WalMart Case Analysis 20 year average return on equity of 33% & compound average sales growth of 35%.

By 1993 market value of $57.5billion USD. Sales per square foot is $300 compared to industry average of $210. David Glass & Don Soderquist sales went up from $16billion in 1987 to $67 in 1993. Earnings quadrapuled from $628 million to $2.3billion. Sales were forecast to reach $84billion and capital expenditures $3.2billion. April 1993 growth in comparable store sales was 7-8% first time under 10% since 1985, lost $17billion in market value as stock price fell by 22%. Would WalMart grow at breakneck speed? Discount Retailing: Gross margins 10-15% lower than conventional stores. Heavily cut costs through un luxurious fixtures, limited in-store selling, scarce ancillary services like credit and delivery. Self service became need of the hour except for big ticket items. WalMarts Growth History: Initially there were 18 WM and 15 Ben Franklin stores. Warehouses were built buying volumes at attractive prices went public in 1972 to fund the building of these warehouses. David Glass on WMs strategy We are pushing from the inside out. We dont jump and backfill. In 1993 WM faced 55% of direct competition from KM and Target stores however KM faced 82% direct competition from Walmart stores and Target faced 85% direct competition from Walmart stores. Sams Legacy: Believed in the price of $ and was obsessed with cost leadership. Walton described his management style as management by walking and flying around. Others described it as management by looking over your shoulder. Merchandising: WMs merchandise was tailored to individual markets and stores. Traiting a process that indexed product movements in the WMs store to a thousand store and market traits. Shelf space for product category according to demand. Where WM was located next to KM or Target its prices were 10.4% and 6% lower respectively. Where there was no direct competition WMs prices were 6% higher. Sams choice premium quality line offered an average 26% price advantage. WMs SWOT: Strength:

Cost Advantage Low Price and Customer oriented Strong SCM People are key to success

Weakness: No decoration No focus unlike some focused payers. Opportunity: Threat: Other Competitors. Price Wars. Core Operations: A WM store devoted only 10% of its square footage for inventory. Electronic scanning of uniform product codes at the point of sale to ensure accurate pricing and also to help track inventory. Installation of a satellite system in 1983 which enabled sales data to be analysed daily which merchandise moved slowly to prevent overstocking. Distribution: Hub and Spoke distribution model. Distribution Centre WM store(48 hours of original request). Merchandise replenishment originated at the point of sale. Information transmitted via satellite to WM heard quarters or to Supplier distribution centres. 80% of purchases from its own DC and remaining 20% from direct suppliers. Crossdocking = transferring products from in-bound vehicles to store-bound vehicles. WM stores were grouped together, trucks could resupply several on a single trip. Trucks also picked up new shipments on the return trip as vendors were in WM territories. 1 million sq feet and 700 staff operating. Could provide to 150 to 200 stores within 200 miles. Pick to light system to guide to the product. Vendor Management: Banning of manufacturers sales agents(who sell manufacturers product to a wholesaler or retailer). 10% of P&Gs total revenue. Building its own brand. Social Welfare Image building New locations & store types Overseas markets.

HRM: Non-Unionized. Lean operation managed by committed people. Training decentralised(at DCs). Diversification: Sams clubs. Hypermarkets from France. High inventory turn over rate. Inventory financed through trade accounts payable. Supercentre=SuperMarket+Discount Store.

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