SECTION A
– CASE ANALYSISAnswer All Questions [Total Marks is
40]
WAL-MART STORES, INC., UNITED STATE OF AMERICAWal-Mart Stores, Inc., branded as
Walmart, is an Americanmultinationalretail corporation that runs chains of large discount department stores and warehouse stores. The company is theworld's third largest public corporation, according to theFortune Global 500list in 2012, thebiggest private employerin the world with over two million employees, and is thelargest retailer in the world. Walmart remains afamily-owned business, as the company is controlled by theWalton family, who own a 48 percent stake in Walmart.
[5][6]It is also one of theworld's most valuable companies.
[7]The company was founded bySam Waltonin 1962,incorporatedon October 31, 1969, and publicly traded on theNew York Stock Exchangein 1972. It is headquartered inBentonville,Arkansas. Walmart is also the largestgroceryretailer in the United States. In 2009, it generated 51 percent of its US$258billion sales in the U.S. from grocery business.
[8]It also owns and operates theSam's Clubretail warehousesin North America.
[9][10]By 1988, Wal-Mart was the most profitable retailer in the US, and by November 1990, it outsoldK-mart.
[11]By 1991 it outsold Sears in retail, making it America's largest retailer, a distinction it still holds.
Walmart has 8,500 stores in 15 countries, under 55 different names.
[12]The company operates under the Walmart name in the United States, including the 50 states andPuerto Rico. It operates in Mexico asWalmex, in the United Kingdom asAsda, in Japan asSeiyu, and in India as Best Price. It has wholly owned operations in Argentina, Brazil, and Canada. Walmart's investments outside North America have had mixed results: its operations in the United Kingdom, South America, and China are highly successful, whereas ventures in Germany and South Korea were unsuccessful.
HistoryIn 1945 a businessman and formerJ. C. Penneyemployee,Sam Walton, purchased a branch of theBen Franklin Storesfrom theButler Brothers.
[13]Sam's focus was on selling products at low prices to get higher-volume sales at a lower-profit margin. He portrayed it as a crusade for the consumer. He experienced setbacks, because the lease price and branch purchase were unusually high, but he was able to find lower-cost suppliers than the ones used by other stores. He passed on the savings in the product pricing.
[14]Sales increased 45 percent in his first year of ownership to $105,000 in annual revenue, which increased to $140,000 the next year and $175,000 the year after that. Within the fifth year, the store was making $250,000 in revenue. When the lease for the location expired, he couldn't reach an agreement for renewal, so he opened a new Ben Franklin franchise in Bentonville, Arkansas and called it "Walton's Five and Dime."
[14][15]On July 2, 1962, Walton opened the first Walmart Discount City store located at 719 Walnut Ave. inRogers, Arkansas. The building is now occupied by a hardware store and an antique mall. Within five years, the company expanded to 24 stores acrossArkansasand reached $12.6million in sales.
[16]In 1968, it opened its first stores outside Arkansas, inSikeston, MissouriandClaremore, Oklahoma.
[17]Incorporation and growth (1969–2005)The company wasincorporatedas
Wal-Mart Stores, Inc.on October 31, 1969. In 1970, it opened its home office and first distribution center inBentonville,Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2million. It began trading stock as apublicly held companyon October 1, 1970, and was soon listed on theNew York Stock Exchange. The firststock splitoccurred in May 1971 at a market price of $47. By this time, Walmart was operating in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma; it entered Tennessee in 1973 and Kentucky and Mississippi in 1974. As it moved into Texas in 1975, there were 125 stores with 7,500 employees and total sales of $340.3million.
[17]Walmart opened its first Texas store inMount Pleasanton November 11, 1975.
[18]In the 1980s, Walmart continued to grow rapidly, and by its 25th anniversary in 1987 there were 1,198 stores with sales of $15.9billion and 200,000 associates.
[17]This year also marked the completion of the company's satellite network, a $24million investment linking all operating units of the company with its Bentonville office via two-way voice and data transmission and one-way video communication. At that time, it was the largest private satellite network, allowing the corporate office to track inventory and sales and to instantly communicate to stores.
[19]In 1988, Sam Walton stepped down as CEO and was replaced byDavid Glass.
[20]Walton remained as Chairman of the Board, and the company also rearranged other people in senior positions.
In 1988, the first
Wal-Mart Supercenteropened inWashington, Missouri.
[21]Thanks to its superstores, it surpassedToys "R" Usin toy sales in the late 1990s.
[22]The company also opened overseas stores, entering South America in 1995 with stores in Argentina and Brazil; and Europe in 1999, buyingAsdain the UK for $10billion.
[23]In 1998, Walmart introduced the "Neighborhood Market" concept, now known as "Walmart Market", with three stores inArkansas.
[24]By 2005, estimates indicate that the company controlled about 20 percent of the retail grocery and consumables business.
[25]In 2000,H. Lee Scottbecame President and CEO, and Walmart's sales increased to $165 billion.
[26]In 2002, it was listed for the first time as America's largest corporation on theFortune 500list, with revenues of $219.8billion and profits of $6.7billion. It has remained there every year, except for 2006 and 2009.
[27][28][29][30][31][32]In 2005, Walmart had $312.4billion in sales, more than 6,200 facilities around the world– including 3,800 stores in the United States and 2,800 elsewhere, employing more than 1.6million "associates" worldwide. Its U.S. presence grew so rapidly that only small pockets of the country remained further than 60miles (100km) from the nearest Walmart.
[33]As Walmart grew rapidly into the world's largest corporation, many critics worried about the effect of its stores on local communities, particularly small towns with many "mom and pop" stores. There have been several studies on the economic impact of Walmart on small towns and local businesses, jobs, and taxpayers. In one, Kenneth Stone, a Professor of Economics atIowa State University, found that some small towns can lose almost half of their retail trade within ten years of a Walmart store opening.
[34]However, in another study, he compared the changes to what small town shops had faced in the past– including the development of the railroads, the advent of the Sears Roebuck catalog, as well as the arrival of shopping malls– and concluded that shop owners who adapt to changes in the retail market can thrive after Walmart arrives.
[34]A later study in collaboration withMississippi State Universityshowed that there are "both positive and negative impacts on existing stores in the area where the new supercenter locates."
[35]In the aftermath ofHurricane Katrinain September 2005, Walmart was able to use its logistical efficiency in organizing a rapid response to the disaster, donating $20million in cash, 1,500 truckloads of free merchandise, food for 100,000 meals, as well as the promise of a job for every one of its displaced workers.
[36]An independent study by Steven Horwitz ofSt. Lawrence Universityfound that Walmart,The Home DepotandLowe'smade use of their local knowledge about supply chains, infrastructure, decision makers and other resources to provide emergency supplies and reopen stores well before FEMA began its response.
[37]While the company was overall lauded for its quick response – amidst thecriticismsof theFederal Emergency Management Agency– several critics were nonetheless quick to point out that there still remain issues with the company's labor relations.
[38]Initiatives (2005–present)In October 2005, Walmart announced it would implement several environmental measures to increaseenergy efficiency. The primary goals included spending $500million a year to increase fuel efficiency in Walmart's truck fleet by 25 percent over three years and double it within ten, reducegreenhouse gasemissions by 20 percent in seven years, reduce energy use at stores by 30 percent, and cut solid waste from U.S. stores and Sam's Clubs by 25 percent in three years. CEO Lee Scott said that Walmart's goal was to be a "good steward for the environment" and ultimately use onlyrenewable energysources and produce zero waste.
[39]The company also designed three new experimental stores inMcKinney, Texas,Aurora, Colorado, andLas Vegas, Nevada. withwind turbines,photovoltaicsolar panels,biofuel-capable boilers, water-cooled refrigerators, andxeriscapegardens.
[40]Despite much criticism of its environmental record, Walmart took a few steps in what is viewed as a positive direction, which included becoming the biggest seller of organic milk and the biggest buyer of organic cotton in the world, as well as reducing packaging and energy costs.
[41]Walmart also spent nearly a year working with outside consultants to discover the company's total environmental impact and find where they could improve. They discovered, for example, that by eliminating excess packaging on their toy line Kid Connection, they could not only save $2.4million a year in shipping costs but also 3,800 trees and a million barrels of oil.
[41]Walmart has also recently created its ownelectric companyin Texas,
Texas Retail Energy, and plans to supply its stores with cheap power purchased at wholesale prices. Through this new venture, the company expects to save $15million annually and also lays the groundwork and infrastructure to sell electricity to Texas consumers in the future.
[42]In March 2006, Walmart sought to appeal to a more affluent demographic. The company launched a new Supercenter concept inPlano, Texas, intended to compete against stores seen as more upscale and appealing, such asTarget.
[43][44]The new store has wood floors, wider aisles, asushibar, a coffee/sandwich shop with freeWi-FiInternet access, and more expensive beers, wines, electronics, and other goods. The exterior has a hunter green background behind the Walmart letters, similar to Neighborhood Market by Walmarts, instead of the blue previously used at its supercenters.
On September 12, 2007, Walmart introduced new advertising with theslogan, "
Save Money Live Better," replacing the "
Always Low Prices, Always" slogan, which it had used for the previous 19 years.Global Insight, which conducted the research that supported the ads, found that Walmart'sprice levelreduction resulted in savings for consumers of $287billion in 2006, which equated to $957 per person or $2,500 per household (up 7.3 percent from the 2004 savings estimate of $2,329).
[45]On June 30, 2008, Walmart removed the hyphen from its logo and replaced the star with a symbol that resembles a sunburst or flower. The new logo received mixed reviews from some design critics, who questioned whether the new logo was as bold as competitors, such as theTargetbullseye or as instantly recognizable as the former company logo, which was used for 18 years.
[46]The new logo made its debut on the company's walmart.com website on July 1, 2008. Walmart's U.S. locations were to update store logos in the fall of 2008, as part of an ongoing evolution of its overall brand.
[47]Walmart Canada started to adopt the logo for its stores in early 2009.
[48]On March 20, 2009, Walmart announced that it is paying a combined $933.6million in bonuses to every full and part-time hourly worker of the company. An additional $788.8million inprofit sharing,401(k)contributions, and hundreds of millions of dollars in merchandise discounts and contributions to the employees' stock purchase plan is also included in this plan. While the economy at large was in an ongoingrecession, the largest retailer in the U.S. reported solid financial figures for the most recent fiscal year (ending January 31, 2009), with $401.2billion in net sales, a gain of 7.2 percent from the prior year. Income from continuing operations increased 3 percent to $13.3billion, and earnings per share rose 6 percent to $3.35.
[49]On July 16, 2009, Walmart announced plans to develop a worldwide sustainable product index.
[50]On February 22, 2010, the company confirmed it was acquiringvideo streamingcompanyVudu, Inc.for an estimated $100million.
[51]In January 2011, at the urging ofMichelle Obamaand her staff, Walmart announced a program to improve the nutritional values of its store brands over the next five years, gradually reducing the amount of salt and sugar, and eliminating trans fat. Walmart also promised to negotiate with suppliers such asKraftwith respect to nutritional issues. Reductions in the prices of whole foods and vegetables were also promised as well as efforts to open stores in low-income areas, "food deserts", where there are no supermarkets.
[52]On April 23, 2011, the company announced that it was testing its new "Walmart To Go" home delivery system where customers will be able to order specific items offered on their website such as groceries, toiletries, and household supplies. The initial test is inSan Jose, California, and the company has not said whether it will be rolled out nationwide.
[53]On November 14, 2012, Walmart launched their first mail subscription service called Goodies. Customers pay a $7 monthly subscription for five to eight delivered food samples each month, so they can try new foods.
[54]Operating divisionsWalmart's operations are organized into three divisions: Walmart Stores U.S.,Sam's Club, and Walmart International.
[9]The company does business in nine different retail formats:supercenters,food and drugs,general merchandisestores, bodegas (small markets), cash and carry stores,membership warehouse clubs,apparelstores, softdiscount storesand restaurants.
[9]Walmart Stores U.S. is the company's largest division, accounting for $258billion, or 63.8 percent of total sales for financial year 2010.
[9]It consists of three retail formats that have become commonplace in the United States:Discount Stores,Supercenters, andWalmart Markets. The retail department stores sell a variety of mostly non-grocery products, though emphasis has now shifted towards supercenters, which include more grocery items.
In September 2006, Walmart announced a pilot program to sellgeneric drugsat just $4 per prescription. The pilot program was launched at stores in theTampa, Floridaarea, and expanded to all stores in Florida by January 2007. While the average price of generics is $29 per prescription, compared to $102 for name-brand drugs, Walmart maintains that it is not selling at a loss, or providing as an act of charity – instead, they are using the same mechanisms of mass distribution that it uses to bring lower prices to other products.
[55]Many of Walmart's low cost generics are imported from India and made by drug makers in the country, includingRanbaxyandCipla.
[56]On February 6, 2007, the company launched a "beta" version of a movie download service, which sold about 3,000 films and television episodes from all major studios and television networks.
[57]The service was discontinued on December 21, 2007, due to low sales.
[58]From 2008 through 2011, Walmart operated a pilot program in the small grocery store concept called
Marketsidein the metropolitanPhoenix, Arizonaarea. They plan to take what they have learned from this concept and incorporate that into their newer Walmart Express stores which they are developing.
[59]Walmart Discount StoresWalmart discount stores arediscount department storeswith size varying from 51,000 square feet (4,738.1m
2) to 224,000 square feet (20,810.3m
2), with an average store covering about 102,000 square feet (9,476.1m
2).
[9]They carrygeneral merchandiseand a selection ofgroceries. Many of these stores also have a garden center, apharmacy,Tire&LubeExpress, optical center,one-hour photo processing lab,portraitstudio, a bank branch, a cell phone store and a fast food outlet. Some also have gasoline stations.
[60]In 1990, Walmart opened its first
Bud's Discount Citylocation in Bentonville. Bud's operated as a closeout store, much likeBig Lots. Many locations were opened to fulfill leases in shopping centers as Walmart stores left and moved into newly built Supercenters. All of the Bud's Discount City stores closed or converted into Walmart Discount Stores by 1997.
[16][61]As of March 2012, there were 629 Walmart discount stores in the United States. In 2006, the busiest in the world was one inRapid City, South Dakota.
[62]Walmart SupercenterWalmart Supercenters arehypermarketswith size varying from 98,000 to 261,000 square feet (9,104.5 to 24,247.7 m
2), with an average of about 197,000 square feet (18,301.9m
2).
[9]These stock everything a Walmart discount store does, and also include a full-service supermarket, including meat and poultry,baked goods,delicatessen,frozen foods, dairy products, gardenproduce, and fresh seafood. Many Wal-Mart Supercenters also have a garden center,pet shop,pharmacy, Tire &LubeExpress, optical center, one-hour photo processing lab, portrait studio, and numerous alcove shops, such as cellular phone stores, hair and nail salons, video rental stores, local bank branches (newer locations haveWoodforest National Bankbranches), and fast food outlets– usuallySubway, but sometimesDunkin' Donuts,McDonald'sorBlimpie. Some also sell gasoline distributed byMurphy Oil Corporation(whose Walmart stations are branded as "Murphy USA"),Sunoco, Inc.("Optima"), orTesoro Corporation("Mirastar").
[60]The first Supercenter opened in 1988, inWashington, Missouri. A similar concept,
Hypermart USA, opened inGarland, Texasa year earlier. All of the Hypermart USA stores were later closed or converted into Supercenters, such as the first ones located in Garland TX and Bannister TX, which were both reopened as Walmarts.
As of March 2012, there were 3,029 Wal-Mart Supercenters in the United States.
[62]The largest Supercenter in the United States, covering 260,000 square feet (24,154.8m
2) and two floors, is located inCrossgates CommonsinAlbany, New York.
[63]The "Supercenter" portion of the name on these stores has been phased out, simply referring to these stores as "Walmart," since the company introduced the new Walmart logo in 2008. The Supercentre portion of the name is still used on supercentres in Canada.
Walmart MarketWalmart Market is a chain ofgrocery storesthat average about 42,000 square feet (3,901.9m
2).
[9]They are used to fill the gap between discount store and supercenters, offering a variety of products, which include full lines of groceries, pharmaceuticals, health and beauty aids, photo developing services, and a limited selection ofgeneral merchandise.
Previously branded as "Wal-Mart Neighborhood Market", the first store opened in 1998, inBentonville,Arkansas. As of May 2012, there are 199 Walmart Markets.
[62][64]Supermercado de WalmartWalmart opened "Supermercado de Walmart" locations to appeal to Hispanic communities in the United States.
[65]The first one, a 39,000 square feet (3,600m
2) store in theSpring Brancharea ofHouston, opened on April 29, 2009.
[66]The store was a conversion of an existing Walmart.
[67][68]The opening was Wal-Mart's first entry in the Hispanic grocery market in Houston.
[69]In 2009 another Supermercado de Walmart opened inPhoenix, Arizona.
[70]Walmart also planned to open "Mas Club," a warehouse retail operation patterned afterSam's Club.
[71]Walmart ExpressWalmart Express is a smaller discount store, with a range of services, from simple grocery shopping, to check cashing, and even gasoline service. The concept is focused on small towns that are not able to support a larger store, and in large cities where physical space is at a premium.
Wal-Mart planned to build 15 to 20 Walmart Express stores, focusing on Arkansas, North Carolina and Chicago, by the end of its fiscal year in January 2012.
"This is about access to breadth of assortment", says Walmart's Anthony Hucker, vice president of strategy and business development.
As of December 2011, Walmart Express opened inRichfield, North Carolina,Snow Hill, North Carolina,
[72]Gentry, Arkansas,
[73]Prairie Grove, Arkansas,
[74]Gravette, Arkansas
[75]andChicago, Illinois.
[76][77]Sam's ClubSam's Club is a chain ofwarehouse clubswhich sell groceries andgeneral merchandise, often in large quantities. Sam's Club stores are "membership" stores and most customers buy annual memberships. However, non-members can make purchases either by buying a one-day membership or paying a surcharge based on the price of the purchase.
[78]Some locations also sell gasoline.
[60]The first Sam's Club opened in 1983 inMidwest City, Oklahoma
[78]under the name "Sam's Wholesale Club".
Sam's Club has found a niche market in recent years as a supplier to small businesses. All Sam's Club stores are open early hours exclusively for business members and their old slogan was "We're in Business for Small Business." Their current
[when?]slogan is "Savings Made Simple" as Sam's Club attempts to attract a more diverse member base. In March 2009, the company announced that it plans to enter theelectronic medical recordsbusiness by offering a software package to physicians in small practices for $25,000. Wal-Mart is partnering withDelland eClinicalWorks.com in this new venture.
[79]Sam's Club's sales during 2010 were $47billion, or 11.5 percent of Walmart's total sales.
[9]As of March 2012, there are 611 Sam's Clubs in the United States.
[10]Walmart also operates more than 100 international Sam's Clubs inBrazil, China,Mexico, andPuerto Rico.
[10]Walmart InternationalWalmart's international operations currently
[when?]comprise 4,263 stores and 660,000 workers in 15 countries outside the United States.
[80]There are wholly owned operations in Argentina, Brazil, Canada, and the UK. With 2.1million employees worldwide, the company is the largest private employer in the U.S. and Mexico, and one of the largest in Canada.
[3]In the financial year 2010, Walmart's international division sales were $100billion, or 24.7 percent of total sales.
[9]Walmart has operated in Canada since its acquisition of 122 stores comprising theWoolcodivision ofWoolworth Canada, Incin 1994. As of July 2010, it operates over 300 locations (including 100 Supercentres) and employs 82,000 Canadians, with a local home office inMississauga, Ontario.
[81]Walmart Canada's first three Supercentres (spelled as inCanadian English) opened on November 8, 2006, inHamilton,London, andAurora, Ontario. The 100th Canadian Supercentre opened on July 10, 2010, inVictoria, BC. In 2010, Walmart Canada Bank was introduced in Canada with the launch of the Walmart Rewards MasterCard.
[82]In the mid 1990s Wal-mart tried with a large financial investment to get a foothold in the German retail market. In 1997 Wal-mart took over the supermarket chain Wertkauf with its 21 stores for DEM750million (€375million)
[83]and in 1998 Wal-mart took over 74 Interspar stores for DEM1.3billion (€750million).
[84][85]The German market at this point was an oligopoly with high competition among the companies which also used a similar low price strategy as Wal-mart. Because of this, Wal-mart's low price strategy yielded no competitive advantage. Also Wal-mart'scorporate culturewas not viewed positively among employees and customers in Germany, particularly Wal-mart's "statement of ethics", which restricted relationships between employees and led to a public discussion in the media, resulting in a bad reputation for Wal-mart among customers.
[86][87]In July 2006, Wal-Mart announced its withdrawal from Germany due to sustained losses. The stores were sold to the German companyMetroduring Wal-Mart's fiscal third quarter.
[88][89]Wal-mart did not disclose its losses from its ill fated German investment, but they were estimated around €3billion.
[90]In 2004, Walmart bought the 116 stores in theBompreçosupermarket chain in northeastern Brazil. In late 2005, it took control of the Brazilian operations of Sonae Distribution Group through its new subsidiary, WMS Supermercados do Brasil, thus acquiring control of the Nacional and Mercadorama supermarket chains, the leaders in theRio Grande do SulandParanástates, respectively. None of these was rebranded. As of April 2010, Wal-Mart operates 64 Super-Bompreço stores, 33 Hyper-Bompreço stores. It also runs 45 Wal-Mart Supercenters, 24 Sam's Club stores, and 101 Todo Dia stores. With the acquisition of Bompreço and Sonae, Walmart was in 2010 the third largest supermarket chain in Brazil, behindCarrefourandPão de Açúcar.
[91]Wal-Mart Brasil, the operating company, has its head office inBarueri, São Paulo State, and regional offices inCuritiba, Paraná;Porto Alegre, Rio Grande do Sul;Recife, Pernambuco; andSalvador, Bahia.
[92]In November 2006, the company announced a joint venture withBharti Enterprisesto open retail stores inIndia. As foreign corporations were not allowed to directly enter the retail sector in India, Walmart operated through franchises and handled the wholesale end.
[93]The partnership involves two joint ventures; Bharti manages the front end involving opening of retail outlets, while Walmart takes care of the back end, such ascold chainsand logistics.Bharti Walmartoperates stores in India under the brand name "Best Price Modern Wholesale". The first store opened inAmritsarin May 2012. On September 14, 2012, the Government of India approved 51 percent FDI in multi-brand retails, subject to approvals by individual states, effective September 20, 2012.
[94][95]In an interview withThe Wall Street Journal, Wal-Mart Stores Inc President and CEO, Asia Scott Price, stated that Walmart would be capable of opening stores in India within a time frame of 2 years. Price also said that the company expects to continue its partnership with Bharti Enterprises in operating Best Price Modern Wholesale.
[96]Expansion into India faced some significant problems. In November 2012, Walmart admitted to spending $25 million lobbying Congress
[97]- lobbying is conventionally considered bribery in India.
[98]Walmart is conducting an internal investigation into potential violations of theForeign Corrupt Practices Act.
[99]Bharti Walmart suspended a number of employees, which are rumored to include its CFO and legal team, to ensure "a complete and thorough investigation."
[100]The suspension focused attention on Bharti Walmart as a part of the broader debate surrounding the desirability of allowing multi-brand FDI into India.
[101][102]The September 20, 2012 approval of FDI was challenged by opposition parties and narrowly passed in a contentious parliamentary vote in early December.
[103][104]Sales in 2006 for Walmart's UK subsidiary,Asda(which retains the name it had before acquisition by Walmart), accounted for 42.7 percent of sales of Walmart's international division. In contrast to the US operations, Asda was originally and still remains primarily a grocery chain, but with a stronger focus on non-food items than most UK supermarket chains other thanTesco. As of 2011, Asda had 523 stores, including 147 from the 2010Nettoacquisition. In addition to small suburban Asda stores, larger stores are branded Asda Walmart Supercentres, as well as Asda Superstores and Asda Living.
[4][105][106]In addition to its wholly owned international operations, Walmart has joint ventures in China and several majority-owned subsidiaries. Walmart's majority-owned subsidiary in Mexico isWalmex. In Japan, Walmart owns 100 percent ofSeiyuas of 2008.
[88][107]Additionally, Walmart owns 51 percent of the Central American Retail Holding Company (CARHCO), consisting of more than 360 supermarkets and other stores in Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica.
[108]In 2008, Walmart named German retailing veteran Stephan Fanderl as the president of Walmart Emerging Markets-East in an effort to, "explore retail business opportunities in Russia and neighboring markets." The market is estimated to be worth more thanUS$140billion per year in food sales alone.
[109]In January 2009, the company acquired a controlling interest in the largest grocer inChile, Distribucion y Servicio D&S SA.
[110]On September 28, 2010, Walmart announced it would buyMassmart Holdings Ltd. ofJohannesburg,South Africain a deal worth over $4billion, giving the company its first stores in Africa.
[12]In December 2011, Walmart neither confirmed nor denied speculation that it was eyeing opportunities inPakistan. "We have not made any announcements concerning Pakistan," said Megan Murphy, Walmart's international corporate affairs manager in an e-mail. Walmart does not comment on market entry speculation, she added. Murphy, however, said their priorities are to "concentrate on the markets where we already have operations and look for growth opportunities in markets where customers want to see us and where it makes sense for our long-term growth."
[111]In February 2012, Walmart announced that the company raises its stake to 51 percent in Chinese Online SupermarketYihaodianto tap rising consumer wealth and help the company offer more product. The stake expansion is subject to Chinese government regulatory approval.
[112]An April 2012 investigative report in
The New York Timesreported that a former executive of Walmart de Mexico alleged that, in September 2005, Walmart de Mexico had paidbribesvia local fixers calledgestoresto officials throughout Mexico in order to obtain construction permits, information, and other favors. Walmart investigators found credible evidence that Mexican and American laws had been broken. Concerns were raised that Walmart executives in the United States "hushed up" the allegations. Reportedly, bribes were given to rapidly obtain construction permits, which gave Walmart a substantial advantage over its business competitors.
[113]A follow-up investigation by
The New York Times,published December 17, 2012, revealed evidence that regulatory permission for siting, construction, and operation of nineteen stores had been obtained through bribery. There was evidence that a bribe of $52,000 was paid to change a zoning map, which enabled the opening of a Walmart store a mile from a historical site inSan Juan Teotihuacán.
[114]After the initial article was released, Walmart released a statement denying the allegations and describing its anti-corruption policy. While an official Walmart report states that they found no evidence of corruption, the article alleges that previous internal reports had indeed turned up such evidence before the story became public.
[115]Forbes magazinecontributor,Adam Hartung, also alluded that the bribery scandal was a reflection of Walmart's "serious management and strategy troubles," stating, "[s]candals are now commonplace... [e]ach scandal points out that Walmart's strategy is harder to navigate and is running into big problems."
[116]As of December 2012, internal investigations ongoing into possible violations of the Federal Corrupt Practices Act.
[117]Walmart has invested $99 million in the internal investigations, which have expanded beyond Mexico to implicate operations in China, Brazil, and India.
[118][119]The case has added fuel to the debate as to whether foreign investment will result in increased prosperity, or if it merely allows local retail trade and economic policy to be taken over by "foreign financial and corporate interests."
[101][120]VuduIn February 2010, the company agreed to buyVudu, a Silicon Valley start-up whose three-year-old online movie service is being built into an increasing number of televisions and Blu-ray players. Terms of the acquisition were not disclosed, but a person briefed on the deal said the price for the company, which raised $60million in capital, was over $100million.
[121]It is the third most popular online movie service, with a market share of 5.3 percent.
[122]Private label brandsAbout 40 percent of products sold in Walmart areprivate labelstore brands, or products offered by Walmart and produced through contracts with manufacturers. Walmart began offering private label brands in 1991 with the launch ofSam's Choice, a brand of drinks produced byCott Beveragesexclusively for Walmart. Sam's Choice quickly became popular, and by 1993 was the third most popular beverage brand in the United States.
[123]Other Walmart brands include Great Value and Equate in the US and Canada, andSmart Pricein Britain. A 2006 study talked of "the magnitude of mind-share Walmart appears to hold in shoppers' minds when it comes to awareness of private label brands and retailers."
[124]EntertainmentIn 2010, the company teamed withProcter & Gambleto produce
Secrets of the Mountainand
The Jensen Project, two-hour family movies which featured the characters using Walmart and Procter & Gamble branded products.
The Jensen Projectalso featured a preview of a product to be released in several months in Walmart stores.
[125][126]A third movie,
A Walk in My Shoes, also aired in 2010 and a fourth is in production
[
when?
].
[127]Walmart's director of brand marketing also serves as co-chair of theAssociation of National Advertisers's Alliance for Family Entertainment.
[128]Corporate affairs
Walmart is headquartered in the Wal-Mart Home Office complex inBentonville,Arkansas. The company'sbusiness modelis based on selling a wide variety of general merchandise at "always low prices."
[9]They refer to their employees as "associates". All Wal-Mart stores in the US and Canada also have designated "greeters" at the store entrance, a practice pioneered by founderSam Waltonand later copied by other retailers. Greeters are trained to help shoppers find what they want and answer their questions.
[129]For many years, associates were identified in the store by their signature blue vest, but this was discontinued in June 2007 and replaced with more modern and professional khaki pants and polo shirts. The wardrobe change was part of a larger corporate overhaul for the store in an effort to increase sales and rejuvenate its stock price.
[130]Unlike many other retailers, Wal-Mart does not charge aslotting feeto suppliers for their products to appear in the store.
[131]Instead, it focuses on selling more popular products and provides incentives for store managers to drop unpopular products, as well as asking manufacturers to supply more popular products.
[131]On September 14, 2006, the company announced that it would phase out itslayawayprogram, citing declining use and increased costs.
[132]Layaway ceased to be offered on November 19, 2006, and required merchandise pickup by December 8, 2006. Wal-Mart now focuses on other payment options, such as increased use of six- and twelve-month, zero-interest financing. The layaway location in most stores is now used for Wal-Mart's Site-To-Store program, which was introduced in March 2007. This enables
walmart.comcustomers to buy goods online with a free shipping option, and have goods shipped to the nearest store for pickup.
[133]Maggie Sans, representing Walmart, sat on the Private Enterprise Board as Secretary of theAmerican Legislative Exchange Council.
[134]On May 31, 2012, Walmart announced they were suspending their membership in the organization. Sans said:
"Previously, we expressed our concerns about ALEC's decision to weigh in on issues that stray from its core mission 'to advance the Jeffersonian principles of free markets.' We feel that the divide between these activities and our purpose as a business has become too wide. To that end, we are suspending our membership in ALEC."
[135]Finance and governanceFor thefiscal yearending January 31, 2011, Wal-Mart reported anet incomeof $15.4billion on $422billion of revenue with a 24.7 percentgross profit margin. The corporation's international operations accounted for $109.2billion, or 26.1 percent of total sales.
[2]It is the world's 18th largest public corporation, according to theForbes Global 2000list, and the largest public corporation when ranked by revenue.
[136]Wal-Mart is governed by a fifteen-member Board of Directors, which is elected annually byshareholders.Robson Walton, the eldest son of founderSam Walton, serves asChairman of the Board.Michael T. Dukeserves as Chief Executive Officer (CEO), andLee Scott, formerly CEO, serves as Chairman of the Executive Committee of the Board. Other members of the board includeAída Álvarez,Jim Breyer,M. Michele Burns,James Cash,Roger Corbett,Douglas Daft,David Glass,Marissa Mayer, Gregory B. Penner, Allen Questrom, Arne M. Sorenson,Jim Walton, Christopher J. Williams, and Linda S. Wolf.
[2][137]Sam Walton died in 1992. After Walton's death, Don Soderquist, Chief Operating Officer and Senior Vice Chairman, became known as the "Keeper of the Culture."
[138]Notable former members of the board includeHillary Clinton(1985–1992)
[139]andTom Coughlin(2003–2004), the latter having served as Vice Chairman. Clinton left the board before the1992 U.S. Presidential Election, and Coughlin left in December 2005 after pleading guilty to wire fraud and tax evasion for stealing hundreds of thousands of dollars from Wal-Mart.
[140]On August 11, 2006, he was sentenced to 27 months of home confinement, five years of probation, and ordered to payUS$411,000in restitution.
[141]CompetitionIn North America, Wal-Mart's primary competition includesdepartment storeslikeKmart,Target,ShopKoandMeijer, Canada's TheReal Canadian SuperstoreandGiant Tiger, and Mexico'sComercial MexicanaandSoriana. Competitors of Wal-Mart's Sam's Club division areCostco, and the smallerBJ's Wholesale Clubchain operating mainly in the eastern US. Wal-Mart's move into the grocery business in the late 1990s also set it against major supermarket chains in both the United States and Canada. Several smaller retailers, primarilydollar stores, such asFamily DollarandDollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales.
[142]In 2004, Wal-Mart responded by testing its own dollar store concept, a subsection of some stores called "Pennies-n-Cents."
[143]Wal-Mart also had to face fierce competition in some foreign markets. For example, in Germany it had captured just 2 percent of the German food market following its entry into the market in 1997 and remained "a secondary player" behindAldiwith a 19 percent share.
[144]When in July 2006, Wal-Mart announced its withdrawal from Germany, its stores were sold to German companyMetro.
[89]Wal-Mart continues to do well in the UK, and itsAsdasubsidiary is the second largest chain afterTesco.
[145]In May 2006, after entering the South Korean market in 1998, Wal-Mart withdrew and sold all 16 of its South Korean outlets toShinsegae, a local retailer, for $882million. Shinsegae re-branded the Wal-Marts asE-martstores.
[146]Wal-Mart struggled to export its brand elsewhere as it rigidly tried to reproduce its model overseas. In China, Wal-Mart hopes to succeed by adapting and doing things preferable to Chinese citizens. For example, it found that Chinese consumers preferred to select their own live fish and seafood; stores began displaying the meat uncovered and installed fish tanks, leading to higher sales.
[147]Customer baseWalmart customers give low prices as the most important reason for shopping there, reflecting the
"Low prices, always"advertising slogan that Wal-Mart used from 1962 until 2006.
[148]The average US Wal-Mart customer's income is below the national average, and analysts recently estimated that more than one-fifth of them lack a bank account, twice the national rate.
[
citation needed
]A Wal-Mart financial report in 2006 also indicated that Wal-Mart customers are sensitive to higher utility costs and gas prices.
[149]A poll indicated that after2004 US Presidential Election, 76 percent of voters who shopped at Wal-Mart once a week voted forGeorge W. Bush, while only 23 percent supported senatorJohn Kerry.
[150]When measured against other similar retailers in the U.S., frequent Wal-Mart shoppers were rated the most politicallyconservative.
[151]In 2006, Wal-Mart took steps to expand its US customer base, announcing a modification in its US stores from a "one-size-fits-all" merchandising strategy to one designed to "reflect each of six demographic groups– African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural residents."
[152]Around six months later, it unveiled a new slogan:
"Saving people money so they can live better lives". This reflects the three main groups into which Wal-Mart categorizes its 200million customers: "brand aspirationals" (people with low incomes who are obsessed with names likeKitchenAid), "price-sensitive affluents" (wealthier shoppers who love deals), and "value-price shoppers" (people who like low prices and cannot afford much more).
[148]Wal-Mart has also made steps to appeal to moreliberalcustomers, for example, by rejecting theAmerican Family Association's recommendations and carrying the DVD
Brokeback Mountain,a love story between two gay cowboys in Wyoming.
[153]Economic impactKenneth Stone, Professor of Economics atIowa State University, in a paper published in
Farm Foundationin 1997, found that some small towns can lose almost half of their retail trade within ten years of a Wal-Mart store opening.
[34]He compared the changes to previous competitors small town shops have faced in the past– from the development of the railroads and the Sears Roebuck catalog to shopping malls. He concludes that small towns are more affected by "discount mass merchandiser stores" than larger towns and that shop owners who adapt to the ever changing retail market can "co-exist and even thrive in this type of environment."
[34]One study found Wal-Mart's entry into a new market has a profound impact on its retail competition. When a Wal-Mart opens in a new market, median sales drop 40 percent at similar high-volume stores, 17 percent at supermarkets and 6 percent atdrugstores, according to the June 2009 study by researchers at several universities and led by the Tuck School of Business atDartmouth College.
[154]ALoyola University Chicagostudy suggested that the impact a Wal-Mart store has on a local business is correlated to its distance from that store. The leader of that study admits that this factor is stronger in smaller towns and doesn't apply to more urban areas saying "It'd be so tough to nail down what's up with Wal-Mart".
[155]A June 2006 article published by thelibertarianLudwig von Mises Institutesuggested that Wal-Mart has a positive impact on small business.
[156]It argued that while Wal-Mart's low prices caused some existing businesses to close, the chain also created new opportunities for other small business, and so "the process ofcreative destructionunleashed by Wal-Mart has no statistically significant impact on the overall size of the small business sector in the United States."
[157]For the concern of jobs, a study commissioned by Wal-Mart with consulting firmGlobal Insight, found that its stores' presence saves working families more than US$2,500 per year, while creating more than 210,000 jobs in the U.S.
[158]Alternately, theEconomic Policy Instituteestimates that between 2001 and 2006, Wal-Mart's trade deficit with China alone eliminated nearly 200,000 U.S. jobs.
[159]Another study at theUniversity of Missourifound that a new store increases net retail employment in the county by 100 jobs in the short term, half of which disappear over five years as other retail establishments close.
[160]Another study by Global Insight found that Wal-Mart's growth between 1985 and 2004 resulted in food-at-home prices that were 9.1 percent lower and overall prices (as measured by theConsumer Price Index) that were 3.1 percent lower than they would otherwise have been.
[161][
dead link
]A 2005 story in
The Washington Postreported that "Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50billion per year."
[162]A study in 2005 at theMassachusetts Institute of Technology(MIT) measured the effect onconsumer welfareand found that the poorest segment of the population benefits the most from the existence of discount retailers.
[163]A 2004 paper by two professors atPennsylvania State Universityfound that U.S. counties with Wal-Mart stores suffered increased poverty compared with counties without Wal-Marts.
[164]They hypothesized that this could be due to: the displacement of workers from higher-paid jobs in the retailers customers no longer choose to patronize, Wal-Mart providing less local charity than the replaced businesses, or a shrinking pool of local leadership and reducedsocial capitaldue to a reduced number of local independent businesses.
[164]DrRaj Patel, author of "Stuffed and Starved: Markets, Power and the Hidden Battle for the World Food System", said in a lecture at theUniversity of Melbourneon September 18, 2007, that a study in Nebraska looked at two different Wal-Marts, the first of which had just arrived and "was in the process of driving everyone else out of business but, to do that, they cut their prices to the bone, very, very low prices". In the other Wal-Mart, "they had successfully destroyed the local economy, there was a sort of economic crater with Wal-Mart in the middle; and, in that community, the prices were 17percent higher".
[165]American newspaper columnistGeorge Willnamed Wal-Mart "the most prodigious job-creator in the history of the private sector in this galaxy" and that "[b]y lowering consumer prices, Wal-Mart costs about 50 retail jobs among competitors
for every 100 jobs Wal-Mart creates". In terms of economic effects, Will states that "Wal-Mart and its effects save shoppers more than $200 billion a year, dwarfing such government programs asfood stamps($28.6 billion) and theearned income tax credit($34.6 billion)".
[166]A 2001McKinseyGlobal Institute study of U.S. labor productivity growth between 1995 and 2000 concluded that "Wal-Mart directly and indirectly caused the bulk of the productivity acceleration" in the retail sector.
[167]Robert Solow, a Nobel laureate in economics and an adviser to the study, stated that "[b]y far the most important factor in that [growth] is Wal-Mart."
[168]Employee and labor relationsWith close to 2.2 million employees worldwide, Walmart has faced a torrent of lawsuits and issues with regards to its workforce. These issues involvelow wages,poor working conditions, inadequatehealth care, as well as issues involving the company's stronganti-unionpolicies. Critics point to Walmart's highturnoverrate as evidence of an unhappy workforce, although other factors may be involved. Approximately 70% of its employees leave within the first year.
[169]Despite the turnover rate the company still is able to affect unemployment rates. This was found in a study by Oklahoma State University which states, "Walmart is found to have substantially lowered the relative unemployment rates of blacks in those counties where it is present, but to have had only a limited impact on relative incomes after the influences of other socio-economic variables were taken into account."
[170]Gender and sexual orientationIn 2007, agender discriminationlawsuit,
Dukes v. Wal-Mart Stores, Inc., was filed against Walmart, alleging that female employees were discriminated against in matters regarding pay and promotions. Aclass actionsuit was sought, which would have been the nation's largest in history, covering 1.5million past and current employees of Wal-Mart.
[171]On June 20, 2011, theUnited States Supreme Courtruled in Wal-Mart's favor, stating that the plaintiffs did not have enough in common to constitute a class.
[172]The court ruled unanimously that because of the variability of the plaintiffs' circumstances, the class action could not proceed as presented, and furthermore, in a 5–4 decision that it could not proceed as any kind of class action suit.
[173]However, several plaintiffs, including Ms. Dukes, still intend to file individual discrimination lawsuits separately.
[174]According to a consultant hired by plaintiffs in a sex discrimination lawsuit, in 2001, Wal-Mart's EEOC filings showed that female employees made up 65 percent of Wal-Mart's hourly paid workforce, but only 33 percent of its management.
[175][176]Just 35 percent of its store managers were women, whereas 57 percent were at comparable retailers.
[176]Wal-Mart says comparisons with other retailers are unfair, because it classifies employees differently; if department managers were included in the totals, women would make up 60 percent of the managerial ranks.
[176]Others have criticized the lawsuit as without basis in the law and as an abuse of the class action mechanism.
[177][178][179]In 2007, Wal-Mart was named by the National Association for Female Executives as one of the top 35 companies for Executive Women.
[180]Wal-Mart's rating on theHuman Rights Campaign'sCorporate Equality Index, a measure of how companies treatLGBTemployees and customers, has fluctuated widely during the past decade, from a low of 14 percent (2002) to 65 percent (2006). They were praised for expanding their antidiscrimination policy protecting gay and lesbian employees,
[181]as well as for a new definition of "family" that included same-sex partners.
[182][183]However, they have been criticized by the HRC in other areas, such as not renewing its membership in the National Gay and Lesbian Chamber of Commerce.
[184]In January 2006, Wal-Mart announced that "diversity efforts include new groups of minority, female and gay employees that meet at Wal-Mart headquarters in Bentonville to advise the company on marketing and internal promotion. There are seven Business Resource Groups: women, African-Americans, Hispanics, Asians, Native Americans, Gays and Lesbians, and a disabled group."
[185]CriticismWal-Mart has been subject to criticism by numerous groups and individuals. Among these arelabor unions, community groups,grassrootsorganizations, religious organizations, environmental groups and Wal-Mart customers. They have protested againstWal-Mart, the company's policies and business practices, including charges of racial and gender discrimination.
[186][187][188]Other areas of criticism include the corporation's foreign product sourcing, treatment of product suppliers, employee compensation and working conditions, environmental practices,the use of public subsidies, andthe company's security policies.
[189]Wal-Mart denies doing anything wrong and maintains that low prices are the result of efficiency.
[190][191][192]
Founded in 1962, by Sam Walton having Headquarters at Bentonville, Arkansas, United States. The number of locations are 8,970 (2011) worldwide. S. Robson Walton, Chairman, Mike Duke, President/CEO. The products are Apparel/footwear specialty, cash & carry/warehouse club, is count store, hypermarket/ super-centre / superstore, supermarket.
Revenue =
US$469.162billion(2013),
Operating income
=
US$27.801billion (2013),
Net income
=
US$16.999billion (2013),
Total assets
=
US$ 203.105billion (2013),
Total equity
=
US$76.343billion (2013),
Employees =
2.2million (2013) |
- From Wikipedia, the free encyclopediaThis page was last modified on 8 June 2013 at 20:04.
(Please note, your answers may and could be based on the Text of the above Case Study, Lectures’ Notes as well as your own knowledge and research).
Answer all questions below
[Each question carries 8 marks and Total Marks is 40]
- Describe Walmart global strategy in maintaining its strengths to enable it to retain its market share regionally and globally?
[ 7 marks ]
- Discuss the factors and objectives of Walmart Department Store’s cooperative strategy with three examples.
[ 7 marks ]
- Identify the opportunities and threats faced by Walmart in dealing its business for the last few decades?
[ 7 marks ]
- Discuss the recent criticism and US Court Case faced by Walmart.
[ 5 marks ]
- State three options for managing its (Walmart) activities in buying and selling its shares, assets, and affiliated sub-companies, if any, in its efforts of protecting the company from risks, and sustaining success?.
[ 7 marks ]
- Discuss the use of organizational structure and controls to effectively support Walmart
strategy?
[ 7 marks ][ 40 TOTAL MARKS ]SECTION B -
Answer any THREE (3) questions out of FIVE (5) questionsQUESTION 1:The six key aspects of corporate strategy as it affects diversification decisions are as follows:
a. Corporate strategy and diversification as concepts have changed over time.
b. There are potential sources of economic gain that make diversification attractive.
c. There are alternative forms of diversification.
d. There exists a rationale, or logic, for guiding corporate decisions about adding businesses.
e. There is a relationship between corporate strategy and competitive advantage.
f. There are roles of corporate strategy in dynamic contexts.
1.1. How does broadening the scope of the products and/services is related to performance?
[6 marks]1.2. With examples, explain why should a manager be concerned with types of diversification?
[6 marks]1.3. What are some of the limits of diversification benefits?
[8 marks][Total 20 marks]QUESTION 2:Synergy may be created through a proper, appropriate, correct and reliable management of all factors of production through utilisation of the firm’s competencies and applying best practices. One can then argue that one reason for acquiring another firm would be to absorb and assimilate the target’s resources, knowledge, and capabilities, which may be primary sources of competitive advantage. When firms combine resources and capabilities through Mergers and Acquisitions (M&As), they may be able to create a bundle of resources that is unavailable to competitors. If the combined resources and capabilities are complementary, the competitive advantage may be long term. If the combination is valuable and rare, the acquiring firm may be able to generate profits greater than the sum of the two firms’ individual profits. Bear in mind, however, that transferring resources, knowledge, or capabilities can create long-term competitive advantage only if the cost of the acquisition doesn’t exceed the cost to other firms of accumulating comparable resource stocks.
2.1. What are the factors that need to be taken into account before acquiring another firm or firms?
[7marks]2.2. What are some of the benefits of acquisition over internal development?
[7 marks]2.3. What are the disadvantages of acquisition?
[6 marks][Total 20 marks]QUESTION 3:When a firm embarks its products at a global market, it needs to manage properly between its original headquarters management and policies with its sub-unit partners especially during the transition period. The firm also needs to examine thoroughly its business activities as far as its Supporting activities and its primary activities as can be seen at the Value Chain Model.
In this case so much so with the strategy formulation internationally is so important, but also on the planning and the strategic fit of its implementation. The must include in such implementation or operation strategy the kind of components that to be centralized, and where geographically, to those can or may be decentralized, managed and coordinated.
3.1. What are differences of international strategy configuration, and give examples of each?
[8 marks]3.2. Why do firms operate globally and what are the risks?
[7 marks]3.3. Discuss the accounting costs associated with internationalization.
[5 marks][ TOTAL 20 MARKS ]QUESTION 4:A strategic alliance is a partnership in which two or more firms combine resources and capabilities with the goal of creating mutual competitive advantage. An alliance may involve sharing resources related to only one key activity in the partners’ value chain, such as R&D, or it may involve coordination across many value chain activities. For example, partners may work together to develop new products via shared R&D and also cooperate on the production and marketing of the new products.
4.1. What are the possible ways in which alliances can help firms achieve a competitive advantage? Explain.
[11 marks]4.2. Explain potential risks associated with alliances.
[9 marks][ TOTAL = 20 MARKS ]QUESTION 5:Corporate governance is the system by which organizations are directed and controlled by their owners. It is the means and mechanisms used to ensure that managers act in accordance with investors' best interests. Corporate governance addresses the distribution of rights and responsibilities among different participants in the organization, such as the board, managers, shareholders, and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, governance also provides the structure through which the company’s objectives are set and the means of attaining those objectives and monitoring performance.
5.1. Define the agency relationship and managerial opportunism and discuss their strategic implications.
[7 marks]5.2. What is the role of the board of directors in corporate governance?
[6 marks]5.3. In what ways is corporate governance related to strategy formulation and implementation?
[7 marks][ TOTAL = 20 MARKS ]