A

PROJECT REPORT

ON

“STRATEGIC ANALYSIS OF THE-

SUBMITTED TO:-                                                               SUBMITTED BY:-

MS.HIMANI SHARMA                                                        ALPANA SHARMA(04)

NEHA AGARWAL(34)

MONICA SAROHA(30)

SHANTANU PRAKASH(57)

JITENDER SAHNI(19)

MANISH NAHARIA(26)

Sec: G Batch- MBA (2007-2009)

ACKNOWLEDGEMENT

The project “strategic analysis of WAL-MART”, has been undertaken, in partial fulfillment of the requirements of Master in Business Administration (MBA) offered by Amity Business School, Noida. We take this opportunity to thank Dr.HIMANI SHARMA, for providing us an opportunity to take this project work and providing guidance during the project.

And, above all we would like to thank the entire person who were closely associated with the project right from the beginning and under whose supervision and guidance whole of the project has been completed. Our sincere thanks also goes to those senior students who guided us in our work, who selflessly revealed several information, without which we would not have been able to unravel several ideas, which is now part of this report.


CONTENTS

  • GLOBALISATION AND RETAILING
  • ABOUT WAL-MART
  • WAL-MART GOING GLOBAL
  • BUSINESS STRATEGY FOR WAL-MART
  • ENVIORNMENTAL STUDY FOR WAL-MART
  • WAL-MART ANALYSIS-INTERNAL
  • BCG MATRIX FOR WAL-MART
  • P.E.S.T. ANALYSIS FOR WAL-MART
  • PORTER’S FIVE FORCES ANALYSIS FOR WAL-MART
  • S.W.O.T. ANALYSIS FOR WAL-MART
  • VALUE CHAIN ANALYSIS
  • STRATEGIC ANALYSIS FOR WAL-MART
  • COMPETITIVE ADVANTAGE FOR WAL-MART
  • CORE COMPETENCIES FOR WAL-MART
  • DISTRIBUTION AND INTEGRATION FOR WAL-MART
  • WAL-MART RECENT DEVELOPMENT
  • EXPANSION STRATEGIES IN INDIA.

GLOBALISATION AND RETAILING

                                                      ……………………….Beginning of a new era

INTRODUCTION

We are living in a “Global village” today. Globalization is affected by several factors, including low growth in domestic markets, information technology, global consumer and shopping patterns, and the opening up of new Markets. Retail being an integral part of business world cannot remain untouched by all these things. However it is not easy for retailers to become global. Performance in foreign markets depends on careful adaptation of the home formula, since there are still regional differences and mostly local sourcing. They have to go for a ‘glocal’ strategy- “think globally act locally.”

Introduction to Globalization and Transnational Strategy in relation to Retailing

Globalization refers to growing economic interdependence among countries as reflected in increasing cross-border flows of three types of entities:

  1. goods and services,
  2. capital
  3. Technology

The term globalization can relate to any of several levels of aggregation: the entire world, a specific country, a specific industry, a specific company, or even a specific line of business or functional activity within the company.

Transnational strategies although global in nature incorporate a global configuration and a high degree of co-ordination allowing the business to retain local responsiveness

The two most strategic expansion routes for international retail expansion are global and multinational strategies. Global retailers replicate a standard format throughout their expansion worldwide while multinational strategies result in adaptation of their retail offering. Multinational retailer’s expansion is generally slower than global retailers and the management is decentralized. Multinational target markets in closer proximity. International expansions of retailers are challenging and unpredictable, and a slow approach is healthy.

As markets evolve, differentiation becomes more important.

The manifesto of global brands emerged in 1983 when Theodore Levitt published “The Globalization of Markets”. It was the emergence of homogenisation. Enabling this was technology with mass transport and communication and the disappearance of national tastes and preferences. The multinational corporation operates in a number of countries and adjusts its products and practices in each at high relative costs. The global corporation operates with resolute constancy at low cost, as if the entire world were a single entity; it sells the same things in the same way everywhere.

WAL-MART

INTRODUCING WAL-MART

"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)

(WAL-MART FOUNDER)

Wall mart bought a revolution in the field of retail industry with its tag line “low Price Always.”

Sam Walton, a businessman from Arkansas, began his retail career when he started work on , , at a  store in  where he remained for 18 months. In 1945, he met , a regional  that owned a chain of  called . Butler Brothers offered him one in .

Walton could neither come to agreement on the existing store's lease renewal nor find a new location in Newport. Instead, he opened a new Ben Franklin franchise in , but called it "Walton's Five and Dime." There, Walton achieved higher sales volume by selling products with slightly smaller markups than most competitors.

On , , Walton opened the first Wal-Mart Discount City store. Within five years, the company expanded to 24 stores across  and reached $12.6 million in sales. In 1968, it opened its first stores outside Arkansas, in  and .

Wal-Mart is the world’s largest corporation. Wal-Mart is U.S.A.’s biggest seller of DVDs, diamonds, groceries, toys, guns, CDs, apparel, dog food, detergent, jewellery, sporting goods, videogames, socks, bedding, and largest film developer, optician, private truck fleet operator, energy consumer, and real estate developer.

Americans save about US$10 Billion by shopping at Wal-Mart (Buffet, 2003). Wal-Mart’s revenue accounted for 15% of the entire U.S. retail market in 2002, excluding automobiles Sales globally have been affected over the recent weeks. International sales increased 14.3% to $10.3 billion. Wal-Mart’s revenues are forecast to approach $700 billion in 2010. Wal-Mart has four large scale retail formats; Wal-Mart Stores, SAM’s Club, Wal-Mart Supercenters and Neighborhood Markets Analysis and Evaluation of Wal-Mart’s Global / Transnational Strategy.

Company History:

Wal-Mart Stores, Inc. is not only the largest retailer in the world, it now also ranks as the largest corporation in the world. The retail giant dwarfs its nearest competition, generating three times the revenues of the world's number two retailer, France's Carrefour SA. Domestically, Wal-Mart has more than 1.2 million workers, making it the nation's largest nongovernmental employer. U.S. operations include 1,478 Wal-Mart discount stores (located in all 50 states); 1,471 Wal-Mart Supercenters, which are combined discount outlets and grocery stores (and which make Wal-Mart the country's top food retailer); 538 Sam's Clubs, the number two U.S. warehouse membership club chain (trailing Costco Wholesale Corporation); and 64 Wal-Mart Neighborhood Markets, smaller food and drug outlets also offering a selection of general merchandise. International operations, which commenced in 1991, include Wal-Mart discount stores in Canada and Puerto Rico; Wal-Mart Supercenters in Argentina, Brazil, China, Germany, Mexico, Puerto Rico, South Korea, and the United Kingdom; and Sam's Clubs in Brazil, China, Mexico, and Puerto Rico. In Mexico, Wal-Mart also operates Bodegas discount stores, Suburbias specialty department stores, Superamas supermarkets, and Vips restaurants. In addition, the company runs Todo Dias supermarkets in Brazil, Neighborhood Markets supermarkets in China, ASDA combined grocery and apparel stores in the United Kingdom, and Amigo supermarkets in Puerto Rico. Wal-Mart also holds a 36 percent stake in The Seiyu, Ltd., a leading Japanese retailer. In all, more than one-quarter of Wal-Mart's stores are located outside the United States, and international operations generate about 18.5 percent of total revenues. The heirs of founder Samuel Walton continue to own about a 38 percent interest in the company.

Wal-Mart Discount Stores

Wal-Mart Discount Stores are  with size varying from 51,000  (4,738.1 ) to 224,000  (20,810.3 ), with an average store covering about 102,000  (9,476.1 ).They carry  and a selection of . Many of these stores also have a garden center, a ,  &  Express, optical center, ,  studio, and a  outlet. Some also have gasoline stations.

The first Wal-Mart store opened in  in . It was later remodeled and expanded into a 24-hour Wal-Mart Supercenter.

In 1990, Wal-Mart opened its first Bud's Discount City location in Bentonville. Bud's operated as a closeout store, much like . Many locations were opened to fulfill leases in  as Wal-Mart stores left and moved into newly-built Supercenters. All of the Bud's Discount City stores closed or converted into Wal-Mart Discount Stores by 1997.

As of , , there were 979 Wal-Mart Discount Stores in the United States. In 2006, the busiest Discount Store in the world was located in .

Wal-Mart Supercenter

Wal-Mart Supercenters are  with size varying from 98,000  (9,104.5 ) to 261,000  (24,247.7 ), with an average of about 197,000  (18,301.9 ). These stock everything a Wal-Mart Discount Store does, and also include a full-service , including  and , , , ,  products, , and fresh . Many Wal-Mart Supercenters also have a garden center, , , Tire & Lube Express, optical center, one-hour photo processing lab, portrait studio, and numerous alcove shops, such as cellular phone stores, hair and nail salons, video rental stores, local bank branches, and  outlets. Some also sell ; distributors include  (whose Wal-Mart stations are branded as "Murphy USA"),  ("Optima"), or  ("Mira star").

The first Supercenter opened in 1988 in . A similar concept, , opened in  a year earlier. All of the Hyper mart USA stores were later closed or converted into Supercenters.

As of , , there were 2,435 Wal-Mart Supercenters in the United States.

Wal-Mart Neighborhood Market


Wal-Mart Neighborhood Markets are  that average about 42,000  (3,901.9 ). They offer a variety of products, which include full lines of , pharmaceuticals, health and beauty aids, photo developing services, and a limited selection of .

The first Neighborhood Market opened in 1998 in . As of , , there were 128 Neighborhood Markets in the United States.

Sam's Club

Sam's Club is a chain of  which sell  and , often in large quantities. Sam's Club stores are "membership" stores and most customers buy annual memberships. However, non-members can make purchases either by buying a one-day membership or paying a surcharge based on the price of the purchase. Some locations also sell gasoline. The first Sam's Club opened in 1983 in  under the name "Sam's Wholesale Club".

Sam's has found a niche market in recent years as a supplier to small businesses. All Sam's Club stores are open early hours exclusively for business members and its slogan, as such, is "We're In Business for Small Business."

According to Wal-Mart's 2007 Annual Report, Sam's Club's sales during 2007 were $42 billion, or 12.1% of Wal-Mart's total 2007 sales. As of , , there were 586 Sam's Clubs in the United States. 

WAL-MART “GOING GLOBAL”

Wal-Mart and International Expansion

Wal-Mart was entered into international markets by a conviction that it could achieve competitive advantage abroad by applying its combination of technology, logistics and human resources with its tremendous buying power with multinational consumer goods suppliers. Wal-Mart’s strategy has been to acquire companies and convert them into the Wal-Mart way stores. European retailers like Carrefour and Ahold, have more than 20 years of international experience than Wal-Mart. Multinational retailer’s entry is usually by mergers & acquisitions, which is what Wal-Mart did in its initial entry into Mexico, with a joint venture with CIFRA, the most powerful retailer in Mexico.

CIFRA enables Wal-Mart’s entry with stronger networks in the trade especially with vendors and understanding the local needs and culture while Wal-Mart brings in its competency like logistics and service. Wal-Mart’s employees; especially the management are a key resource and enable its contribution to its success. In an remarkable editorial in The Economist (2000), Wal-Mart’s entry into Europe and global expansion plans have been heavily criticised and

undermined due to the inability of global sourcing capabilities of supermarket products and apart from the already well established retail networks of chain stores and discounters like Metro, Carrefour, Aldi which all individually and collectively dominate the market and aren’t up for sale as Wal-Mart would try to.

Models For Strategic Analysis

                                                                              Stability Strategies                                                              

  1. Directional Strategy :                               Growth Strategies

                                                                              Retrenchment Strategies

  1. Portfolio Analysis Strategies                       Build

                                                                                 Hold

                                                                                 Harvest

                                                                                 Diversification                    

  1. Corporate Parenting

        

CORPORATE LEVEL STRATEGY

1.Stability strategy

The firm stays with its current business and production level in the same market. It maintains the existing level of effort and is satisfied by incremental growth. Wal-Mart has been following stability strategy in US market. They are maintaining the cost leadership in the market by saving 2350 dollars on an average for each American family annually .with their motto of always low prices always they are able to transfer the benefit to the customer. They are able to stabilize the cost leadership by having an efficient distribution network. They own 80% of their logistics all around the world. It gives them a competitive advantage over suppliers. It results in minimizing the bargaining power of the suppliers.

As the US market is almost saturated before expanding their business to global market they followed a PAUSE STRATEGY in which they took a time and opportunity to rest, they continued with their supermarket chain of stores. It enabled the company to consolidate its resources after a prolonged period of rapid growth in the industry. It was just a temporary strategy which was consequently followed by NO CHANGE STRATEGY. However for long they cannot follow the any change strategy, due to tough corporate competition in US market like K-mart, Sears, and K-Club etc. The profit that the Wal-Mart generates is mainly due to its scale of operations. There is a wafer-thin profit margin which comes from bulk buying. Due to stagnation in US market, it is now a necessity for Wal-Mart to expand its business horizons.  

Growth Strategy

In addition to its overall business strategy, Wal-Mart's growth strategy is strikingly different from most other big box retailers. Most companies establish stores near major urban areas with a potentially large clientele base,

Wal-Mart, by comparison, "spread out like molasses from its Arkansas base by constructing new stores strategically located near distribution hubs and smaller towns, rather than leapfrogging across the nation like the other retailers,"

Join now!

 And its growth is completely homegrown. Unlike many other companies, Wal-Mart has not bought up existing retail chains in order to preserve control over its corporate culture, experts say, which has helped Wal-Mart stay ahead of its rivals.

As an illustration of its productivity-driven corporate philosophy, Wal-Mart began an internal "survival of the fittest" competition among individual stores. By building more stores than necessary, store managers felt a strong incentive to "crack down on workers and improve the efficiency of their store to stay alive," Lichtenstein said.

This aggressive growth strategy -- with its potentially negative implications for ...

This is a preview of the whole essay