WalMart Group 5 Sec B

8/12/2019 WalMart Group 5 Sec B

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PREPARED BY: MEDHA MATHUR (WMP08071), PRANAY PR SINGH (WMP08074), RAHUL BHANSALI (WMP08076)RAHUL DEV SINGH(WMP08077), RAHUL UPADHYAY(WMP08078), VIPUL TONDON (WMP6126)


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DISCOUNT RETAIL INDUSTRY ANDHISTORY OF WALMART

Emerged in US in mid-1950s

10-15% lower gross margins than conventional departmental store

Walten Brothers opened their first Walmart in Arkansas in 1962.

Walmart became public in 1970

Industry growth peaked in 1970s, the nos of stores increased by 64% and salesby 144%

Too many players entered into discounting in 1970

Wal*Mart opened the first three Sams clubs in 1983

Sams sales surpassed Price Clubs, making it the largest wholesale club in 1987

Discounters Sales grew from $2 billion in 1960 to $68 Billion in 1985


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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 $300 $210square foot

Performance ofWal*Mart


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Financial Summary


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PURCHASING AND DISTRIBUTION

Centralized purchasing

Used in-Store terminal to wire merchandise request to a centralcomputer

Central computer linked to 3000 vendors

No more than 1/5th of its volume from any one vendor

Optimal utilization of trucks

5 distribution networkcovering 175 stores within a 300 mile radius

Cost of inbound logistics2% of sales (half as compared withindustry)


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STORE OPERATION

859 Stores leased (except 47)

Rental 1.8% of sales (lowest)

More store area available for selling space as company

distribution network reduce storage requirement

Inventory turns exceeds 4.5

Emphasis on hard goods than soft goods

In 1971 started computerized system to track inventory

$20 million satellite network to ease real time communication

Electronic scanning of Uniform product code (UPC)


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MARKETING

Majority Branded merchandise (95%)nationally advertised

We sell for less marketing theme

Price competitivelowest than competitors

Everyday low prices promotional strategy

13 promotions in a year

Ad. Expenditure 1.1% of sales

Cash and Carryless than 5% by cards

Use CAD design to suggest a merchandise mix for each store9based on climate, customer preferences, ethnic mix)


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HRM

100000 employee (70% full time , 30% part time)

Non-unionized.

We care about our people buttons wore by managers

Decentralized: full autonomy

Top management spent time in stores

Employees officially called associates give views forimprovements in stores

Profit sharing program- Yes we can Sam

- Store within store- Shrink incentive- Stock sharing

Top 100 companies to work in US


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ADMINISTRATION

Emphasized Frugality

Heavy emphasis on communication within the company

12 Regional VPs, visit the stores (Monday to Thursday) , meets

on Friday and meets with 250 employees on Saturday todiscuss results and settle for direction in coming weeks

CEO and Chairman- Sam Walton very actively involved withemployees and company affairs

In 1986, named CEO of the year by financial world


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DIVERSIFICATION

3 new ventures in 1984- Dot discount drug, Helens Art and craftand Sams wholesale club

Analyst excited about Sams wholesale club, hailed warehouseclubs as most excited retail format

Warehouse clubs limits gross margin to 9-10 %, prices low by 20%as compared to discounters and supermarkets

Stocks only 3500 top-selling items, high population for highturnovers

$4.4 Billion sales by these clubs. High growth in coming years.Required investment of $ 5-10 million

Wal-Mart has 12 clubs in 1985, sales $777 million

Sam Club buys merchandise independent of discount stores


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EXPANSION


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INTERNALFACTORS

EXTERNALFACT

ORS

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

SW

Diversity in products & services Convenient prices & locations

Strong market presence Customer loyalty Strong financial performance Cost and pricing advantages over

rivals Good supply chain

Global Expansion: new geographicareas

Increasing online sales Strategic alliances

Acquiring rival firms

HarmfulHelpful

Brand image-weakreputationLow global presenceBehind rivals in e-commerce

Intense Competition Laws and Regulations:

Trade policy Cultural barriers Current economy Slow market growth Transport of distinctive

comptency


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P.E.S.T. Analysis

1970 - 1985 Political: National Debt was increasing.- trading agreements (NAFTA)

Economical:Unemployment Rate(10%).- To tame inflation, Interest

rates were at an all time high in1982!

- 1982 Recession was severeand lasted long

Socio Cultural:Increasingly better informedconsumers since WWII.

- TV had intensified advertisingby manufacturers.

- Government standards alsobolstered consumers self-confidence.

- Wanted cheaper, self-

service retailers (ie. discountchains).

Technological:Electronic scanning ofuniform product code.- Satellite system.- Electronic data interchange

(EDI)


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Pricing Strategy and Actionssupporting the Strategy

Based on cost advantageAlways low prices---AlwaysStable priceSpent less on ad.Operating expenses are low

Store managers set up prices

Locate store in isolated rural areas and small towns

Buy its own warehouses

Buy at a best price (backward integration)


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Modern Day Technology Turningthe Tide

Electronic scanning of uniform product code(UPC) at the POSEnsure accurate pricingImprove efficiencyReduce ShrinkageImprove communications

Satellite systemData collected and analyzedObserving Merchandise flow, overstock, discountVideo transmissions, credit card authorizations, and inventory

control

Electronic data interchange (EDI)CPFRForecastingPlanningReplenishing

Shipping applications


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COMPETITIVE ADVANTAGE

Differentiation- Better

Cost leadership- Cheaper

Quick response- faster

Wal-Mart started their first 30 stores in rural and sub-urbs area

Wal-Mart competitive advantage

-adopted cost leadership strategy to achieve competitiveadvantage in the market-cost leadership strategies are helping Wal-Mart to reduce itscost of operations and thus enjoy higher profits as well as thelarger market share


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COMPETITIVE ADVANTAGE

Techniques to gain sustainability- Optimal use of resources (tangible and intangible),

Organizational capabilities and competencies to createvalues for the customers

- economies of scale that helps to keep the prices lower ascompared to the competitors.

- Wal-Mart has the tremendous bargaining power with itssuppliers and thus it purchases products at lower prices.

- MIS: Effective and efficient control of inventories throughpoint-of-purchase data collection methods

- Distribution: Effective use of logistics management technique(ware house)


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THANK YOU

WalMart Group 5 Sec B

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