1. LOW COST LEADERSHIP OF
WALMART
Presented by
 Rohith Castelino
 Advait Bhobe
 Anshu Lakra
 Lokesh
Merugupala
 Sudarshan R

3. KEY STATISTICS ON WAL-MART
 Founder Sam Walton & Family – owns 48% of Wal-
Mart
 Headquartered at Bentonville , Arkansas , US
 Total No. of Stores – 8500 Stores
 Stores in US – more than 5000
 Outside US – more than 3000 Stores in 15 Countries
 Total Employees – 2.2 Million
 Total Sales – 446 billion
 Net Income – 15 billion

4. INTRO CONTD.
 Worlds 3rd largest public corporation
 It operates in Mexico as Walmex, in the United
Kingdom as Asda, in Japan as Seiyu, and in India
as Best Price.
 United Kingdom, South America and China are
highly successful, whereas ventures in Germany
and South Korea were unsuccessful.

5. WAL-MART SUBSIDIARIES
 Wal-Mart Stores Division US
 Wal-Mart Discount Store
 Wal-Mart Supercenter
 Wal-Mart Neighborhood Market
 Sam’s Club
 Wal-Mart International
 Private Labels (Sam’s Choice , Great Value ,
Equate ,Smart Price)

6. WAL-MART’S GROWTH IN LAST 25 YRS
 Diversified into Food & Grocery , Private Labels
and online store.
 Wal-Mart online is the e-commerce website.
 Has started selling online Music and Movies.

7. SOME INTERESTING FIGURES
 First Store opened at Rogers , AR in 1962
 World’s largest Private Employer , fourth only to
China’s Army ,NHS of UK, and Indian Railways.
 Wal-Mart sells 20% of retail grocery in US and 45%
of total Toys sold in US.
 Its bigger than Europe’s Carrefour , Tesco & Metro
AG combined.

8. WAL-MART INTERNATIONAL
 Present in 14 countries
 Walmax in Mexico
 ASDA in UK
 The Seiyu Co. Ltd in Japan
 Wholly owned subsidiaries in
Argentina , Brazil , Canada ,Puerto
Rico

9. WAL-MART – MARKET SHARE /
COMPETITORS
Wal-Mart is three times big than its nearest competitor Carrefour

10. WAL-MART IN INDIA

11. OPPORTUNITIES IN INDIA
 India’s retail trade is estimated at $206
billion & growing at 5% annually.
 Only 3% of market organized – shopping
malls.
 India as fastest growing sourcing market.
 India’s vast market for food retailing.
 Cold chain - Refrigerated distribution of fruits
n vegetables.
 Can add value to customers by means of
low price and wide range of merchandise.

12. PRESENT SCENARIO
 Wal-Mart joint venture with Bharti
 15 large wholesale outlets over the next
seven years
 Govt. of U.P forced several top retailers to
shut shop after local Kirana stores triggered
unrest.
 Other foreign retailers : Carrefour –
Wadias, Debenhams - Future group
 ICRIER study – 12 million stores

13. LATEST DEVELOPMENTS
 FDI approval has changed the equation.
 President Scott Press has announced that they
will open their stores in the coming 12-18 months
in Indian states that are allowing FDI in Multi-
brand retail.
 Location of stores still not yet decided, however
partnership with Bharti to continue.
 50,000 temporary staff to be recruited for the
holiday season in multi-brand retail..

14.  Anxiety in small traders that Wal-Mart offering
various products at very cheap rates. They will
have no option but to close down.
 Anxiety in general trading community that Wal- Mart
outsource most of its products.
 However, government regulations such as
mandatory 30% sourcing from local suppliers is
expected to somewhat ease the scenario.

15. MARKET EFFICIENCY OF
WALMART
MAJOR
COMPETITORS
Allocative
Efficiency
Technical
Efficiency
There can be economy only where there is efficiency
- Benjamin
Disraeli

16. ALLOCATIVE EFFICIENCY OF
WALMART
 Goods and services should be
produced only if their Marginal Benefit
(MB) >= Marginal Cost (MC)
 Competitive markets produce where the
demand curve intersects the supply
curve (MB = MC)
 For example, if a consumer expects to
get $7 of MB from the 31st unit of a
good, then he/she will be willing to pay
anything up to $7 to get it
 Hence, Wal-Mart produces the output
that the consumers would prefer
Efficiency of a practically flawless nature may be reached naturally in
the struggle for bread.
..... author

17. WALMART – VARIOUS PHASES
Q1  Wal-Mart forego potential gains
Q1 to Q0  MB that exceeds their MC (Surplus Value)
Q2  Wal-Mart’s surplus decreases, because of high costs

18. TECHNICAL EFFICIENCY OF
WALMART
 Wal-Mart targets to produce Q0 units in the least-cost
way
 Wal-Mart's top 100 suppliers attached special Radio
Frequency Identification (RFID) microchips to cases of
products that they ship to Wal-Mart warehouses
 Wal-Mart supplier Dan River, is complied with Wal-
Mart's Internet communication system in, using software
from Web Methods
 Uses iSoft Corporation's Commerce Suite (relatively
unknown & inexpensive software)

19. PRICING STRATEGY
 Highly competitive pricing strategy.
 At places where Walmart and Kmart stores were located
next to each other, Wal-Mart prices - 1% lower.
 Where Wal-Mart, Kmart and Target are located within 4-6
miles of each other, Wal-Mart's average prices- 10.4%
and 7.6% lower respectively.
 In remote locations where there was low competition
from discount stores- 6% higher than usual.

20. PRICING STRATEGY CONTD.
 Changed its slogan from “Always the low price- Always”
in the 1990s to low price “Every day every Where” in
2011
 Overall, Wal-Mart's prices have been 2.2.% lower than
Kmart, 3.7% lower than Target and 21.4% lower than
large retailers such as Caldor and Bardlees.
 Focus on minimalistic distribution and operations in order
to ensure that each product has the lowest possible
price.
 Concept of “Bait and Hook pricing strategy”- extremely
low prices coupled with moderate price increases not
very successful as consumers moved elsewhere.
 Constantly evolving low cost strategy.

21. COST LEADERSHIP STRATEGY- HOW?
 Efficient supply chain management
 Efficient because almost all product data can be tracked to
and from the manufacturer, warehouse, and the store shelf.
 Saves Wal-Mart several million dollars as it can prevent
losses from faulty product management.
 Efficiency in operations and distribution
strategies
 Opens stores outside of large cities and within 200 miles of
existing stores. By bunching stores together in small
areas, distribution costs are below average.
 Seeks to meet different customers’ needs with four main
distinct retail options; these include discount
stores, supercenters, Sam’s Clubs, and neighbourhood
markets

22. COST LEADERSHIP STRATEGY- HOW?
CONTD.
 Bargaining power
 Wal-Mart buys its products at rock-bottom
prices, exchanges high purchase volumes for
low cost while passing the savings onto its
customers. The bargaining power of suppliers is
weak.
 Many suppliers even give in to Wal-Mart's
pressure because they depend on the discount
retailer for the majority of their sales
 The bargaining power of buyers is also weak
because there is a very broad base of customers
and a significant demand for low prices.

23. COST LEADERSHIP CONTD.
 Extensive use of technology
 Information of quantity orders transmitted via
satellite to Wal-Mart HQ or to supplier distribution
centers.
 Constant tracking of inventory by store
managers and computerized systems help
reduce inventory holding costs.
 Cross docking
 Products transferred directly from in-bound
vehicles to store-bound vehicles, enabling goods
to be delivered continuously to warehouses and
thus eliminating inventory holding costs at this
level.

24. LOW COST LEADERSHIP

25. PROS AND CONS OF LOW COST
LEADERSHIP
 PROS
 Drives costs down, so in the end consumer benefits as low
prices makes it affordable for all income groups.
 Increases market share. Provides a great opportunity for
the company to leverage the economies of scale coupled
with the ruthless cost cutting measures .More the
competitive space it occupies – which also means that
more competitors eliminated – more effective are
economies of scale and as a result the costs are driven still
lower.
 CONS
 Credibility
 Discounts
 Perception of Quality

26. THANK YOU…