information across stores was also a valuable tool to help "problem" stores.

1) The Customer--One of Walton's deepest beliefs was that the customer is always right, and his stores are still driven by this philosophy. When questioned about Wal-Mart's secrets of success, Walton has been quoted as saying; "It has to do with our desire to exceed our customers' expectations every hour of every day"

2) The Associates--Walton's greatest accomplishment was his ability to empower, enriches, and trains his employees. He believed in listening to employees and challenging them to come up with ideas and suggestions to make the company better. At each of the Wal-Mart stores, signs are displayed which read; "Our People Make the Difference." Associates regularly make suggestions for cutting costs through their "Yes We Can Sam" program. One of Wal-Mart's goals was to provide its employees with the appropriate technological tools, in order to do their jobs more efficiently, and succeed in the retail market. Wal-Mart has grown from a single store open by Sam Walton in 1962 to a global corporation. Wal-Mart is presently the largest private employer, hiring directly for its own needs, in the United States. Wal-Mart has promoted over 9,000 associates into management positions.

International Development

Wal-Mart noticed certain saturation in their home market, especially in the suburbs. They recognized that future growth and expansion could only take place internationally. 1992 was the year of starting their international activities. They joined a joint venture with CIFRA, the largest retailer in Mexico. After the successful introduction into the international market they made a logical decision to try the similar approach in other neighborhoods. Wal-Mart operates in ten different countries overseas.

Future Expansions

The company will further expand its Neighborhood Market concept by adding 50 new stores in the upcoming fiscal year. Wal-Mart International plans to open 100 to 110 units in existing markets. Projects are scheduled to open in each of the countries, and will include new stores and clubs as well as relocations of a few existing units. These announced units also include several restaurants, department stores and supermarkets in Mexico. In addition, Germany will continue with the remodeling of all the acquired hypermarkets.

Retail Industry

The retailing industry is mature