walmart group 5 sec b
TRANSCRIPT
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PREPARED BY: MEDHA MATHUR (WMP08071), PRANAY PR SINGH (WMP08074), RAHUL BHANSALI (WMP08076)RAHUL DEV SINGH(WMP08077), RAHUL UPADHYAY(WMP08078), VIPUL TONDON (WMP6126)
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DISCOUNT RETAIL INDUSTRY ANDHISTORY OF WALMART
Emerged in US in mid-1950s
10-15% lower gross margins than conventional departmental store
Walten Brothers opened their first Walmart in Arkansas in 1962.
Walmart became public in 1970
Industry growth peaked in 1970s, the nos of stores increased by 64% and salesby 144%
Too many players entered into discounting in 1970
Wal*Mart opened the first three Sams clubs in 1983
Sams sales surpassed Price Clubs, making it the largest wholesale club in 1987
Discounters Sales grew from $2 billion in 1960 to $68 Billion in 1985
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20-year average return on equity of 33%
Compound average sales growth of 35%
Market value = $57.5 billion
Wal*Mart Industry average
Sales per $300 $210square foot
Performance ofWal*Mart
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Financial Summary
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PURCHASING AND DISTRIBUTION
Centralized purchasing
Used in-Store terminal to wire merchandise request to a centralcomputer
Central computer linked to 3000 vendors
No more than 1/5th of its volume from any one vendor
Optimal utilization of trucks
5 distribution networkcovering 175 stores within a 300 mile radius
Cost of inbound logistics2% of sales (half as compared withindustry)
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STORE OPERATION
859 Stores leased (except 47)
Rental 1.8% of sales (lowest)
More store area available for selling space as company
distribution network reduce storage requirement
Inventory turns exceeds 4.5
Emphasis on hard goods than soft goods
In 1971 started computerized system to track inventory
$20 million satellite network to ease real time communication
Electronic scanning of Uniform product code (UPC)
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MARKETING
Majority Branded merchandise (95%)nationally advertised
We sell for less marketing theme
Price competitivelowest than competitors
Everyday low prices promotional strategy
13 promotions in a year
Ad. Expenditure 1.1% of sales
Cash and Carryless than 5% by cards
Use CAD design to suggest a merchandise mix for each store9based on climate, customer preferences, ethnic mix)
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HRM
100000 employee (70% full time , 30% part time)
Non-unionized.
We care about our people buttons wore by managers
Decentralized: full autonomy
Top management spent time in stores
Employees officially called associates give views forimprovements in stores
Profit sharing program- Yes we can Sam
- Store within store- Shrink incentive- Stock sharing
Top 100 companies to work in US
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ADMINISTRATION
Emphasized Frugality
Heavy emphasis on communication within the company
12 Regional VPs, visit the stores (Monday to Thursday) , meets
on Friday and meets with 250 employees on Saturday todiscuss results and settle for direction in coming weeks
CEO and Chairman- Sam Walton very actively involved withemployees and company affairs
In 1986, named CEO of the year by financial world
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DIVERSIFICATION
3 new ventures in 1984- Dot discount drug, Helens Art and craftand Sams wholesale club
Analyst excited about Sams wholesale club, hailed warehouseclubs as most excited retail format
Warehouse clubs limits gross margin to 9-10 %, prices low by 20%as compared to discounters and supermarkets
Stocks only 3500 top-selling items, high population for highturnovers
$4.4 Billion sales by these clubs. High growth in coming years.Required investment of $ 5-10 million
Wal-Mart has 12 clubs in 1985, sales $777 million
Sam Club buys merchandise independent of discount stores
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EXPANSION
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INTERNALFACTORS
EXTERNALFACT
ORS
STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
SW
Diversity in products & services Convenient prices & locations
Strong market presence Customer loyalty Strong financial performance Cost and pricing advantages over
rivals Good supply chain
Global Expansion: new geographicareas
Increasing online sales Strategic alliances
Acquiring rival firms
HarmfulHelpful
Brand image-weakreputationLow global presenceBehind rivals in e-commerce
Intense Competition Laws and Regulations:
Trade policy Cultural barriers Current economy Slow market growth Transport of distinctive
comptency
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P.E.S.T. Analysis
1970 - 1985 Political: National Debt was increasing.- trading agreements (NAFTA)
Economical:Unemployment Rate(10%).- To tame inflation, Interest
rates were at an all time high in1982!
- 1982 Recession was severeand lasted long
Socio Cultural:Increasingly better informedconsumers since WWII.
- TV had intensified advertisingby manufacturers.
- Government standards alsobolstered consumers self-confidence.
- Wanted cheaper, self-
service retailers (ie. discountchains).
Technological:Electronic scanning ofuniform product code.- Satellite system.- Electronic data interchange
(EDI)
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Pricing Strategy and Actionssupporting the Strategy
Based on cost advantageAlways low prices---AlwaysStable priceSpent less on ad.Operating expenses are low
Store managers set up prices
Locate store in isolated rural areas and small towns
Buy its own warehouses
Buy at a best price (backward integration)
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Modern Day Technology Turningthe Tide
Electronic scanning of uniform product code(UPC) at the POSEnsure accurate pricingImprove efficiencyReduce ShrinkageImprove communications
Satellite systemData collected and analyzedObserving Merchandise flow, overstock, discountVideo transmissions, credit card authorizations, and inventory
control
Electronic data interchange (EDI)CPFRForecastingPlanningReplenishing
Shipping applications
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COMPETITIVE ADVANTAGE
Differentiation- Better
Cost leadership- Cheaper
Quick response- faster
Wal-Mart started their first 30 stores in rural and sub-urbs area
Wal-Mart competitive advantage
-adopted cost leadership strategy to achieve competitiveadvantage in the market-cost leadership strategies are helping Wal-Mart to reduce itscost of operations and thus enjoy higher profits as well as thelarger market share
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COMPETITIVE ADVANTAGE
Techniques to gain sustainability- Optimal use of resources (tangible and intangible),
Organizational capabilities and competencies to createvalues for the customers
- economies of scale that helps to keep the prices lower ascompared to the competitors.
- Wal-Mart has the tremendous bargaining power with itssuppliers and thus it purchases products at lower prices.
- MIS: Effective and efficient control of inventories throughpoint-of-purchase data collection methods
- Distribution: Effective use of logistics management technique(ware house)
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THANK YOU