Case Study

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 Save money. Live better.

“The secret of successful retailing is to give your customers what they

want. And really, if you think about it from your point of view as a
customer, you want everything: a wide assortment of good quality
merchandise; the lowest possible prices; guaranteed satisfaction with
what you buy; friendly knowledgeable service; convenient hours; free
parking; a pleasant shopping experience.”

- Sam Walton, Founder Wal-Mart

 What is Wal-Mart?
• 6775 Stores worldwide
• 4065 Stores in US
• 2701 Stores in 14 Countries
• Total Employees of 1.9 Million
• Total Sales of 348.6 billion in 2006
• Net Income of 11 billion in 2006
Some Wal-Mart Products
 Who was Sam Moore Walton?
• Born on March 29, 1918 to his parents Thomas Gibson and Nancy Lee
Walton near Kingfisher, Oklahoma.
• Graduated from University of Missouri.
• Opened his first store, a Ben Franklin franchise, in Newport, Arkansas
on September 1, 1945.
• First Wal-Mart opened in 1962 in Rogers, Arkansas.
• Despite having billions, Walton still drove a pickup truck and wore
clothes from his own discount store, Wal-Mart.
• Died in April 5, 1992

Source:www.about.com
 Sam Walton Principles
• Respect for the individuals

• Striving for Excellence

• Service to customer
Let us start the journey….
 What Drives Wal-Mart?
• Customer
Rule # 1: The Customer is always right
Rule # 2: If the Customer happens to be wrong, refer to
Rule#1

• Employee
If the employees were respected and treated well they would
in turn treat the customers with respect and satisfied customers
would continue their relationship with Wal-Mart
 Sam One Step Ahead
• “10 Foot Attitude” Rule: States that
“whenever an employee was within a distance of
10 feet from a customer he had to look into
customers eyes, greet him/her, and ask if he
could be of any help.”

• “Sundown” Rule: Solve the problem of an

Customer before Sunset
 Wal-Mart’s Strategy
• Multiple Store Formats
• Wal- Mart’s Geographical Expansion
Strategy
• Everyday Low Prices
• Merchandising Innovations
• Advertising
• Distribution
 Multiple Store Formats
• Discount Stores
• Supercenters
• Sam’s Club
• Neighborhood Markets
 Wal-Mart At A Glance

Discount Stores Neighborhood Markets

Sam’s Club Supercenter

Geographic Expansion Strategy
• First Saturate the existing market than open
new store within 200 miles of distribution center
• Opening Stores in surrounding small towns
before targeting metropolitican area
• Acquisition and opening of new stores is the
mode of entry in markets e.g. Japan, Brazil,
Canada, Puerto Rico and UK
 The Success Term Was EDLP
(Every Day Low Price)

• To provide customers – a wide variety of high

quality, branded and unbranded products at the
lowest possible price, offering better value for their
money
• To procure products in bulk at the lowest possible
prices from the manufacturers
• Sharing the savings with customers
• Wal-Mart’s products were usually priced 20%
lower than its competitors
 Merchandising Innovations
• Wal-Mart imitates good ideas and
merchandise practices employed by other
retailers
– Experiments in store layout, Merchandise
displays, store color schemes, Merchandise
selections, and sales promotion techniques
were part of it
 Distribution
• Cost effective management practices
especially supply chain
• Use of independent trucking firms
• Own centralized distribution centers
 Wal-Mart’s advertisement describing
EDLP
“Because you work hard for your every
dollar, you deserve the lowest price we
can offer every time you make a purchase.
You deserve our Every Day Low Price. It’s
not a sale; it’s a great price you can count
on every day to make your dollar go
further at Wal-Mart ”
 Explaining his pricing strategy
Mr. Sam Walton said:

“ By cutting your price, you can boost your sales

to a point where you earn far more at the
cheaper retail price than you would have by
selling the item at the higher price. In retailer
language; you can lower your markup but earn
more because of the increased volume”
 Areas where the cost was
checked
 The stores were set up in large buildings, while
ensuring that the rent paid was minimal
 Not much emphasis was laid on the interiors of
the store
 Did not invest in standardized ordering program
 Did not even have a standard distribution system
in place
 Accounting data were manually written-up
 There was a high check in recruiting the staff
 Wal-Mart’s Advertisement
• Advertisement expenditure was about
0.3% of sales revenue where as
competitors were spending 1.5% to 2.3%
of their sales revenue
• Media for advertisement; Radio & T.V
Wal-Mart Customer-Centric policies
• Rollback of prices
• Special buys
• Anniversary Sales
• Satisfaction guaranteed
• Offering Best Price

“We Sell for Less”

“ Satisfaction Guaranteed”
 Customer Service Initiatives
• Store of Community
“Merchandize mix of a Wal-Mart store in
one region differed substantially from that
of another.”
Approaches to Strategy Execution
Implementation and execution:-
A:-lowest possible prices from its suppliers
B:- forging close working relationship with key suppliers
in order to capture win – win cost saving through
out its supply chain.
C:- keeping its internal operation lean and efficient
D:- paying attention to even the tiniest details in store
layouts and merchandising
E:- making efficient use of state of the art technology an
F:- nurturing a culture that thrived on:-
hard work
Constant improvement and
Pleasing customers( especially passing cost
savings on to customers in the form of low prices).
 Use Of Information Technology in
Wal-Mart
• Wal-Mart invested $700 million in IT
• Electronic Data Interchange System (EDI)
• Satellite Communication
• Data Warehousing
• Data Mining
• 3D Visualization Tool
• Customer Information Kiosks
• 960
• www.walmart.com
WALL-MARTIFICATION
 Guiding Principals
with suppliers

So what does Wal-Mart expect of its suppliers?

A:-Price Leadership :-
commitment-- We Sell for Less
customer trust-- placed in this commitment.
“Its not about price – it is about getting great products
on their shelves utilizing efficient processes.”
 B– Commitment to Growth
According to Wal-Mart,
whether you get your foot in the door of a few stores or serve hundreds of
stores immediately, you still have the opportunity to grow your business
with them., they want their suppliers to be innovative and creative, which
includes new products, new twists or new merchandising.
“The end goal is to grow our business together”,
. Example;-
Terracyle manufactures plant food - the product is made from and
packaged entirely out of waste. The plant food is made from organic
materials and is packaged in used soda bottle containers.
Although the company is based in the US, Terracycle’s brand was first
launched in Canada., Wal-Mart assisted the company in improving its
product, which is now available throughout the Wal-Mart chain in North
America.
C- Well-Managed Partnerships –

They generally meet with their suppliers every

quarter to talk about what’s working and what’s not
and to discuss options or potential for growth.

“By sharing information, knowing one another’s

business, and having a joint business plan, we
think there is always room for improvement with
our suppliers”,
 D--Best People -

• Many of Wal-Mart’s buyers have 20, 30 or 35

years of experience and Wal-Mart believes that
it has the best buying organization.
As result, there is an expectation that suppliers
will assign their best people to the Wal-Mart
account. In partnership with its suppliers, the
company operates in a fast-paced environment
and must be responsive to the needs and
changing tastes of its customers.
 Win-Win Relationships –

what is a win-win relationship?

it is recognizing that success
goes beyond profit.
A “win” for Wal-Mart means consistently
having great products on store shelves. A
supplier wins when its products are
purchased by customers and its business
grows as a result of its partnership with Wal-
Mart.
 Open Minds – .

“If you think you can build a better mousetrap, we

want to know about it. If you have a great idea
for how we should merchandise your category,
we want to know about it. If you think we’re not
doing something as well as we could, we want
to know about it. But most of all, when we ask
for your input and creativity, we want you to be
up to the task.”
 Fair Dealings –

“Often, when people talk about doing business

with Wal-Mart they use the expression tough but
fair. “
Absolutely firm- exercising honesty and integrity ,
which will form the foundation of their relationship
with suppliers.
An Open Door policy provides the opportunity for
vendors to discuss their concerns with the buyers or
management team.
“We have great partnerships with our suppliers.
Without them, our business would crumble”,
• �- Sign a vendor agreement
(Insurance coverage (minimum $2 million), trademark property,
merchandise requirements, packaging and labeling standards, and
quality standards (including replenishment expectations, expiry
date management, delivery, pre-testing requirements etc).
• �- Ensure that your computer system is
compatible with their systems, and
• �- Sign their ethics code.
( Each year Wal-Mart spends approximately $40 million to verify vendors’
production plants. They also audit factories and train suppliers and their
factory managers to increase their familiarity with Wal-Mart’s Standards for
Suppliers.
 The Culture at Wal-Mart
• Four key core values and business
principles of Sam Walton’s approach to
managing:-
– Treat employees as partners, sharing both
good and bad about the company.
– Build for the future, rather than just immediate
gains.
– Recognize that the road to success includes
failing, which is the part of training process.
– Involve associates at all level in total decision
making process.
Continued…

– Walton’s success flowed from his cheerleading

management style, continuous improvement & his
habit of staying in close touch with both consumer
and associates.

– Wal-Mart culture was used throughout the company

at meetings of store employees, managers and
corporate gatherings.
 Three Basic Beliefs underlying Wal-Mart
culture

• Treat individuals with respect and dignity.

• Service to customers :- Company had to build their trust
in the customers by providing them excellent service.
• Strive for excellence
• Three beliefs were supplemented by several
supporting cultural themes and practices such
as:-
• Go all out to exceed customers’ expectations
• Practice Sam Walton’s 10 rules for building a
business.
• Sundown” Rule: Solve the problem of an
Customer before Sunset.
 10 Commandments of Sam

Rule #1
Commit to your business. Believe in it more than anything else.

Rule #2
Share your profits with all your associates, and treat them as
partners.

Rule #3
Motivate your partners.

Rule #4
Communicate everything you possibly can to your partners.

Rule #5
Appreciate everything your associates do for the business.
Rule #6
Celebrate your success and find humour in your failures.

Rule #7
Listen to everyone in your company, and figure out ways to
get them talking.

Rule #8
Exceed your customer's expectations.

Rule #9
Control your expenses better than your competition.

Rule #10
Swim upstream. Go the other way. Ignore the conventional
wisdom.
Soliciting Ideas from Associates:-
• Listening to associates’ comments, soliciting
suggestions, discussing how improvements
could be made & praising associates who were
doing good job.

• Listening to employees was a very important

part of each manager’s job. All of Wal-Mart’s top
executives relied on a concept known as
management by walking.
 Compensation and Incentives
• Health care benefit package was provided to its
employees.
• Benefits for full time employees:-
• Vacation and personal time.
• Holiday pay.
• Medical leave.
• Maternity leave.
• Counseling services for associates and their
families.
• Scholarships for associates and their spouse.
 Continued..

• Three types of Incentives plans:-

• The profit sharing plan:- eligibility criteria after
1 year of service.
• Stock purchase and stock option plan.
• Sales Contests and other Incentive
programs.
 Training
• The company had number of training tools such
as:-
• Class room courses
• Computer based learning
• Distance learning
• Corporate intranet sites
• Mentor programs
• Satellite broadcast
• Skills assessments
Types of training:-
• Management training
• Associate training

Meetings and Rapid response:-

• Company used meetings both as a
communication device and as a culture-building
exercise.
 Competitive Environment
• Competition centered on
– Pricing
– Store Location
– Store Formats
– Store Size
– Shopping Atmosphere
– Store Image
 Wal-Mart’s Competitors
• K-Mart, Target, Kroger, Albertsons, Giant Eagle,

Safeway were the primary competitors.

• Wal-Mart also competed against category retailers like

Best Buy, Circuit city

• Surveys of households comparing Wal-Mart with K-

Mart and Target indicated that Wal-Mart has a strong

competitive advantage.
Wal-Mart – Market Share / Competitors
Wal-Mart is three times big than its nearest competitor
Carrefour
 Competitive Strategies
1. Operational Promotional Strategies.

2. IT Systems.

3. Some Stores open for 24X7 days.

4. To cover all segments from the low-income to the upper

income segments.
 Wal-Mart's Performance
• Increase in overall profits for past 4 yrs.

• US households buy about 22% of groceries

from Wal-Mart

• A profit Margin of 9.3% in 2005 as compared

to 8.4% in 2002

• Its revenues represent 2.3% of US GDP.

 Wal-Mart International
• WalMax in Mexico
• ASDA in UK
• Sieyu in Japan
• Wholly owned subsidiaries in Argentina,
Brazil , Canada ,Puerto Rico
 Interesting facts about Wal-Mart
• It has grown from being a US$ 50 company some 45 years
ago to become the second-largest company on Fortune 500
list and America’s largest retailer at present.
• At US$ 380 billion, Wal-Mart is almost as big as half the
Indian economy (GDP of US$ 640 billion).
• Wal-Mart accounts for over 30 per cent of the sales of some
of the leading manufacturers like Procter & Gamble.

Source: MeriNews, WalMart Annual Report

 Contd….

• Wal-Mart is the largest American corporation in terms

of sales, $245 billion last year.
• It is now the nation's largest grocer, toy seller and
furniture retailer. More than 30 percent of the
disposable diapers purchased in the country are sold
in Wal-Mart stores, as are 30 percent of hair-care
products, 26 percent of toothpaste and 20 percent of
pet food.
• Estimated market capitalization of Wal-Mart in 2020
is $11.1 trillion
 Wal-Mart’s Future?
• US market is moving towards saturation
• Active 6000 lawsuits, Few of them are:
– Customer injuries
– Truck accidents
– Discrimination angainst women
– Unpaid OT
• Wal-Marts Criticization for:
– Releasing Guns beofre 10 days waiting period without verifying
the identity.
 Cont..
– Violatuion of state’s 1988 toy weapon law
– Hiring Janitorial contractors having illegal immigrants
– United Food and Commercial Workers (UFCW)
increasing pressure for wages and benefit hikes
– opposition from Big Box retailer to open new stores in
VT and CA
– Limitaion of Retail space by local authorities in Oakland
and San Francisco
 Contd..
– Criticism from Journalists
– Walmartwatch.com keeping vulure eye and
publicizing the conduct on the part of wal-
mart’s management
• Wal-Marts 3rd CEO still believe tripling of
Wal-Mart in near future.
 Will Wal-Mart Shine?
• Trillions of Bytes of Customer data
(Forecasted Sales efficiently e.g. Beer before Hurricanes)
• Soon Company will require its biggest suppliers to tag shipments to
some of its distribution centers with tiny transmitters that would
eventually let Wal-Mart track every item that it sells.
• Industry analysts predict that by 2010, Wal-Mart estimated sales will
exceed $500 billion dollars a year
• SuperCenters are clearly the company's growth vehicle, with 3,131
expected to be in operation in 2010.
• It already offers financial services, telecommunications, travel
services and gasoline at 10 to 15 cents a gallon less than
conventional gas stations.
 Hopes Alive
Wal-Mart CEO Lee Scott told the Chicago
Tribune earlier this year, "When you get
as large as we are, you have to paint a
picture in people's minds that you can still
grow. Otherwise they think of $285 billion
and think 'That's the end of that.' Well it
isn't. It's not even the start of it. We have
a five-year plan, and have a pretty good
idea in five years where we'll be."
• It already offers financial services,
telecommunications, travel services and
gasoline at 10 to 15 cents a gallon less
than conventional gas stations.
 Future Strategies
• Commercial banks and credit card companies rack up
hundreds of billions of dollars in fees from consumers
who move through Wal-Mart's doors. Wal-Mart has been
eyeing this cash cow for years. Now the company might
finally make its move.
• Wal-Mart filed an application to operate an industrial
bank based in Utah to handle electronic-payment
processing at its stores. If approved, the move could
mean big savings for the company, which uses a third
party to process its roughly 140 million monthly debit-
card, credit-card and electronic check-transfer payments
 Cont…
• Wal-Mart is already in the banking
business through the Walton Family,
which owns 96% of Arvest Bank.
• Some banks are already feeling the
squeeze from Wal-Mart. First Interstate
Bank plans to close 60 branches in Wal-
Mart stores in Montana and Wyoming.
Wal-Mart Cheer
Give me a W!
Give me a A!
Give me a L!
Give me a Squiggly!
Give me a M!
Give me a A!
Give me a R!
Give me a T!
What’s that spell?
Wal-Mart!
What’s that spell?
Wal-Mart!
Who’s number one?
The Customer
• …. and the journey still
continues …
References:
• www.walmartfacts.com
• www.gartner.com
• www.forrster.com
• www.hoovers.com
• www.wikipedia.com
• www.walmart.com
• www.image.google.com
• www.about.com
• www.youtube.com
Thank You