Strategic analysis of Operational

aspect of Wal-Mart
Submitted To : Prof. Mahua Guha
Prof. Rojers P. Joseph

Submitted By:
Section D | Group 6

Hrangbung Darthang (PGP09189)

Faizan Ahmad (PGP09202)
Nasreen Rahat (PGP09206)
Neeta Kumari (PGP09208)
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Prakhar Nagaich (PGP09217)
Walmart – An overview
• American multinational retail corporation operating a chain of hypermarkets, department stores and grocery
stores
• Founded by Sam Walton in 1962 and headquartered in Bentonville, Arkansas
• As of Jan 2019 - has 11,348 stores and clubs in 27 countries, operating under 55 different names
• World’s largest company by revenue – over USD 500 bn as well as the largest private employer in the world
with 2.3 million employees
• Business model - based on selling a wide variety of general merchandise at low prices
• Governed by - 12 member board of directors elected annually by shareholders
• As of March 2017, the company has 3,29,23,77,090 outstanding shares. These are held mainly by the Walton
family, a number of institutions and fund
• Walmart’s investments outside North America has seen mixed results. Its operations and subsidiaries in the
United Kingdom, South America and China are highly successful, while its ventures in Germany and South
Korea failed

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• Walmart Labs was formed to develop technology to assist in serving
customers
• acquired Bharati Walmart Private Limited including the Best Price
Modern cash-and-carry business in India in 2013 2010’s
• Introduced the Walmart Advanced Vehicle experience (a state of art
tractor trailer) in 2014
• First service company to take #1 spot on the Fortune 500 ranking
• Launched site to store service to enable online customers to pick up merchandise 2000’s
• A cash and carry facility opens in India in 2009
• Bought the McLane company, a leader in worldwide logistics and distribution
• Made Retail Link and Electronic Data Interchange (EDI) available also opened online stores in 1990’s
1996
• Became the largest private employer in the United States by 1997 and the world by 1999

• Reached $1 billion in sales, achieving that milestone in just 17 years, fastest in US history
• Became by far the largest US importer 1980’s
• The first super center was opened which carries groceries in addition to general merchandise

• First distribution centre was opened

1970’s
• Became a publicly held company and got listed on New York Stock Exchange

• Sam Walton opened the first Walmart in Arkansas 1960’s

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• Official incorporation as Wal-Mart Stores, Inc on Oct 31 1969
Global Retail Industry
Global Retail Leaders (2018)

 Valued at USD 23,460 bn in 2017 and is expected to attain a

CAGR of 5.3% during 2018-23

 Stores which form a chunk of this industry can be classified into

Convenience store, Specialty retailer and Internet retailing

 Is in Mature stage and is highly competitive in the developed

countries of Europe & North America

 Consumer spending which accounts for around 2/3 of the GDP,

has been a key indicator of health of this industry

 Increasing number of online shopping is a major driver. An

increasing number of smartphone users has penetrated across
countries which are also driving the e-commerce channel. Also
Internet of Things is reshaping the industry

 Major players : Walmart Inc., Metro Group, The Kroger

Company, The Home Depot Inc, Tesco, Alibaba Group,
Amazon.com Inc., Costco Wholesale Corporation, Inter IKEA
Systems BV and Target Corporation
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 Economical-Stability of Social- Healthy Environmental-
Political - Stable
major economies, lifestyle trend, Technological- Green products
political scenario,
Continued growth of Cultural diversity Automation, Business trend, Waste
Support for
developing countries, trend, Urban Analytics, Increasing use disposal and
globalization, Wage
Employment level/ migration of mobile devices environment
related laws
Purchasing power conservation laws

PESTEL Analysis Legal- Food safety laws,

Advertising rules,
Consumer protection
laws

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Porter’s forces Analysis

Bargaining Power (customers) - High Bargaining Power (Suppliers)-Low

Low power individually •Low switching costs from one supplier to another
Low switching costs •Product has a lot of substitutes
Many alternatives ( both online & offline) •Huge quantity of purchases
Abundance of information
Industry Rivalry - High

•Slow Industry growth

•Competitors have similar sizes
•High production capacity
Threat of Substitutes -
Barriers To Entry - Medium
Medium

•Economies of scale
•Prices and quality of products very competitive
•High capital requirement
•Performance of substitutes are similar
•Low switching among companies for customers
•Consumer switching costs are low
•

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Operational Analysis
Location

 A key success factor

 Influences customers in the way of decisions made where to shop
 Influences suppliers in the way of product placement in stores
 Logistics strategy is to have a dense store network to make it easier and quicker to deliver the product
 A dense network of stores results in savings of distribution costs

Business Segment Operation

Walmart stores: store segment is the largest segment which consists of three different retail formats, namely
• Supercentres: these average about 187,000 square feet in size and offer a wide variety of products
• Discount stores: these average about 100,000 square feet in size and offer a limited stock of food products
• Neighborhood markets: these average about 43,000 square feet in size and offer a full-line supermarket

SAM’s Club
• Consists of membership warehouse clubs in the USA. These clubs average about 128,000 square feet in size

Wal-Mart International
• Located in many countries worldwide and operates in several different formats of retail stores
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Supply Chain Management
Procurement& Inventory
Logistics
Distribution Management

Procurement & Distribution

 Company directly procures from manufacturers, by-passing all intermediaries

 EDI saves time and makes procurement efficient
 Spends significant amount of time in meeting with vendors and analyzing their cost structures
 First to experiment with central database, store level point of sale system and satellite network
 Distribution centres are located in different areas, which ensure a smooth flow of goods

Logistics

 Walmart has quick and responsive transportation system with more than 3500 trucks
 Trucks allow the company to ship goods from the distribution centers to the stores in about two to three days and refill the
stores shelves twice a week
 Walmart implements ‘Cross-docking’ in which finished goods are picked up directly from the manufacturing plant of a
supplier, sorted out and then directly supplied to stores
 Walmart has shifted the focus from ‘supply chain’ to the ‘ demand chain’ which meant that instead of retailer pushing
products into the supply chain system, customers could pull products when and where needed 8
 Inventory Management

 Walmart uses Information Technology(IT) capabilities to monitor inventory level, for instance, Walmart applied IT to capture
the customers’ demand information and then stock more popular products for the customers leading to an overall
reduction in the inventory.
 Has entered into collaboration with P&G for maintaining inventory in its stores and built an automated re-ordering system
 Uses a centralized inventory data system using which the personnel at the stores could find out the inventories and the
location of each product at any given time
 Makes use of bar code reading and radio frequency technology to manage inventories

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Wal-Mart Supply Chain Network and Replenishment Processes
Products arrive at
the distribution
center
Products are
Retail link routes
Vendor receives Carrier and organized on a
shipment and vendor Vendor ships
order from vendor coordinate per store basis
accepts routing ordered
Walmart information pick up time products
Product arrive
at center point To Wal-Mart

• Walmart's store network has various distribution centres which focus on each holding specific fragment and item type
• Walmart uses a private fleet for short pull shipments, which incorporate some inbound and outbound transportations
• Wal-Mart utilizes a framework called Inforem to robotize their renewal procedure for their retail locations
• In the warehouse replenishment process, goods are foremost stored at the warehouse level and then distributed to
different retail stores
• The types of goods that go through the warehouse replenishment process are those that are high in demand and have
high margins

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Wal-Mart Business Strategy and Supply Chain Strategy Linkage

Prominent competitive strategy : Provide consumers with high quality products at the lowest price possible
while still gaining profits and getting a sizeable return in investment
• Wal-Mart’s overall business strategy is to provide Every Day Low Prices (EDLP) to customers
• The supply chain strategy supports the business strategy to ensure on-shelf availability of a variety of
products in a convenient location at low prices
• The distribution centers were put closer to real-time information so as to clearly entail the in-stock levels of
each store
• operating model based on efficient flow through distribution processes supports the business strategy
• supply chain enablers of EDLP are capital investments that facilitate vendor collaboration, which then
supports differentiation in supply chain processes
• Retail Link is a supply chain visibility tool developed to facilitate supply chain partner collaboration
• Continued investment in IT is seen through its RFID initiatives
• Through its IT capacities, private trucking armada, and merchant retailer joint effort endeavours, Wal-Mart
can execute separating store network procedures to its items

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 SWOT Analysis
Strengths

 Low-cost structure: Walmart offers high-quality goods at prices lower than other retailers. It upholds it promise of ‘everyday low prices’ by
trying to squeeze its suppliers’ profit margin.
 Scale of operations: With more than USD 400 bn revenue and more than 10,000 stores, Walmart is the most powerful retail company in the
world. Its gigantic size allows it to benefit from economies of scale .
 Efficient supply chain: Effective supply chain and logistics help Walmart in maintaining the low-cost structure. In fact, logistics is one of the
most important Wal-Mart keys for success. It has adopted technologies like RFID to reduce inventory .
 Sustainability : Walmart enjoys a profitable return in economic downturns despite the fact that many retailers are badly affected. Walmart can
sustain its profits by increasing revenue in both developed and developing international markets.
 International presence: As of 2018, Walmart is operating in 11,735 locations in around 29 countries of the world. By growing internationally,
the company diversifies its income sources, gains valuable new experiences and strengthen the company’s retail leadership position

Weaknesses

 No differentiation : Walmart does not follow a differentiation strategy as some of its competitots do. It can cost it to lose customers if it
comes at a time when customers have more income and do not make their purchases only taking into account the prices.
 High employee turnover : The company loses many employees who find other jobs with better labour conditions or where they get more
respect with same salary.
 Low wage : The company, in its aim of cost savings, has been disrespectful of its employees at times and so it has been involved in cases of
labour related lawsuits. It is also criticized for poor working conditions, unpaid overtime work, low wages and female discrimination.
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 Opportunities

 Expansion: Foreign markets offer new opportunities of growth and provide new experience for the company as it operates quite differently
abroad than in the home market
 Private products: Walmart could increase the number of private label products and earn higher profit margin as it is seen that its private labels
are highly popular
 Health conscious customers: Walmart can also increase the range of healthy products in accordance with the changing taste for natural
ingredients and less of artificial sweeteners
 Brand building: Walmart can improve its image by putting efforts on social welfare. Green ethics in fact are becoming a part of Walmart’s
value. Saving electricity by creating self-sufficient supercenters, reducing greenhouse emissions, making shorter shipments to save oil,
investing in renewal energies are some examples

Threats

 Divergent goals: There is a conflict of interest when Walmart tries to improve its operation in order to become an eco-friendly company. It is
true that Walmart has scope for improvement but given its size and business identity as a low-price retailer, it is hard to think how far
company can go in this direction
 Competition: Some competitors like Target, Costco, Amazon and Tesco are putting in huge efforts to eliminate price differences that Walmart
enjoys. If it happens, Walmart will lose clients and will experience increased competition in the near future
 International laws: Regulatory compliance is a long and cumbersome process which demand suitable modifications in the work culture, wage
laws, logistics model. If entered in foreign country with Joint venture, care has to be taken to keep company’s secrets else Walmart could end
up losing its competitive advantage of logistics, which happened in the case of expansion in Germany
 Cannibalization: When Walmart opens a new store, 20 % of its sales come from old stores in the vicinity. The result is a decline in sale of old
stores by the new one. 13
• Investments of $3bn and • Conception of Walmart
$16bn In jet.com and as an inexpensive store
Flipkart, respectively is being tweaked
• Walmart has partnered
• Partnership with with Lord and Taylore
Microsoft to Create to on-board premium
‘Walmart cloud factory’ brands like Calvin Klein,
to Accelerate digital Tommy Hilfiger and
innovation Donna Karen
• Customers will get the
• MS Azure and MS 365 chance to buy from
will help in Transferring over 125 high-end
hundreds of existing brands without
Applications to cloud exorbitant prices
architecture
• Integrating the • These will reshape
physical and digital our shopping experience
marketplace 1)instore inventory
• Pickup towers are tracker
coming up at brick 2)instore drone assistance
and mortar stores , 3)Blockchain
which will hold the 4)Audio surveillance
merchandise ordered
online
• This option will give
competitive edge to
Walmart over its rival
Amazon
•
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Improvement Proposals
Future international business practices

 There are many strategies like Greenfield investment, licensing, franchising and joint ventures with local partners
 We are recommending Walmart to follow a JV route
 The first option of greenfield investment will likely increase the company’s expenses
 Walmart doesn’t enjoy the same status in other countries as in USA, so licensing and franchising will not be as effective
 In case of JV, Walmart will leverage the knowledge that partners have of local culture and customer tastes.
 The number one priority in JV is to choose the right trustworthy partner. It is also recommended that the company doesn’t share with foreign
partners its technical know-how used in its logistics

Growth Strategies

 Innovation: Walmart should continue its investment in innovation to become more efficient in its logistics and operations, and thereby,
maintaining its strategy of cost leadership
 Financial services: Banking services will be a complement to current services of Walmart. It can easily do that with little modifications in its
huge number of stores. Customers will see another reason to enter the store : doing their shopping and banking all in one place
 SME partnership : Walmart can provide wholesale options to SMEs. This will improve its reputation amidst the criticism that SMEs go out of
business when a new store opens, and the tie-up will lead to a win-win situation
 Friendlier corporate attitude: Walmart has marred its image due to labour suits and aggressive approach with suppliers. While entering
foreign markets, instead of barging in, it should adopt a friendlier corporate attitude, which will help it in making a long-lasting relationship
with every stakeholder
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Conclusion
 Wal-Mart has reached a dominant position in retail market with the most rapid growth in its discount provision network through
reducing the extra costs in operations and preventing the marginal expansions.

 Wal-Mart looks after their customers’ demands and maintains an efficiency in-stock level as well as permits the suppliers to be
informed about the sale of its merchandise on run-time

 Walmart strength is that due to the size of its operations, economies of scale work in its favour. More importantly, a successfully
integrated supply chain is a key means of competitive advantage for the fast and impressive growth of Wal-Mart as well as
maintaining its leading position in the retail industry in the world

 It is also alleged that whenever Walmart moves into a town, SMEs go out of business. Since it offers lower prices than local stores,
local businesses lose revenues and such claims are regularly made against Walmart when it tries to expand

 The company has seen substantial uptick in sales since its foundation in 1962 in Arkansas but recently its growth has fallen due to
cannibalization, cut-throat competition, market saturation, etc

 Consumers’ purchasing power has recently risen and so is the demand for luxury goods. Price is no longer the sole option when it
comes to making a purchase decision. Walmart needs to quickly adapt to this changing trend and follow a differentiation strategy to
remain ahead of the competitors

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Thank you !!

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