Wall Mart- Mis Report

1.

Analysis of the Industry’s environment:

Wal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue, according to the 2008 Fortune Global 500. Founded by Sam Walton in 1962, it was incorporated on October 31, 1969, and listed on the New York Stock Exchange in 1972. It is the largest private employer in the world and the fourth largest utility or commercial employer, trailing the British National Health Service, and the Indian Railways. Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U.S. It also owns and operates the North American company, Sam's Club. As Wal-Mart 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 Wal-Mart on small towns and local businesses, jobs, and taxpayers. In one, Kenneth Stone, a Professor of Economics at Iowa State University, found that some small towns can lose almost half of their retail trade within ten years of a Wal-Mart store opening. 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 Wal-Mart arrives. A later study in collaboration with Mississippi State University showed that there are "both positive and negative impacts on existing stores in the area where the new supercenter locates .Wal-Mart Stores Division U.S. is Wal-Mart's largest business subsidiary, accounting for 67.2% of net sales for financial year 2006. It consists of three retail formats that have become commonplace in the United States: Discount Stores, Supercenters, and Neighborhood 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. This division also includes Wal-Mart's online retailer, walmart.com. In North America, Wal-Mart's primary competition includes department stores like Kmart, Target, ShopKo, Meijer, and

Canada's Zellers, Winners, and Giant Tiger. Competitors of Wal-Mart's Sam's Club division are Costco, and the smaller BJ's Wholesale Club chain 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, primarily dollar stores, such as Family Dollar and Dollar General, have been able to find a small niche market and compete successfully against Wal-Mart for home consumer sales. In 2004, Wal-Mart responded by testing its own dollar store concept, a subsection of some stores called "Pennies-n-Cents. Wal-Mart also had to face fierce competition in some foreign markets. For example, in Germany it had captured just 2% of German food market following its entry into the market in 1997 and remained "a secondary player" behind Aldi with a 19% share. In July 2006, Wal-Mart announced its withdrawal from Germany. Its stores were sold to German company Metro. Wal-Mart continues to do well in the UK, and its ASDA subsidiary is the second largest chain after Tesco. In May 2006, after entering the South Korean market in 1998, Wal-Mart withdrew and sold all 16 of its South Korean outlets to Shinsegae, a local retailer, for $882 million. Shinsegae re-branded the Wal-Marts as Emart stores. 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. In addition, under heavy pressure from the Chinese government, Wal-Mart accepted a form of organized labor in China. Chinese labor unions do not negotiate contracts but simply pay dues to the government, "to secure the social order." However, Chinese consumers may be more open to Americana than shoppers in Europe.

Kinds of strategic moves that industry members are likely to employ: 

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Design and open a new store prototype within four years that improves energy efficiency and reduces greenhouse gas emissions by up to 30 percent in these stores. Reduce greenhouse gas emissions from existing stores, clubs and distribution centers by 20 percent within seven years. Establish a US program within 18 months that gives preference to suppliers who aggressively reduce emissions. Implement a China program that gives preference to environmentally-responsible suppliers. Aggressively pursue regulatory and policy changes that promote energy efficiency and renewable energy. Reduce solid waste from US stores and clubs by 25 percent within three years. Work with suppliers to reduce packaging, increase recycled content, and expand recycling of Packaging. Eliminate PVC packaging from private label brands within two years. Sourcing: establish independent monitoring of Wal-Mart’s factory certification program; separate the factory certification and buying functions; cease doing business with supplier factories that fail to meet Wal-Mart’s ethical standards; collaborate with industry, government and NGOs to improve sourcing in developing countries. Healthcare: make healthcare insurance available to all employees for $23 per month or less and their children for $15 per month; put healthcare clinics in stores for employees and customers; provide volume discounts on healthcare insurance to small businesses; collaborate with business, government and others on US healthcare reform with the goal of lowering costs by as much as 25 percent.

 Wages: support an increase in the US minimum wage; continue paying market wages.  Communities: enhance existing community engagement processes with the goal of building mutually beneficial partnerships and better meeting community needs.  Diversity: increase the percentage of women and minorities in management; tie management compensation to achieving diversity goals; use Wal-Mart scale to assist and grow minorityowned businesses.

2. Analysis of the nature and strength of competitive forces Michael Porter described a concept that has become known as the "five forces model". Using this model, business leaders can develop a strategic edge over rival firms by better understanding, the industry context in which the firm operates. Porter’s approach takes an industry vista helping you to assess, at a corporate strategy level, the attractiveness of the industry to potential entrants at a given time.

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Potential Competitors: Medium pressure

o Grocers could potentially enter into the retail side. o Entry barriers are relatively high, as Wal-Mart has an outstanding distribution systems, locations, brand name, and financial capital to fend off competitors. o Wal-mart often has an absolute cost advantage over other competitors. •

Rivalry Among Established Companies: Medium Pressure o Currently, there are three main incumbent companies that exist in the same market as Wal-Mart: Sears, K Mart, and Target. Target is the strongest of the three in relation to retail. o Target has experienced tremendous growth in their domestic markets and have defined their niche quite effectively. o Sears and K-Mart seem to be drifting and have not challenged K-Mart in sometime. o Mature industry life cycle.

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The Bargaining Power of Buyers: Low pressure o The individual buyer has little to no pressure on Wal-Mart. o Consumer advocate groups have complained about Wal-Mart’s pricing techniques. o Consumer could shop at a competitor who offers comparable products at comparable prices, but the convenience is lost.

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Bargaining Power of Suppliers: Low to Medium pressure o Since Wal-Mart holds so much of the market share, they offer a lot of business to manufacturers and wholesalers. This gives Wal-Mart a lot of power because by Wal-Mart threatening to switch to a different supplier would create a scare tactic to the suppliers. o Wal-Mart could vertically integrate. o Wal-Mart does deal with some large suppliers like Proctor & Gamble, Coca-Cola who have more bargaining power than small suppliers.

Substitute Products: Low pressure o When it comes to this market, there are not many substitutes that offer convenience and low pricing. o The customer has the choice of going to many specialty stores to get their desired products but are not going to find Wal-Mart’s low pricing.

o Online shopping proves another alternative because it is so different and the customer can gain price advantages because the company does not necessarily have to have a brick and mortar store, passing the savings onto the consumer.

3 Identification Industry’s driving forces and pinpointing the key factors for future competitive success in the industry: These may be the key factors for future competitive success in the industry To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region.

 The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India.

 New locations and store types offer Wal-Mart opportunities to exploit market development.

They diversified from large super centers, to local and mall-based sites.

 Opportunities exist for Wal-Mart to continue with its current strategy of large, super centers.

 Since Wal-Mart is the largest retailer in the United States, it has a very good opportunity to become the largest retailer in the world. They do not always carry a diverse selection of products, so they could expand stores and merchandise to attract more customers

 Wal-Mart has already announced a new health care plan which would increase benefits to employees.

 And there are also some strengths of the industry that help them for future competitive success in the industry-

 Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.

 Wal-Mart has grown substantially over recent years, and has experienced global expansion (for example its purchase of the United Kingdom based retailer ASDA).

 The company has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement.

 A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.