As the largest mass merchandiser in the world, Wal-Mart's work in supply chain execution, research, and policies defines best practices for the broader high volume retailing industry worldwide. Wal-Mart is comprised of three operating segments including the Wal-Mart stores, Sam's Club and the International Stores. The typical Wal-Mart discount store as 50 departments or more and a few are offering groceries in addition to apparel, fabrics, stationery and books, shoes, house wares, hardware, electronics, home furnishings, small appliances, automotive accessories, gardening accessories, sporting goods, toys, and pet food. Wal-Mart moved into the SuperCenter retailing concept in the 1990s and has at this point 1,700 of these SuperCenters worldwide (Sampson, 2008).
These SuperCenters range in size from slightly over 90,000 square feet to 260,000 square feet. These are substantially larger than its normal stores, ranging in size from 90,000 square feet to 261,000 square feet. Wal-Mart also runs smaller stores called Neighborhood Markets in Alabama, Arkansas, Florida, Kansas, Kentucky, Mississippi, Oklahoma, Tennessee, Texas, and Utah. Wal-Mart also operates over 550 Sam's Clubs in 48 states. Sam's Clubs offer consumers bulk buys of merchandise, groceries, sundries, and selected items under the Sam's Club Member's Mark store brand. The larger Sam's Clubs also include one-hour photo processing, pharmaceuticals, optical departments, and gasoline sales. Sam's Clubs are membership only, cash-and-carry operations. Wal-Mart's International segment is one of the fastest growing and is comprised of wholly owned operations in Argentina, Canada, Germany, China, South Korea, Puerto Rico and the UK, and majority-owned subsidiaries in Brazil and Mexico. It owns joint ventures in China, and has a minority ownership interest of a retailer in Japan.
Corporate Analysis and Appraisal
In completing a corporate analysis and appraisal, an assessment of strengths, weaknesses, opportunities and threats (SWOT) is used as the framework for completing the analysis.
Globally recognized brand and a strong reputation as a global company
Wal-Mart's global brand and presence is accentuated by its many store locations and activities across many nations of the world, and the growth of stores throughout the Pacific Rim nations of Japan and Korea.
Strong management and employee development program - Many members of the management team at Wal-Mart came from managing stores, which makes their senior management adept at handling the complexities of running such a large corporation in addition to understanding its culture. Wal-Mart has a strong commitment to training programs designed to identify high-potential individuals and develop them into strong managers. A good proportion of employees, in fact, began their time with Wal-Mart as hourly employees. This is perhaps at the root of the loyalty and business understanding that Wal-Mart employees tend to show. The employees are also not governed by a union. This allows Wal-Mart more freedom on work productivity rulings, and does not suffer the threat of strike action.
Excellent logistics system - Wal-Mart has an unparalleled logistics system that continues to deliver outstanding performance. Wal-Mart was the first retailer to develop drop shipping processes for moving products directly form manufacturers to distribution center, a practice that saved millions of dollars in distribution center charges. In addition, the company has invested in over 3,500 company-owned trucks to get goods from its over 100 distribution centers in the United States alone to nearly 5,000 stores. The focus on safety and reliability in logistics is also reflected in the high standards for drivers Wal-Mart has, which requires any driver to have 300,000 accident-free miles with no major traffic violations to get hired.
Global procurement and world class supplier relationship management - Due to its size in the U.S. alone and because it sells many of the same products in many countries, Wal-Mart obtains economies of scale when it purchases goods. The company has a "no nonsense" attitude around procurement and supplier relationship management, shunning the typical fancy dinners and perks typically associated with courting and selling large retail accounts. Wal-Mart runs the tightest ship in retailing when it comes to getting the lowest price from suppliers and managing relationships with them. Their supplier relationship management strategies include setting and keeping mandates for electronic product code (EPC) technology adoption through their RFID initiatives and pilots, heavy reliance on operational reporting of results back to suppliers through a world-class distributed order management system pioneered with Proctor & Gamble in the early 1990s, and an intensity of focus around the time value of information as exemplified in their investment in direct satellite links with 1,700 of their suppliers that represent 80% of the products sold. Wal-Marts' supplier relationship management strategies are world class and are studied by many other corporations globally on a regular basis.
Intelligent use of debt financing - Wal-Mart continues to manage their debt well as is shown in the trending of their Current Ratio, which is included in the financial analysis attached.
Aggressive growth strategy - Wal-Mart's expansion strategies are continually showing high levels of growth, with the company spending aggressively on new store development and a focus on international expansion throughout the Pacific Rim including Japan and China. The challenges for Wal-Mart in global expansion however is a cultural one; their focus on low prices and exceptional service, to a large extent underwritten by quick inventory turns (see Appendix a for ratio analysis of net profit margins) as illustrated by a relatively low Return on Assets (ROA), and very thin Net Profit Margin ratio hovering at 3% or below for the last ten years signals a business model that thrives on speed and velocity of inventory turns.
Culture that celebrates service - the Wal-Mart culture is in large part a reflection of the core values of its founder, Sam Walton. His five core values of treating individuals with respect and dignity, service to customers, striving for excellence, soliciting feedback and ideas for change from all associates signifies Mr. Walton's belief that the best way to make a decision is to get feedback from the people on the store floor directly impacted by it. He also strove to create a culture that continually challenges the status quo and made it OK for anyone to challenge a process or procedure that did not directly contribute to the value delivered to a customer.
Insufficient European exposure - Despite its world class logistics and supplier management systems, Wal-Mart currently has an operating presence in less than twenty countries around the world. Most surprising is the lack of strength in the UK and Australia, two economies very similar to the U.S. In many respects including logistics and supplier management.
Poor Saturday store sales - Over 100 senior managers gather every Saturday morning to review the weeks' performance and also watch Saturday store performance, typically one of the slower days for stores. Wal-Mart's drop off in Saturday store sales can also be attributed to the rapid build-up of SuperCenters throughout large metro areas.
Price deflation - This is a global dynamic that is affecting Wal-Mart and their response is shown in the intense focus on managing suppliers very aggressively. At times Wal-Mart has moved to create vertical integration strategies that give themselves more control over their supply chains. The world-class approach the company uses for supplier relationships is a combination strategy to turn this area of weakness into core strength.
Consumers showing signs of liking store variety - Wal-Mart's strength is its ability to create stores quickly and roll them out. The overall trending line for Net Profit Margin indicates the rapid inventory turns the company also relies on to continually stay profitable on such thin margins based on an analysis of their financial condition as shown in Appendix a.
Make global expansion a high priority for global growth - as has been mentioned previously, the growth of in the UK and throughout the Pacific Rim has significant upside potential for the company. Ascertaining the growth of Wal-Mart internationally however shows that the company has been slow to move into a low-cost provider strategy globally and instead looked to build on the significant horizontal integration competitive advantages built and perfected on the North American continent.
Expand SuperCenters with More Aggressive Use of Drop Shipping - the company has significant cost savings potential available to them through the marrying of RFID and mixed pallet drop shipping from its largest suppliers directly to distribution centers. An example of this is the scanning through RFID technology of mixed-pallet shipments from Proctor & Gamble for example directly to SuperCenters, alleviating the need to use the distribution center and incur those costs. The focus on integrating RFID and logistics especially from their largest suppliers has significant cost savings associated with it.
Growth areas harder to capitalize on and penetrate - the continued focus on consumer products, electronics and housewares and the lack of a move into other lucrative areas of retailing including Do it Yourself (DIY) products like Home Depot and Lowe's carry is…