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GLOBAL INDUSTRY ANALYSIS

GLOBAL INDUSTRY ANALYSIS. Group 5 M Ashrith Reddy Ajith Nair Bharat Sampath Saachi Singla. Vision and Mission Saving people money to help them live better.

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GLOBAL INDUSTRY ANALYSIS

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  1. GLOBAL INDUSTRY ANALYSIS Group 5 M Ashrith Reddy Ajith Nair Bharat Sampath Saachi Singla

  2. Vision and Mission • Saving people money to help them live better. • Offers the best quality merchandise at the lowest prices in all their stores, from school supplies, to household items and top quality groceries.

  3. Key Facts • Founder of Wal-Mart Stores : Mr. Sam Walton • Year 1945 ---> Ben Franklin franchise store • By 1950s --- -> 15 stores • Year 1962 ---- > Wal-Mart Discount City store • Year 1969 ----- >18 Wal-Mart stores &15 Ben Franklin franchise stores • Year 1970 ----- > 30 discount stores in rural states • South and Midwest • Build its own warehouse • Buy in volume at attractive prices • Store the merchandise • Year 1972 --- > Took the company public & Raised $3.3 million • Year 1993---- > West coast and northeastern states • By Year 1994----- > Wal-Mart Operated in 47 states • Few statistics of Wal-Mart • 20-year average return on equity - 33% • Compound average sales growth - 35% • Market value = $57.5 billion • Year 1988 • CEO: David Glass & COO: Don Soderquist took over the charge

  4. Financial Summary ( 1985 -1993) In Millions of dollars ($)

  5. Strategy of Wal-mart • Same goods for less( charges 2-5%lower price) & still earns profit. •  Very good operational efficiency  • Use of IT in all verticals of business • Effective use of logistics management • Global Expansion for new market opportunity  • Networked to HQ via private satellite in 1983 • Bargaining power over suppliers • Data used to “profile” each market • Predicts demand, optimizes stock 

  6. Operations Strategy • Wal-mart created significant advantage through the systems it developed to manage it’s warehouses and stores • Initially Wal-mart choose locations without direct competitions from large chains(rural areas) • Wal-mart created a culture of supporting values, skills, technologies, supplier –customer relationship, HR and approaches to motivation that could not be easily copied by other firms

  7. Organic Growth • Steadily builds new stores doesn’t buy other chains • Builds stores in cheap locations with room for expansion from standard, efficient design (no acquisitions) • With only 10% (vs. 25% of industry std) of space for storage(relying on logistical superiority)

  8. Value proposition • Excel at attributes such as price, quality, on-time delivery, selection, availability, that their competitors can’t match • Non-commodity brand based on lower prices, which is a key differentiator and value proposition to most of our society today. • Change in tagline last year – from “Everyday Low Prices” to “Save Money. Live Better.” proves it’s move toward sustainable products with low cost.

  9. Competitive Strategies • Low cost – High volume strategy • Low cost: Lower operating expenses than the industry average. The cost • advantage is its superior distribution capability • Location of stores • Inside-out growth patterns • Cross-docking • Superior information management. • High Volume: Wal- Mart’s prices are low by the industry standard, which, combined with its lower costs, indicates a strategy that aims at growth in volume through grabbing increased market share • Customer Satisfaction: Low prices, advanced information management and extremely motivated employees (“10 ft rule”, “sundown rule”) relates to a better customer experience than at other discount stores, even though Wal-Mart remains a self-service retailer. • Wal-Mart stores offers a one-stop solution by offering a wide range of • products. • Key strategies for growing • Wanted to penetrate isolated rural areas and small towns with population of approx • 5000-25000 • Pattern adopted by Wal-Mart --- > Always push from inside out • Around Mid-80s One third were located in areas that were not served by any of its competitors which made them take advantage of the market .

  10. The Scenario in the United States • Sears Roebuck and K-Mart were considered to be Wal-Mart’s main competitors, but • according to recent figures of the retail industry , K-Mart is the only big chain that • might be able to keep Wal-Mart’s fast pace. • K-Mart is the second-largest U.S. retailer (total sales in 1998 of $33 billion) and recently • has initiated an image brand initiative for 1999. By year end, almost the entire chain of • about 2,000 stores will be converted to the Big K format, similar to Wal-Mart's • Supercenter concept • Walmart Competitive Advantage • Distribution Capabilities : Efficient distribution; e.g. cross-docking, Walmart’s own distribution centres, and “inside-out” location strategy • Good Relationship with Suppliers : Wal-Mart integrates suppliers via IT and are benefited in terms of pricing. • Work Culture : Customer-oriented workforce motivated through generous monetary participation and belief in Wal-Mart culture • Data Mining : Active collection and usage of customer purchase behaviour information.

  11. Suppliers • Weak Power • Availability of alternate suppliers keeps them in weak position • Who wants to put off a retailer who supplies 15% of market growth? Porters Five Force Analysis • Barriers to entry • High • Volume is essential to survive a discount retailer. • High capital expenditure • Hard to find locations without competition. Barriers to entry Suppliers Competitors Customers Substitutes • Substitutes • Moderate • Retailers having different formats, have price discounts sufficiently large • Online sellers • Direct sales retailers (Dell) • Customers • Average power • Competition is fierce in retail distribution. • Heavy volumes leads to heavy discounts. • Switching cost is low

  12. Ware House Clubs and Supercenters • Ware House Clubs : pioneered by Price Club in 1970’s. Sam’s club turned to be twice the size of Price Club by 1993 and proved to be the largest wholesale club in the country. The operating philosophy at Sam’s Club was to offer a limited number of SKUs. It worked on a cash-and-carry operation wherein the annual membership fee of 25$ was paid. • Gross Margin of 9-10 % • Pass the Savings on to the members • Low Cost merchandising • Minimizes handling costs • Supercenters : Supercenter was a combination of supermarket and discount stores. it differ from supermarkets by offering a limited package sizes and brands in order to keep the costs low. These stores contained al items ranging from bakeries, delis, portrait studios, photo labs to groceries and speciality departments like floral boutiques. • Familiarity • Low-price image

  13. Porter's Generic Value Chain Firm Infrastructure Support Activities Human Resource Management Inferior fixtures standardization, Trucks, Average store size 84,000 square feat Technology Development Non-unionized, Full autonomy to associates, Decentralized, profit sharing program, Job rotation, Stock purchase plan Procurement Margin UPC at POS, EDI, Information system, VMI ,Cross docking , Satellite system, CPFR Maintain long-term relationship, No single supplier accounting for more than 2.4%, Selective suppliers ( P&G & GE), NO nonsense policy • VMI system • Retail link • EDI • CPFR • Six days a week(9~21) Monday(12:30~17:30) • Two step hub and spoke distributing system • Everyday low price • Always low price, always • Self service • Cash and carry • Save money, live better • credit card, • Layaway plan • ECR • Satisfaction guarantee policy • Quick response (QR) PrimaryActivities InboundLogistics Outbound Logistics Marketing & Sales After Sales Service Operations

  14. Milestones Achieved • 1962 • Sam Walton, the company’s founder, opens Wal-Mart’s first discount store inn Rogers, Arkansas USA. • 1970 • Wal-Mart opens its first distribution centre and establishes its headquarters in Bentonville, Arkansas. • 1975 • Wal-Mart makes its first acquisition, purchasing 16 Mohr-Value stores in the states of Michigan and Illinois. • 1983 • Wal-Mart is named “No. 1 Retailer” by Forbes magazine for the 8th year • in a row • 1991 • Wal-Mart opens its first international store, in Mexico City • 1994 • Wal-Mart • opens its first environmentally friendly prototype store. • 1996 • Wal-Mart enters China through a joint-venture agreement.

  15. 1997 • Wal-Mart is named the US’s largest private employer, with 680 000 associates in the US and 115 000 international • associates. • 1999 • Wal-Mart acquires the Asda Group in the United Kingdom, plus 71 Interspar outlets in Germany. The company becomes the world’s largest private employer and is named “No. 1 Corporate Citizen in America” by the • Cone/Roper Report. • 2004 • Wal-Mart hits the number one spot in the “Most Admired Companies” • list in Fortune magazine for the second year in a row • 2006 • The number of customers shopping at Wal-Mart stores reaches 176-million per week. • 2007 • Bharti Enterprises and Wal-Mart enter into a wholesale cash and carry • business joint-venture in India. • 2010 • Wal-Mart expresses an interest in South Africa’s largest wholesaler and third largest retailer, Massmart

  16. Issues and Challenges • Organizational Rigidity • Diversification

  17. Inferior fixtures standardization

  18. US Sales Revenue in 2006 from Annual Reports (In $)

  19. Thank You

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