Background

 Headquarters: Bentonville, Arkansas

 Founded by Sam Walton
 NYSE:WMT
 Industry: Retail; Largest Retailer in the World
 Sales: $256.3B (2004)
 Employees: 1,500,000 (2004)
 Wal-Mart Stores, Inc. operates Wal-Mart Stores,
Supercenters, Neighborhood Markets and SAM'S CLUB
locations in the
1. United States
2. Puerto Rico
3. Canada, China
4. Mexico, Brazil
5. United Kingdom
6. Argentina
7. South Korea.
 Background Cont.
 Leader in defining corporate trends
 Pioneered Use of Universal Bar Code (UBC)
system
Question 1
 Applegate’s change elements
1. Strategy
 Organizations are now thinking globally and acting locally.
 Firms must change the way they are organized and employees at all level must become
information and knowledge literate.

2. Structure
 Adopting a hybrid organization model called the ‘information age organization’.
 Organizations are now structured as flat, fast, flexible and focussed on areas of core
competencies.

3. Operating and Management process

4. Distribution of Power and Authority

5. Core beliefs and values

 Have respect for the individual.
 Practice excellent customer service.
 Strive for excellence in all that we do .
 Information age organization represents an interesting blend of tradition and transformation
 Wal-Mart's Strategies
 Site selection.

 Wal-Mart benefits from economies of scale in manufacturing

and logistics

 They are leaders in the field of vendor managed inventory

 Aggregation Effect: whereby Wal-Mart sells as many different

items as possible. This allows the company to grow revenue
over its fixed cost base (more sales out of the same store).

 Information Systems: Wal-Mart helped push the retail industry

to adopt UPC codes and bar-code scanning equipment. Also,
Wal-Mart's plans to use RFID-based Electronic Product Codes
to lower the costs of supply chain management.
 Wal-Mart's Strategies Cont.
 Cost Control: Wal-Mart watches controllable expenses very closely. Hourly
employees can be reprimanded or terminated for having unauthorized
overtime.

 Wal-Mart also squeezes out any inefficiencies in the business, such as

reducing paper consumption by using a computerized process.

 Wal-Mart's sophisticated distribution system and information technology to

track inventory has significantly improved its efficiency and productivity
making it far more profitable than other retailers.

 Wal-Mart began an internal "survival of the fittest" competition among

individual stores. By building more stores than necessary, store managers felt
a strong incentive to "crack down on workers and improve the efficiency of
their store to stay alive" .
Question 2
 When Wal-Mart comes to town
competitors:
 Seek Local Government help
 Decide to adopt size caps, better wage laws,
or other rules under which Wal-Mart store would not be admissible
 Try to fend off new Wal-Mart stores by showing that the proposed stores’
plans are inadequate to address storm water runoff, increased car traffic,
and other.
 Competitors consult attorneys help you figure out the legal weaknesses in
Wal-Mart’s proposal, incase they do not to fit within zoning regulations for
the size and intended use of their development.
 If Wal-Mart has already come to town,
competitors:

Change:
 Treatment of labor force

 Management styles

 Type of clientele targeted

 Performance of present stores

 Advertising strategies

 Store décor

 Invest in re-positioning their brands by modifying store locations, hiring

and motivating staff employees, and promoting the brand through
advertising to their target segment
Question 3
 Business Strategies
 Global centralized information system for our operations

 Universal systems and platforms

First two philosophies have enabled Wal-Mart to drive costs down and helps maintain
efficiency.

 Merchants first and technologists second

 Third philosophy is to develop easy to use systems; developers have responsibility and
obligation to understand the business

 Minimal transition to transfer people

The processes and the systems are generally the same. Easy to
transfer people from one store to the other, and they're able to pick up
right where they left off. Therefore, no significant downtime or startup
time in the transition.
 For business acquisitions, eliminate before automate practice with
IS/IT Development.
Define success; eliminate before automate; business process overview
The next step is to eliminate before they automate. Eliminate steps, processes, reports,
keystrokes; eliminate any activity can possibly be eliminated.

 Power/Authority
They follow a model of decentralized decisions but centralized systems and controls.
They have a common system and a common platform, but we have to allow a great deal
of flexibility in their systems.
 Walmart
Tesco – Costco - Target
Products and Services:
 Wal-Mart: Sells a high range of products, ranging from house hold appliances to car-parts, stationary,
cosmetics, furniture, food products, art, home décor, etc.
 Tesco: Mainly food, But has moved into areas such as clothes, consumer electronics, consumer
financial services, internet service and consumer telecoms.
 Costco: Initially preferred to sell only boxed products , but now sells many other products that are
more difficult to handle, such as fresh produce, meat, seafood, fresh baked goods, flowers, clothing,
books, software, home electronics, jewelry, art and furnitureAlso has expanded towards tire garages,
pharmacies, Hearing Aid Centers, optometrists, photo processing, gas stations and ready-to-eat
Rotisserie Chicken.

Clientele :
 Tesco : Sells brands to appeal to upper, medium and low income customers in the same stores.
 Wal-Mart and Costco : Both aim the low-income group, who are ready for quantity over quality.

Adverstising:
 Wal-Mart spends only 0.3 percent of its revenue on advertising
 Its competitors spend 2.3 percent on an average. Infact , Tesco has very sophisticated marketing
campaigns with improved promotions reporting and performance tracking.
Opening New Stores :
 Wal-Mart constructs new stores strategically located near distribution hubs and smaller
towns
 Most of its competitors establish stores near major urban areas with a potentially large
clientele base

Employee Benefits :
 Wal-Mart : Known for a very low wage program for its employees.
 Tesco : High Education Policy, Life Insurance Cover, Medical Insurance, Personal
Accident Insurance, Gratuity.
 Costco : They have a high wage approach for their employees. They have benefit
packages including Health Care, Dental Care, Pharmacy Program, Vision Program, Life
Insurance, Long Term Disability. Costco believes in “Paying higher wages translates into
more efficiency”.
 Target’s Business Strategy
 Target chose not to go “head to head” with Wal-Mart Differentiation:
mass merchandiser of affordable chic goods
 Target outperforms Wal-Mart on specific dimensions: cleanliness of
stores, shopping environment and experience, and shorter waiting time to
pay
 Target's success was attributable to two key factors:
1. the right kind of differentiation
2. distinctive marketing communications.
 Target's dedication to match Wal-Mart's prices on like items
 Target's customers, referred to as "guests,"
 Demographic: on average younger, better educated, and more affluent.
 Target is often pronounced in faux French, "Tar-zhay," to connote its
trendy sensibility
Question 4
Kmart
 Stores located in declining
urban areas
 In January 2002, Kmart filed
for bankruptcy
 Brands: Martha Stewart
Everyday, JOE BOXER, Jaclyn
Smith, Sesame Street and
Thalia Sodi, among others.
 Purchased Sears, Roebuck
and Co. for $12.3 billion
Sears
 Stores located
predominately in malls
 off-mall growth strategy
 household staples — food,
cleansers and paper
products
 "Come see the softer side of
Sears."
 Strategic Rationale
 Merger accelerates execution of pre-existing strategies of both
retailers
– Provides Kmart with more unique and differentiated products
– Enables combined company to rapidly grow off-mall in locations closer,
more convenient to the customer
– Leverages the scale and financial strength of the combined company

 Real estate strategy

– Significantly expands Sears points of distribution in key markets; High
concentration of urban and high-density suburban locations
– Opportunity to monetize non-strategic real estate as appropriate

 Combines wealth of leading proprietary brands to further differentiate

stores from competition
– Craftsman, Kenmore, Lands’ End, DieHard
– Martha Stewart Everyday, Joe Boxer, Jaclyn Smith, Sesame Street
 Strategic Rationale
Cont.
 The combination of Kmart and Sears will:
 – Leverage the strength of two leading
retailers
 – Create compelling, differentiated customer
offerings
 – Create shareholder value through significant
synergies
Will Sears Holding Inc. be
successful?
Question 5
What has been their impact to date?
 Organizing in groups
 walmartwatch.com
 TUCSON
 informing the public:
 TV
 Radio
 Newspaper
 Take cases to court
 When the employees are lay off since the join unions
 To make Wal-Mart pay for the extra hours
 Legal actions in 30 states:
 Propose and promote legislation as:
 To make companies like Wal-Mart pay for health insurance
 “Anti-big-box" stores laws to ban super center stores.
 Tucson , TX
 Clack Country, NV
 What do you see as their long term
impact on Wal-Mart?
 Labor:
 At some point organized unions will finally enter the Wal-Mart workforce. Only a couple of them re
working right now but with pressure from the public and better organization by the unions they are
becoming part little by little of the company.
 Company ethos:
 The flooding of lawsuits is forcing the company to change some of their 'distincting' policies
regarding employment and location as well as the way the choose to organize their stores. Future
lawsuits will make this changes more important in the future.
 Community:
 The company will change some of their policies, as store location and size, so they do not alienate the
public as they have done in the pass. Making the communities more pro-Walt mart will be needed to
avoid the present ant-Wal-Mart situation.
 Market share:
 Walt-Mart will loose some of the market share due to how the public looks at Wal-Mart policies and
style. This threat will probably make the company change more than lawsuits or new laws.
 International Grow:
 The success of Wal-Mart in other countries, as European ones, is been threat red since workers are
organizing even before the company moves to those countries. Harder labor legislation prevents Wal-
Mart of imposing their labor ethics in those countries and makes them change their approach.
Do you see this grass roots rousing strategy as
being more effective than new laws?
 Public strategy:
 Public opinion and union demonstrations can affect the selling ability
of Wal-Mart, affecting the economic benefits of the company and
decreasing their market value. These effects will probably force Wal-
Mart more than anything to change their approach.
 Laws:
 Laws have the potential of affecting companies as Wal-Mart in a
dramatic way. On the other hand these multinationals can affect how
laws are passed and fight them in the court.
 Conclusion:
 Both approaches have advantages and disadvantages. If Wal-Mart
improves their PR, then the public strategy will loose its power. Using
laws is a more secure way of affecting Wal-Mart but not as powerful as
public discontent.
Will it work with any company who
violates cultural norms?