Wal-Mart’s Global Strategy
* In the past two decades Wal-Mart has been the leading domestic retailer. In 2002, Wal-Mart stood atop the Fortune 500 for the first time. Wal-Mart’s top ranking reflects the rise of retailing as one of the most important global industries, as well as the company’s individual excellence and consistent performance. In 2001 the company had higher sales than the next four largest global retailers combined. The sales differential against U.S. based retailers is even more pronounced, as Wal-Mart top line in 2001 was more than four times that of the second largest retailer Home Depot. Its primary success has come from its excellence in customer service, supply chain management, and ability to keep prices low. The problem facing Wal-Mart is determining how to sustain its dominance in the industry. The underlying strategic factors contributing to this problem are the United States’ retail market becoming very saturated and Wal-Mart’s inability to be profitable globally. * Its core retail business can be divided into four retail divisions: Wal-Mart Stores, Super Centers, Sam’s Club Warehouses and Neighborhood Markets. Wal-Mart stores and Super Centers provide “one-stop family shopping”; combining groceries and general merchandise departments. Sam’s Club is the nation’s leading members-only warehouse club providing discounted prices for members by buying directly from suppliers. Neighborhood Markets offer a convenient shopping experience for customers who need groceries, pharmaceuticals and general merchandise. * Other competitors in the domestic retail environment are; Sears, Costco, K-Mart and Target. Internationally, each country has a domestic equivalent to Wal-Mart with few spanning outside of their borders. Carrefour (France), Tesco (U.K), and Metro (Germany) are the exception with retail locations in several countries. * Keeping their stores no-unionized is also a key success factor in the company’s low cost provider strategy. With all of their competitors unionized, Wal-Mart enjoys a substantial low cost salary differential. Another contentious low cost strategy employed by Wal-Mart is to only hire part-time workers. By using only part-time “associates”, Wal-Mart is not liable to pay any benefits thereby saving millions of dollar in benefit payroll costs.
* Year- to-date (case date 2002), Wal-Marts comparable store sales have increased 7.3% with a 7.8% increase for the Wal-Mart Stores segment and 4.7% for Sam’s Club. Wal-Mart holds 7% market share of the US retail industry and continues to gain share in both the discount and food/grocery channels. Wal-Marts domestic operations continue to grow faster than the overall retail market and faster than its major competitors. In 2001, Wal-Mart had its biggest gain in market share in the past five years. * The supercenter’s account $65 billion-$70 billion in sales in 2001 or 30% of total company sales. On average a supercenter carries about 100,000 items. * The International segment contributed more than 16% of 2001 company revenue and 12% of 2001 company operating income, has made significant progress in improving its profitability. By 2002 one-third of company sales growth is projected to come from this segment. * Wal-Mart has become adept at leveraging the buying power behind its $218 billion in global sales (2001). Through its’ global supply logistics and procurement program, its general merchandising margin has risen 9% in total. Wal-Mart can maximize its strong position with suppliers to combine the best prices with a very high quality products offering. * Year over year sales have grown between 12% and 16% while inventories have been averaging between 5%-6% an indicator of Wal-Marts strong inventory controls. * With the U.S. retail market becoming more saturated, Wal-Mart knew that to sustain its leadership it would have to expand globally. Wal-Mart entered...
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