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ASIA PACIFIC INSTITUTE OF INFORMATION TECHNOLOGY IN COLLABORATION WITH STAFFORDSHIRE UNIVERSITY UK BA (Hons) in Business Administration

[Individual Assignment] Management Report for Wal-Mart Stores Incorporation Module code & Title BLB10089-3-STRM, Strategic Management Prepared by Chamila Illukkumbura (CB002598) GF1041BA Date of Submission 15 November 2010 Instructor Mr. Marlon Gunasekara Submitted in partial fulfilment for the Degree of Bachelor of Arts (Hons) in Business Administration Word Count (3278 words)

ACKNOWLEDGMENTS
I would like to thank my lecturer Mr. Marlon Gunasekara for his immense support and guidance towards completing this assignment efficiently and effectively. Without his guidance and support this Study would have been short sighted.

My dear parents for their unconditional support and guidance given to me, without whom I would have not come this far. Furthermore I would like to express my gratitude and my appreciation to my dearest friends for standing by me and lending a helping hand to see me through this project. And last but not least to Business school of Asia Pacific Institute of Information Technology for providing me with the background and tools necessary for the accomplishment of this study. Thank you

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TABLE OF CONTENT

1. SECTION ONE ......................................................................................................................... 1 1.1 INTRODUCTION ............................................................................................................... 1 1.2 THE COMPANY ................................................................................................................. 2 1.3 PRODUCT PORTFOLIO .................................................................................................... 3 1.4 METHODOLOGY ............................................................................................................. 5 2. SECTION TWO......................................................................................................................... 6 2.1 AN INTERNAL / EXTERNAL ENVIRONMENT ANALYSIS ........................................ 6 2.2 COMPANY RESOURCES AUDIT .................................................................................... 8 2.3 MICHAEL PORTERS VALUE CHAIN ANALYSIS FOR WALMART ...................... 11 2.4 COMPETITOR ANALYSIS ............................................................................................ 14 2.5 COMPETITIVE SCOPE ANALYSIS ............................................................................... 17 2.6 MICHAEL PORTERS FIVE FORCE ANALYSIS ......................................................... 18 2.7 CUSTOMER ANALYSIS ................................................................................................ 20 2.8 HOFSTEDES CULTURAL DIMENSIONS IN TERMS OF THE UNITED STATES .. 22 2.9 CLIMATE ANALYSIS .................................................................................................... 24 COUNTRY ANALYSIS ......................................................................................................... 24 2.10 STRENGTHS, WEAKNESS, OPPORTUNITIES AND THREATS ASSESSMENT FOR WAL-MART .................................................................................................................. 27 2.11 CRITICAL DISCUSSION OF THE FINDINGS OF WAL-MARTS ENVIRONMENTAL ANALYSIS .......................................................................................... 28 3. SECTION THREE ................................................................................................................... 29 3.1 FUTURISTIC ORIENTATION IN COMPARISON TO KMART ................................. 29 3.2 FUTURISTIC ORIENTATION OF WALMART ............................................................ 30 3.3 FUTURISTIC ORIENTATION TRAGET ...................................................................... 33 3.4 CRITICAL ANALYSIS OF FUTURISTIC ORIENTATION ......................................... 35 4. SECTION FOUR ..................................................................................................................... 36 4.1 THE STRATEGIC MOVES TOWARDS BECOMING US AND GLOBAL MARKET LEADER. ................................................................................................................................. 36 4.2 CORPORATE LEVEL STRATEGIES ............................................................................ 36 iii

4.3 BUSINESS LEVEL STRATEGIES ................................................................................. 40 4.4 FUNCTIONAL LEVEL STRATEGIES ......................................................................... 42 4.5 OPERATIONAL LEVEL STRATEGIES ........................................................................ 43 5. SECTION FIVE ....................................................................................................................... 46 5.1 A CRITICAL EFFECTIVENESS ANALYSIS OF CURRENT ORGANIZATIONAL STRATEGIES.......................................................................................................................... 46 5.2 A CRITICLA REVIEW OF WAL-MARTS FINANCIAL PERFROMCE .................. 49 5.3 NONE FINANCIAL PERFORMNCE ............................................................................ 50 CUSTOMER EXPECTIONS .................................................................................................. 50 5.4 CRITICISM FOR STRATEGY ....................................................................................... 52 5.5 A CRITICLA REVIEW OF WAL-MARTS NONE FINANCIAL PERFROMCE ......... 53 5.6 PERFORMANCE INTERPRETATION MATRICES ...................................................... 54 6. SECTION SIX ......................................................................................................................... 55 6. 1 THE CURRENT STRATEGIES VS FUTURE STRATEGIES OF WAL-MART ......... 55 6.2 GREEN OBJECTIVES OF THE ORGANIZATION...................................................... 56 6.3 RECOMMENDATIONS .................................................................................................. 57 6.4 THE PROPOSED STATEGY EVALUATION TABEL .................................................. 59 7. CONCLUSION ....................................................................................................................... 61 8. REFERENCE ........................................................................................................................... 62 APPENDIX .................................................................................................................................. 68 APPENDIX C .............................................................................................................................. 70 APPENDIX D .............................................................................................................................. 71

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LIST OF TABLES
Table 1 : Methodology ....................................................................................................... 5 Table 2 : Company Resource audit .................................................................................... 8 Table 3 : Quantitative Company Resource audit ............................................................. 10 Table 4 : Michael porter's Value chain analysis .............................................................. 11 Table 5 Quantitative Michael porter's Value chain analysis ............................................ 13 Table 6 : Competitor analysis .......................................................................................... 14 Table 7 Quantitative competitor analysis ......................................................................... 15 Table 8 : Competitive scope analysis ............................................................................... 17 Table 9 : Michael porter's five force analysis .................................................................. 18 Table 10: Quantitative Michael porter's five force analysis ............................................ 19 Table 11: Customer analysis ............................................................................................ 20 Table 12: Quantitative customer analysis ........................................................................ 23 Table 13: Country analysis .............................................................................................. 24 Table 14: Quantitative country analysis ........................................................................... 25 Table 15 : Strengths, weakness, opportunities and threats assessment for Wal-Mart ..... 27 Table 16 : Futuristic orientation of Wal-Mart .................................................................. 30 Table 17 : Futuristic orientation of target ........................................................................ 33 Table 18 : Corporate level strategies ................................................................................ 39 Table 19 : Business level strategies ................................................................................. 40 Table 20 : Functional level strategies............................................................................... 42 Table 21 : Operational level strategies ............................................................................. 43 Table 22 : Total sales revenue ............................ Source: (Wal-Mart annual report, 2009) 46 Table 23 : Earnings per share ........................................................................................... 46 Table 24 : Criticism for strategy ...................................................................................... 52 Table 25 : Proposed recommendations ............................................................................ 57 Table 26 A critical comparisons of the four organisational strategies advocated by Bartlett and ghosal............................................................................................................ 70

LIST OF FIGURES
Figure 1 Trend set in the retail industry by Wal-Mart ....................................................... 2 Figure 2 Past and present and Wal-Mart logos ................................................................. 2 Figure 3 Product portfolio .................................................................................................. 3 Figure 4 Strategic management model ............................................................................... 4 Figure 5 Kenichi ohmae's 3c model ................................................................................... 6 Figure 6 : Sub analysis of Internal / external environment analysis .................................. 7 Figure 7 : Michael porter's Value chain ........................................................................... 11 Figure 8 : Wal-Mart Segment proportion......................................................................... 16 Figure 9 : Customer expectations ..................................................................................... 21 Figure 10 : Overall customer expectations....................................................................... 21 Figure 11 Hofstedes cultural dimensions........................................................................ 22 Figure 12: Futuristic orientation model ........................................................................... 29 Figure 13 : Envisioned future model ................................................................................ 31 Figure 14 : Hierarchy of Organizational Aims ................................................................ 36 Figure 15 : Location of stores .......................................................................................... 38 Figure 16 : Corporate level Strategies .............................................................................. 40 Figure 17 Low cost strategic process ............................................................................... 41 Figure 18 : Business level strategies ................................................................................ 41 Figure 19: Functional level strategies .............................................................................. 42 Figure 20 Supply chain .................................................................................................... 44 Figure 21 Operational level strategies.............................................................................. 44 Figure 22 : Wal-Mart overall strategy.............................................................................. 45 Figure 23 : Total sales revenue ........................................................................................ 46 Figure 24 : Earnings per share ......................................................................................... 47 Figure 25 : Current ratio analysis ..................................................................................... 47 Figure 26 : Return on Assets analysis .............................................................................. 48 Figure 27 : Return on share holder analysis ..................................................................... 48 Figure 28 : Customer expectations ................................................................................... 50 Figure 29: Overall customer expectations........................................................................ 50
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Figure 30 : Share holder expectations .............................................................................. 51 Figure 31 Overall Share holder expectations ................................................................... 51 Figure 32 : Organizational HR structure .......................................................................... 58

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LIST OF ABBREVIATIONS
TSR - Total Sales Revenue CRA - Current Ratio Analysis EPS - Earnings per Share IHRM- International Human Resource Management PDI Power Distance Index IDV- Individualism MAS- Masculinity UAI- Uncertainty Avoidance Index LTO- Long Term Orientation HR -Human Resource Management PR- Public Relations US- United States CIA- Central Intelligence Agency

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LIST OF APPENDIXES
Appendixes A ...68 Appendixes B .....69 Appendixes C ...70 Appendixes D ...71

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EXECUTIVE SUMMARY
Strategic management is considered as the key factor which determines whether an organization is to succeed or if it is to fail. Thus believing that an organizations sufficient internal resources and ideal external environmental factors will ensure ones success, it is short sighted. For only formulation and implementation of sound strategic management practice and policies can ensure ones future success. However a future is never guaranteed thus the formulation and implementation is not alone sufficient, hence and organization must vigilantly analyze and be aware of its ever changing internal and external environmental factors. The following study intends to identify and assess the internal strengths and weakness and external opportunities and threats for the organization, thus illustrate the strategic aspects currently impacting Wal-Mart. Furthermore critically evaluating Wal-Marts futuristic orientation in contrast to its main competitor and identifies and elaborates the strategic moves of Wal-Mart towards capturing business in the US (United states) and international markets. Moreover the study analyze the effectiveness of the current strategies adopted by the organization in terms of its past and present financial and none financial performance thus present the reader with the necessary strategic recommendation needed to enhance the effectiveness and efficiency of Wal-Mart and the future strategic path needed to be taken to maintain their competitive advantage. The findings of this study indicates that regardless of various criticisms from unfavorable media, small town communities and various labor unions, Wal-Mart has achieved substantial growth in its 50 years of operational history via its sound strategic management operations and policies and practices. However the author recommends that the organization should indentify and thus re-modify its strategic approaches towards its role as environmentally sustainable and socially responsible global organization and pay furthermore close attention to its International human resources and Local human resources within the US.

1. SECTION ONE
1.1 INTRODUCTION
Hyman (1987 cited in Edwards and Rees 2007) states in terms of military context strategy refers to the planning and organizing the expected campaign however Chandler (1962 cited in Edwards and Rees 2007) argues that strategy is the basic long term goals and objectives of an enterprise and that it is the adoption of a course of action and allocation of the resources required for executing these goals. Mintzberg (1987) argues that an organization needs a strategy in order to set direction for themselves and to outsmart their competition or at least to survive in an extremely competitive environment, thus as stated in Black well publishing (2010) the key issue that should be answered when discussing organizational strategy is a Clear sense of organizational objectives and how these objectives will be addressed Viz Mintzberg (1987) states the competitor with a better strategy will win or in other words, a competitor with a clear strategy will beat the one who does not have any. Hamel and Prahalad (1989) points out that managers in numerous industries are working hard to match the competitive advantages of their global rivals thus the authors argues that the application of strategic concepts such as Strategic fit between resources and opportunities, generic strategies of low cost vs differentiations vs focus and strategic hierarchy of goals, strategies and tactics has helped mitigate the process of competitive decline of organizations. Thus Wal-Mart stores.inc has been subjected to testing in the following study.

1.2 THE COMPANY


Wal-Mart stores.inc considered as one of the worlds largest organizations operating within the retail industry and the largest retailer in the United States was founded in 1963 in Roger Arkansas by MR. Sam Walton. Since then this organization has rendered its services more than 200 million times per week via its net work of 8576 retail shops spread over 55 countries (Wal-Mart, 2010). As of 2010 the company employees over 2.1 million employees, and recorded a substantial sales revenue of 405 billion USD. Ranked as the number one company in the world by the Fortune 500 magazine, WalMart regardless of recent world financial crisis recorded an astonishing operational income of 22.8 billion USD in 2009. Thus many professionals argue that Wal-Mart has forever changed the way the retail industry functions.

Figure 1 Trend set in the retail industry by Wal-Mart Wall mart has blazed a path that numerous other retailers are now following, many of them vigorously competing with Wal-Mart (Furman, 2005)

1962-1964

1964-1968

1968-1981

1981-1992

1992-2008

2008-2010

Figure 2 Past and present and Wal-Mart logos

The current product portfolio of this organization is as follows.

1.3 PRODUCT PORTFOLIO

Figure 3 Product portfolio Sources: (Authors work ,2010)

The following report is structured in accordance to the strategic management model as advocated by Gunasekara,( 2010) in order to gain an in-depth understanding of the current strategical approaches taken by Wal-Mart and to understand the effectiveness of these strategies. Furthermore it will in turn aid to formulate the necessary modifications recommended.

Figure 4 Strategic management model


(Gunasekara, 2010)

1.4 METHODOLOGY
The necessary data and information needed for the successful completion of this study has been attainted via primary and secondary research. Relevant journal articles from leading academics and authors in the fields of strategic management, furthermore the corporate website, other relevant web information and relevant publications has been referred. Table 1 : Methodology
The first section presents the reader a brief
SECTION ONE

company and industry analysis Will assess the internal strengths and

SECTION TWO

weakness and external opportunities and threats for the organization ,thus illustrate the strategic aspects currently Mart Presents a critical evaluation of Wal-Marts impacting Wal-

SECTION THREE

futuristic orientation in contrast to its main competitor. Identifies and elaborates the strategic moves

SECTION FOUR

of Wal-Mart towards capturing business in the US (United states) and international markets. This section will analyze the effectiveness of

SECTION FIVE

the

current

strategies

adopted

by

the

organization in terms of its past and present financial and none financial performance. The final section of this study will present the
SECTION SIX

reader

with

the

necessary to

strategic the

recommendation

needed

enhance

effectiveness and efficiency of Wal-Mart and the future strategic path needed to be taken to maintain their competitive advantage.

Sources: (Authors work,) )2010)


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2. SECTION TWO
2.1 AN INTERNAL / EXTERNAL ENVIRONMENT ANALYSIS
In order to analyse the manner in which the internal and external environment effect towards Wal-Mart gaining opportunities to understand the main forms of threats the organization faces from its competitors and how Wal-Mart mitigates its internal weaknesses via its corporate strengths, kenichi ohmaes 3c model has been adopted.

Thus according to the above model The 4 Cs will address:Company

Internal company Strengths, and Weaknesses External company Opportunities, and Threats

Competitors Customers Climate

Figure 5 Kenichi ohmae's 3c model (Source: Authors work, 2010 Based on kenichi ohmaes 3c model) Sub analysis of Internal / external environment analysis is as follows

Figure 6 : Sub analysis of Internal / external environment analysis Source: (Authors work, 2010)

2.2 COMPANY RESOURCES AUDIT


Table 2 : Company Resource audit FINANCIAL RESOURCES
STABILITY (USD) Billion NET SALES NET SALES INCREASE AS % OPERATIONAL INCOME FREE CASH FOLLOWS

2007 344.8

2008 374.3

2009 401. 2B

2010 405

It is evident that the organization is currently indicating a stable financial position with a progressive path.

11.6% 8.6% 20.5 22.0

7.2% 22.8

2008 5705 Million

2009 11648 Million

PHYSICAL RESOURCES
TECHNOLOGY AND INNOVATIVENES S

Internet shopping,

The organization has implemented the latest achieve technological competitive invasions advantage to of

lower operational costs via cross docking inventory systems, MIS etc.

ORGANIZATION AL CULTURE

Respect for individuals, service for customers and strive for excellence as advocated by Sam Walton.

The senior management of Wal-Mart strongly believes that a key to success in having the right corporate culture and, Wal-Mart is ready to implement their way of doing things no matter where they operate.

LOCATION OF OPERATIONS

8576 retail shops spread over 55 countries

In comparison to its financial position the geographic is dispersion relatively of the poor,

organization

however Wal-Mart has realized the need of becoming a global company. INTANGIBLE RESOURCES
POLICIES AND PRACTICES

Respects individual customers and gives them, priority 8

Wal-Marts distinctive practices and policies of always low prices, severing

and Sam Waltons 3 philosophies of Respect for individuals, Service for customers and strive for excellence

the customer with a smile, respecting individuals and striving for never ending excellence has given Wal-Mart an extremely that positive no consumer retailer

perception possesses.

other

THE MARKET SHARE IN TERMS OF NET SALES. MARKET SEGMENTS

Wal-Mart 79% K mart 13% Target 8% Wal-Mart US 64% International 24% Sams Club 12%
Sam's Club International Wal Mart US 12% 24% 64%

According the annual sales Wal-Mart has captured 79% of the current market share Wal-Mart US the oldest segment for the organization has captured the largest percentage of sales; however Wal-Mart expected that in the future the International sale will exceed their domestic sales and bubble its overall turnover.

HUMAN RESOURCES
TOP MANAGEMENT

Rob Walton Chairmen Michael T Duke President/ CEO Brian C. CornellExecutive vice president C. Douglas McMillanExecutive vice president

The current senior management of the organization is carefully chosen

veterans of the industry. Thus far the decision they have take have proved them itself to be most successful.

ASSOCIATES

2.1 Million employees

Wal-Mart believes recruiting the most talented individual in to its ranks thus creating a knowledge pool which it believes create a long term competitive advantage.

Source: (Wal-Mart annual report, 2009) (Wal-Mart, 2010)


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Table 3 : Quantitative Company Resource audit


Likert scale Factors Weight unfavorable 1 2 3 Favorable 4 5 Score Weight score 0.55 0.55 0.44 0.33 0.44 0.55

Financial Resources Technology innovativeness Organizational culture Location of operations Policies and practices The Market share in terms of Net sales. Market segments Top management Associates
Overall score

11.1%

5 5 4 3 4 5

and

11.1% 11.1% 11.1% 11.1% 11.1%

11.1% 11.1% 11.1% 100%

3 5 5 39

0.33 0.55 0.55 4.29

Sources: (Authors work ,2010)

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2.3 MICHAEL PORTERS VALUE CHAIN ANALYSIS FOR WALMART

Source: (Michael porter 1985 cited in Wilmott, 2010) Figure 7 : Michael porter's Value chain In order to clearly understand the position of Wal-Mart within the retail industry it is vital to analyze the manner in which the organization adds value to the services it renders. Hence the following table illustrates the value addition of primary and supportive activities of Wal-Mart. Table 4 : Michael porter's Value chain analysis
PRIMARY ACTIVITIES Factor Inbound logistics Description The use of cross docking systems, Value addition More accurate

Management information systems and decision inventory management support systems and decisions Operations The organization is a service oriented company NA and does not operate any form of purchasing

manufacturing.

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Outbound logistics Marketing sales

Transportation services ,shipping services 4 times Faster self management and Low prices always marketing

Faster

and

more

accurate re-shelf campaign Creating a price

Appendix (A) for example. All ways smile perception in the mind marketing campaign of the consumer that Wal-Mart prices are the lowest in the market place.

Services

Training

and

development

of

Wal-Mart Will

deliver

high

associates to be more courteous and helpful standards of customer towards customers. satisfaction in terms of service quality. SUPPORT ACTIVITIES Procurement Finds the suppliers who offer the lowest market The organization will price for commodities which meet the highest of cut down cost of sales. Wal-Marts quality standards Technology development The organization uses the latest technological Create a competitive developments in inventory management and advantage over its

retailing in order to minimize operational cost to competition in terms of maximize process efficiency. service operational quality, efficiency

and effectiveness. HRM The organization selects, recruits, trains and Will create a team who develops to retain the best talent in the industry. has the potential to understand the strategic path of Wall-Mart and be able to implement it successfully. Infrastructure Wal-Mart fully own vast amount of real-estate The fixed assets of the which include lands, store buildings, warehouse organization will create and mega stores. Furthermore the organization a sense to credibility owns its own fleet of transportation vehicles. towards organizations in the the

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mind of investors and associates.

Sources: (Authors work ,2010) Table 5 Quantitative Michael porter's Value chain analysis
Likert scale Factors Inbound logistics Operations Out bound logistics Marketing and sales Services Procurement Technology development HRM Infrastructure Weight 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1% 100% unfavorable 1 2 3 Favorable 4 5 Score 4 5 4 3 4 5 4 5 5 Weight score 0.44 0.55 0.44 0.33 0.44 0.55 0.44 0.55 0.55 4.29

Sources: (Authors work ,2010) The above illustrated a detailed company resources analysis in which each factor was rated by means of Likert rating. The overall quantitative company resources audit revealed a score of 4.29 indicating that the internal resources of the organization are sufficient for Wal-Mart to maintain its current position as market leader, thus implying that the organization is internally strong.

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2.4 COMPETITOR ANALYSIS


The following illustrates a competitor analysis for Wal-Mart in comparison to its two main competitors. Table 6 : Competitor analysis
WAL- MART TARGET COSTCO WHOLESALE 2009 REVENUE 405 Billion USD 64.9 Billion USD 71.4 Billion USD OPERATING INCOME FORTUNE 500 WORLD RANK FOUNDED IN CEO SHARE HOLDER EXPECTATIONS EARNINGS PER SHARE CUSTOMER EXPECTATIONS RANK IN US RETAIL INDUSTRY TYPE OF ORGANIZATION Public Public Public Public/ Under the umbrella of Sears corporation STAKEHOLDER EXPECTATIONS ONLINE RETAILING PRODUCT PORTFOLIO NUMBER OF OUTLETS 8576 retail shops spread over 55 countries 1740 retail shops 580 stores 1327 stores across 49 states and Puerto Rico, and the U.S. Virgin Yes Appendix Yes Appendix Yes Appendix Yes Appendix 42% 75% NA 40% 1st 2nd 3rd 4th 72% 70% NA 52% 3.35 3.30 1963 Michael T Duke 100% 1969 Gregg Steinhafel 90% NA 30% 1983 1962 23.95 Billion 1 3.5 Billion NA 1.7Billion NA 297 Million NA 43.6 Billion USD K MART

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Islands

NUMBER OF EMPLOYEES

2.1 Million employees In total

351000 employees In total

119 600 employees In total

337,000 employees In total

MARKET SHARE BASED ON INCOME LOGOS

69%

11%

12%

8%

Sources: (Authors work, 2010, investors.target, 2010, sears holdings, 2010, costco, 2010) Table 7 Quantitative competitor analysis
Likert scale Factors 2009 revenue Number of employees Income Share holder expectations Earnings per share Customer expectations Stakeholder expectations Product portfolio Number of outlets Total Weight unfavorable 1 2 11.11% 11.11% 11.11% 11.11% 11.11% 11.11% 11.11% 11.11% 11.11% 100% 3 Favorable 4 5 Score 5 5 5 5 4 3 1 4 4 Weight score 0.55 0.55 0.55 0.55 0.44 0.33 0.11 0.44 0.44 3.96

Sources: (Authors work 2010)

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Wal-Mart during 2009 has recorded substantial sales revenue, one which is 70 % higher than that of its two main competitors. The analysis revealed that this organization in all aspects in average is 50% higher that its main competitors, for e.g. as pointed out in the above table Wal-Mart net work of stores amounts to 8000+ where as target owns only 1740. Thus the quantitative competition analysis indicates despite the fact that there are external threats for Wal-Mart from its competitors, the organizations fanatical and physical resources are superior than that is its competitors.

Costco 12% Target 11%

K mart 8%

Wal- Mart 69%

Figure 8 : Wal-Mart Segment proportion Sources: (Authors work ,2010)

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2.5 COMPETITIVE SCOPE ANALYSIS


Table 8 : Competitive scope analysis
Brand competition

Traget

Sears

K mart

Metro

Tesco

Baugar Group

Costco Wholesale

Industry competition

Pharmacies, drug stores, department stores. groceries. auto spare parts shops, hardware stores,

Form competition

News papers stands , hot dog stands , magazine stands, one dollar shops ,

Generic competition

Cinemas, Restaurants, Fast food outlets, Pest control, Building contractors, telemarketing, Gardeners door to door sales organizations,

Sources: (Authors work 2010)

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2.6 MICHAEL PORTERS FIVE FORCE ANALYSIS


H= HIGH M= MEDIUM L= LOW

Table 9 : Michael porter's five force analysis Threat of new entrants Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Cost of advantages Government policies Threat of substitute products H H L H Concentration of buyers No of alternatives H Importance of price to H Cost effectiveness buyers H No of alternative sources Switching costs M Standardization Vs L Price sensitiveness substitutes H Switching costs Possibility of vertical integration Level of intensiveness of rivalry among existing Firms No of main competitors Market growth rate Degree of differentiation Cost of Structures Source: (Authors work ,2010 adapted from Michel Porter) H M H H H H H Bargaining power of suppliers Concentration and size of suppliers Buyer importance in terms of cost and quality Switching costs Possibility of forward and vertical integration H L H H

Bargaining power of buyers

M M L H

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Table 10: Quantitative Michael porter's five force analysis Likert scale Factors
Threat of new entrants Bargaining power of suppliers Bargaining power of Buyers Threat of substitute products Level of Intensiveness of rivalry among existing Firms

Weight 20% 20% 20% 20% 20% 100%

unfavorable

Favorable

Score 5 2 4 4 2

Weight score 0.6 0.8 0.8 0.4 0.6 3.2

Overall score

Sources: (Authors work, 2010) The organization face moderate threat of new arrivals, however it currently possesses the internal strength to counter these threats. The suppliers relatively do not have bargaining power over Wal-Mart due to its volume purchasing. Thus Wal-Mart is able to provide goods at the lowest possible prices in turn eliminating bargaining power of buyers. However if a consumer who wish, not to purchase from Wal-Mart , may choose from a range of direct substitute organizations. Nevertheless the internal level of rivalry is high among leading retailers, yet Wal-Mart leads by more than 70% ahead of any competitor.

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2.7 CUSTOMER ANALYSIS


Table 11: Customer analysis FACTORS EVIDENCE Low price seekers , quality service seekers, faster
MARKET TREND

check out time, more variety The global financial crisis of 2009 has left most

MARKET OPPORTUNITY US POPULATION GROWTH RATE HOUSE HOLD INCOME

global retailers in near bankruptcy. More over it has negatively affected consumer buying patterns in all US income classes. Mostly middle incomers who are considered as the main target market for retail business. 79% of market share is owned by Wal-Mart

MARKET

SHARE

BASED

ON

ANNUAL REVENUE

The average US consumer is under the perception


CURRENT MARKET POSITION IN TERMS OF CONSUMER

that Wal-Mart offers the lowest prices for commodities. Despite the fact that it may not be true in terms of most commodities, for the consumer can buy it elsewhere for a much cheaper price, Wal-Mart marketing has created the

PERCEPTION

consumer perception that they offer the lowest prices always.


ATTRACTIVENESS OF MARKET US POPULATION PER CAPITA INCOME

310 232 863 46 000 USD According to Zenith management consulting (2005)

CUSTOMER EXPECTATIONS

the target customers of the retail industry has a hand full of core expectations that must be met by the retailer who wishes for continuous purchasing such as convenience, price, service, quality and scope.

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The following figure illustrates the extent Wal-Mart has achieved these expectations in contrast to its main competitors.

120% 100% 80% 60% 40% 20% 0%

Convenience Price Service Quality Scope

Figure 9 : Customer expectations


80% 70% 60% 50% 40% 30% 20% 10% 0% Wal-Mart Traget Kmart Avg. Grocery Avg. Drug Chain chain

Figure 10 : Overall customer expectations Sources: (Authors work 2010) Zenith management consulting (2005)

Sources: (Authors work 2010)

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2.8 HOFSTEDES CULTURAL DIMENSIONS IN TERMS OF THE UNITED STATES

100 80 60 40 20 0 PDI IDV MAS UAI LTO

Figure 11 Hofstedes cultural dimensions


Source, (Hofstede, 2010) UNITED STATES POWER DISTANCE (PDI)
By national context the US is a nation with low power distance. Manager does not seek respect by job title or description.

UNCERTAINTY AVOIDANCE (UAI)

Inline US culture they possess a low uncertainty percentage, hence US has far less uncertainty avoidance levels.

INDIVIDUALISM / COLLECTIVISM(IDV)

Americans are a race who respects the privacy of physical and psychological space. They relatively do not bother to intrude in to ones personal business unless they are invited to do so.

MASCULINITY / FEMININITY(MAS)

Americans are

relatively more competitive in

work related activities more over they are assertive, ambitious thus according to Hofstede (2010) has a tendency to prefer the accumulation of wealth and material possessions

TIME ORIENTATION(LTO)

Relativity American are Short term oriented

Source: (Authors work, 2010)

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Table 12: Quantitative customer analysis


Likert scale Factors Market trend Market opportunity US population growth rate House hold income Market share based on annual revenue Current market position in terms of consumer perception Attractiveness of market US population per capita income customer expectations 16.6 4 0.64 4.32 16.6 5 0.8 16.6 4 0.64 16.6 5 0.8 Weight Unfavorable 1 2 16.6 16.6 Favorable 3 4 5 4 5 0.64 0.8 Score Weight score

Total Sources: (Authors work 2010)

The analysis reviles that the organizations target consumers market trend has become Low price seekers , quality service seekers, faster check out time and more variety seekers and that the US market still holds large potential, more over the next generation consumers of the organization does not reside in the US but rather the international market. The analysis further relived that Wal-Mart achieves 100% in term of consumer price and scope expectations, however it fails to deliver on consumer Service, quality and convenience expectations. However as illustrated in Figure 7 the organizations ability to meet overall consumer expectations is recorded at 72% the highest among its competitors.

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2.9 CLIMATE ANALYSIS COUNTRY ANALYSIS


Table 13: Country analysis
POLITICAL Constitution based federal republic Divided in to 50 states Legal: federal court system based on English common law Chief of state: Barrack H Obama came into power with a 52.4% majority. Vice president Joseph R. Biden The senate is led by the Democratic party with 57 seats where as the house of representatives is led by the Republican party with 178 seats. Numerous political pressure groups such as environmentalists, business groups, labor unions ,churches and ethnic groups ECONOMICAL 2009 14.14 trillion USD GDP 2008 14.52 trillion USD 007 14.52 trillion USD 2.6% GDP real growth rate 2009 46 000 USD GDP per capita 2008 47 700 USD 2007 48 200USD Agriculture 1.2% GDP composition Industry 21.9% Service 76.9% Labor force 154.2 Million Unemployment 9.3% Population under 12% rate poverty line SOCIAL Population 310 232 863 Age Structure 0-14 20.2% 15-64 67% 64 and above 12. 8% Population growth rate 0.97% Urban population 82% Ethnic groups White 79.96%, Black 12.85%, Asian 4.43%, Native 0.97%, Hawaiian 0.18%, others 1.61% Religion Protestant 51.3 %,Roman catholic 23.9% ,Mormon 1.7%, other Christians 1.6% Jewish 1.7% , Buddhists 0.7% Muslims 0.6% Languages English 82.1% Spanish 10.7% Indo European 3.8% 24 P+ P-

E+

E-

S+

S-

Asian and Pacific Islands 2.7% Other 0.7% Literacy rate 99% TECHNOLOGICAL Telephone users 150 Million Cellular phone users 270 Million Internet hosts 439 Million Internet users 231 Million Railways 226 457 KM Road ways 6 506 204 KM ENVIRONMENTAL Area 9 826 675 Sq KM Land 9 161 966 Sq KM Coastline 19 924 Sq KM Climate Temperature mostly yet tropical in Florida and Arctic in Alaska Natural resources Coal ,Copper , Lead, Molybdenum , Phosphate, Uranium, Bauxite, Gold, Iron , Mercury, Nickel, Potash , Sliver , Tungsten, Zinc, Petroleum, Natural gas , Timber Sources: (Authors work 2010,CIA Fact book 2010 )

T+

T-

En+

EN-

Table 14: Quantitative country analysis


Likert scale Factors Weight unfavorable 1 Political Economical Social Technological Environmental Overall score 20% 20% 20% 20% 20% 100% 2 3 Favorable 4 5 5 4 5 4 5 Score Weight score 1 0.8 1 0.8 1 4.6

Sources: (Authors work 2010)

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The current US political environment is extremely favorable to all domestic US organizations, for the current Obama administration is keen of lending a helping hand to all MNCs with US origins. However during the period of 2008- 2009 the US markets and consumer spending patterns were severally effected by the global recession. However Wal-Mart has managed to keep its progressive financial growth stable. The social and technological factors are favorable to the organization due to the fact in US, Wal-Mart has trouble free access to the latest technological innovations, and the average US consumer prefers low price, high quality goods with best customer service. Furthermore environmental factors plays a positive and vital role in the success of all Wal-Marts operations due to the fact that most of Wal-Mart products are made with US resources for its policy of Buy American.

26

2.10 STRENGTHS, WEAKNESS, OPPORTUNITIES AND THREATS ASSESSMENT FOR WAL-MART


Table 15 : Strengths, weakness, opportunities and threats assessment for Wal-Mart
Positive effect towards accomplishment of goals Negative effect towards accomplishment of goals


Internal

Strengths Adequate number of people to do the work Information systems that use the best technology available Strong brand name and brand recognition High investor confidence. Positive consumer perception regarding price. Leader of industry. Consumers demand ease of shopping. Economies of scale due to the organizational large size and structure. Positive consumer perception regarding quality of service. High levels of financial stability Ability to take over or wipe out competition. Opportunities The world economic crisis has left many retailers face bankruptcy. Supernormal profits provide financial security for future diversifications. Decrease of consumer buying power of luxury and branded goods. Low cost good manufacture from rising nations (India, China) CSR projects minimizing damages caused to corporate good will. Obama administration keenness to lend a
helping hand to US corporations in order to boom the US economy Growing, larger and potential Asian markets.

Weaknesses Extensive labor relation problems Community relation problems. High levels of criticism regarding organizational strategy of dominance. Miscellaneous public relation problems Numerous issues regarding labor union demands. Membership limited to Sams club stores. Lack of diversification on service offering, all diversification are within same industry. No formal Vision statement. Few women and minorities in higher management.

External

Threats Increasing numbers of online retailers Global recession aftermath effects Increasing number of competitors creating price wars. Small committees dislike Wal-Mart entering their market Diminishing profit margins. Respective local laws projecting small scale business (US and international) US income taxation policies. Regulation of Wal-Mart pharmacies

(Wal-Mart annual report 2009 , 2010) (Sooper Tutorials 2010) 27

2.11 CRITICAL DISCUSSION OF THE FINDINGS OF WALMARTS ENVIRONMENTAL ANALYSIS


Table 16 Environmental analysis summery
Factor Company resources audit Value chain analysis Competitor analysis Michael Porters Five Force analysis Customer analysis Climate analysis SWOT analysis Factors Weight Unfavorable 1 2 Strengths Weaknesses Opportunities Threats Overall score 25% 25% 25% 25% 100% 3 Favorable 4 5 Environment Internal Internal External External External External Internal/ External Likert scale Score Weight score 1.25 0.75 1.25 0.75 4 4.6 4 3.2 4.29 4.29 Score

5 3 5 3

Source: (Authors work, 2010) When critically analyzing the internal company resources of Wal-Mart it is evident that the organization does have sufficient internal resources. Scoring 4.29 on a Likert scale it has proven that Wal-Marts current resources are sufficient for the organization to achieve and maintain high levels of competitiveness. Furthermore the value chain analysis which were conducted in order to indentify the value addition of Wal-Mart current processes presented an overall score of 4.29 indicating that the value addition is substantially large. However Michel Porters Five Force analysis indicated a score of 3.2 which can indicate that the retail industry is extremely competitive. Nevertheless the company SWOT analysis indicated a score of 4 which revealed numerous threats and weaknesses of the organization. Regardless above, Wal-Mart via its internal strengths and opportunities is able to counter theses weakness and threats.
28

3. SECTION THREE
3.1 FUTURISTIC ORIENTATION IN COMPARISON TO KMART
Any organization that wishes to become the leader of their industry must gain a thorough understanding of the future strategic path they intend to follow, to a greater extent than that of their competitors. Thus be ready to tackle all barriers that may arise in the industries future. Hence in order for Wal-Mart to gain a futuristic orientation of their strategic path, it must initiate a proper headlight team who possesses a visionary leadership of the organization. Therefore in order to clearly understand Wal-Marts foresight of its future, the futuristic orientation model of Gunasekara, (2010) has been adopted. The following illustrates the model.

Figure 12: Futuristic orientation model (Gunasekara,(2010)

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3.2 FUTURISTIC ORIENTATION OF WALMART


Table 16 : Futuristic orientation of Wal-Mart CORE IDEALOGY
HEADLIGHT TEAM Rob Walton Chairmen Michael T Duke President/ CEO Brian C. Cornell- Executive vice president C. Douglas McMillan- Executive vice president Wal-Mart is considered as one of the worlds largest organizations operating within the retail industry and the largest retailer in the United States. Its services more than 200 million times per week via its net work of 8576 retail shops spread over 55 countries (Wal-Mart, 2010). As off 2010 the company employees over 2.1 Million employees and has recorded substantial sales revenue of 405 billion USD DESIRED POSITION OUTWARD LOOKING To enter into South American and Asian markets (Wal-Mart, 2010) To diversify within the industry. To become a truly global company.

CURRENT ORGANIZATIONAL POSITION

The organization within the next 4 years wishes to : To capitalize on the down fall of other competitive retailers due to the global financial crisis. (Times, 2010) To keep the Wal-Mart culture strong in its international operations. (WalMart, 2010)

30

FORWARD LOOKING

The organization within the next 6 years wishes to : To play an even bigger leadership role on the social issues that matter to their customers. (Wal-Mart, 2010) To achieve Sam Waltons Vision of Giving the world an opportunity to see what its like to save money and have a better life (Wal-Mart, 2010)

SHARED IN DEPTH FORESIGHT VIEW

The organization within the next 10 years wishes to : To understand on the business

challenges that retailer face and solve them (Wal-Mart ,2010 ). To become a truly global MNC. (Wal-Mart, 2010) VISION = CORE IDEOLOGY + ENVISIONED FUTURE Long term goals Internationalization

As of November 2010 Wal- Core purpose Mart has not formulated an Giving the world an vision statement opportunity to see what its like to save money and have a better life (Wal-Mart, 2010)

Core values Sam Waltons 3 philosophies

Vivid description Giving the world an opportunity to see what its like to save money and have a better life (Wal-Mart, 2010)

Figure 13 : Envisioned future model

Respect for individuals Service for customers strive for excellence

Internal analysis SWOT analysis Porters Five force analysis Mission

External analysis PEST analysis

To help people save money so they can live better." (investors.

31

Wal-Mart stores ,2010)

Organizational goals

To expand in to Asian markets. To discover new potential markets

(Wal-Mart annual report, 2009)

Organizational objectives Corporate level objectives


To share best practices and leverage Wal-Marts global supply chain. To keep the Wal-Mart organizational culture strong where ever they may operate. To recruit the most talented people in the world into Wal-Marts ranks. (Michael T Duke, Wal-Mart 2010) To create consistent growth on its international segments. (Wal-Mart annual report 2009)

Business level objectives

To build an extremely strong management team who can execute the organizational strategy effectively. To offer more brands To offer sustainability forced products To create more value for Sams members To help consumers save on their energy bills

(Wal-Mart annual report, 2009)

Functional level objectives

To archive zero waste To create local supply chains for all outlets To help the community they serve.

(Wal-Mart annual report, 2009)

Operation level objectives

To create a enhanced and memorable customer experience To create faster check out time To create a more friendly and cleaner environment

(Wal-Mart annual report, 2009)

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3.3 FUTURISTIC ORIENTATION TRAGET


Table 17 : Futuristic orientation of target CORE IDEALOGY
HEADLIGHT TEAM Founded by: George Dayton Gregg Steinhafel Chairmen, President, CEO Timothy R.Bear ,Michael D.Giffith ,Beth M. Jacob ,Troy H Risch ,Douglas A. Scovanner Terrence J Scully. (Target ,annual report 2009 ) CURRENT ORGANIZATIONAL POSITION Founded in 1969 as Dayton Hudson the company was renamed as Target in 2000 and has thus become the second largest retailer in US with 1743 stores as of 2010, in 2009 the company recorded a 63.4 billion USD income (Target ,Annual report 2009 ) DESIRED POSITION To become the most preferred retail service provider in the United States OUTWARD LOOKING The organization within the next 4 years wishes to : Create Low pricing supply chains. Provide quality merchandise that are stylish and trendy. FORWARD LOOKING The organization within the next 6 years wishes to : Create a more effective organizational culture within Target. Become a more socially responsible organization. SHARED IN DEPTH FORESIGHT VIEW The organization within the next 10 years wishes to : Enter into global market place. Become an Icon for Stylish, Fun and Affordable shopping. 33

VISION

As of 2010 Target corporation has not formulated a vision statement Our mission is to make Target the preferred shopping destination for our guests by delivering outstanding value, continuous

MISSION

innovation and exceptional guest experience by consistently fulfilling our Expect More. Pay Less brand promise.

ORGANIZATIONAL GOALS

To become a upscale discount chain who provide trendy merchandise at extremely affordable prices

ORGANIZATIONAL OBJECTIVES CORPORATE LEVEL OBJECTIVES


To use the Target organizational culture as a strategic tool to unite the Target team around the global and provide clear direction on how to approach their business. (Target, Annual report 2009 ) To improve the community where ever Target operates.

BUSINESS LEVEL OBJECTIVES

To work diligently to remove the price perception gap. To select team members from diverse backgrounds

FUNCTIONAL LEVEL OBJECTIVES

P fresh design to be implemented on all stores To leverage the power of Target brand on target household essentials brand. To create safe and secure working environments for all its employees To control expenses without effecting the quality of service (Target ,Annual report 2009)

OPERATION LEVEL OBJECTIVES

34

3.4 CRITICAL ANALYSIS OF FUTURISTIC ORIENTATION


As Wal-Mart CEO Michael T Duke points out no matter how sound once strategies may be the Future success is never guaranteed, (Wal-Mart, 2010) thus it is vital for any organization operating in any form of industry to have a clear futuristic orientation regarding their strategic move of capturing and retain the market. Thus, when critically analyzing Wal-Mart and Target Corporation it is evident that both of these titans in the retail industry do have clear futuristic paths, they intent to follow. However these orientations differ to one another significantly. Due to the fact that WalMart undoubtedly is the largest and most dominating organization operating in the industry, with strategical aim of becoming the monopolistic power of the industry, other retailers have realized that they cannot compete with Wal-Marts financial power hence they simply adopt strategies which merely allows them to remain in the market. Nevertheless Target Corporation via its sound management strategies has become the closest competitor to Wal-Mart which has allowed Target to focus on strategies to counter that of Wal-Mart, such as Eliminating the low price perception. In order for Wal-Mart to maintain in its current position as the market leader and for Target to reduce the gap between them and Wal-Mart, both organizations have created strategic targets which they intent to accomplish in its allocated time frame, for example: Outward looking (Within 4 years) Forward looking (Within 6 years) Shared in depth foresight view (Within 10 years) Wal-Mart has set its future direction on becoming the global leader of the retail industry and to capitalize on its ability to wipeout competition (A strategy which is been criticized by many) whereas Target Corporation which has realized that competing directly with the market leader at this point is quite fruitless, thus they have set their sights on capturing the US market segment and to become the most preferred shopping destination for their customers by delivering outstanding value, continuous innovation and exceptional guest experience by consistently fulfilling their Expect more - Pay less brand promise as advocated in their corporate mission.

35

4. SECTION FOUR
4.1 THE STRATEGIC MOVES TOWARDS BECOMING US AND GLOBAL MARKET LEADER.

Figure 14 : Hierarchy of Organizational Aims Source: (Authors work adopted form Gunasekara, 2010, Pereira, 2003, Daugherty 1993 cited in online essays, 2010) When critically analyzing Wal-Marts current operations it is evident that they have different strategies throughout its organizational levels in order to become the market leader. According to (Pereira, 2003) theses strategies are:-

4.2 CORPORATE LEVEL STRATEGIES


Cost leadership strategy: To dominate the retail market where ever Wal-Mart had its presence. Wal-Mart uses its size and financial backing to create supply chains which enables them to offer the cheapest possible unit price with its volume buying power. Furthermore it marks a very low markup on its goods relative to other retailers. Thus triggering consumer to purchase from Wal-Mart. interns for its low markup Wal-Mart gains massive turnovers.

36

According to (Pereira, 2003) all local Wal-Mart outlets are given directions to use maximum price competition with other local organizations, in the process eliminating smaller retailers and gaining a monopoly in the respective local area. The strategy of dominating the retail market despite its various criticisms which will be presented in the following section, has proved itself to be a foolproof strategy. Growth strategy: To grow by expanding in the US and Internationally. Ranked as the number one organization in the world by the fortune 500 magazine, WallMart in its near 50 years of operational history has become the number one retail service provider in the US. Thus now the organization has laid its path on becoming the worlds most preferred retailer. This phase of their international operations have been swift yet powerful. For Wal-Mart uses corporate takeover as their main strategy of entry into new markets. For example:
1994 1998 1999 Wal-Mart took over Wooko Stores chain in Canada. Wal-Mart took over 21 Werkauf Store units in Germany Wal-Mart took over ASDA of the United Kingdom

Source : (Wal-Mart 2010) This strategy gains a competitive advantage for Wal-Mart even before it enters the target market. Furthermore it allows the organization to wipe out its main competition. The strategic steps of entering a target market for Wal-Mart is as follows:-

37

Target a potential location

Deploy employees and strategic teams and purchase real-estate

Create substantial presence in targeted location by means of the organizational size and wealth.

Create brand familiarity on target location without changing old chains brand name.

Once local outlets are performing to desired levels conduct a local management analysis of its competitive environment.

Change old name into Wal-Mart and redesign the outlets to appear in line to Wal-Mart.

Build lager stores and new units on newer locations.

Sources: (Authors work ,2010) Location and amounts of Stores in 2009

Figure 15 : Location of stores


(Dave Porter,2009) 38

Table 18 : Corporate level strategies

MAIN STRATEGY

SUB STRATEGY Differentiation strategy

DESCRIPTION Offers unique warranties and brand images thus Wal-Marts customers believe that they are being provided with the best buying options among competitors. The organization has launched a range of programs in order to encourage sustainability of the

AIM

Consumer loyalty

Grow Green strategy

To more

become

environmental ly responsible

world fisheries, forests and farmers. Furthermore via this Wal-Mart intends to reduce energy use and wastage, and push its nearly 60 000 suppliers to produce goods that are eco friendly. and thus encouraging consumers to buy green items Corporate strategy Growth Strategy Vertical Integration The organization develops its own brand name products called Sams Choice (Carlson, 2004) 1990 Wal-Mart acquired McLane a leading US supply chain services company. (McLane co,2010) Strategic partnerships

To control pricing

gain over of

items such as Soda. Cereal, Pet food added

Pioneering effort with Proctor and Value Gamble, Partnership with CRM and environmental defense fund to

service offering.

implement sustainability. Clinic at Wal-Mart, partnership with leading medical institutes in local areas. Furthermore Wal-Mart has entered into co partnerships with organizations such as McDonnells, Hollywood movie companies and Music recording label companies (Pereira, 2003). (The Week, 2010)(e How, 2010)(USA today, 2006) (Scribe, 2010)

39

Figure 16 : Corporate level Strategies


(Source; Authors work, 2010)

4.3 BUSINESS LEVEL STRATEGIES


Table 19 : Business level strategies

MAIN STRATEGY LOW

SUB STRATEGY PRICES

DESCRIPTION Wal-Mart Creates positive perception in the mind of the consumer. The organization want the consumer to believe that they are conducting business with most reputed retailer and that they are getting the best price deal in the market. To create stores that are 20 000 sq feet or less which is 1/7 the organization size of Wal-Mart stores. These new stores will mix market side and

AIM

To

attract

new

ALLWAYS

customers. Meet consumer

expectation of low price merchandise.

Convenience store strategy

Capture new market segments

BUSINESS LEVEL STRATEGIES Big Box strategy

neighborhood market concepts. To create stores which exceeded 50 000 Sq feet long, Single storey building with no doors, this achieves economies of scale by high volumes and low price. Volume purchasing The organization uses its high volume purchasing power to negotiate the best prices from suppliers.(Thomas & Strickland cited in online essays,2010) Long term relationships with supplier, Best price deals for Economies of scale

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Furthermore the organization at all times intend to maintain positive relationships with its suppliers.(Thomas & Strickland cited in online essays, 2010 )

goods thus creating long term partnerships between both parties

Everyday low prices

Low prices From Suppliers

More Customers

More Goods SoldLower Operating Costs /More purchasing

Figure 17 Low cost strategic process Source: (Authors work adopted form Slide share, 2010)

Figure 18 : Business level strategies (Source: Authors work, 2010)

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4.4 FUNCTIONAL LEVEL STRATEGIES


To branch out in to new sector of the retail industry Diversification into new sector of business is a Wal-Mart stagey (Pereira, 2003). However this only applies within the retail industry viz during the course of last 40 years Wal-Mart has diversified its operation into pharmacies, automotive rapier shops and grocery sales shops. Nevertheless it has failed to diversify into other industries thus limiting the expansion of organization. Human Resource Management strategy However the company strongly believes that all practices and policies of Wal-Mart should be diverged in order to create uniformity at national level, company level, institutional level, industry level and individual HRM practice factors as argued by Liu (2004) Zero tolerance policy towards unionization. Table 20 : Functional level strategies
MAIN STRATEGY SUB STRATEGY DESCRIPTION AIM

Local tailoring

Develop lesser market fits, To work form regional hubs

To

come

more

locally responsive to consumer needs.

FUNCTIONAL LEVEL STRATEGIES Targeting value Offer branded general Intergraded

To encourage repeat purchasing and high volume purchasing.

oriented customers

merchandise.

logistics : Suppliers to check out, provide continues and reliable service (Bcit Business, 2010)

Figure 19: Functional level strategies


(Source : Authors work, 2010)

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4.5 OPERATIONAL LEVEL STRATEGIES


Table 21 : Operational level strategies

MAIN STRATEGY

SUB STRATEGY Wal-Mart culture

DESCRIPTION

AIM

The company has created a culture of Supporting values, skills, technology of suppliers, customer relationship and its human resources

Competitive advantage

Technology

Wal-Mart

has

created

significant

Allow organization

the to

competitive advantage through the IT systems, it has developed to manage its warehouses and stores. Furthermore OPERATIONAL LEVEL STRATEGIES Implementation of Wal-Marts unique cross docking Massively parallel processor computer system to track stock movement. (Daugherty 1993 cited in online essays, 2010 ) Strategy of use of IT in all vertical of business Location selection The organization selects target location without any form of direct competitions. Transportation and logistics Operations efficiency strategy effective use of logistic management strategy, faster check out time, real time data used to profile each market strategy predicts demand and optimizes stock strategy.

achieve economies of scales and thus give mangers more control in terms of store level. (online essays ,2010)

Dominate market before competition Efficiency and effectiveness of operations.

(Scribe, 2010)

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Figure 20 Supply chain Source: (Authors work adopted form Slide share, 2010)

Figure 21 Operational level strategies (Source: Authors work, 2010)

44

A graphical illustration of Wal-Mart overall strategy.

Figure 22 : Wal-Mart overall strategy (Source: Authors work, 2010)

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5. SECTION FIVE
5.1 A CRITICAL EFFECTIVENESS ANALYSIS OF CURRENT ORGANIZATIONAL STRATEGIES
TOTAL SALES REVENUE (TSR) Table 22 : Total sales revenue
Wal-Mart 2009 401.1 2008 373.8 2007 344.8 2006 308.6 2005 281.5 2009 65.3 2008 64.9

Source: (Wal-Mart annual report, 2009)


Target 2007 63.36 2006 59.5 2005 52.6

500 400 300 200 100 0 2009 2008 2007 2006 2005 Wal-Mart Target

Figure 23 : Total sales revenue


Sources: (Authors work, 2010)

EARNINGS PER SHARE BILLIONS USD (EPS) Table 23 : Earnings per share
Wal-Mart 2009 3.35 2008 3.16 2007 2.92 2006 2.72 2005 2.46 2009 3.30 2008 2.86 Target 2007 3.33 2006 3.21 2005 2.71

Source: (Wal-Mart annual report, 2009)

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4 3.5 3 2.5 2 1.5 1 0.5 0 2009 2008 2007 2006 2005 Wal-Mart Target

Figure 24 : Earnings per share CURRENT RATIO 0.95 0.9 0.85 0.8 0.75 2005 2006 2007 2008 2009 0.8 0.9 0.9 0.9 0.9 Current ratio

Figure 25 : Current ratio analysis


2009 0.9 2008 0.8 Wal-Mart 2007 0.9 2006 0.9 2005 0.9

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RETURN ON ASSETS 10.00% 9.50% 9.00% 8.50% 8.00% 7.50% 2005 2006 2007 2008 2009 Figure 26 : Return on Assets analysis
2009 8.4% 2008 8.5% Wal-Mart 2007 8.8% 2006 9.3% 2005 9.8%

9.80% 9.30% 8.80% 8.50% 8.40% Return on assets

RETURN ON SHAREHOLDERS 23.50% 23.00% 22.50% 22.00% 21.50% 21.00% 20.50% 20.00% 19.50% 23.10%

22.80% 22.00% Return on 21.20% shareholders 21.00%

2005

2006

2007

2008

2009

Figure 27 : Return on share holder analysis


2009 21.2% Wal-Mart 2008 2007 2006 2005 21.0% 22.0% 22.8% 23.1% Source: (Wal-Mart annual report, 2009)

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5.2 A CRITICLA REVIEW OF WAL-MARTS FINANCIAL PERFROMCE


The analysis of TSR achieved by Wal-Mart in comparison to target corporation revealed that in 2009 Wal-Marts TSR of 401.2 billion USD was 72% higher than that of targets 65.3 billion USD revenue viz in 2008 ,2007 ,2006 and 2005 the organization recorded higher percentage sales of 70% , 68%, 68% 69% than that of Target corporation. In the analyzed period of five years TSR of Wal-Mart has progressed. However the organizations EPS does not indicate as much variations as that of TSR. For example in 2009 EPS in comparison to target was 3.35: 3.30, 2008 it was 3.16: 2.86 and 2007, 2.92: 3.33. In terms of current ratio analysis (CRA) the organization indicated that despite 2008 0.8, the organization managed to maintain an average of 0.9. Thus it can be assumed that the global finical crisis in fact did effect the organization. Nevertheless regardless of the above mentioned financial performance Wal-Mart has witnessed a steady decline on its return of assets from 9.80% in 2005 to 8.40% in 2009, the lowest in a five year period. Furthermore returns on shareholders have decreased significantly from 23.10% in 2005 to a low 21.20 % in 2009 with the lowest recording in 2008 of 21.00%. .

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5.3 NONE FINANCIAL PERFORMNCE


CUSTOMER EXPECTIONS
120% 100% 80% 60% 40% 20% 0% Convenience Price Service Quality Scope

Figure 28 : Customer expectations Sources: (Authors work, 2010) Zenith management consulting (2005) OVERALL CUSTOMER EXPECTATIONS
80% 70% 60% 50% 40% 30% 20% 10% 0% Wal-Mart Traget Kmart Avg. Grocery Avg. Drug Chain chain

Figure 29: Overall customer expectations

50

STAKE HOLDER EXPECTATIONS


120% 100% 80% 60% 40% 20% 0% Wal-Mart Traget Kmart Avg. Grocery Chain Avg. Drug chain Customers Shareholders Vendors Community Workers

Figure 30 : Share holder expectations OVERALL STAKE HOLDER EXPECTAIONS


80% 70% 60% 50% 40% 30% 20% 10% 0% Wal-Mart Traget Kmart Avg. Grocery Chain Avg. Drug chain

Figure 31 Overall Share holder expectations

51

5.4 CRITICISM FOR STRATEGY


Table 24 : Criticism for strategy GENDER DISCRIMINATION
Dukes Vs Wal-Mart is considered as the largest gender discrimination law suit in the United States. The law suit was filed alleging that women in the organization were

systematically given less pay than that of male workers. Furthermore it was alleged that women were give less opportunities to progress in their careers. (Wal-Mart watch, 2010)

LABOUR UNIONS

Labor unions, Christian organizations and environmentalists have criticized Wal-Marts strategic Numerous polices labor and business practices. the

unions

accuse

organization of not allowing its employees to form any union with its Anti union stance (Fair companies, 2010)

SMALL SCALE BUSINESS OWNERS

The Wal-Mart strategy of creating dominance in whatever market they operate, had caused many small scale retail organizations to face bankruptcy, thus creating numerous social problems in rural communities.

LIMITING EMPLOYEE BENEFITS

The organization has been accused of limiting


its full time employees and recruiting only part time employees also mitigating its responsibility of health insurance policies to employees.

(Washington post ,2006)

(fair companies,2010)

(urban places and spaces,2010)

(agency social media,2010)

(lake wood buzz,2010)

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Likert scale Factors Weight unfavorable 1 2 3 Favorable 4 5 4 5 1 4 Score Weight score 1 1.25 0.25 1 3.5

customer expectations stake holder expectations criticism for strategy leadership orientation
Overall score

25% 25% 25% 25% 100%

Sources: (Authors work 2010)

5.5 A CRITICLA REVIEW OF WAL-MARTS NONE FINANCIAL PERFROMCE


Overall Wal-Mart has secured 75% on meeting customer expectations, in comparison to 70% of Target Corporation and 52% of Kmart. Thus indicating that in average Wal-Mart is leading in meeting customer expectations via its sound strategic management. However analyzing in-depth it is revealed that Wal-Mart scores poor in terms of quantity of service than Target. Nevertheless it scores 100% on meeting consumer price expectations which is considered as one of the organizations main strategic objectives. In terms of overall stake holder analysis Wal-Mart does not perform to expected levels, for the organization merely scores 45% in comparison to Target which scores 75%. It can be interpreted that due to the fact of even though Wal-Mart scores 100% in meeting shareholder expectations and 70% in customer expectations, due to its poor strategic management of corporate HR policies and PR polices the organization performs extremely poor in terms of community expectation (18%), Vendor expectations (13%) and workers expectations (20%). The organization till this day follows it founder, Sam Waltons Vision of Giving the world an opportunity to see what its like to save money and have a better life (Wal-Mart, 2010) thus all Walmart leader since then have been compelted to follos the three core philosophies of Respect for individuals ,Service for customers , strive for excellence.

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5.6 PERFORMANCE INTERPRETATION MATRICES


Absolute Trend analysis
High Wal-Mart Sound short term performance does not perform in the long run. Low

High

Sound performance.

Low

Sound long term performance does not perform in the short run.

Weak performance.

Cross trend analysis


Sound Weak

Sound

Sound performance.

Weak absolute performance/ Okay in comparison to competitors.

Wal-Mart

Weak

Good absolute performance/ Weak in comparison to competitors.

Weak performance.

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6. SECTION SIX
6. 1 THE CURRENT STRATEGIES VS FUTURE STRATEGIES OF WAL-MART
To capitalize on the down fall of other competitive retailers due to the global financial crisis. (Times, 2010)

To play an even bigger leadership role on the social issues that matter to their customers. (Wal-Mart, 2010)

To achieve Sam Waltons Vision of Giving the world an opportunity to see what its like to save money and have a better life (Wal-Mart, 2010)

To understand on the business challenges that retailer face and solve them (Wal-Mart, 2010)

To become a truly global MNC. (Wal-Mart, 2010)

The global financial downturn left many organizations facing near bankruptcy, especially the retail industry throughout the world has had its toll due to this scenario. However, supported by its financial power, Wal-Mart has survived past turbulent economic situations. Thus the organization plans to reformulate its corporate strategy to capitalize and use the misfortune of its competitors as a window of opportunity to wipe out competition (Times, 2010). Furthermore as discussed in the previous section, the organization faces numerous criticisms regarding their strategic approaches by various communities and organizations thus the organization intends to create strategic move to play a bigger role on social issues that matter to its consumers (Wal-Mart, 2010).

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Moreover as Wal-Mart CEO Mike Duke (2010) points out, Wal-Mart is ready to achieve Sam Waltons vision of Giving the world an opportunity to see what its like to save money and have a better life thus Duke (2010) indicates that the organization must understand on the business challenges that retailer face and solve them by becoming a truly global company and the undisputed leader of the global retail industry.

6.2 GREEN OBJECTIVES OF THE ORGANIZATION


The intended environmental protection strategies of the organization are illustrated in the following diagram To slash gasoline use by its truck fleet which is considered as one of the largest in the US and use Hybrid vehicles which in turn will increase fuel efficiency by 25% during the course of Three years and achieve 50% within 10 years thus saving 310 million USD a year by 2015

To buy 10% of its wild caught salmon and frozen fish for North American markets only form fisheries that are certified for sustainability by the non - profit marine stewardship corporation. Within three to five years.

To Reduce energy usage of all 7000+ Wal-Mart stores around the globe by 30 % and green house gas emissions by 20 % within 7 years.

To reduce solid wastes from Wal-Mart stores by 25% within three years.

(USA today, 2006)

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6.3 RECOMMENDATIONS
Table 25 : Proposed recommendations CHANGE NEGATIVE PUBLIC PERCEPTION OF COMPANY SO1
Pereira, (2003) points out that the current public image of the Wal-Mart in terms of NGOs and Labor unions and community organizations is Bully and Tyrant thus the author recommends that the organization restrategies it approach towards public

relations. In turn creating a rather favorable corporate image.

ALLOW UNIONIZATION SO2

As mentioned above Wal-Mart strategy of zero tolerance for unionization has affected the corporate good will in a negative manner, thus the author recommends that the

organization let loose of its stance and allow labor unions to form under a controlled environments in order to give Wal-Marts associates the opportunity to express their legitimate grievances.

HUMAN RESOURSE MANAGEMENT STRATEGY SO3

Wal-Mart is rapidly expanding on its international operations, however as (Michael T Duke, Wal-Mart ,2010) CEO of Wal-Mart states the organizational culture of Wal-Mart is a competitive advantage for the companys success, the company strongly believe that all practices and policies of Wal-Mart should be diverged in order to create uniformity, barriers such as national level, company level, institutional level, industry level, and individual HRM practice factors as argued by Liu (2004) thus the author recommends that Wal-Mart should adopted a transnational strategy when dealing with its international subsidiaries

A detailed analysis of MNC strategic models are presented in Appendix (C) the following illustrates a graphical illustration of the recommended strategy. 57

Figure 32 : Organizational HR structure Sources: (Authors work, 2010)

58

6.4 THE PROPOSED STATEGY EVALUATION TABEL


Criteria
SO1 SO2 SO3

SUITABILITY
SC1 Would it Help to strengthen the tangible and intangible recourse base? SC2 Would it Help in building distinctive competencies? SC3 Would it Help in gaining comparative, competitive advantage, corporate advantage? SC4 Would it Help in enhancing overall financial and non financial performance? SC5 Would it Help In achieving the objectives, goals, mission and vision of the organization. SC6 Would it Produce timely and reliable results? SC7 Would it Have a positive impact on corporate and brand image? SC8 Would it have a positive impact on corporate governance? SC9 Dose it address or take advantage of the critical SWOT factors in the internal and external environment. SC10 Dose it improve the overall strategic position of the organization.

Y Y Y

Y Y Y

Y Y Y

Y Y Y Y

Y Y Y Y

Y Y Y Y

ACCEPTABILITY
AC1 Would the proposed strategy help to provide a positive effect on customer expectations? AC2 Would the proposed strategy help to provide a positive effect on shareholder expectations?

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AC3 Would the proposed strategy help to provide positive effect on society expectations? AC4 Would the proposed strategy help to provide positive effect on employee aspirations? AC5 Would the proposed strategy help to provide positive effect on management aspirations?

FEASIBILITY
FC1 Would the proposed strategy implementation be supported with adequate availability of financial resources? FC2 Would the proposed strategy implementation be supported with adequate availability of human resources? FC3 Would the proposed strategy implementation be supported with adequate availability of physical resources? FC4 Would the proposed strategy fit with the existing culture of the organization? FC5 Would the proposed strategy fit with the existing structure of the organization? FC6 Would the proposed strategy fit with the skill inventory level of the organization? FC7 Would the proposed strategy fit with the current resources capabilities of the organization? FC8 Would the proposed strategy fit with the current technology of the organization? FC9 Would the proposed strategy be capable of coping with competition?

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7. CONCLUSION
The Study conducted an internal strengths / weakness and external opportunities and threats assessment for Wal-Mart. Stores Inc, an organization considered as global business titan and classified as the largest retailer in the United States. The SWOT assessment revealed that the strategic factors that has the greatest impact on the organizational performance. Furthermore, this study evaluates and understands the futuristic orientation of the organization in comparison to Target Corporation, the organizations main competitor. The analysis revealed both organizations despite Wal-Mart not possessing a clear vision statement does indeed posses clear and specific futuristic orientation regarding their respective future strategic direction. The study moreover identifies and explains each strategic move the organization has implemented in all levels of the organizational structure in order to become the market leader. Thus critically evaluating the effectiveness of these strategies in terms of WalMarts financial and none financial performance, which indicates that regardless of various criticism from unfavorable media, small town communities and various labor unions, Wal-Mart has achieved substantial growth in its 50 years of operational history via its sound strategic management operations and policies and practices. However the author recommends that the organization should indentify and thus remodify its strategic approaches towards its role as environmentally sustainable and socially responsible global organization and pay furthermore close attention to its International human resources and Local human resources within the US.

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APPENDIX
APPENDIX A

(gearlive,2010)

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APPENDIX B

INDUSTRY PERFORMCE
Total retail Sales 2009 Total retail Sales 2008 Total E commerce retail sales 2009 Total E commerce retail sales 2008 Furniture and fittings electronics Materials and Gardening equipment Food and beverages Health and personal care Clothing and accessories Music and sports 4281 Billion USD 4413 Billion USD 131.8 Billion USD 132.3 Billion USD 105.5 Billion USD 111.1 Billion USD 323.3 Billion USD 587.7 Billion USD 245.8 Billion USD 216.0 Billion USD 87.7 Billion USD

(Source : plunkett research,2010)

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APPENDIX C
A CRITICAL COMPARISON OF THE FOUR ORGANISATIONAL STRATEGIES ADVOCATED BY BARTLETT AND GHOSAL
FACTOR MULTIDOMESTI C INTERNATIONAL GLOBAL TRANSNATION AL Simple Global Complex global -

PORTER 1986 OBJECTIV E ACHIEVED

Country-centered

Multinational flexibility

Worldwide learning

Global efficacy

Multinational flexibility Worldwide learning Global efficacy

STRUCTUR ES R

Decentralized Federation Financial Flows

Coordinated Federation Financial and knowledge flows

Centralized Hub

Integrated Network

Large flows of _ people , resource and knowledge across interdependent units

CONTROL S
GRAPHICAL ILLUSTRAT ION OF

Loose operational controls

Medium operational controls

Tight Financial and operational controls

Co-ordination through shared decision making.

MODELS

Table 26 A critical comparisons of the four organisational strategies advocated by Bartlett and ghosal
Source (Harzing and Ruysseveldt, (2004), Edwards and Rees, (2006) Adopted form group assignment

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APPENDIX D
EXTERNAL ANALYSIS CHECKLIST
PORTERS FIVE COMPETITIVE FORCES

POTENTIAL ENTRY: How difficult is it for new firms to enter your market Easy 1- 2 -3 -4 -5 Difficult

Few 1- 2 -3 -4 -5 Many SUPPLIER POWER : How much bargaining power do your buyers have? How many options exist for lessening buyer power? BUYER POWR : How much bargaining power do your buyers have? How many options exist for lessening buyer power? POTENTIAL SUBSTITUTES : How many alternatives do buyers have for getting the benefits of your products or services in some other way? How many options exist for improving your price performance tradeoff? How many options exist for finding less substitute sensitive customers? RIVALRY : What level of intensity exists in the rivalry between you and your direct
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Much 1- 2 -3 -4 -5 Little

Few 1- 2 -3 -4 -5 Many

Much 1- 2 -3 -4 -5 Little

Few 1- 2 -3 -4 -5 Many

Many 1- 2 -3 -4 -5 Little

Few 1- 2 -3 -4 -5 Many

Few 1- 2 -3 -4 -5 Many

High 1- 2 -3 -4 -5 Low

competitors? How strong are these direct competitors? How many options exist for taking on these competitors head to head?

Strong 1- 2 -3 -4 -5 Weak

Few 1- 2 -3 -4 -5 Many

How many options exist for picking areas Few 1- 2 -3 -4 -5 Many of the market that are not so competitive?

INTERNAL ANALYSIS CHECKLIST


MARKETING RESOURCES LowHigh 12345 12345 Ability to gain customers versus the 12345 competition 12345 Knowledge of the market 12345 Product/Service line breadth and depth 12345 Product/Service quality in terms of function, 12345 12345 12345 12345
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Customer satisfaction with products/services

image, place, time, possession, ease of use

Advertizing and promotion activities

Product/Service pricing

Facilities and methods used to sell to

12345 12345

customers

Market share 12345 12345 12345 Efficient asset management (TAT*) 12345 12345 Proper balance of debt and equity (EM*) 12345 Strong and recurring return on equity (ROE*) 12345 12345 12345

FINANCIAL RESOURCES

Strong and recurring operating profits (PM*)

Strong and recurring return on investment (ROI*)

Strong and recurring cash flow

Ready access to outside/new funds

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HUMAN RESOURCES 12345 12345 12345 12345 12345 12345 12345

Adequate number of people to do the work

Adequate quality of people to do the work

Personnel plans

Job design and descriptions

Performance standards and evaluation

procedures

Training programs

Good morale as evidenced by absenteeism, turnover, tardiness, complaints, bickering, employee growth and development 12345 12345 12345 12345 12345 12345 12345
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Compensation system that promotes

performance

and satisfaction

Equitable and competitive pay

Equitable and competitive fringes

Appropriate use of teams

Work ethic of individuals and teams

12345 12345 12345 12345

Operations/Production Resources

Quality of needed facilities to serve customers

Capacity of needed facilities to serve 12345 customers 12345 Up-to-date and appropriate technology (building, machinery, etc.) 12345 12345

Effective and efficient physical layout

Effective and efficient work flow 12345 Effective and efficient inventory control 12345 Effective and efficient purchasing practices 12345 12345 12345 Effective management style 12345 Timely decision making
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Effective and efficient production practices

MANAGEMENT/LEADERSHIP RESOURCES

Effective delegation

12345 12345 12345

Effective participation

Effective risk taking

Effective leadership 12345 ORGANIZATIONAL RESOURCES 12345 Appropriate mix of resources (people, money, equipment) available 12345 Resources properly placed to do the job 12345 Effective interdepartmental communications 12345 Effective reporting relationships Firms public image 12345 12345

Strong organization culture (productivity, honesty, dispute handling, tolerance of change) 12345

INFORMATION RESOURCES 12345 Appropriate financial and cost accounting systems


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Planning system appropriate for internal analysis (assessing strengths and weaknesses)

12345

Planning system appropriate for external analysis (assessing opportunities and threats)

12345 12345

Control system that highlights problems and generates corrective action 12345

Information systems that use the best technology available 12345

Effective information for strategic decision making

Effective information for operational decision making

Ability to utilize internet and e-commerce

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WAL- MART

TARGET

COSTCO WHOLESALE

K MART

Product Offering

Electronic office Movies music books Apparel, Shoes, jewelry Baby and kids products Toys and video games Sports fitness Auto home improvement Photo Crafts and party supplies Pharmacy, health and beauty Grocery Pets.

Home Entertainment Electronics Mens Womans Bed and bath Movies Video games Kids Kitchen and dining Sports Beauty Furniture Toys Baby Gift giving Books Gaming Pharmacy Clinic Optical

Appliances Automotive Baby and Necessary Beauty and health Bed and Barth Books and magazines Clothing Electronics / office Fitness and sports Food and grocery Home Improvement Jewelry and Watches Music, movies and Gaming Pharmacy Pets Shoes Toys

78