MBA 712-01 - Strategic Management
Wal-Mart Stores ended its 2009 fiscal year with nearly $266 billion in sales at its Wal-Mart Stores, $47 billion at Sam’s Club, and $99 billion in its international locations. This represented an increase a substantial portion of market share that presented a challenge for competitors. Yet Wal-Mart at the same time was challenged to move forward with intense competition from its rivals, Target and Costco. Target was a slightly higher end option for Wal-Mart stores, and Costco was a Sam’s Club competitor that rivaled the bulk retail center with its club membership and low wholesale pricing. In addition, there were challenges with its size creating issues with speed and response, as well as becoming more vulnerable from competitors because of its larger visibility in the market. Attacks by labor unions targeting Wal-Mart’s employees created challenges, corporate responsibility and environmental issues were coming to the forefront, and there were also issues with how to successfully expand into international markets. Wal-Mart’s core competencies, which included its EDLP or Every Day Low Pricing structure, it’s cutthroat purchasing and vendor/supplier tactics, sophisticated supply chain and distribution network, relationships with major branded products as well as its own line of Great Value products, and its high emphasis on outstanding customer service were all unique drivers in Wal-Mart’s strategic positioning that would ensure its success if it followed its previous strategies while integrating some new ones to adapt to economic and consumer-mindset changes occurring in recent history. The above graph shows how Wal-Mart has the market share in comparison to other large retailers over the last decade and going into 2009 (2). Wal-Mart’s Operations
Wal-Mart set itself apart from competitors by its distinct vendor relationship- dealing directly with manufacturers, directing their suppliers’ operations, centralizing purchasing and dictating purchase prices of products-yanking contracts without mercy if their terms are not agreed to. Wal-Mart’s size and bargaining power has enabled them to strong-arm suppliers this way. Regarding its supply chain and logistics, Wal-Mart is a leader in how it approaches its warehouse inventory to sales floor distribution. It was the first company to link its cash registers to store inventory as well as utilize RFID technology to manage out-of-stock sales losses. In-store operations differ from other retailers due to possession of brand name products, decentralized store management and unparalleled customer service. Marketing utilizes a focus on patriotism, and catering to the only real ‘boss’, according to Sam Walton, which is the customer. Word-of-mouth advertising and monthly rather than weekly flyers has made Wal-Mart’s advertising to sales ratio lower than rival companies. In 2004 and 2005, political pressure and audits forced Wal-Mart to install an installation of executives to serve in the role of a CSR representative for the company. Organizationally, Wal-Mart had been run with a large centralized focus with weekly meetings that were held in the headquarters in Bentonville, Arkansas. However as 2009 approached, the meetings were moved to monthly ones, which created some operational and cultural challenges as a result. Financial Analysis
Wal-Mart’s increase in sales from the early 2000’s until 2009 showed a roughly 250% increase in overall profits across its three divisions, U.S. stores, Sam’s Club and its International stores. The large gains in sales leveled off in the later 2000’s due to the economic downturn and other factors. Cost of goods sold and selling, general and administrative expenses nearly tripled between late 1990’s and late 2000’s indicating possibly higher costs from its suppliers, or possibly larger overall purchase quantities. Wal-Mart’s current ratio dropped...