report on wal-mart
...has been the main competitive area that Wal-Mart has been able to have success where many retailers usually find difficult to execute. Wal-Mart has been able to build consumer trust by delivering the promise of low price day-in and day-out. They have built success into their business strategy by driving down costs in all aspects of their business. This all encompassing goal as the low cost provider in the market has many operational advantages that has enabled Wal-Mart to create an efficient productivity loop. These operational advantages come from more accurate data forecasting due to POS data sharing with their suppliers. This ultimately helps to develop inventory efficiencies throughout the supply chain between Wal-Mart and their suppliers. Wal-Mart・s development of its Retail Link expands on the productivity loop that has proven to be highly successful. They are working with global suppliers to implement their Retail Link systems that they hope to completely implement in the near future. One of the successful stories behind the Retail Link is the introduction of Pampers disposable diapers. Wal-Mart turned an item that had a turnover rate of 25 times per year to 125 times per year. This success translated into dramatically lower inventory productivity costs for Wal-Mart and its suppliers. The Retail Link works because it is built on just-in-time concepts and methods that have enabled Wal-Mart to work directly with its suppliers. Key to the Retail Link is working directly with suppliers. Success in inventory control has helped to further increase the gap between Wal-Mart and its competitors. Saving On Advertising Another cost advantage of EDLP is that it does not depend on the kind of advertising that most retailers find hard to control. There advertising strategy has become a competitive cost advantage. It spends less than one percent of sales on advertising which is only about one sixth that of its main competitors. Wal-Mart recognizes the importance of EDLP over excessive promotional spending. For example, there are no flyers that specifically promote an item. This ultimately reduces costs in other areas such as its logistical and distribution systems. Store Design Strategy On a visit to Wal-Mart, most retailers would be troubled to find a store design that just doesn・t seem to match that of a retailer that would attract a customer following and with dramatic increases in sales. Wal-Mart・s store design is not meant to be a delightful attraction. Their low cost store design is meant to send a message of value and savings to their customers. The real retail experience for customers is coming away with savings in their pockets. Matching Pricing And Demographics Part of Wal-Mart・s EDLP strategy is to be able to price the same product according to store area. This means that although Wal-Mart tries to offer low prices, they do not necessarily offer the lowest price on every store item. Their strategy is to use the information provided by the Retail Link system to be aware of customer demands on every store. In this way, Wal-Mart can offer a basket of goods at any particular store according to such factors as demographics, local competition, or local economics. This strategy has enabled them to price products differently from store to store, but at the same time meet customer expectations of the store. Each store is thus focused on meeting needs. For example, Wal-Mart is currently determining the basket of goods that Japanese consumers in Japan will come to expect as Wal-Mart hopes to expand in the Asian market. Distribution And Outbound Logistics Wal-Mart・s competitive advantage lies in its ability to know faster than its competitors what is selling and what is not selling on the shelves. The ability to do this lies in its efficient distribution system comprised of a network of suppliers, distribution centers, and being the retailer with the most sophisticated information systems. They have a 101- terabyte computer system that receives critical data from around the globe via satellite. This enables managers to use handheld scanners to check information on a product on the shelves in terms of how much of the product the store has sold that day, at what price, the profit contribution, and inventory levels. Analysts can check inventory levels and orders and track sales everywhere. They also have their own company owned truck-tractors that enable them to have goods delivered to any of its stores within thirty eight to 40 hours after orders are placed. All orders and reorders are made according to sales because only very few items are left on the shelf long periods in order to reduce costs. Wal-Mart also tracks what products are moving too slowly in any of its stores, and will move them to a different store location to see if they sell. This is done as an alternative to having to reduce prices. Wal-Mart also places its stored in key strategic locations to better serve customers. It has placed its stores in small towns that were ignored by their competitors. They have benefited on the idea that people will come if prices are as good or better than stores in larger cities that were a couple of hours drive by car. This also helped Wal-Mart to establish itself in strategic geographic locations as the sole discount retailer. Part of this success was the ability to successfully tailor to local market demand whereby managers were empowered to oversee what items to display based on customer preferences and also how to allocate the amount of shelf space based on the local demand. Moreover, with the combination of efficient use of store floor space afforded by less holdings of inventory, a regionally competitive pricing strategy, shelf labeling rather than individual product labeling to minimize the handling of good, all contribute to the availability of goods when the customers want it and at the prices they prefer. Sales And Marketing More Value For Less Wal-Mart is continually finding new ways to create value for its customers. Value creation involves focusing on offering everyday low prices, and making it easier to shop at Wal-Mart. The Rollback program was first introduced in 1992 to create the image that Wal-Mart is ：continually； finding ways to roll back its prices. This means that they are not resting on their ：everyday low prices； but try to offer a low price that tends to stay low. The ability to keep the prices low makes people smile, which is how the cheerful Wal-Mart mascot of a smiley face came about. Quality Assurance Wal-Marts value for less assurance is also backed up by it quality assurance standards. They will never sacrifice quality in order to sell products at a lower price. The company sets high standards whereby its products meet the industry standards and government regulations. It has set up consumer-testing laboratories for which it can ensure product safety. In addition, if a customer still is not satisfied with the quality of their products, Wal-Mart has fair return and exchange policies. Offering Better Merchandise And New Products Wal-Mart has a huge assortment of products whereby its supercenter・s can have up to 150,000 different products. This is part of Wal-Marts strategy of trying to have a one-stop shop for their consumers. It is all about offering consumers everything they need in one place. Wal-Mart also has seasonal items whereby the company will create a change in product assortment. The consumer with the busy lifestyle will especially find it convenient to shop at a Wal-Mart store. Wal-Mart continues to grow by improving its merchandise and continually offering new product lines. In its apparel interests, it has been able to improve its George brand of clothing and will add Levi・s apparel to its offerings. In its housewares interests, Wal-Mart has put its product-development expert at work in offering new color designs. They will also introduce Egyptian-cotton towels and bedding that will be offered at prices no more than what they currently have priced their normal towels and bedding. Wal-Mart is currently doing well and hopes to further develop opportunities for better sales performance in the heat-and-serve meal section of its food program. Their food program is continually driven by national brands of which it is well prepared to develop. Success in the jewelry department has made Wal-Mart one of the top sellers of diamonds in the world. After introducing their Keepsake brand of diamonds last spring, it has since been able to increase its sales in every other category of its diamond offerings. Its Keepsake brand of diamonds features high quality fashionable cuts of diamonds. Wal-Mart will continue to offer products that keep pace with technology. This was initially an area where they thought they could not be as competitive unless certain products reached certain price points. They have since made a shift in the right direction in extending its new technology product offerings in its electronics department. By being more aware of what consumers want, the benefits have overcome the risks as is evident in their success in entering the DVD player market early on and doing likewise with flat screen televisions and wireless technology. Wal-Mart Supports Its Communities There are many advantages and opportunities for Wal-Mart in supporting the communities in which they serve. Company associates in their own local regions are empowered to identify important community services and determine the amount of money to spend. Wal-Marts eagerness to become partners in their communities has been shown by there support of over 100 million dollars spent during fiscal year 2003 in the U.S and Puerto Rico. The Wal-Mart Foundation supports these community causes. In addition, they have been able to encourage their customers to contribute millions through local fund raising. Wal-Mart also supports communities through merchandise donations and in-kind support through their individual stores. The company has already contributed and helped to raise a total of 200 million dollars in 2003. The company・s community involvement has not gone unnoticed by President George W. Bush who has already honored Wal-Mart with the prestigious Ron Brown Corporate Leadership Award in May 2002. This award is only presented to the best corporate citizens in America annually. This award recognizes Wal-Mart・s commitment to its employees and communities besides its business interests. Forbes has also named Wal-Mart as one of the 10 most philanthropic corporations in America that same year. Community involvement can be seen during natural disasters as money and relief items made a huge impact in the communities. Wal-Mart has also recognized the need of its associates whereby it has recently launched the new U.S program called the Associate in Critical Need Trust. The trust was created to help its Associates to cope with unforeseen circumstances. Most Admired Company in America Award (2003) The commitment and dedication to customers as well as the Wal-Mart communities in which they live has not gone unnoticed. Shareholders can now be proud to call its company the ：Most Admired Company； in America as is has been honored to be by Fortune magazine for the year 2003. Customer Service Customer Greetings When Wal-Mart customers enter the Wal-Mart stores, they can expect to be greeted by a Wal-Mart associate with a warm welcome. This is part of the whole customer shopping experience. Wal-Mart associates are trained to make their customers welcomed and aware that there is someone there to help them with their shopping decisions. Easy return policy Return policies are made easy at Wal-Mart to increase customer satisfaction. The company wants their customers to be completely satisfied with their shopping experience. Thereby, Wal-Mart offers to take back most products that do not meet the customer・s expectations at no cost. There are some restrictions on certain products. They also offer their customers different ways of returning products depending on where it was bought. Customer・s can return products either to a Wal-Mart Store or return it by mail. Learning before buying Wal-Mart customers are encouraged to learn more about the products they intend to buy before they buy it. One way they offer product information is through their website. The company offers detailed information on many products and even buying guides on certain product categories like digital cameras and home theatres. This makes it convenient for customers to view the information, print the information, and take it to their Wal-Mart store and find the product they are looking for. This is another service that Wal-Mart offers their customers so that they can feel more confident in making their purchases. Secure Online Shopping Online shopping is made very easy and at the same time very secure. Many customers are aware of the dangers of shopping online and it is up to online companies to indicate that all online transactions can be just as safe and secure as shopping at their local Wal-Mart stores. Wal-Mart ensures that transactions are secure through a number of ways. The company never sells or rents personal customer information to any third parties and will give prior notice as to how information collected is used as is described in their privacy policy. Online shopping is made secure and safe by the use of Secure Sockets Layer (SSL) technology. This technology utilizes encryption to secure sensitive information exchanged online. Wal-Mart also supports Verified by Visa (VbV). This is basically an authentication technology for Visa cards to ensure that only an authorized cardholder can place orders. Improving reputation through research Wal-Mart has become a successful and highly visible company in the world. However, they have also drawn those who do not like Wal-Mart. In order to protect there name from further scrutiny, Wal-Mart has initiated a research program to understand the difference between the groups that like the company and those that do not. Several key audiences include consumers, investors, and their own company associates. Their goal is to find out how these audiences feel about Wal-Mart as a retailer and corporate citizen. Since initiating the program in 2002, Wal-Mart has since learned that they have an excellent reputation, that their reputation is a very local experience, job opportunity improves reputation, and must expand good neighbor image. The results have so far been very positive in many different areas. The findings indicate that 90 percent of those surveyed respect and admire the company as very reputable. The company is considered both an excellent retailer and corporate citizen. Wal-Mart has also found that people find the company to be a local experience. This means that people identify with their local Wal-Mart store in that it is a store of the community. They do not attach Wal-Mart・s corporate headquarters to their image of the local Wal-Mart store. This is a good sign for Wal-Mart in its approach to serving the Wal-Mart neighborhoods through charitable giving programs. The company has also earned respect from those who were previously reluctant to appreciate what Wal-Mart has to offer to the communities in which it serves. When these people finally come to understand that Wal-Mart means more than retailing, their opinions improve. They eventually come to realize that the company offers career opportunities. They offer a competitive employment package and most of their jobs are full-time jobs. The research also indicates a growing desire of people to see Wal-Mart associates get more involved in community issues. In their desire to increasingly understand Wal-Marts overall economic impact on their communities, they have come to expect the company to keep its stores clean and safe. Wal-Mart has been able to respond to these opportunities to protect and further improve its name and reputation in the communities in which its serves. Examples include the development of communications programs to better show their job and career opportunities. Considerations in more flexible store design and store locations have also been put forth to give local government more opportunities to get involved. Wal-Mart has thus positioned itself to better grow with its communities as it continues to focus on improvement. Value Chain - Support Activities Firm Infrastructure To facilitate company goals of better control and management of every aspect of the business, Wal-Mart has taken on the role of being the leader in using information technology in the industry. It has built a highly successful infrastructure enabled by sophisticated technology that has enabled it to improve its distribution network and provide its associates with the technological tools to work more efficient. This has ultimately enabled their business to run more efficiently in terms a quicker and more accurate means of obtaining information. Point-of-sale bar code scanning is used in all of its stores, and hand held computers enable orders to be placed immediately. Wal-Mart also has controls its distribution more efficiently with its large private satellite communication systems. There is also a staff of twelve hundred on hand to support its information systems infrastructure. Procurement Global Procurement Wal-Mart has made new strides in global procurement from a third party starting in 2002. Their global procurement program will enable them to build a global supply chain whereby they can better share their buying power and network of merchandise globally with its worldwide operations. What will ultimately develop from this added business value is the ability to globally coordinate product development and delivery. In this way, they have kept in line with Sam Walton・s goal of delivering product quality and value to consumers worldwide. An example of one of Wal-Mart・s procurement activities includes how the company last year picked Sichuan Changhong Electric Co. in China as a color TV supplier. This was done to support Wal-mart・s one day Thanksgiving Blitz event in the U.S. The Changhong company was able to double its profits from its previous year of sales. The Chinese company is an appliance maker and is just one of the Chinese companies that Wal-Mart buys products from. Wal-mart is actually the largest buyer of Chinese products. Wal-Mart also has 27 stores in China where 95 percent of the goods it sells are made locally. Technological Development Wal-Mart has taken on the role of being the leader in using information technology in the industry. It has been able to use technology in to control all aspects of its company. A radio frequency network among area stores has improved its distribution network, and hand held computers have provided its associates with the technological tools to work more efficiently. This has ultimately enabled their business to run more efficiently in terms a quicker and more accurate means of obtaining information. Point-of-sale bar code scanning have also been installed in all of its stores, and a large private satellite communication systems is also used to have better control over its distribution system. They actually own one of the largest private satellite systems. Internal Product Development A product development team works with Wal-Mart buyers in order to identify opportunities for improvement in product categories such as domestics, apparel, and electronics. These improvements are contingent on the success Wal-Mart has in encouraging their customers to broaden their consumer needs at Wal-Mart. The trend is that Wal-Mart customers prefer to shop for all their needs at one store. These needs have gone beyond basic household supplies to food products. Internet e-tailing The growing opportunities that the Internet provides as a highly efficient channel has not gone unnoticed by Wal-Mart. Despite concerns over cost delivery, merchandise returns, and data security, Wal-Mart made its presence in 1996 as Wal-Mart On-line which as been renamed as Wal-Mart.com in 2000. Retailing over the Internet has become another channel in which they have been able to provide customers easy and quick shopping twenty-four hours a day and seven days a week. Wal-Mart.com is a subsidiary with a separate management and board of directors. It is also strategically located in the San Francisco Bay area where there is easy access to Internet executive and technical talent. Human Resource Management Nurturing The Customer-Centered Culture Part of what makes a good company is how they instill their corporate culture in their employees. Employee attitudes must be inline with corporate strategies. This ensures that the company will grow in the desired direction. Wal-Mart・s associates must respond to their customers in the manner in which is consistent with the company・s image. The company will hire college students who are working for Wal-Mart for management jobs. However, they intend to recruit about 70 percent of their management from hourly workers. This is one way they can retain their company culture. Developing Wal-Mart Leaders The traditional thought at Wal-Mart is that its leaders must understand its company culture and commitment to integrity in order to continually be successful. This thought had driven Sam Walton himself to lead in developing the next generation of Wal-Mart leaders. Some of the strategies in this respect have developed under their leadership initiatives. These initiatives include the Business Leadership Series, the accelerated programs for high-potential international managers, and the People Asset Reviews. This leadership initiative has proven to be a successful value added model that has enabled Wal-Mart to have recruit internally to fill some key company positions. Key appointments have been made in positions such as senior vice president and CIO (Linda Dillman), senior vice president, insurance and benefits (Susan Chambers), and president and chief executive officer of SAM・S CLUB Division (Kevin Turner). Commitment In Electing Directors Companies will find it an increasing good practice to have independent outside directors. Wal-Mart has made this commitment for many years in electing its directors annually. These ：outside directors； provide a perspective on the company that is crucial to the strength of the company・s board that include ：inside directors； with comprehensive and broad hands on knowledge of company operations. The outside directors help to bring up new perspectives on current issues that the company must be able to address. Employee Benefit Gains The pride that Wal-Mart has in its employee・s ongoing development extends beyond company training. Their outstanding performance is also rewarded through employee stock purchasing plans and profit sharing plans. Currently, Wal-Mart employees own 8 percent of company stock. There are two ways in which stock can be purchased. Either an amount is deducted from the employee・s paycheck with 15 percent of the amount contributed by the company, or a lump-sum purchase is made with an additional 15 percent put in by the company. Wal-Marts profit-sharing plan is a way of rewarding employees for increased efficiencies, for recognition of excellent service, and to further encourage employees to think about growing career wise with the company. The company・s contributions are made from net profits and held under a trustee-administered plan. SWOT Analysis Figure 2. SWOT Analysis Strengths Some of Wal-Mart・s strength・s are shown in Figure 2. These strengths include every day low price, efficient IT infrastructure, distribution efficiencies, good product mix, and geographic presence. By offering every day low prices, Wal-Mart does not rely on sales specials in order lower its prices. The company has been able to keep the prices of its products below that of its competitors every single day. By having a good product mix to go along with low prices, consumers find it more enticing to go to a store with such characteristics. They can get more of what they need at prices they can afford to pay. Wal-Mart is able to offer an array of affordable products because of its highly efficient IT infrastructure and distribution efficiencies. The company makes sure that it is using the best technology available to control the distribution of its products worldwide. This ultimately enables operation activities to fit well together to achieve maximal efficiency and lower cost. Weaknesses Some of Wal-Mart・s weaknesses are shown in Figure 2. These weaknesses include the possible portrayal of a cheap image, strategy of direct-supplier system, store zoning problems, and store real estate problems. There is the possibility that some consumers will unknowingly associate a discount store such as Wal-Mart with cheap quality products. It is one thing to have cheap products and another to have products made of cheap quality materials. Wal-Mart must be careful to ensure that consumers are aware they their products are offered at low prices due to system efficiencies. Within some neighborhoods, it would not be possible to have any type Wal-Mart・s store platforms. For example, their supercenter・s would certainly not fit in many small neighborhoods. Wal-Mart may need to scale-down its store platform if it wants to serve in busy and crowded cities or smaller neighborhoods. Further related to zoning issues are the store real estate problems. Just because a company has the ability to build a huge store anywhere it wants to, it does not necessarily mean that it is possible to build one anywhere it wants to. The real estate issue becomes more evident in crowded cities such as Japan where there is a major concern over the availability of real estate. Opportunities Some of Wal-Mart・s opportunities are shown in Figure 2. These opportunities include entering existing markets, entering emerging markets, expanding into the urban marketplace, offering new products, and flexibility in store design. The opportunity to enter existing markets is wide open. There are at least two ways to do so. Wal-Mart can either build a new store or buy an existing retailer. The method of choice may be determined by such factors as the availability of real estate or the cost of building and buying out an existing retailer. Emerging markets are a very good place to get a foothold in some regions. By being the first mover into an emerging market, the advantageous are numerous. There are possibilities for branding and building relationships with the communities in the long run, which will prove valuable to deterring competition. Wal-Mart has had some success in the urban marketplace and should look more into that market place to place its smaller scale stores. These smaller stores will likely be more neighborhood friendly and more efficient than having a huge store. This can help the company in its efforts to find the appropriate store design for a given neighborhood size. As with all stores, success is really about what you have to offer to your customers. A successful store must offer basic consumer needs and wants. However, it is also important to have a good product mix. Wal-Mart has had success in introducing new products such as electronics and jewelry, and can build on that product mix as they begin to offer different apparel as well. Threats Some of Wal-Mart・s threats are shown in Figure 2. Although it seems that Wal-Mart has few threats to consider, it must still consider them in order to remain one of the best in the industry. These threats include increased competition, economic uncertainty, unions, and government regulation. The discount variety store industry is a fiercely competing marketplace and the big players are always strategically placed to gain new cus...