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1. WAL * MART By: Divya Mishra & Team

10. 1. To what extent is Wal-Mart’s performance attributable to industry attractiveness (Use: Five Forces) and to what extent to competitive advantage (Compare Wal-Mart’s ROCE disaggregation to its competitor’s. Better ratios are competitive advantages)? Five Forces Analysis

11. Cost Efficiency Efficient In-Store Operation Leading-edge Logistics Cost Efficiency

12. 2 In which of Wal-Mart’s principal functions and activities (e.g. purchasing, distribution, marketing, IT, HR, etc.) do WM’s main competitive advantage lie? Identify the firm’s core competencies. Cost Efficiency Efficient In-Store Operation Leading-edge Logistics Cost Efficiency

14. 3 To what extent is WM’s competitive advantage sustainable? Why have other retailers had limited success in imitating WM’s strategy and duplicating its competitive advantage? Competitive Advantage Core Competence Valuable Rare Non-imitable Non-substitutable Assessment Size Y Y Y Y SUSTAINABLE Logistic Y Y Y Y SUSTAINABLE Internal operations Y Y Y Y SUSTAINABLE Cost efficiency Y Y Y Y SUSTAINABLE Location Y Y Y Y SUSTAINABLE

15. 4 Looking ahead, what measures does WM need to take to sustain its recent performance and defend against competitive and other threats? Criteria of Sustainability

17. News 2 Wal-Mart Canada to open 40 new supercenters in the coming fiscal year Source: Mississauga, Ontario, January 26, 2011 Wal-Mart.com

18. Wal-Mart Expansion

22. According to the DCF (discounted cash flows) paradigm, value drivers of a firm are such as sales growth, operating profit margin, cash tax rate, proportion of net working capital to sales, proportion of fixed assets to sales, and proportion of other long term assets to sales. These value drivers can be used to estimate a firm’s future free cash flows (ultimately the firm’s value). Based on your analysis above, propose a strategic plan that can increase the firm’s future free cash flows (i.e. by improving its value drivers). Read file FCF drivers.doc in your Blackboard vista. Identify which value drivers that can be improved and justify. Calculate the potential value creation of your proposed strategic plan. Assume that the firm has certain competitive advantage period and the residual value is the firm’s book value. For example competitive advantage period of 4 year suggests that there won’t be any economic profit created after year four. Thus, the residual value is the perpetuity value of the firm’s book value at year four and discounted at t = 4Make your own assumption as necessary.

24. Questions