Strategy and Execution - MM Binus Business School

1. 3/26/2015
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CaseAnalysis-NitrofixGhana,Inc.
Binus Business School,
MM Executive Batch 20
Presented by Group I
Alexander Christian
Dina Sandri Fani
Puntin Kulmongkon
Case Study Analysis
Walmart Stores Inc.

2. Company’s Overview
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Operates in
16 countries
globally
Founded in
1962 by Sam
Walton
Largest global
corporation
by revenues
Largest
market share
of total global
retail
Ranked top 3 in
Forbes and Fortune
500 for past 5 years

3. History of Walmart
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1960s
Retail Revolution
Sam Walton's strategy was
built on an unshakeable
foundation: The Lowest Prices
Anytime, Anywhere
1962
On July 2, 1962, the first
Walmart store in Rogers, Ark.
1969
The company officially
incorporated as Wal-Mart
Stores, Inc.
1970s
Walmart Goes National
In the 1970s, a decade of incredible growth, "Mr. Sam" began
to take Walmart national, proving his vision's widespread
appeal.
1970
Walmart became a publicly traded company. The first stock
was sold at $16.50 per share.
1971
The first distribution center and Home Office opened in
Bentonville, Ark.
1972
Walmart was listed on the New York Stock Exchange (WMT).
With 51 stores, Walmart recorded sales of $78 million

4. History of Walmart
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1980s
Decade of Firsts
In the 1980s, the first Sam's Club
opened, serving small businesses
and individuals, and the first
Walmart Supercenter opened,
combining a supermarket with
general
1980
Walmart reached $1 billion in
annual sales
1983
The first Sam’s Club opened in
Midwest City, Okla.
1990s
America’s Top Retailer
By 1990, Walmart was the
nation's number-one retailer.
As the Walmart Supercenter
redefined convenience and
one-stop shopping, Every Day
Low Prices went international.
1991
1st international stores in
Mexico City (Sam’s Club Store)
1993
Walmart celebrated its first $1
billion sales week.
2000s
New Millennium
Implementation of omni-channel
strategy to provide seamless
shopping experience for its
customers
2002
Topped the Fortune 500 ranking of
America's largest companies for
the 1st time
2014
Doug McMillon succeeded Mike
Duke as CEO. 2.2 million
associates worldwide; serves
>200 million customers each
week at >11,000 stores in 27
countries

5. Vision and Mission
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“To improve the quality of life for everyday
people around the world”.
“Our vision is to provide the good quality
and service to our customers, while
remaining the market leader and striving
daily to be the most admired company”

6. Walmart Business Challenges
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01 External Factors
 Maturing market in its core business
 Target for critics on social issues: pushing production
from the U.S. to low-wage overseas producers resulted
to a depressed wage growth in the U.S.
02 Internal Factors
 Might reach saturation point so unable to sustain high
year on year growth rate
 Prodigious rate in stores growth lead to sales
cannibalization
 Sam’s Club warehouse stores performance is much
lower than leading store “Costco”
 Shifting away from its original target market, i.e. low
income customer which focuses in low price
 Hard time in international operations due to inability to
respond local markets
 Imbalanced Chinese relation
• Is it possible for Walmart
to sustain its accustomed
high growth rates?
• Is it necessary for
Walmart to find new
business to continue its
historic success?

7. ExternalAnalysis
Porter Five ForcesAnalysis
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Rivalry
Potential
Entrants
Customers
Substitutes
Suppliers
High
The retail business is a highly
competitive industry. Wal-Mart faces a
number of competitors in all segments of
their business.
 Exit barriers are high
 Slow industry growth
 Have excess capacity
 Cost structure of firms: sensitive to
cost
 Buyer’s switching cost is low
 Competitors have similar sizes
 Price elasticity of demand
Discount Store
 Kmart
 Target
 Caldor
Warehouse Clubs
 Price Club
 Costco
 Pace
Supercenter
 Meijer
 Fred Meyer

8. ExternalAnalysis
Porter Five ForcesAnalysis
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Low
Being that the retail industry is a
highly saturated market, new
entrants would face difficulty
succeeding in this industry. In fact, it
is highly difficult for discount
retailers to penetrate other markets
as Wal-Mart tried to enter Germany
and South Korea. The company was
unsuccessful and had to pull out
because of its unprofitability
Rivalry
Potential
Entrants
Customers
Substitutes
Suppliers

9. ExternalAnalysis
Porter Five ForcesAnalysis
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High
Consumers today are searching for the
best deals possible. They are waiting
for discounts and sales to bulk up on
products. Customers know what they
want and how far they are willing to
search for the item. Thus, switching
cost is low. Retailers must maintain
high inventory levels to retain
customers and their market share.
Rivalry
Potential
Entrants
Customers
Substitutes
Suppliers

10. ExternalAnalysis
Porter Five ForcesAnalysis
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Medium
Substitute products are products that can
be used as replacements for other
products to satisfy the same necessity.
Wal-Mart benefits from this idea as
discounters have lower prices than
department stores and consumers go for
higher quality product with the lowest
prices.
 Prices and quality of substitute
products are very competitive.
 Performance of substitute products are
similar.
 Consumer switching costs are low.
Rivalry
Potential
Entrants
Customers
Substitutes
Suppliers

11. ExternalAnalysis
Porter Five ForcesAnalysis
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Medium-Low
Forging relationships with suppliers is
essential to Wal-Mart’s business. Without
timely inventory deliveries, Wal-Mart could
not maintain its full shelves and would lose
customers.
 Wal-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.
Rivalry
Potential
Entrants
Customers
Substitutes
Suppliers

12. ExternalAnalysis
Knowing Walmart’s competitors
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COMPETITION
Target Corporation
Kmart Corporation
Costco Wholesale Corporation
The Kroger Co.
Albertson's, Inc.
Walgreen Co.
CVS Corporation
Carrefour SA
Royal Ahold N.V.
Toys 'R' Us, Inc.

13. ExternalAnalysis
Knowing Walmart’s competitors
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01 Retailer Industry: Target
 Ranked #33 in the Fortune 500.
 Target offers very similar products.
 Target went abroad in January 2011
02 Supermarket Industry: Dollar General
 One of the main competitors, pursuing low
prices.
 Good location in smaller communities is the
main competence advantage.
 Strategy: Save time, save money
 Many items per $1

14. InternalAnalysis
Combined Strategy: Cost Leadership & Differentiation Strategies
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 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.

15. InternalAnalysis
Walmart SWOTAnalysis
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S W
T
Strengths
 Customers loyalty
 High Brand value
 Good inventory control
system
 Good reputation on quality
and low price
 Emphasis in Human
Resource management and
development
Opportunities
 Strategic Alliances and
merger
 Increase Demand
 Technological developments
 New retail formats
 Customers concern about
environment
Threats
 Cultural differences in new
markets
 Countries economic
problems
 Local regulations
 Antitrust issues
 Intense competitive
conditions
O
Weaknesses
 Much of the same
merchandise
 Low reaction to changes in
market
 Insistence on doing things
“the Wal-mart way”
 Low current ratio
 Low market research in
foreign countrie

16. InternalAnalysis
Walmart Key Success Factor
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Philosophy
 Keep prices below everybody else
 Trip expenses can’t exceed 1% of the purchases
Spent lots of time in his own store and
observe competitors
Culture
 Do not show off buying luxury goods
Success
 The way it treated its associates

17. InternalAnalysis
Walmart Key Success Factor
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Management style
 Maintain an open-door policy
 Empowering associates
 Maintain technology superiority
 Build loyalty among associates,
customers, and suppliers

18. InternalAnalysis
Walmart Key Success Factor
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Tailor to individual market or individual
store
Information system
 A process which indexed product
movements in the store to over a thousand
store and market traits
 Using inventory and sales data

19. InternalAnalysis
Walmart Key Success Factor
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Promotional strategy
 Everyday-low-prices
Few promotions
 13 major circulars per year
Satisfaction guaranteed policy
Marketing slogan
 Lower price
Store managers set up prices
2-4% pricing differential between Wal*Mart and its best
competitors in most markets in early 1990s
Lower price
Maximize sales
volume
and industry
turnover
Minimize
expenses

20. InternalAnalysis
Internalization as key strategy to keep growing
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Why
Internalization?
01 Saturated domestic market
02
United States represents only 4%
of world’s population (missing of
96% of potential customers)
Emerging Markets with lower
disposable income offer huge
platforms for growth in discount
retailer.
03
To keep growth in revenues by
creating economies of scale04

21. InternalAnalysis
Internalization as key strategy to keep growing
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01
Management Risk (culture,
language, customer preferences,
distribution systems)
02 High investment
Political and Economic risks03
Exchange Rates risk04
Risk Factors?

22. InternalAnalysis
Internalization as key strategy to keep growing
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Reasons of
Failure?
01
Not able to benefit from economies of
scale, e.g. Germany
02 Unable to become cost leader
Culture differences03
Low profitability market04
Political & legal barriers (India)
Foreign companies are not allowed to set
up big stores
05
Fail to understand the market (South Korea)
Very demanding customers and did not
customize to market
05

23. Recommendation
TOWSStrategies
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24. Recommendation
Other key proposed strategies for Walmart’s consideration
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Fine tuning business
Strategies
 Back to basic and shifting
position back to price
leader to gain customer
trust
 Consider to sell Sam’s
Club warehouse store
business as no clear
selling point
 Consider to raise employee
wage to reduce turnover
rate
Continue Internalization
with a better approaches
 Consider to expand to
developing countries as
most people will go for a
cheaper product. Potential
countries to be considered
include Indonesia,
Vietnam, & Philippines
 Adjust international
business strategy to match
with local condition
Refresh its supply chain
strategies
 Reduce dependent level of
production from China
especially garment
products. Such as:
Bangladesh

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CaseAnalysis-NitrofixGhana,Inc.3/26/2015