Sams Clubs

GLOBAL INDUSTRY ANALYSIS - CASE STUDY Wal*Mart Stores, Inc. a presentation Anthony, Crystal, Sandy From YZU university
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Sam Walton Founder of Wal*Mart Stores, Inc. Performance of Wal*Mart 20-year average return on equity of 33% Compound average sales growth of 35% Market value = $57.5 billion
Wal*Mart Sales per square foot Industry average

$300

$210

WALMART
Background
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Year 1988 CEO: David Glass COO: Don Soderquist How to sustain the companys phenomenal performance?
1987 Net sales Net Income Number Of Stores Discount Stores Sams Wholesale Clubs Supercenters 1,114 84 N.A. 1,953 419 68 15,959 628 1993 67,345 2,333

WALMART
Background
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Where Emerged in the U.S. When Mid-1950s Top 10 discounters in 1962 Wal*Mart remained only The industry became more concentrated Discount store companies operated 5 or more stores accounted for 62%

WALMART
Discount Retailing
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Year 1945 Ben Franklin franchise store In 1950s 15 stores Year 1962 Wal*Mart Discount City store Year 1969 18 Wal*Mart stores 15 Ben Franklin franchise stores

Wal*Marts Discount Stores and History of Growth

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WALMART

Year 1970 30 discount stores in rural states South and Midwest Cost of good sold Build its own warehouse Buy in volume at attractive prices Store the merchandise Year 1972 Took the company public Raised $3.3 million

Wal*Marts Discount Stores and History of Growth

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WALMART

Year 1993 West coast and northeastern states Year 1994 Operated in 47 states

Wal*Marts Discount Stores and History of Growth

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WALMART

Key strategies for growing Locate store in isolated rural areas and small towns (population 5000~25000) Pattern of expansion Always push from inside out Mid-1980s One third were located in areas that were not served by any of its competitors

Wal*Marts Discount Stores and History of Growth

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WALMART

Year 1993 Wal*Mart faced 55% (Kmart), 23% (Target) Kmart 82%, Target 85% from Wal*Mart

Wal*Marts Discount Stores and History of Growth

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WALMART

Philosophy Keep prices below everybody else Trip expenses cant exceed 1% of the purchases Spent lots of time in his own store and observe competitors Culture Do not show off buying luxury goods Success The way it treated its associates

Wal*Marts Discount Stores and Sams Legacy

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WALMART

Management style Maintain an open-door policy Empowering associates Maintain technology superiority Build loyalty among associates, customers, and suppliers

Wal*Marts Discount Stores and Sams Legacy

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WALMART

Tailor to individual market or individual store

Information system A process which indexed product movements in the store to over a thousand store and market traits Using inventory and sales data

Wal*Marts Discount Stores and Merchandising

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WALMART

Marketing slogan Lower price Store managers set up prices 2-4% pricing differential between Wal*Mart and its best competitors in most markets in early 1990s

Wal*Marts Discount Stores and Merchandising

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Strength
Cost advantage Low price & customer-oriented Strong supply chain People are key to success

Weakness
Ignore store decoration Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.

Opportunity
Build its own brand Put efforts on social welfare better image New locations and store types Overseas markets

Threat
Other competitors Intense price competition

Wal*Marts Discount Stores and SWOT Analysis

WALMART

Backward integration No nonsense negotiator Economies of scale Maintain long term relationship with supplier, as powerful partner (RSP)

Wal*Marts Discount Stores and Vendor Relationships

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Backward integration Electronic data interchange (EDI) CPFR Forecasting Planning Replenishing Shipping applications

Wal*Marts Discount Stores and Vendor Relationships

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WALMART

The CPFR Process

Once
FRONT END AGREEMENT

Seller
Collaborative Planning Collaborative Forecasting Collaborative Replenishment

Qtr.

JOINT BUSINESS PLAN

CREATE SALES FORECAST

Wk, Mo

IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS

Wk, Mo

CREATE ORDER FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS

GENERATE ORDER

Buyer

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Backward integration Vendor-managed inventory (VMI) system Wrangler GE

Wal*Marts Discount Stores and Vendor Relationships

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Backward integration From EDI to Retail link

Wal*Marts Discount Stores and Vendor Relationships

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WALMART

Whole Supply chain Economies of scale Cost leadership competitive advantage JIT inventor POS and retail link CRS & VMI EDI CPFR

Wal*Marts Discount Stores and Vendor Relationships

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Warehouse clubs

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Diversification and Sams Clubs

Operating philosophy To offer a limited number of SKUs in pallet-size quantities in a no-frills, warehouse-type building Location Often locate next to a Wal*Mart Sams chose to cannibalize its own sales rather than give competitors any openings

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Diversification and Sams Clubs

Staff

450 associates Full-time - 70% Part-time - 30%

WALMART
Diversification and Supercenters
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Business Hours

24 hours Seven days a week

WALMART
Diversification and Supercenters
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Discount Store Kmart Target Caldor Warehouse Clubs Price Club Costco Pace Supercenter Meijer Fred Meyer

Competitors High degree of concentration High industry growth Have excess capacity Cost structure of firms: sensitive to cost Buyers switching cost is low Firm can adjust prices quickly Price elasticity of demand

Diversification and Five Force Analysis

WALMART

Supermarket Kroger Safeway Stores

Potential Entrant They have distribution channels Access to raw materials Allocate favorable locations

Diversification and Five Force Analysis

WALMART

Key players Procter & Gamble GE Wrangler

Suppliers Industry is concentrated Many suppliers No-nonsense

Diversification and Five Force Analysis

WALMART

Target Market ??????

Customers Low switching cost Transportation cost

Diversification and Five Force Analysis

WALMART