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WalMart Analysis

  1. Carla Cordero - Carles De Oleza - Alex Doldán - Patricia Igual - Luis Pérez
  2. How to transfer core competencies to other countries?
  3. Outline • History Overview - Vision, Mission and Goals • Interna & External Analysis -Value Chain -SWOT & Pestel Analysis -5 Forces Model -Main Competitors •Internationalization -Driving Forces -Entry decisions -Examples of success and failure •Suggestions
  4. History Overview • 1962: Walten Brothers opened fist Walmart in Arkansas • 1970: Walmart became public • 1990: 1st National retailer • 1991: International Expansion • 1993: Creation of “Great Value” • 2003: Largest corporation in the world • 2012: 50th Anniversary
  5. Mission Statement, Vision, Goals, & Purpose Mission Statement: To help people save money so they can live better Goal: Becoming in an international brand Vision: “If we work together, we’ll lower the Advertising slogans: cost of living for everyone…we’ll give Save Money. Live better the world an opportunity to see what it’s like to save and have a better life.
  6. Customer Target • “Wal-Mart's targeted demographic: – Modest incomes – Shoppers interested in prices • But the customer base is changing
  7. Internal & External Analysis
  8. Firms’ Value Chain General administration Human resource management Technology development Procurement Inbound Outbound Marketing Operations Service logistics logistics and sales
  9. Support Activities Firms infrasctructure: close connection between headquarter and local stores. Human resources: - Based on Interaction practices between company and employees -Low pay but other benefits (health care plans, retirement plans, or promotion opportunities) -2.2 million associates globally. -Every time we open a supercenter, we provide roughly 300 jobs -Women57% of our U.S. workforce, 27% of corporate officers, and 20% of our Board of directors. Techonology development: It is the key factor of the company. It constitutes a competitive advantage against competitors. - Computer-based technology POS (Point of sales) system Satellite System Procurement: -Wal-Mart deals directly with manufacturers, by passing all intermediaries. - EDI : Electronic data interchange MANUFACTURER – WALMART - CUSTOMERS
  10. Primary Activities Inbound Operations Outbound Marketing and Service Logistics Logistics sales -VMI system 3 business segments: -Hub and spoke - Word of mouth -accepting returned distribution system. communication. goods (Vendor managed a)WalMart stores inventory) - Super centers - CROSS DOCKING: -focuses on everyday -Satisfaction - Discount centers logistic technique to low prices guarantee continuous make the - Neighborhood replenishment markets distribution process “Save money, live - Opening more efficient better” hours(24/7) -EDI (Electronic b) SAM’S Club -Sales are on a self- Data Interchange c)WalMart service, cash-and-carry international basis.
  11. Business Formats 1) Walmart Stores • Walmart Discount Stores 629 in the US • Walmart Supercenter: Walmart Discount Stores + Full Service Supermarket. 3,029 in the US. • Walmart Market: Previously branded as Walmart Neighborhood Market. 199 in the US. 2) Sam’s Club. Buy in large quantities. 611 opened in the US.
  12. Walmart in the US
  13. Distribution Channels • “Saturation Strategy” • The company owns a fleet of more than 3,000 trucks and 12,000 trailers. • The Wal-Mart Way – Cross Docking.
  14. Resource - Based View Of The Firm Difficult to Difficult to Competency Valuable Rare imitate substitute Conclusion Integrated technology of supply chain Yes Yes Yes Yes Sustainable Compt. adv Ability to generate large sales volume Yes No No Yes Comp. Parity Superior logistics system Yes Yes Yes Yes Sustainable comp. adv Operation decentralization Yes Yes Yes No Temp. comp. adv Strong culture Yes Yes Yes Yes Sustainable comp. adv Human resources (management team and employee autonomy) Yes Yes Yes No Temp. comp. adv
  15. SW Helpful Harmful INTERNAL FACTORS STRENGTHS WEAKNESSES • Diversity in products & services •Brand image-weak • Convenient prices & locations reputation • Strong market presence •Low global presence • Customer loyalty •Behind rivals in e- • Strong financial performance commerce • Cost and pricing advantages over rivals • Good supply chain EXTERNAL FACTORS • Global Expansion: new geographic • Intense Competition areas • Laws and Regulations: • Increasing online sales Trade policy • Strategic alliances • Cultural barriers Acquiring rival firms • Current economy • Slow market growth • Transport of distinctive comptency OPPORTUNITIES THREATS
  16. PESTEL Analysis • Political: Policies on economy, trading agreements (NAFTA…) . • Economical: Unemployment Rate, slightly increase in consumption. • Socio Cultural: Faster pace of live- Efficiency is key. • Technological: Use of IT technologies. Online shopping. • Environmental: Recycling, Contamination issues. • Legal: More laws and more complex.
  17. The Five Forces Model 1. Bargaining Power of Customers: Low I. Customers usually make small purchases. II. A large number of customers. III. Wal-Mart’s main customers are individuals. 2. Bargaining Power of Suppliers: Medium-Low I. Wal-Mart purchases huge quantities of products from its suppliers. II. Low switching costs from one supplier to another. III. Products have a lot of substitutes. IV. Almost all the products are not critical for Wal-Mart.
  18. The Five Forces Model 3. Potential entrants / Barriers to entry: Medium-High I. Economies of scale. II. High capital requirements. III. Customers mainly look for products with low prices and standard quality. IV. Low switching costs among companies for customers. V. Requires a precise distribution system. 4. Power of Substitutes: High I. Prices and quality of substitute products are very competitive. II. Performance of substitute products are similar. III. Consumer switching costs are low.
  19. The Five Forces Model • 5. Potential Competitors/ Rivalry: High I. Wal-Mart represents the 25% share of the U.S. Supermarket business. II. Competitors have similar sizes. III. Industry growth is slow. IV. Exit barriers are high. V. There is a high production capacity WAL-MART main competitors: Retailer Industry: Supermarket Industry: • Target • Dollar General • K-Mart • Lowe’s Food.
  20. Strategic Group Map High Customer service/ Price Low Low Number of Product Categories High
  21. Main Competitors Retailer Industry: Target Supermarket Industry: Dollar General I. Target is the main competitor of Walmart I. One of the main competitors, pursuing low prices. II. ranked #33 in the Fortune 500. II. Good location in smaller communities is III. Target offers very similar products. the main competence advantage. IV. Target went abroad in January 2011. III. Strategy: Save time, save money IV. Many items per $1 Mission: to Make Target your preferred shopping destination in all channels by delivering outstanding value, continuous Mission: to best serve others by keeping it real innovation and exceptional guest experiences. and simple.
  22. Business-Level Strategy: Combined Strategy Walmart combines a Cost-Leadership and Differentiation strategies because: I. Allowed to achieve a large scale and an efficient supply chain. II. Has its own low-cost brands, like Great Value. III. A unique cost structure that allows Walmart to establish the lowest prices and achieve competitive advantage. (best value/price combination ) IV. Present in many different industries and markets with efficient distribution channels. V. Very difficult strategy to imitate by offering a broad quantity of products at a low price.
  23. Internationalization
  24. Internationalization • Reasons for expanding abroad • Risks • International Strategy • Success • Key issues
  25. Forces Favoring Globalization • 3 main reasons – Saturated domestic market – 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. • Economies of Scale • Growth • Revenues • Reduce political risk
  26. Risks of Expanding Abroad • Management Risk – Culture, language, customer preferences, distribution systems. • High investment • Political and Economic risks • Exchange Rates risk
  27. Entry Decisions • Important decisions any company needs to face when going international: – What markets to enter, when and what size. – What strategy to follow. – What mode of entry.
  28. What markets to enter? Europe: •Mature Markets •High Rivalry •Lack of strong costumer relationship
  29. What markets to enter? Asia: •Most distant geographically •Most different culturally and logistically •Required high financial and managerial resources
  30. What markets to enter? Latin America: • Closest markets • Large population •Emerging Markets
  31. Walmart International
  32. What Strategy to follow Trans Global National Inter Multi national domestic Low High Local Responsiveness
  33. Mode of entry of International Expansion
  34. Mode of entry of International Expansion Year Country Mode of Entry 1991 Mexico 50% Joint Venture Cifra 1994 Brazil 60% Joint Venture Lojas Americana 1994 Canada Acquisition Woolco (weak player) 1995 Argentina Wholly owned Susbidiary 1996 China New opening, JV, Acquisition 1998 South Korea Adquisition 1999 U.K. Acquisition of ASDA 2002 Japan Acquisition Seiyu 2002 Germany Acquisition of Wertkauf and Spar 2007 India Joint Venture 2011 Southern African Countries Acquisition of Massmart Holding Limited
  35. Examples of International Success • Mexico: – Largest Walmart’s foreign presence (68%) – 38% Retail Market Share in Mexico • Canada – One of the most successful international expansion – Acquired Woolco Stores and changed structure • Both countries are close and were exposed to Walmart.
  36. Examples of International Success • China: – Most populous country – Lower income in middle-class families – Adaptation to market – 85% of products from local suppliers.
  37. Examples of International Failure • Germany – Walmart was not able to benefit from economies of scale – Unable to become cost leader – Mode of entry: • Wertkauf (right move) • Spar (wrong move) – Culture differences – Low profitability market – Lost $1 Billion
  38. Examples of International Failure • India – Political and legal barriers: • Foreign companies are not allowed to set up big stores unless they sell only one brand. • South Korea – Very demanding customers – Did not customized to market – Big companies also fail in South Korea
  39. Key Success Factors • A supply chain with integrated technology • An ability to generate large sales volume (economies of scale) • Every Day Low Prices • Superior logistics systems • Decentralized operations • A strong and unique culture (in U.S.)
  40. Suggestions
  41. “Think local, act global” • Locally leveraged: – Shared knowledge between units. • Worldwide learning: – Advantages of interconnected economies. • Adaptation: – To locally customize processes and services
  42. Questions & Answers