A. Executive Summary
In 2005, Lee Scott, president and CEO of Wal-Mart Stores Inc. delivered a speech defining his vision for Wal-Mart in the 21st century. One goal he laid out was a call for the company to eliminate all the waste Wal-Mart’s stores and other facilities send to landfills by 2025 – it was a zero waste initiative.
Wal-Mart Stores Inc. is the largest retail company in the United States and has been ranked number one on the Fortune 500 Index by Fortune Magazine. Wal-Mart has four parts to their corporate strategy.
B. Vision Statement
“The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good-quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience.”
– Sam Walton (1918-1992)
C. Mission Statement
Wal-Mart Stores, Inc. does not have a formal mission statement. This is because Kim Ellis, the Public Relations Coordinator, said that they believe the customers are more interested in other aspects of the business, and they, the company, are focused on meeting their basic consumer needs.
Since Wal-Mart does not have a mission statement our group has created a mission statement that they might use. It discusses all nine components of a mission statement.
This is the mission statement we have established:
Our first responsibility is to provide all consumers the best products and services with guaranteed satisfaction under one roof. Wal-Mart provides a wide array of products like toys, electronics, groceries, jewelry, ladies, men, and children’s apparel, and hard goods at reasonable prices. We will continue to offer scholarships to deserving high school graduates in hopes of providing students with a well-deserved education. Consumers have been conveniently provided with on-line shopping, but also with the concept of “one-stop shopping.” The Wal-Mart team is devoted to everything that Wal-Mart has accomplished as a universal competitor. We are dedicated to recruiting, rewarding, and retaining employees of good moral standing by providing benefits for excellent performance, providing clean environments to work in, and by providing equal opportunity for all individuals. We will continue to offer the highest quality products at the lowest price to strive to be the best in the retail industry.
Components of Mission Statement:
2. Products or services
5. Concern for survival, profitability, growth
8. Concern for public image
9. Concern for employees
In the mission statement we target our customers by saying: “Our first responsibility is to provide all consumers the best products and services.” Their customers are their number one priority. Customers keep Wal-Mart in business, so of course they would want to offer them their best products and services. The mission statement targets products or services by saying: “Wal-Mart provides a wide array of products like toys, electronics, groceries, jewelry, ladies, men, and children’s apparel, and hard goods.” Wal-Mart has so many different types of products and services that a list of the basic departments needed to be listed. These products are their main service. Their concern for public image is stated: “We will continue to offer scholarships to deserving high-school graduates.” Wal-Mart intends to make the future better. They want to see more high-school graduates go on to college and make something of them. By offering scholarships, it helps these graduates to pursue their dreams for a better future.
The mission statement mentions technology in that: “Consumers have been conveniently provided not only with the use of on-line shopping.” On-line shopping is becoming the main way for a lot of people to do their shopping. Technology is making on-line shopping as easy as possible so people do not have to leave the privacy of their own homes and, in turn, they get to spend more time with their families.
The mission statement aims at markets by saying: “Wal-Mart is accomplished as a universal competitor.” Wal-Mart has stores worldwide. They have conquered the international market.
They are the number one retail-variety store in the world.
The mission statement shows a concern for employees by saying: “We are dedicated to recruiting, rewarding, and retaining employees of good moral standing.” They want their employees to know that they actually have a reason for coming to work. Without employees, Wal-Mart would not exist. They show their employees that they care about them and their needs. The mission statement talks about self-concept with the statement: “By providing benefits for excellent performance, providing clean environments to work in, and by providing equal opportunity for all individuals.” Wal-Mart hires anyone who is capable of doing their job. You see this each and every time you walk into a Wal-Mart or see a commercial on television.
The mission statement talks about their philosophy in that “We will continue to offer the highest quality products at the lowest prices.” Wal-Mart’s slogan is low prices every day. If a competitor has a product at a lower price Wal-Mart will match it, just so they can live up to their philosophy.
The mission statement talks about the concern for survival, growth, and profitability in that they “Strive to be the best in the retail industry.” Wal-Mart does this each and every day by opening new stores and having the lowest prices. Hardly anyone goes to a store and buys a product at a higher price when they know they can get it for less. This is how they are striving to be the best.
11. Products or services
14. Concern for survival, profitability, growth
17. Concern for public image
18. Concern for employees
D. External Audit
External Analysis: Opportunities
An opportunity available to the industry is the free trade zone. When the government enters into new trade agreements with foreign countries, businesses in the United States have the ability to offer products from these countries in their stores. This simply increases the markets available to retailers.
Social, cultural, demographic, and environmental
An opportunity facing the industry is that customers want ease of shopping. To provide the ease of shopping the industry is guaranteeing that the customers will find what they want when they want it. This is supported by convenient presentation and the right level of service every time the customer shops.
Political, legal, and government
An opportunity facing the industry is that the Asian market is virtually untapped by the retail world. By having an untapped market it gives a huge opportunity for companies to expand. It promises unlimited potential for growth and profits.
An opportunity facing the industry is that internet shopping is growing. To take advantage of internet shopping, the industry is focused around the customer. The customer receives friendly site designs, efficient order fulfillment, fast delivery and professional customer response. They process returns, refunds, and rebates quickly.
An opportunity facing the industry is that the value of money is weakening. The weakening value of money will help the industry because it reduces the ability of foreign manufactures to offer discounts.
External Analysis: Threats
A threat is that the economy is very slow right now. There is no way of preventing it and no way to change it. This impacts all businesses and causes profit margins to be reduced as price-cutting ensues to attract more consumers.
Social, cultural, demographic, and environmental
A threat is customer theft. Manufacturers are fighting back against customer theft by embedding paper clip sized antitheft tags, called electronic article surveillance labels, inside products and packaging. Called source tagging, the process offers several major benefits.
For one, merchandise tagged on the factory floor during manufacture or packaging lets retail employees spend less time in the storeroom applying labels and more time on the show floor helping customers. Also, high-theft merchandise previously displayed behind glass can now sit out in the open, boosting sales significantly. Another social, cultural, demographic, and environmental threat is employee theft. Along with antitheft labels there are radio-frequency circuits that are hidden in packages and go unnoticed. The only time they will go off is when the bar code scanner does not deactivate the circuit, which means they stole it. This helps to prevent the two forms of employee theft, which are sweat hearting and sliding. Sweat hearting is when the employee charges the customer less than the actual price and sliding is when the employee covers the barcode at the point of sale.
Political, legal, and governmental
A threat is the Chinese regulations. China has one of the largest populations in the world; however, the Chinese government does not take kindly to opening their country to foreign establishments. Also, there is rampant corruption among the Chinese, and they have no generally accepted accounting principles.
A threat facing the industry is that technological advances may make the products obsolescent. As technology advances, products being sold today are gone tomorrow; this provides less products for retailers to sell.
A threat is that the industry is not following consumer taste. To overcome the threat of not providing consumers wants the industry is expanding rapidly in the urban centers while traditional “wet markets” are being edged out as the middle-class enlarges and young people flock to the cities.
Competitive Profile Matrix
A competitive profile matrix identifies a firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position. The ratings are as follows:
1 major weakness, 2 minor weaknesses, 3 minor strengths, and 4 major strengths.
CPM – Competitive Profile Matrix
Critical Success Factors Rating Wal-Mart Target K-mart Rating Weighted Score Rating Weighted Score Rating Weighted Score Advertising 0.20 3 0.6 4 0.8 3 0.6 Global expansion 0.10 4 0.4 2 0.2 3 0.3 Price Competitiveness 0.10 4 0.4 3 1.20 3 0.3 Financial Position 0.15 4 0.6 3 0.40 2 0.3 Product Quality 0.10 3 0.3 4 0.40 2 0.2 Customer Loyalty 0.10 3 0.3 3 0.40 2 0.2 Market Share 0.05 3 0.15 3 0.60 1 0.05 Reputation 0.10 4 0.4 4 0.40 3 0.3 Management Practices 0.10 2 0.2 3 0.40 2 0.2 Total 1.00 3.3 3.3 2.45
Compared together, Wal-Mart, Target and Kmart are very close competitors. They are all retail-variety discount stores making their existence known throughout the world, except Target, which you cannot find globally. These three companies are constantly vying for the reputation as the lowest priced retailer.
In the competitive profile matrix, the most critical success factor would be advertising with a weighted score of 0.25. Advertising for these competitors is very critical if they want to compete against each other for the best quality products at low prices. With this, Target was scored the highest with a rating of 4 while both Wal-Mart and Kmart are rated as a 3.
This is because Target does a lot more advertising then Wal-Mart and Kmart.
The next most critical success factor is global expansion with a weighted score of 0.20. This is somewhat important if you wanted to keep up with the competitors. Wal-Mart was found to be rated the highest with a 4 with Kmart was rated next with a 3, and finally Target rated as a 2. Wal-Mart was ranked the highest because they are found around world, while Kmart was ranked next because they are only found in a few other countries. Target, ranking last, does not have any global branches. This is only a minor weakness because they really do not have to go globally because of how well they are keeping up with the competitors within the United States. Price competitiveness and financial position are ranked next on the competitive profile matrix with a weighted score of 0.15 each. Wal-Mart, ranking the highest in both cases with a 4, is above all competitors. This is because they price reasonably with lower prices than all the competitors and their financial position is great. Target is ranked next with a rating of 3 in both price competitiveness and financial position. Target is known to have somewhat high prices and people tend to see that and want to go shopping elsewhere like Wal-Mart. Their financial position is not that great with the minor strength, but they are keeping up with their major competitor, Wal-Mart. Finally, Kmart is found to have a rating of a 3 in price competitiveness, and a rating of 2 in financial position. This is because Kmart does keep up with the prices of competitors, but they do get pricey in some areas. Their financial position is a minor weakness because of the Martha Stewart scandal and their bankruptcy. Her products were being sold a lot until the scandal came out. Now they are pricing her products really low just to get the inventory sold.
Next, product quality and customer loyalty is found on the competitive profile matrix to have a weighted score of 0.10. Target is found to have a rating of 4 in product quality. In customer loyalty they have a rating of a 3. This is because products found in Target tends to be top brand products, but at the same time, customers see these products somewhere else for a lower price and they tend to go to that place instead. Wal-Mart is ranked next with a rating of 3 in both product quality and customer loyalty. Wal-Mart may not have top brand products but the quality is fairly good.
Customer loyalty is also ranked as a 3 because some people do like to get better products no matter how much it costs. Kmart, ranked last with a 2. This is because they do not carry quality products. People tend to go other places for what they want because of the better selection and quality.
Finally, the last critical success factor is market share with a rating of 0.05. Wal-Mart and Target are both ranked 3 while Kmart is ranked 1. This is about right because as indicated by the total weighted score, Kmart is the weakest with 2.55. Target’s total weighted score was in between but closer to Wal-Mart’s score of 3.15, and Wal-Mart’s was the strongest weighted score as 3.50.
In conclusion of the competitive profile matrix, Wal-Mart as a competitor rises above both Target and Kmart.
External Factor Evaluation
An external factor evaluation matrix identifies the industry-wide opportunities and threats. Weights are assigned to the various opportunities and threats based on how well the subject company is responding to the threats and opportunities. The ratings are as follows:
1= poor response, 2 = average response, 3 = above average response, and 4 = superior response.
The main opportunities that we identified were increasing internet shopping, ease of shopping, free trade zones, the Chinese market, and the value of the dollar. The main threats that we identified were technology making products obsolete, customer and employee theft, slow economy, the Chinese regulations, and not offering what the consumer wants.
The opportunities were weighted .15 for internet shopping, .10 for ease of shopping, .10 for free trade zones, .10 for Chinese markets, and .05 for the weak dollar. The threats were weighted .10 for technology making products obsolete, .20 for customer and employee theft, .05 for the slow economy, .10 for the Chinese regulations, and.05 for not offering what consumers want.
The weights and are representative of the importance the opportunities and threats presented to Wal-Mart. They were determined by considering the impact that each one has on the industry and how well Wal-Mart is conditioned to react to the situations presented.
We felt that the most important factors were internet shopping, and customer and employee theft. These two factors are paramount to the industry and all of its counterpart’s success.
If these factors are not addressed by the industry, bankruptcy is sure to follow.
We rated each of the opportunities and threats based on how well Wal-Mart has been positioning itself in the market. Wal-Mart’s website has been a huge success with it contributing additional revenue to the bottom line; we rated this as a 4. The response to consumer demand for one-stop shopping has also been a success. The fact that you can buy a vast majority of everyday needs such as groceries, clothes, personal care products, electronics, among many other products shows the commitment Wal-Mart is making to the one-stop shopping idea. We also rated this 4.
We felt that Wal-Mart’s continued expansion into foreign countries to be above average and thus rated it a 3. Because China is heavily regulated, we rated their response to the opportunities available in China a 2. This is still a very good score because it is very difficult for any firm to expand into China.
Wal-Mart’s reaction to the dollar weakening has been above average because of its worldwide coverage. They have been able to take advantage of this economic factor with ease and we rated it a 3.
The response to threats has been equally impressive. While technology is constantly making products obsolete, Wal-Mart has been able to position itself to be a positive avenue for selling all of the newest and innovative products. Wal-Mart suppliers definitely have a great opportunity for sales because of the vast audience that patronize Wal-Mart. We rated this as a 3. Employee and customer theft is inevitable in all industries. This was ranked as a 2 because Wal-Mart uses the same devices that the entire industry uses. The slowing economy has been a sour point to all industries as well. Wal-Mart has been able to limit its exposure by offering low prices and maintaining its market-leading share. We ranked this factor a 4. Again, because China is such a tough market to enter, we ranked their response to Chinese regulations a 2. The idea that companies offer products that consumers do not want is not uncommon. There have been thousands of products that have flopped after being introduced. Wal-Mart has been able to circumscribe their exposure by offering thousands of products across many different areas. We ranked their response to this a 4. The final score, 2.80, that was obtained from the external factor evaluation matrix shows that Wal-Mart is above average when reacting to opportunities and threats.
1. The failure of circuit city
2. Having always low price
3. Wal-Mart operated internationally in 13 countries
4. Wal-Mart grouped its smaller discount stores into a new hometown USA program
5. Accepting Master cards for payments
6. Major cost advantages over Super Kmart and Target
7. Wal-Mart launched a pilot program in China
8. Philanthropy and community involvement
9. Kmart shut down 600 stores in the united states during 2002
10. To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region.
11. The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India.
12. New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large super centers, to local and mall-based sites.
13. Opportunities exist for Wal-Mart to continue with its current strategy of large, super centers.
1. Opening of large stores Kmart
2. Opening of retailers as Target and Venture
3. Three pharmacies claiming Wal-Mart was deliberately pricing products below cost to bit competitors
4. Kmart operates as a subsidiary of Sears Holding and Target discount retailers with sales of $17 billion
5. Opening of Costco wholesale corporation
6. Being number one means that you are the target of competition, locally and globally.
7. Being a global retailer means that you are exposed to political problems in the countries that you operate in.
8. The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost has fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat.
External Factor Evaluation (EFE) Matrix
Success Factors Weight Rating Weighted Score Opportunities 1. The failure of circuit city 0.08 4 0.32 2. Having always low price 0.06 3 0.18 3. Wal-Mart operated internationally in 13 countries 0.07 3 0.21 4. 0.05 3 0.15 5. 0.07 3 0.21 6. 0.07 2 0.14 7. 0.05 1 0.05 Threats 1. 0.06 3 0.18 2. 0.05 2 0.10 3. 0.03 3 0.09 4. 0.03 2 0.06 5. 0.07 2 0.14 6. 0.03 2 0.06 7. 0.05 3 0.15 8. 0.06 3 0.18 9. 0.04 2 0.08 10. 0.02 1 0.02 11. 0.03 3 0.09 12. 0.02 2 0.04 13. 0.06 4 0.24 Total 1.00 2.69
Five Forces Analysis of Wal-Mart Industry
Threat of Competitors:
The biggest threat in the US Grocery/Discount Retailer industry is competition. In particular, the main players are Wal-Mart, Kmart and Target. These firms also face competition from wholesalers such as BJ’s and Costco. Wal-Mart, as the industry leader, has adopted a cost leadership generic strategy. In the past, most firms have not been able to match Wal-Mart’s “everyday low prices.” The problem is that Wal-Mart’s barrier to entry (economies of scale) and strength (supply-chain management) can be easily replicated with sufficient resources. By definition, discount retailers are competing to see who can offer the lowest prices. This places a heavy burden on all firms to maintain a profit margin as they do so.
Threat of New Entrants:
The Grocery/Discount Retailer industry’s threat of new entrants is very low. New firms would be faced with the task of beating the prices of wholesale giants immediate upon entry. Given the economies of scale, brand recognition, service, and variety of product offerings that Wal-Mart, Target, and others continue to improve on each day, this seems very unlikely. In addition, existing firms could afford to temporarily drop prices even lower in order to force a new competitor out of the market.
The suppliers to Wal-Mart and other discounters have almost no power. Wal-Mart is notorious for pressuring suppliers to cut their margins lower and lower, and often receives criticism for this practice. Unfortunately, there is no way around this given the consumer demand for quality goods at low prices. And while a supplier might sell half of its volume through Wal-Mart, this brand probably makes up less than 5% of Wal-Mart’s sales. Relentlessly cutting costs all the time, wholesalers deal directly with suppliers and hold all the power.
Buyers’ actually hold a good deal of power in the US Grocery/Discount Retailer industry.
Rivalry among Competition
Due to Wal-Mart’s size, domination in the retail industry lacks any real rival intensity among its main competitors at this time. While Wal-Mart excels in the retail industry, much of the competition nationally is struggling to stay in business let alone compete. Two retailers that fit this description would be K-MART and Sears. It appears the nearest rival companies at this time would be Target
Internal Analysis: Strengths
Wal-Mart’s policies and practices are designed to ensure an environment that is equitable and inclusive. To that end, Wal-Mart solicits feedback from all of their employees, annually, regarding their opinions of their work experience and the company’s implementation of Wal-Mart’s basic beliefs and values. In addition, they provide training on working with people, leadership skills, equal employment opportunities, diversity and sexual harassment prevention.
Wal-Mart is committed to providing all employees state-of-the-art training resources and development time to help achieve career objectives. They have a number of training tools in place that keeps then out in front of the competition, including classroom courses, computer-based learning, distance learning, corporate intranet sites, mentor programs, satellite broadcasts, skills assessments, and job announcements. These tools are successfully increasing advancement opportunities for women and minorities. Wal-Mart has been ranked among Training Magazine’s ‘Top Training 100’ companies for two consecutive years. Respect for the individual, one of Wal-Mart’s company’s three core values, is reinforced throughout their training process. Wal-Mart is committed to the customers and communities they serve. Wal-Mart hires locally, representing the diversity and uniqueness of everyone’s hometown. As the demographics of the nation have changed, so has the family of Wal-Mart’s employees. More than 15 percent of their employees are over the age of 55, and they are the nation’s largest employer of Hispanics and African-Americans.
Wal-Mart also uses its respectable financial position to attract and retain employees by offering stock ownership and profit-sharing programs. These programs are available to all full-time employees of Wal-Mart and make a significant impact on the earnings of employees. They are allowed to purchase shares of stock at reduced prices, which allows them an immediate appreciation of their portfolio. With the profit-sharing program, the employees receive bonuses at the end of the year based on the success of the overall company. These also provide a significant amount of compensation to their employees.
Wal-Mart also has very strong community-based initiatives. They have continually gave college scholarships for high school seniors, raised funds for nearby children’s hospitals through the Children’s Miracle Network Telethon, provided money and manpower for fund raisers, school benefits and churches, Boy and Girl Scouts, park projects, police and fire charities, food banks, senior citizen centers, and more. They also educate the public about recycling and other environmental topics with the help of a “Green Coordinator,” a specially trained employee who coordinates efforts to make an environmentally responsible store.
Along this same line, Wal-Mart has created Environmental Demonstration Stores in Lawrence, Kansas; Moore, Oklahoma; and City of Industry, California. These stores serve as a “test tube” for environmentally friendly building materials and experimental methods for conserving energy and water.
Finally, the corporate structure of Wal-Mart is very well rounded and managed with three core values: respect for the individual, service to their customers, and striving for excellence. The management of Wal-Mart is the backbone to the entire company and these core-values have propelled Wal-Mart to the top of their industry and have allowed Wal-Mart to be the world’s largest company.
The nature of Wal-Mart’s marketing is in its Every Day Low Price (EDLP) campaign. This is what makes Wal-Mart successful. Sam Walton devised a system for which price setting was to be followed. Sam wouldn’t allow management to hedge a price at all. If the list price was $1.98, but Wal-Mart had paid only 50 cents, they would mark it up 30 percent, and that’s it.
Sam’s philosophy was “No matter what you pay for it, if we get a great deal, pass it on to the customer.”
The other major campaign Wal-Mart employs is the Rollback. This occurs when Wal-Mart lowers the already lowered Every Day Low Prices. This has really been a successful way for Wal-Mart to increase its patrons. When consumers shop, they are always looking for the best deal, since Wal-Mart already offers low prices, when they rollback prices, they are able to out-price all of their competition. Stemming from the management’s core values, Wal-Mart has been known for their customer oriented approach. Wal-Mart maintains one of the best satisfactions guaranteed programs, which promotes customer goodwill. One can return virtually any product to Wal-Mart without any problems. They simply take the product back and promptly refund the price of the product, nearly no questions asked. They also promote goodwill among consumers by employing a tactic, which Sam created known as the “Ten Foot Rule.” This is simply the idea that if a customer comes within ten feet of an employee, they are required to greet them and ask if they can help them in any way. This is also evident through employees getting to know customers on a first name basis.
Finally, perhaps the single most important marketing aspect of Wal-Mart is that they create the ideal one-stop shopping experience. Wal-Mart is organized into ten distinct divisions.
These include: Wal-Mart stores, SAM’S CLUBS, Neighborhood Markets, International, walmart.com, Tire & Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, and Wal-Mart’s Used Fixture Auctions. Through these divisions, Wal-Mart offers thousands of products. The Wal-Mart stores contain groceries, clothes, healthcare products, toys, electronics, bedding, sports and recreation, automotive, among other items. Because of this conglomeration of products, the typical consumer can go into any Wal-Mart and walk out without having to stop at another store for anything that they could need.
Since 2000, Wal-Mart’s revenue has consistently increased. In 2000, they had revenues of $165,013 billion and in 2002 their revenue had increased 24% to $217,799 billion. This is astronomical growth in revenues considering the overall size and scope of Wal-Mart. To be able to consistently grow revenues in such a large organization is simply amazing.
The increase in revenues has also been very kind to their cash flow. In 1997, Wal-Mart had a positive cash flow of $4,044 billion and in 2002 this number had increased to a positive $9,961 billion. This growth also had an impact on Wal-Mart’s net income, which is to say that they were able to control their expenses while continuing to grow and expand their operations. In 1997, their net income was a not-so-paltry $3,056 billion, and in 2002, only five years later, Wal-Mart more than doubled their net income to $6,671 billion.
The strength of Wal-Mart is also shown through its ratios. Nearly all of Wal-Mart’s ratios are strengths when measured against the industry averages. Through our ratio analysis, we have shown that Wal-Mart is the best-equipped company to succeed in the marketplace.
Another area of strength is Wal-Mart’s stock price. Figure 4 shows the price of Wal-Mart’s common stock from October 2000 until the end of 2002. The price has fluctuated, but it has only fluctuated between $45 and $65. Including dividends, an investment in Wal-Mart would perform well.
Perhaps the strongest aspect of Wal-Mart is in its access to distribution networks. Wal-Mart uses a system known as cross-docking. This is simply the process of continuously delivering goods to warehouses where they are sorted and distributed to their stores within one day.
This enables Wal-Mart to take advantage of economies of scale with shipping trucks with full loads. This also gives Wal-Mart the ability to increase the speed of deliveries, a faster response to market demands, and a low inventory. This system has allowed Wal-Mart to decrease its sales cost by 2 to 3 percent over the industry. This savings is then priced into the products with the earlier discussed EDLP programs.
This system is maintained through the most important aspect of Wal-Mart, its employees.
With over one million employees worldwide, Wal-Mart definitely has the manpower to move goods. This is also facilitated with a proprietary satellite-based communication system that enables managers and point-of-sale systems real-time information on the needs of each store.
Research and Development
Wal-Mart does not engage in any research and development.
Computer Information Systems
As discussed in the production/operation section, Wal-Mart uses a sophisticated system of satellite-based communications. They also offer a safe, secure and complete website where consumers can purchase all of the same products found in the store. The website is strength because it is not only a means for purchasing products, but is also a very thorough informational site.
E. Internal Audit
Internal Analysis: Weaknesses
The biggest weakness that Wal-Mart has in the management area is that it does not have a formal mission statement. While they do have core values, they do not explicitly tell their employees or consumers what their business is. This is a fundamental aspect of a company and it provides not definition and direction, but it gives a company a statement on which to rely on to stay strong and focused.
Another weakness is that there are few females in top management and there are few minorities employed. With such a societal demand for equality, Wal-Mart is lacking in this category. This is not a very good ethical decision for Wal-Mart to be making. They are really hurting their corporate image by maintaining this position.
The other area that Wal-Mart lacks in is with unions. Currently, Wal-Mart does not have any union involvement. This is a problem because of the perception of treating employees poorly. Unions are created to provide bargaining power to employees on issues that involve their compensation, benefits, and working conditions. This is also a weakness because of job security. With unions, job security is not as much of a concern.
The biggest source of marketing weakness stems from Wal-Mart lobbying to expand into new markets. There are thousands of towns across the United States that have tried to block the introduction of Wal-Mart because of the economic impact that it has on small-town stores and shops. Wal-Mart has a damaged reputation because when they move into a location they end up “forcing” these types of businesses out of business.
Weaknesses in Wal-Mart’s finances are seen in three of its ratios. The fixed asset turnover, earnings per share, and average collection period ratios are not very good. The fixed asset turnover ratio is telling us that they have made a lot of investments, but that they are not being fully used at this point in time. The earnings per share ratio is not good because when compared to the industry, they are not earning as much money for each shareholder.
However, this is most likely due to the sheer number of outstanding shares. The average collection period is a cause for concern because it means that they are allowing their debtors to carry accounts with Wal-Mart for an above average period of time. This is not good because it increases the likelihood of non-payment.
The largest source of concern for this functional area is the slowing speed of checkout lines.
This is simply a product of Wal-Mart’s success. Because more and more people are going to Wal-Mart, and the number of checkout lines is staying constant, the only way to compensate is for the time to checkout increase. This is a problem because it can and will cause people to choose other stores that are less congested. They are basically losing sales due to this fact.
Research and Development
This is a weakness because they do not actively engage in any research and development.
Specifically, they do not do any prior site research before opening a store. They simply approach a local government and build.
Computer Information Systems
We did not find any weaknesses in Wal-Mart’s computer information systems.
Internal Factor Evaluation
The internal factor evaluation is used to evaluate the major strengths and weaknesses of a company. There are weights assigned to strengths and weaknesses based on how the company responds to them. The ratings are: 1 = poor response, 2 = average response, 3 = above average response, and 4 = superior response.
The key strengths we identified were financial position, employees, customer oriented, one stop shopping, satisfaction guaranteed programs, employee stock ownership and profit sharing, well-rounded business, ease of website, good reputation, and favorable access to distribution networks. Along with key strengths of Wal-Mart, we also identified key weaknesses. The key weaknesses are some ratios are not sufficient, non-unionization, no formal mission statement, few women and minorities in top management, undifferentiated products and services, site research, slow speed of checkout service, and finally a damaged reputation.
The strengths were weighted: .04 for financial position, .07 for employees, .07 for customer orientation, .14 for one-stop shopping, .05 for satisfaction guaranteed programs, .05 for stock ownership and profit-sharing, .03 for well-rounded business, .04 for ease of website, .04 for good reputation, and .04 for favorable access to distribution networks. The weaknesses have also been weighted. The weaknesses weighted scores were .03 for insufficient ratios, .15 for non-unionization, .05 for no formal mission statement, .05 for few women and minorities in top management, .03 for undifferentiated products and services, .05 for site research, .04 for slowing speed of checkout service, and .03 for a damaged reputation.
These weights show the importance of each strength and weakness of Wal-Mart. They are determined by how important that quality is to Wal-Mart and how hard of an impact each has against other businesses. We felt that the most important factors were one-stop shopping and non-unionization. These two factors are very important to Wal-Mart’s structure and well being as a whole. If these factors are not evaluated regularly, they could put a start to its potential downfall.
We rated each strength and weakness based on how Wal-Mart seems to be positioning itself against its competitors. Wal-Mart’s employees, customer orientation, one-stop shopping, satisfaction guaranteed programs, stock ownership and profit sharing, ease of website, good reputation and favorable access to distribution networks all have been very successful strengths for the company. These are so successful we rated each with a 4. The financial position of Wal-Mart and the well-rounded business that it is has made Wal-Mart what it is today. Because of this success we rated these factors with a 3.
In their weaknesses, we thought that minor weaknesses included: non-unionization, no formal mission statement, few women and minorities in top management, undifferentiated products and services, site research, and the slowing speed of checkout service. Since these were only minor we gave them a score of 2. We also rated some major weaknesses. These included insufficient ratios and their damaged reputation, which we rated as a 1.
By using these scores in the internal factor evaluation matrix, we came to a total score for Wal-Mart being a 3.01, which is above average. They are above the average company when it comes down to its strengths and weaknesses and how they deal with them.
There are three potential problems for the organization. They are customer and employee theft, slow checkout service, and non-unionization. Ranked in the order of importance, customer and employee theft comes out first. This is a major problem not for just Wal-Mart but for the whole industry as well. The employees start to become very creative in the way the steal merchandise or even money. One example could be when the cashier is checking someone out; the cashier doesn’t give the receipt to the customer, then when the customer leaves the employee will cancel the transaction and take the money. Along with employee theft customer theft is another big issue. No matter what technology Wal-Mart has, someone will figure out how to get around it.
The next potential that is of importance, ranking second, is slow checkout service. When people go to Wal-Mart, they may go for the low prices, but when they go to leave some people may say forget it. Some Wal-Mart’s have the slowest checkouts around. It may take fifteen minutes for someone to buy one thing because of how many people are in line waiting. This really discourages people from going to Wal-Mart and may encourage them to go to a competitor.
Finally the last potential problem Wal-Mart has is non-unionization. This is because in the industry the competitors have unions while Wal-Mart doesn’t. The workforce for Wal-Mart had been lobbying to unionize for the distinct advantage that unions provide to their members. This is important because union membership allows employees to increase their value to the employer and to themselves through collective bargaining. As this pressure increases, Wal-Mart will either have to create unions or they will have to increase its compensation and benefits to employees.
Internal Factor Evaluation (IFE) Matrix
Critical Success Factors Weight Rating Weighted Score Strengths 1. 0.06 4 0.24 2. 0.04 3 0.12 3. 0.06 4 0.24 4. 0.05 4 0.20 5. 0.04 3 0.12 6. 0.03 3 0.09 7. 0.06 4 0.24 8. 0.07 4 0.28 9. 0.02 3 0.06 10. 0.07 4 0.28 11. 0.03 4 0.12 12. 0.06 4 0.24 13. 0.06 4 0.24 Weaknesses 1. 0.04 2 0.08 2. 0.07 1 0.07 3. 0.06 2 0.08 4. 0.06 1 0.05 5. 0.07 1 0.07 6. 0.02 2 0.04 7. 0.03 2 0.06 TOTAL 1.00 2.92
The internal-external matrix is also known as a portfolio matrix because it involves plotting organization divisions in a schematic diagram. It is based on two key dimensions: the internal factor evaluation total weighted score on the x-axis and the external factor evaluation total weighted scores on the y-axis.
On the x-axis of the internal-external matrix, an internal factor evaluation total weighted score of 1.0 to 1.99 represents a weak internal position, a score of 2.0 to 2.99 is considered average, and a 3.0 to 4.0 is considered strong. Similarly, on the y-axis, an external factor evaluation total weighted score of 1.0 to 1.99is considered low, a score of 2.0 to 2.99 is medium, and a score of 3.0 to 4.0 is high.
The internal-external matrix is divided into three different regions. The first region is described as grow and build and can use intensive or integrative strategies. The second region is described as hold and maintain. This region can use market penetration and product development strategies. The third and final region is described as harvest or divest and this is where successful organizations are able to achieve portfolio of businesses.
Wal-Mart is part of grow and build strategies and the three strategies appropriate for the company are market penetration, market development, and product development. This is because the internal factor evaluation total weighted score is 3.01 and the external factor evaluation total weighted score is 2.95 causing them to fall into the medium range in strong position.
1. Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.
2. Wal-Mart has grown substantially over recent years, and has experienced global expansion
3. The company has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart’s efficient procurement.
4. A focused strategy is in place for human resource management and development. People are key to Wal-Mart’s business and it invests time and money in training people, and retaining a developing them.
1. Wal-Mart is the World’s largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.
2. 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.
3. The company is global, but has has a presence in relatively few countries Worldwide.
Financial Ratio Analysis
I. The Internal-External (IE) Matrix
The IFE Total Weighted Score Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 High I II III 3.0 to 3.99
Medium IV V VI The EFE Total Weighted Score 2.0 to 2.99
2 Low VII VIII IX 1.0 to 1.99
F. SWOT Matrix
1. Ongoing development of its employees.
2. Supercenters offer one stop shopping.
4. Diverse Customer Base and Product.
5. Products and services.
6. Satisfaction for Customer oriented.
7. Efficient distribution system
8. Large convenient stores.
9. Corporate citizenship.
10. Strong Management Leadership.
11. Leads industry in information technology.
2. Underperforming divisions
3. Market Share
4. Lack of global presence
5. Small number of super centers
6. Weak in control
7. Increased Economies of Scale
8. environment & Operations continued
Expansion Pace (growth Orientation) Opportunities S-O Strategies W-O Strategies
1. Consumers want ease of shopping.
2. Internet shopping growing.
3. Better educated and more affluent consumers.
4. Increased disposable income
5. Financial Services- (credit cards)
6. Expanding economy.
7. Similar shopping patterns worldwide.
8. Retail sales expected to increase.
9. Environment conscious consumers and Increased social awareness
10. Growing Industry/ greater demand for products.
11. Demand for Top quality, luxury, comfort.
12. Technology (Internet, credit cards, reservations)
1. Dominate the Retail Market wherever Wal-Mart has a presence
2. Advertise more for shopping on-line (S1, O2)
Promote quality products (S5-S7-O3-O4)
3. Increase awareness of Target’s philanthropic activities (S10-O9)
1. Open more super centers (W5, O6).
2. Expand into markets in Mexico and Canada (W4-O6) Threats S-T Strategies W-T Strategies
1. Substitute products more easily because of intense competition.
2. Competition offers better quality/comfort.
3. Aging population.
4. Rising interest rates.
5. Increase in online shopping.
6. Trend is toward super centers.
Decreased Customer Spending. New products and services for older society (S5-T3)
Build more Supercenters for the increased demand for one stop shopping (S2, T2)
Increase awareness of online shopping convenience and benefits (S7-T5)
Open more super centers (W5, T6)
Expand into markets in Canada & Mexico (W4 -T6).
Increase awareness of on-line shopping convenience and benefits (W3, T5)
Sell underperforming divisions(W2, T4)
Strengths-Opportunities (SO) Strategies
The SO alternative strategies for Target Corporation are to present their quality products and philanthropic activities because Target can use their reputation for quality products and services to promote to todays better-educated and more comfortable society in order to increase sales to this market. Target’s efficient distribution system will allow them to provide customers with a wide selection of options and Target’s management team identifies the importance of corporate social responsibility.
Weaknesses-Opportunities (WO) Strategies
The WO for Target Corporation is to open additional super centers in order to take advantage of the growing economy to sell all or part of these divisions in order to minimize their Target’s financial performance and to expand into markets in Mexico and Canada because Target is at this time not concerned in foreign markets and Target should seek to overcome is their underperforming divisions that are not contributing to Target’s growth.
Strengths-Threats (ST) Strategies
The ST for Target Corporation is to needs to develop new products and services in order to increase share market segment that will help to increase their on the whole sales revenues and developing an advertising program to promote their electronic retailing division target direct.
Weaknesses-Threats (WT) Strategies
The WT strategies for Target Corporation are to open additional super centers, expand into markets in Canada and Mexico, advertise online shopping convenience and benefits, and to sell underperforming divisions that will increase Target’s ability to compete with existing super centers and will give the ability to increase sales by developing this new market and efforts on developing Target division.
Based on the TOWS Matrix, the following possible strategies were identified:
* Horizontal Integration
* Market Penetration
* Market Development
* Product Development
* Concentric Diversification
* Joint Venture
As determined by the IE Matrix, Wal-Mart fits into the category of grow and build strategies.
Thus, the aforementioned strategies would fit Wal-Mart very well. All three of the strategies that we decided on are grow and build types. The three strategies that Wal-Mart would benefit most from are: market penetration, market development, and product development.
The market penetration strategy is when a company is seeking to increase the market share for present products or services in present markets through greater marketing efforts. This is also an appropriate strategy for Wal-Mart to implement because they can take advantage of the bankruptcy of K-Mart. Through the increase of Wal-Mart’s marketing campaigns, they can attract and retain most of K-Mart’s customers. Also, because K-Mart has been closing hundreds of stores, Wal-Mart has a distinct advantage of controlling markets where both
Wal-Mart and K-Mart are located. Also, because of Wal-Mart’s economies of scale against its rivals, they have the power to influence markets in their direction.
The company culture is also well suited for this type of strategy. The management of Wal-Mart has ingrained in the employee’s the core values needed to excel at increasing their market penetration. Again, their EDLP and Rollback campaigns can readily be diffused into markets where they do not have as much of a market share as they want. This will also have a positive impact on the company culture because of the increased opportunities available to current employees. As their market share increases, they would also probably begin to add to their product offerings in that area. This will, in turn, allow employees the ability to grow with the company and be promoted into higher positions.
The costs involved with market penetration are not nearly as great as with market development. Wal-Mart only needs to increase its marketing campaigns in the target areas.
And again, with K-Mart’s unfortunate exit in many of the same markets as Wal-Mart, they have an even better chance of success simply because they will be the only large discount retailer in the area. They may not even have to increase any costs in this type of situation simply because of the natural reaction of consumers needs. If they were going to K-Mart for products and K-Mart is closed, their natural reaction would be to simply go to Wal-Mart.
The length of time for this type of strategy implementation can be measured in days. This is because Wal-Mart already has a very large, established marketing campaign. All that they would need to do is realign or increase their marketing in the target area. This is a very simple process of contacting the local television stations and purchasing advertising space.
It can also be accomplished through circular ads and the newspaper. The running length of time for this strategy can be measured in weeks, as Wal-Mart would probably change their campaigns periodically.
This is a good strategy for Wal-Mart because of the relative ease of success that Wal-Mart can garner simply from advertising in areas where K-Mart stores have closed. This is also a good strategy because it will have a positive impact on Wal-Mart’s bottom line without a very large increase in costs. The only bad aspect of this campaign is that other competitors will probably be doing the same. Every single business in that area will have to respond to
Wal-Mart’s drive to increase its customer base.
The advantages of this strategy are almost immediate results, increased market share, increased sales, and increased consumer recognition. Disadvantages of this strategy are possible failure and increase competition.
The market development strategy is simply the introduction of present products or services into new geographic areas. This is a very good strategy for Wal-Mart because it is in line with its core values. Wal-Mart has many areas of opportunity to excel with this strategy, both at home and abroad. They have the needed capital and human resources to expand, they are very successful in their industry, and there are several untapped and unsaturated markets still available. This is also an appropriate strategy because of the increased competition that the retail/discount industry is facing. While Wal-Mart is at the top, they are increasingly seeing their competition move closer to dethroning their position.
The company’s culture already is receptive to this type of strategy. They have been expanding their reach in all facets of their business for years. This type of strategy allows for current employees to be promoted by relocating to new stores, have increased roles in the success of new locations, and be a part of a winning organization. Also, because of the societal influence that Wal-Mart has, they can improve the quality of life in the areas of expansion. This is a very important aspect of Wal-Mart as discussed with their scholarship and community donations.
The costs of this strategy are very high. Because this would involve constructing new buildings and organizing new distribution networks, Wal-Mart has to plan for this with the utmost attention to detail. This is not a very large problem for Wal-Mart, though, because they have the financing available to do just about anything. The typical store covers over
150,000 square feet, and requires a lot of planning before the construction begins.
Everything has to be organized in a way that everything is in place and operating within the shortest amount of time. We believe that Wal-Mart has this capability and will excel in this strategy.
The length of time for Wal-Mart to implement this type of strategy is typically four months.
Wal-Mart has very favorable access to construction companies, local governments, computer systems, and other necessary services needed to expand their operations. This is because of the extraordinary impact that a single Wal-Mart can have on a local area. The sheer size of the stores provides a large boost to local government tax revenues, and Wal-Mart has the incentive of fast turnaround time so that the store can begin adding to their bottom line.
This is a very good strategy for Wal-Mart, and it shows because this is one of their primary strategies that they are currently using. They are following their commitment to expansion by adding additional stores every year and are adding to the economy of the United States by employing hundreds of thousands of Americans. The only negative aspect of Wal-Mart’s strategy is that they are inadvertently taking jobs away at the same time. When Wal-Mart moves into a new area, the local shops and stores are generally “forced” out of business because of the superior pricing ability that Wal-Mart has.
The advantages of this strategy are increased sales, increased market share, increased capital investments, and customer satisfaction.
The disadvantages of this strategy are growing to big too fast, possibility of poor sales in new market area, the expense, increased competition, possible decreased market share, and decreased profit margins.
Finally, the product development strategy is used to increase sales by improving or modifying present products or services. This strategy has the unique capability of propelling
Wal-Mart into higher market sharing places with its other divisions. As discussed earlier,
Wal-Mart operates ten distinct divisions under its name. This strategy could be used to launch these divisions into a more mainstream, market leading position. Also, because Wal-Mart does not invest in research and development, they could open this category to finance the opportunities available in their optical, lube, vacation, and auction divisions.
The company’s culture is very capable of implementing this type of strategy. We believe that Wal-Mart’s employees and management would benefit greatly from this type of strategy. Their marketplace power could very well be large enough to topple even the largest competitors in these business areas with the proper amount of research and development. This opportunity is also in line with the core values of Wal-Mart because they would definitely be able to serve the public well and offer the best possible prices.
The costs for this type of strategy could vary a lot. Depending on the scope and direction that Wal-Mart intends to go, it could cost billions of dollars or only a couple million. If they would focus on one division at a time and upgrade the equipment, product offerings, and service this would be a cost that could be easily handled by Wal-Mart. And, this would also be the best way for Wal-Mart to receive the largest return for each dollar spent. On the other hand, if they went all out and decided to review each division at once, this would probably end with problems. The cost to upgrade and retool all of their divisions at one would easily be in the billions of dollars.
The length of time for this type of strategy would be measured in years. The sheer amount of money and equipment that would need to be installed and upgraded would take a lot of time. Also, before any of the decisions to develop the divisions is allowed, Wal-Mart would need to take time to research the demand for such services.
This is a good strategy because it can enable Wal-Mart to increase its market positions.
Each of their divisions is a major business in any town. If Wal-Mart would implement this strategy, we are sure that they would succeed and be a major competitor in these markets.
The bad part of this strategy is that it will most likely put local businesses out of business.
Because of Wal-Mart’s extremely efficient distribution system, they would be able to undercut all of the businesses in the same line of work.
The advantages of this strategy are increased markets, increased sales, increased incomes, and increased customer loyalty. The disadvantages of this strategy are that it will take away local jobs, it will be expensive to implement over the entire company.
Wal-Mart would be most successful by pursuing the market penetration strategy. This is the best strategy because it is the easiest and least costly option. Wal-Mart has many advantages to choosing this specific strategy over the other ones. While most of the advantages overlap between the different strategies, we believe because of the costs of choosing one of the other strategies, this one is the best.
Because of the potential for expanding too fast and taking on too much debt, Wal-Mart should not choose the market development strategy. This strategy is a good one, but the results could be very positive or very negative, whereas with the market penetration strategy, the results could be very positive or just somewhat negative.
The market penetration strategy is also the simplest strategy for Wal-Mart to implement.
Because of the financial state of K-Mart, Wal-Mart can have an immediate impact on its bottom line just by advertising is those selected markets where both stores exist. Also, Wal-
Mart has very distinct advantages as outlined in their internal strengths. Among the most important are the EDLP and Rollback programs. These will allow the market penetration strategy to succeed to the fullest since Wal-Mart can out price any of the local competition.
We feel that the product development strategy is also a good strategy, but not the best because of its specific costs. As discussed earlier, the costs to retool and update their equipment can be extremely high in order for Wal-Mart to gain a distinct advantage in their divisions. Also, they would have to create an entire new marketing campaign for these distinct services.
G. SPACE Matrix
Strategic Position & Action Evaluation (SPACE) Matrix
It is another important Stage 2 matching tool and its four-quadrant framework indicates:
Overall Strategic position determined by:
1. Financial Strength [FS]
2. Competitive Advantage [CA]
3. Environmental Stability [ES]
4. Industry Strength [IS]
Wal-Mart Corp. had 9.7% sales growth in 2001 compared to 2.7% for comparable stores
Wal-Mart Corp. gross profit margin increased to .32 in 2001 from .31 in 2000
5 Average score for financial strength 5.5 INDUSTRY STRENGTH
* Retail industry has potential for steady sales growth
* Internet shopping increasing
* Retail industry has potential for increased profit growth
6 Average score for industry strength 5 ENVIRONMENTAL STABILITY
* Retail industry takes large capital investment to enter
* Low rate of inflation
* Population is aging
* Population is growing
-4 Average score for environmental stability -3.25
* Wal-Mart sales growth for past four years has exceeded comparable stores
* Wal-Mart has excellent distribution system
* Wal-Mart reputation for quality products
-3 Average score for competitive advantage -2.33
IS Average is 15/3 = 5.00
CA Average is -7/3 = -2.33
FS Average is 11/2 = 5.50
ES Average is -13/4 = -3.25
Directional Vector Coordinates:
x-axis (IS + CA) 5.00 + (-2.33) = 2.67
y-axis (FS + ES) 5.50 + (-3.25) = 2.25
Wal-Mart Corporation’s directional vector is located in the Aggressive quadrant is an excellent position to use its internal strengths to:
1. Take advantage of external opportunities,
2. Overcome internal weaknesses and
3. Avoid external threats.
Wal-Mart a financially strong firm that has achieved major competitive advantages in a growing and stable industry.
The appropriate Strategies in SPACE matrix:
* Market penetration,
* Market development,
* Product development,
* Backward integration,
* Forward integration,
* Horizontal diversification,
Or a combination strategy all can be feasible, depending on the specific statuses that face the firm
H. Grand Strategy Matrix
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Related diversification
Strategic Alternatives Key Internal Factors Weight
Build more Supercenters for the increased demand for one stop shopping Expand into new markets Strengths AS TAS AS TAS Ongoing development of its employees 0.05 4 0.2 3 0.15 Supercenters offer one stop shopping 0.10 3 0.3 2 0.2 Reputation 0.05 2 0.1 3 0.15 Diverse Customer Base and Product 0.10 4 0.4 2 0.2 Products and services 0.05 4 0.2 3 0.15 Satisfaction for Customer oriented 0.05 _ 0 _ 0 Efficient distribution system 0.10 4 0.4 2 0.2 Large convenient stores 0.05 4 0.2 3 0.15 Corporate citizenship 0.05 _ 0 _ 0 Strong Management Leadership 0.05 3 0.15 3 0.15 Leads industry in information technology 0.025 4 0.1 2 0.05 Weaknesses Competition 0.05 4 0.2 2 0.1 Underperforming divisions 0.05 4 0.2 3 0.15 Market Share 0.025 _ 0 _ 0 Lack of global presence 0.05 4 0.2 2 0.1 Small number of super centers 0.025 4 0.1 3 0.075 Weak in control 0.025 3 0.075 2 0.05 Increased Economies of Scale 0.025 3 0.075 2 0.05 environment & Operations continued 0.05 4 0.2 2 0.1 Expansion Pace (growth Orientation) 0.025 4 0.1 3 0.075 SUBTOTAL 1.00 3.2 2.1 Opportunities AS TAS AS TAS Consumers want ease of shopping 0.05 3 0.15 4 0.2 Internet shopping growing 0.1 2 0.2 3 0.3 Better educated and more affluent consumers 0.05 2 0.1 2 0.1 Increased disposable income 0.1 3 0.3 2 0.2 Financial Services- (credit cards) 0.05 4 0.2 4 0.2 Expanding economy 0.05 _ 0 _ 0 Similar shopping patterns worldwide 0.1 4 0.4 2 0.2 Retail sales expected to increase 0.05 4 0.2 2 0.1 Environment conscious consumers and Increased social awareness 0.05 _ 0 _ 0 Growing Industry/ greater demand for products 0.05 2 0.1 2 0.1 Demand for Top quality, luxury, comfort 0.025 4 0.1 4 0.1 Technology (Internet, credit cards, reservations) 0.075 4 0.3 2 0.15 Threats Substitute products more easily because of intense competition 0.05 3 0.15 2 0.1 Competition offers better quality/comfort 0.05 2 0.1 1 0.05 Aging population 0.025 2 0.05 1 0.025 Rising interest rates 0.05 4 0.2 2 0.1 Increase in online shopping 0.025 4 0.1 3 0.075 Trend is toward super centers 0.025 _ 0 _ 0 Decreased Customer Spend 0.025 4 0.1 2 0.05 SUBTOTAL 1.00 2.75 2.05 SUM TOTAL ATTRACTIVENESS SCORE 5.95 4.15
While Wal-Mart’s public affairs strategy works well with its corporate strategy. W e feel that there are a few recommendations which could make the company work better. Recently, Wal-Mart has been criticized for their opposition to allowing their employees to be unionized. Wal-Mart needs to clarify their reasons for their opposition to unionization. The public affairs strategy must also address the negative feelings harbored by some groups who feel that Wal-Mart is encroaching into far too many other sectors retail than it should. These concerns must be addressed if Wal-Mart is to enjoy continued success in creating positive name recognition.
Wal-Mart will need to implement these recommendations if they are going to remain at the top of the Fortune 500, while simultaneously keeping a good reputation and making their name synonymous with cheap prices and good quality merchandise.
L. EPS/EBIT Analysis
In $Millions Common Stock
Financing Debt Financing High Low High Low EBIT (12,719,000 in 2003) 635,950 435,950 635,950 435,950 Interest 5% 0 0 31,798 21,798 EBT 938,900 638,900 604,153 414,153 Taxes 26% 165,347 113,347 165,347 113,347 EAT 773,553 525,553 438,806 300,806 # Shares Outstanding 4,453,000 4,453,000 13,964,000 13,964,000 EPS 5.68 5.64 3.65 3.65
Wal-Mart is a powerful retail brand that offers a variety of merchandise, quality brands and trendy merchandise all in one store. The purpose of this report is to conduct a study of Wal-Mart’s external and internal environment using the strategic management process and to make specific recommendations for its future. The primary objective of Wal-Mart is to maximize shareholder value over time and to increase their number of super centers and to increase the number of stores in less penetrated markets in order to increase sales through a consistent commitment to improving upon previous weaknesses, addressing potential threats, taking advantage of possible opportunities while using their strengths to achieve its objectives and increased success organization.