Walmartpresentation-

THE FIVE FORCES MODEL

How to transfer core competencies to other countries?

2Outline History Overview- Vision, Mission and Goals

Interna & External AnalysisValue ChainSWOT & Pestel Analysis5 Forces ModelMain Competitors

InternationalizationDriving ForcesEntry decisionsExamples of success and failure

Suggestions

History Overview1962: Walten Brothers opened fist Walmart in Arkansas1970: Walmart became public1990: 1st National retailer1991: International Expansion1993: Creation of Great Value2003: Largest corporation in the world2012: 50th Anniversary

Mission Statement, Vision, Goals, & PurposeVision:If we work together, well lower the cost of living for everyonewell give the world an opportunity to see what its like to save and have a better life. Mission Statement: To help people save money so they can live betterGoal:Becoming in an international brandCustomer TargetWal-Mart's targeted demographic: Modest incomesShoppers interested in pricesBut the customer base is changing

Internal & ExternalAnalysisFirms Value Chain

General administrationHuman resource managementTechnology developmentProcurementInbound logisticsOperationsOutbound logisticsMarketing and salesServiceFirms infrasctructure: close connection between headquarter and local stores.

Human resources: Based on Interaction practices between company and employeesLow pay but other benefits (health care plans, retirement plans, or promotion opportunities)2.2 millionassociates globally. Every time we open a supercenter, we provide roughly 300 jobs Women57%of our U.S. workforce, 27% of corporate officers, and 20% of ourBoard of directors.Techonology development: It is the key factor of the company. It constitutes a competitive advantage against competitors.- Computer-based technology POS (Point of sales) system Satellite SystemProcurement:Wal-Mart deals directly with manufacturers, by passing all intermediaries. EDI : Electronic data interchange MANUFACTURER WALMART - CUSTOMERS

Support ActivitiesPrimary ActivitiesInbound LogisticsOperationsOutbound LogisticsMarketing and salesService-VMI system (Vendor managed inventory) continuous replenishmentEDI (Electronic Data Interchange

3 business segments:

a)WalMart storesSuper centersDiscount centersNeighborhood markets

b) SAMS Club

c)WalMart international

Hub and spoke distribution system.

CROSS DOCKING: logistic technique to make the distribution process more efficient

- Word of mouth communication.

focuses on everyday low prices

Save money, live better

Sales are on a self-service, cash-and-carry basis.

accepting returned goods

Satisfaction guarantee

- Opening hours(24/7)Business FormatsWalmart Discount Stores 629 in the US

Walmart Supercenter: Walmart Discount Stores + Full Service Supermarket. 3,029 in the US.

Walmart Market: Previously branded as Walmart Neighborhood Market. 199 in the US.

2) Sams Club. Buy in large quantities. 611 opened in the US.

1) Walmart StoresWalmart in the US

Distribution Channels Saturation StrategyThe company owns a fleet of more than 3,000 trucks and 12,000 trailers.The Wal-Mart Way Cross Docking.

CompetencyValuableRareDifficult to imitateDifficult to substituteConclusionIntegrated technology of supply chainYesYesYesYesSustainable Compt. advAbility to generate large sales volumeYesNoNoYesComp. ParitySuperior logistics systemYesYesYesYesSustainable comp. advOperation decentralizationYesYesYesNoTemp. comp. advStrong culture YesYesYesYesSustainable comp. advHuman resources (management team and employee autonomy)YesYesYesNoTemp. comp. advResource - Based View Of The FirmINTERNAL FACTORSEXTERNAL FACTORSSTRENGTHSWEAKNESSESOPPORTUNITIESTHREATSSWDiversity in products & servicesConvenient prices & locationsStrong market presenceCustomer loyaltyStrong financial performanceCost and pricing advantages over rivalsGood supply chain

Global Expansion: new geographic areasIncreasing online salesStrategic alliances Acquiring rival firmsHarmfulHelpfulBrand image-weak reputationLow global presenceBehind rivals in e-commerce

Intense CompetitionLaws and Regulations: Trade policyCultural barriersCurrent economy Slow market growthTransport of distinctive comptency

OT

15PESTEL AnalysisPolitical: Policies on economy, trading agreements (NAFTA) . Economical: Unemployment Rate, slightly increase in consumption.Socio Cultural: Faster pace of live- Efficiency is key. Technological: Use of IT technologies. Online shopping. Environmental: Recycling, Contamination issues. Legal: More laws and more complex. The Five Forces ModelBargaining Power of Customers: LowCustomers usually make small purchases. A large number of customers.Wal-Marts main customers are individuals.2. Bargaining Power of Suppliers: Medium-LowWal-Mart purchases huge quantities of products from its suppliers.Low switching costs from one supplier to another.Products have a lot of substitutes.Almost all the products are not critical for Wal-Mart.

The Five Forces ModelPotential entrants / Barriers to entry: Medium-HighEconomies of scale.High capital requirements.Customers mainly look for products with low prices and standard quality.Low switching costs among companies for customers.Requires a precise distribution system.Power of Substitutes: HighPrices and quality of substitute products are very competitive.Performance of substitute products are similar.Consumer switching costs are low.

18The Five Forces Model5. Potential Competitors/ Rivalry: HighWal-Mart represents the 25% share of the U.S. Supermarket business.Competitors have similar sizes.Industry growth is slow.Exit barriers are high.There is a high production capacity

WAL-MART main competitors:Retailer Industry: Target K-MartSupermarket Industry: Dollar General Lowes Food.Strategic Group Map

Number of Product CategoriesLowLowHighHighCustomer service/ PriceMain CompetitorsRetailer Industry: Target

Target is the main competitor of Walmart ranked #33 in the Fortune 500.Target offers very similar products.Target went abroad in January 2011.

Mission: to Make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences.Supermarket Industry: Dollar GeneralOne of the main competitors, pursuing low prices.Good location in smaller communities is the main competence advantage.Strategy: Save time, save moneyMany items per $1

Mission: to best serve others by keeping it real and simple.

Business-Level Strategy: Combined StrategyWalmart combines a Cost-Leadership and Differentiation strategies because:

Allowed to achieve a large scale and an efficient supply chain.Has its own low-cost brands, like Great Value.A unique cost structure that allows Walmart to establish the lowest prices and achieve competitive advantage. (best value/price combination )Present in many different industries and markets with efficient distribution channels. Very difficult strategy to imitate by offering a broad quantity of products at a low price.

InternationalizationInternationalizationReasons for expanding abroadRisksInternational StrategySuccessKey issues

Forces Favoring Globalization3 main reasonsSaturated domestic marketUnited States represents only 4% of worlds population (missing of 96% of potential customers)Emerging Markets with lower disposable income offer huge platforms for growth in discount retailer.Economies of ScaleGrowthRevenuesReduce political riskRisks of Expanding AbroadManagement RiskCulture, language, customer preferences, distribution systems.High investment

Political and Economic risks

Exchange Rates risk

Entry DecisionsImportant decisions any company needs to face when going international:

What markets to enter, when and what size.

What strategy to follow.

What mode of entry.What markets to enter?

Europe:

Mature Markets

High Rivalry

Lack of strong costumer relationshipWhat markets to enter?Asia:

Most distant geographically

Most different culturally and logistically

Required high financial and managerial resources

What markets to enter?Latin America:

Closest markets

Large population

Emerging Markets

Walmart International

What Strategy to followTransNationalLow High Local ResponsivenessLow High Cost PressuresGlobalMultidomesticInternational33Mode of entry of International Expansion

Mode of entry of International ExpansionYearCountryMode of Entry1991Mexico50% Joint Venture Cifra1994Brazil60% Joint Venture Lojas Americana1994CanadaAcquisition Woolco (weak player)1995ArgentinaWholly owned Susbidiary1996ChinaNew opening, JV, Acquisition 1998South KoreaAdquisition1999U.K.Acquisition of ASDA2002JapanAcquisition Seiyu2002GermanyAcquisition of Wertkauf and Spar2007IndiaJoint Venture2011Southern African CountriesAcquisition of Massmart Holding LimitedExamples of International SuccessMexico: Largest Walmarts foreign presence (68%)38% Retail Market Share in MexicoCanadaOne of the most successful international expansionAcquired Woolco Stores and changed structure

Both countries are close and were exposed to Walmart.

Examples of International SuccessChina:Most populous countryLower income in middle-class familiesAdaptation to market85% of products from local suppliers.

Examples of International FailureGermanyWalmart was not able to benefit from economies of scaleUnable to become cost leaderMode of entry: Wertkauf (right move) Spar (wrong move)Culture differencesLow profitability marketLost $1 Billion

Examples of International FailureIndiaPolitical and legal barriers:Foreign companies are not allowed to set up big stores unless they sell only one brand.

South KoreaVery demanding customersDid not customized to marketBig companies also fail in South KoreaKey Success Factors A supply chain with integrated technology

An ability to generate large sales volume (economies of scale)

Every Day Low Prices

Superior logistics systems

Decentralized operations

A strong and unique culture (in U.S.)

SuggestionsThink local, act globalLocally leveraged:Shared knowledge between units.

Worldwide learning: Advantages of interconnected economies.

Adaptation:To locally customize processes and services

Questions & Answers