Organizational Analysis of WalMart Store Inc

Organizational Analysis of WalMart Store IncIntroduction and brief overview of Wal-Mart transshipment center Inc.Wal-Mart inject Inc. is non except the sell giant, except in like manner is the largest grocery chain in the world. Wal-Mart store Inc. was founded in 1962. Samuel Walton and his br other J.L. Walton open their first Wal-Mart Discount City in Rogers, Arkansas (Wal-Mart History, 2010). For Wal-Mart store Inc., their common mission is Save people bills so they stand live better (Wal-Mart corporate, 2010). Comp atomic number 18d with their main competitors such as mug and K mart, Wal-Marts 2009 sales were almost 50% much. Because of its giant size and buying power, Wal-Mart stinkpot buy its products at truly busted prices, exchanging gritty purchase volumes for d receive(p) court then passing the savings onto its clients (Wikinvest Wal-Mart, 2010).Wal-Mart has 8,900 stores around the world in three incompatible business segments of sell stores that includin g Wal-Mart stores, Sams Club and Wal-Mart transnational. All of them purport diverse kinds of merchandises including electronic appliances, groceries, furniture, app atomic number 18l and health beauty stuffs etc. For their business segment, they have over 54% of the companys stores atomic number 18 located in the unify States, and the others international stores ar mainly located in central and south America and China. The company mainly focuses on offering the lowest prices to attract its consumers. Wal-Mart totally earned $408 one thousand million tax revenue in 2010, increase 1% comp are to 2009 (Wikinvest Wal-Mart, 2010).REVENUE BY GEOGRAPHY (USD)AnnualFISCAL YEAR ENDING31-1-200631-1-200731-1-200831-1- 200931-1-2010 tax income International59.2B77.1B90.6B98.6BRevenue US284B303BTotal Revenue316B349B379B406B408B(Source www.wikinvest.com/stock/WalMart_%28WMT%29/Data/Key_MetricsRevenue_Breakd hold)In 2009, Wal-Mart earned $255.7 billion in the domestic segment of the com panys revenue. For Wal-Mart stores segment are supercharge categories into three contrasting formats including Supercenters, Discount stores and Neighborhood Stores. For the Sams club, it is the second largest membership-only retailer club ( Costco is the first largest membership-only retailer) in United States belong to Wal-Mart Inc., their main customers mostly are offices, contrivance stores, motels, restaurants and schools etc. (Wikinvest Wal-Mart, 2010).For now, Wal-Mart has total 3,121 international stores all over the world including in Mexico, Japan, Canada, China and countries in central and South America. However, recently Wal-Mart begins to slow down their harvesting rate in the United State and turn their main focus onto its international stores to develop growth. For international stores locations alto stirher earned total $98.6 billion revenue in 2009, compared to the sales of 2008, is increased 9.1% (Wikinvest Wal-Mart, 2010).Strategic History of the IndustryThe w hole retail industry in the United States has over $4 trillion social classly revenue. The main retail companies are including Wal-Mart, Home Depot, Kroger, Costco, and Target. Some of the large companies dominate some retail sectors such as mass merchandisers and grocery stores, other sectors standardised auto dealers and convenience stores are fragmented. However, retail industry sleek over has some small and specialty retailers are single-store feats (Hoover, 2011).The economy deeply affects the retail demand. In other words, retail demand depends on the economy. Many different kinds of economic factors such as job growth, recession, personal income, consumer confidence and interest rates can well-knitly affect consumer spending behavior. When during recessionary periods, the bad economy can affect the retail sales growth rate slow drastically or even sales revenue decline. While the retail spending grows rapidly when in the period of strong economy growth, for example cons umers ordain spend more on grocery when they have more income. However, the rising interest rates will affect consumer purchase behavior and consumer skill to finance large substance of purchase such as purchasing cars (Hoover, 2011).Strategic History of Wal-Mart Store Inc.In the early stage of strategic history for Wal-Mart, they alship canal unchanged their great deal always low price for their customers. Until 1990s, Wal-Mart announced that they planned to go planetary. They inadequacyed to look for international grocery stores for the reasons as following First of all, Wal-Mart has facing very strong contestation in United States such as Target and K mart. These two riotouss had aggressive expanding their business and had started sharing Wal-Marts merchandise share. Secondly, the market in the United States is already saturated it was becoming difficult for the company to continue its growth rate. Thirdly, the US population is accounted for only 4% of the worlds popul ation and if they want to expand their global market, China had the potential massive growth due to their huge population of over 1.3 billion people. The last reason is, globalization opened up in the altogether markets in China and created opportunities for discount stores such as Wal-Mart (Wal-Marts Cost Leadership Strategy, 2004).On the other hand, Wal-Mart is using the strategy that cooperates with local suppliers to purchase their products, even though the organizational culture is standardized with the home country. This strategy is not only use to the products purchasing, but also adapted to the local cultures and stores decoration and designed are also changed to meet local taste all around the world (Wal-Marts Cost Leadership Strategy, 2004).Organizational mission affirmationAs we know, the mission statement for Wal-Mart is every day low price. In grade to insist their mission, Wal-Mart employed three approaches in the market. First, it increased the local purchasing in aver to quail the purchasing costs and also suit consumers needs in different places. Secondly, it maintained a good blood with their suppliers, satisfied them by paying at heart 3-7 days during its initial years. Thirdly, it rent a shited distribution centers (DC) and computerized its management transcription to improve efficiency and trim down costs (ICFAI, 2005).Business Level StrategyFor these several years, Wal-Mart has been move toilsome on expand its stores outside the United States. It through two different to expand their international business market new-fangled store formulation and learnedness. Acquisition strategy of supermarket chains had been a part of Wal-Marts entry andstore expansion strategy in Canada, Mexico, Brazil, Japan, China and Great Britain (The Wal-Mart Puzzle, 2008).Over all, the Wal-Mart strategies were including multiple store segments, lower daily prices, lots of name-brand merchandise, reduce operating costs, emphasized customers satisf ied service, wide selection products, disciplined expansion into new geographic markets, and using acquisition to enter foreign market (Wal-Mart Store Inc., 2010). However, no matter Wal-Mart are in which foreign country, their company vision always low prices is never changed.The companys low distribution costs and cost-efficient supply chain management are the big reasons why Wal-Mart is so success and at the same time reduce the products prices. Wal-Mart has get into distribution efficiency compare with their competitors because of its rural store locations.Current strategy for the major operations/functions of the companyCurrent strategies for Wal-Mart are including low costs, high volume, increase customer satisfaction and expansion strategy. Wal-Mart creates name recognition and customer satisfaction, and combined the retailer with the reputation of offering the best prices. They also expand their new business segments to different sectors such as pharmacies, automotive repair , and grocery sales to increase their sales revenue.Expansion strategyThe company realized that building a new store will allow for increase market share value. After their success in the rural areas, Wal-Mart locomote to urban areas and then moved to surrounding areas. The expansion strategy made Wal-Mart the number one retail store in the United States. As Wal-Mart continue its expansion domestically, the firm obstinate to go international. Furthermore, Wal-Mart realized that acquiring an existing retail firm is necessary for expand domestic and international markets. Therefore, Wal-Mart by acquire retail store which enable to expand locally and internationally.Always low prices practice customers live better strategy is believed the strongest strategy used by Wal-Mart. The firm developed the idea of dealings give care a shot with the manufacturer and with the power control by Wal-Mart will enable it to get the best deal from the manufacturers and suppliers.Organizational st ructure, culture, and control systems(Source http//www.theofficialboard.com/org-chart/wal-mart-stores)Saving people coin to help them live better was the mission for Wal-Mart. Hence, Wal-Mart negotiates different suppliers and understanding their cost structure in order to reduce the price. Wal-Mart has to be certain that the manufacturers were doing their best to repress down costs. Also, Wal-Mart believed in establishing a long-term relationship with their suppliers.Wal-Mart had 129 distribution centers located at different locations all over the US. Over 80,000 items were stocked in these centers. Wal-Marts own warehouses lineally supplied 85 percent of the inventory, as compared to 50-65 % for competitors. Shipping costs for Wal-Mart is about 3 % which is lower than its competitors, 5%. The distribution centers ensured a steady and consistent come down of products to support the supply function (Wal-Marts Cost Leadership Strategy, 2004).Wal-Marts logistics infrastructure was its fast and successful transportation system. The distribution centers were serviced by more than 3,500 company owned trucks. To make its distribution process more efficient, Wal-Mart also uses a logistics technique called cross-docking. In this system, the finished goods were directly picked up from the manufacturing plant from suppliers, and then directly supplied to the customers. The system trim back the handling and storage of finished goods, eliminating the role of the distribution centers and stores (Wal-Marts Cost Leadership Strategy, 2004).SWOT Analysis for Wal-Mart Store Inc..StrengthsReputation vane Name Wal-Mart is a powerful brand and pioneer in the retail industry with the wide spread network of stores. It has a reputation for low price, convenience and a wide figure of speech of products all in one store for customers. Wal-Mart has captured about 10% of the retail market in the U.S. and continues to expand. Wal-Mart stores continue to open all over the country ma king Wal-Mart a household name. Wal-Mart has also been widely acknowledged for its social responsibility actions. The company has donated to a variety of charitable organizations and has been accredited for bringing jobs and wealth to little developed communities.Offer lower-ranking Prices Wal-Mart uses its enormous size and buying power to pressure its suppliers into extremely low prices, offering orders of high volumes of merchandise in diversify for low prices. The good thing about Wal-Mart is that its shifts the low cost advantage to customers and available the products at lower prices. It has loyal customer base because it meets the expectation of customer by always delivering the goods at lower prices at compare to its competitors.Expand Global Market Wal-Mart has aggressively expands its international market over the past a few(prenominal) years and has experienced global expansion. For example its purchase of the United Kingdom based retailer ASDA.Technology Technology i s strength to Wal-Mart with its inventory control system that was recognized as the most sophisticated in retailing. The technology linked all the stores to the headquarters and the companys distribution centers. It also enables the warehouse of which the goods are ordered, and direct the race of goods to the store and proper shelves.Supply chain and logistics management Supply chain and logistics management are one of the strengths of Wal-Mart. This allows Wal-Mart to utilize the Just- in-time inventory concept and avoid the pilling up inventory to save the extra cost for maintaining inventories in the warehouses.Human Resource Wal-Mart always keen to provide prep to their employees to improve the customer service level. The firm hire locally, provides training programs for its employees. Wal-Mart also gets its employees involve and encourage them to make use of words like we, us, and ours. It also provides stock ownership and profit sharing with great contribution from the H. R of the firm. Wal-Mart was named one of the best 100 firms to work for.Cross-docking inventory system Using the cross-dock technique, Wal-Mart was able to effectively leverage their logistical volume into a core strategic competency. Wal-Mart operates an extensive satellite network of distribution centers serviced by company owned trucks. Its satellite network sends point of sale (POS) data directly to 4,000 vendors. Each register is directly connected to a satellite system sending sales information to Wal-Marts headquarters and distribution centers.WeaknessesEmployee disturbance Wal-Mart has high employee turnover which costs more money and time for company to train the new employee.Bad publicity Wal-Mart is currently facing a gender discrimination lawsuit. Their egg-producing(prenominal) employees accuses that they were discriminated against in matters regarding pay and promotions. And also, Their female managers were accounted for the minority group in the company. hire of flexi bility Wal-Mart cover very wide range kinds of products for example like clothes, food, chemists or stationary which lack of flexibility compare with other more focused competitors. Other competitors may have the ability to make changes and improve on a certain product lines when the needs of their customers change. Wal-Mart, however, may have too much merchandise and not be able to focus in on sectors that need to be improved.Some products have poor quality Although Wal-Mart provides low price of products, however, customers sometimes complain about the poor quality of few products. cladding difficulty in International market It is hard for Wal-Mart to expand their business out of US to totally different countries all around the world. Moreover, Wal-Mart has to facing different culture and customer behavior in different countries, for example Wal-Mart facing difficulty to expand the market in China.OpportunitiesCustomers Because Wal-Mart provides low price to their customers, so t hey are able to attract more customers. Furthermore, customers basically are able to purchasing everything in one store that satisfied their needs. Wal-Mart 24 hours stores also satisfied their customers. modify store types Wal-Marts different store types and new locations provide more opportunities to exploit new market. Stores modify from local, small-based sites to large super centers.International Expansion No interrogation that continued expand the international market is a huge opportunity for Wal-Mart. Wal-Marts oversea stores have experienced significant growth. There are actually dreaded opportunities for future growth in developing countries and Asian markets than in the United States such as China and India. Creating strategic alliances and licensing agreements with other global retailers are ways to move into different countries.ThreatsCompetition Wal-Mart faces different strong competitions locally and internationally. Wal-Mart main competitors are including Kmart, T arget, Carrefour and Costco sell. In 2010, the pelf Profit Margin for Wal-Mart is 3.59%, Target 4.22%, Costco sell 1.69%, Carrefour 0.38%, respectively (Hoovers, 2010). Target is Wal-Marts direct competitor in the US, offering a range of universal merchandise in a similar store format (Wikinvest, 2010).Economy Recession The revenue for Wal-Mart is affected by economy recession. Good economy is an opportunity for great business, because customers will have more money to spend. If the economy is great, there will be more jobs and people will shop more. However, if the economy is bad, there will be fewer jobs and people will shop less. Also, with the high price of gasoline and its effect on the economy, Wal-Mart will certainly be affected the most.Strategy imitation Wal-Mart strengthens its competitive advantage on low-cost products. Other competitors may imitate their low-cost strategy to take over their market shares.Low Brand Loyalty In the retail industry, customers would like to choose the product with the lowest price. In other words, customers do not care about the brand or which retail stores, if Costco has the exactly same chips that sell cheaper than in the Wal-Mart, then customers will choose to buy the chips in the Costco not Wal-Mart.TOWS MATRIXSTRENGTHSWEAKNESSESReputation Brand NameBad publicityOffer Low PricesLock of flexibilityExpand Global MarketSome products have poor qualityTechnologyFacing difficulty in International marketSupply chain and logistics managementEmployee turnoverHuman ResourceCross-docking inventory systemOPPORTUNITIESOPPORTUNITIES-STRENGTHSOPPORTUNITIES-WEAKNESSESCustomersBuild on its already efficient distribution system to farther expand in the U.S and globally.Wal-Mart should be awareness and strict to control of the quality of the product in order to keep their customers basis.Diversified Store TypesExpand diversified store types to International market in order to increase profit in International market.Set higher empl oyment standards through enhanced training to keep their employees have best performance.International ExpansionDuplicated the successful delivery logistic management and the distribution centers into International market.Continue to build on cost efficient pricing and production due to expansion.Go into new markets and buy out their local retailers to gain market share.THREATSTHREATS-STRENGTHSTHREATS-WEAKNESSESCompetitionBuy raw materials or products from local suppliers to hold a better political status within the local community further to compete with their competitors.Human resource department should roofy a benefits long-term promotion program or standard and training program for their employees in order to decrease the employee turnover.Economy RecessionCreate their own brand of products and increase the quality of products in order to establish customers loyalty.Establish joint venture partnerships or long-term relationship with local retail companies to get the advantages in the International segment.Strategy imitationDevelop strong RD and technology to enhance the competitive advantage and avoid imitation from other competitors.Low Brand LoyaltyFive Forces Analysis for Wal-Mart Store Inc.Threat of entrances LowThe threat of new entrance in the grocery and discount retailer industry is very low. New entrants have to face with the strong low-price competition among exist giant retail companies like Wal-Mart, Costco and Target. New entrants need to invest large amount of capitals to establish their brand recognition, service, and variety of product offerings that Wal-Mart, Target, and others competitors continue to improve on each day. In addition, existing companies can drop prices lower in order to vehemence a new competitor out of the market. Therefore, the threat of entrances is low. federal agency of buyer-HighCustomers have many choosing opportunities and consider about products very details. They want the product now and they want it with the best service, best quality and reasonable price. Customers also enjoy increasing choice of products and choose one product that has the best quality and better price. For example, if customers harness out Target sells an exactly product that has better quality and price than Wal-Mart, and then they will choose to buy it in Target instead of Wal-Mart.Power of Suppliers LowThe bargaining power of suppliers is very low. Wal-Mart is very famous on giving pressure to their suppliers to cut their price lower and lower in order to offer the lowest price to their customers. On the other hand, reach the supplier of Wal-Mart is a very fierce competition. In 2004, about 10,000 new suppliers applied to become Wal-Mart vendors. However, only about 200, or 2%, were ultimately accepted by Wal-Mart (Gwendolyn Bounds, The Wall Street Journal). Therefore, the bargaining power of suppliers is low.Rivalry HighThe competition in the US grocery and discount retailer industry is very high. The main com petitors for Wal-Mart in the local market are Kmart and Target. These companies also have to face competition from wholesalers such as BJs, Costco and even the international market such as Carrefour. Wal-Mart has adopted a cost leadership generic strategy. In the past, most companies have not been able to match Wal-Marts strategy everyday low prices. However, Wal-Marts barrier to entry (economies of scale) and strength (supply-chain management) can be easily imitated with sufficient resources. Therefore, retailers are in a fierce competition that see who can offer their customers the lowest price.Threat of substitute LowThe threat of substitutes in this industry is low because only few companies have ability to offer such a variety of products available instantly and also low prices. One possible substitute is online obtain however, customers usually do the online shopping for clothes or other stuffs but not for food or grocery shopping. Therefore, the threat of substitute is low. B. Strategic focusKey Strategic IssuesIssue 1 Open too many new stores close to existing stores lead to new stores taking over the market shares from existing stores.Status QuoWal- Mart depends on opens many new stores and expands into new market to increase the long-term sales and income growth. However, because of Wal-Marts large size of expansion, new stores are effects the sales on existing stores. For example, Wal-Mart builds a store relatively close to an already existing store, the new store might take remote customers from the old store thus decrease the sales in existing stores (Wal-Mart, 2010).Evolutionary Change (Incremental Improvement)In order to solve this problem, Wal-Mart expands their business segment into international market instead of domestic market. For example, Wal-Mart opened 5 times number of stores in the international market in 2010 compared to domestic stores most of stores are in Mexico, China, and Central America (Wal-Mart, 2010).Revolutionary Change (Huge/Drastic Change)Wal-Mart is also aggressively to open business segments in India if the country opens up the sector to foreign direct investment. India has retail market more than 1 billion no doubt India is a huge opportunity for Wal-Mart. However, retailers that carry multiple brands (like Wal-Mart) are restricted to wholesale outlets in India. After Indias policy change, Wal-Mart is allowed to expand superstores and generate revenue in India (Wal-Mart, 2010).Specific tactics to implement the strategyWal-Mart needs to establish long-term relationship or joint venture with local retail company to get into the market in India. Although in 2006, Wal-Mart announced that it had tied up with Bharti Enterprises Ltd. (Bharti) to get into the Indian retail sector. Bharti was a diversified company, and one of the biggest mobile telephone service providers in India (Wal-Mart and the Indian Retail Sector, 2007). However, because of the government policy, the small retailers groups and th e Left parties against allowing the company into India are all the barriers that Wal-Mart has to face it.Issue 2 International competitorsStatus QuoIn order to expand and improve the sales revenue for the economy recession curiously in the domestic market, Wal-Mart has been aggressively expand its business segment into international market. However, the local big retailers or small retailers groups are against Wal-Mart to get into their market to take over the market shares because of its low price strategy (Wal-Mart, 2010).Evolutionary Change (Incremental Improvement)Improve its supply chain, logistic and technology segment to lower its delivery and operation costs in order to compete with local big retailers such as Britains Tesco, Frances Carrefour, and Germanys Metro (Wal-Mart, 2010). On the other hand, retail business segment is hard to create products differentiation, because commodity products are all the same for customers. The only way that gains the market shares for reta il stores is not only low price but also quality of products. Therefore, Wal-Mart should awareness of its quality of products to attract more customers even in the international market.Revolutionary Change (Huge/Drastic Change)Wal-Mart should acquire and purchase the local retail companies in order to get into the international market. On the other hand, establish long-term relationship with local suppliers to have the win-win situation for their cooperation.Specific tactics to implement the strategyIn the beginning of year 1, 2 and 3, Wal-Mart should first focus on improving its supply chain, logistic and technology improvement in order to compete with local big retailers on its lower operation, delivery costs and high quality of products. For the long-term tactics, Wal-Mart should deeply penetrate into the local market, understand different cultures and customers behaviors and then cooperate with local suppliers to establish long-term partnership.Personal assessmentSWOT Analysis o f myself in relation to the organization (What can I offer to the organization?).StrengthsInternational expansion (China) Wal-Mart is extremely aggressively penetrated into the market in China. Also, no doubt that China has 1.3 billion populations which accounted for the most majority population in the world, creates a huge business opportunity for Wal-Mart. Therefore, Wal-Mart needs a manager who can speak fluently Mandarin and English, and really understand about Chinese culture and Chinese customers behavior. Hence, I can offer Wal-Mart my knowledge to develop more opportunity in Chinas market in order to maximize the profits.WeaknessesLock of working experience Even though I can speak fluently Mandarin and understand the Chinese culture and customers behavior however, I still lack of working experiences. I do have some part time working experience such as working in starbucks, but do not have full time working experiences.OpportunitiesBecause of my professional knowledge (bachel or and master degree are both business management) are expertise on this content which can offer Wal-Mart a professional employees or manager. Moreover, my family also has business in China, Hangchow, which makes me has understanding and interested about China. I can provide Wal-Mart establish partnership with local suppliers and establish long-term relationship with them to compete with local retails competitors.ThreatsMany applicants around the world There is still having many talented applicants around the world apply to get into this company. Some of the applicants have high education degree and business knowledge and also have ability to speak many different kinds of languages. Therefore, I am in extremely fierce competition.Not every business segment in Wal-Mart is my expertise I have weakened and lower advantages compared to local American because of the speaking and cultural differences. Furthermore, the company does business in many different retail formats, including sup ercenters, food and drugs, general merchandise stores, cash and carry stores, membership warehouse clubs, apparel stores, soft discount stores and restaurants. However, not every business segment in Wal-Mart is in my field of expertise.Financial Analysis2010 Annual Sales (Figure2-1)(SourceHoovers,2011,http//0subscriber.hoovers.com.leopac.ulv.edu/H/company360/competitiveLandscape.html?companyId=11600000000000)As you can see in Figure 2-1, this is 2010 annual sales for 4 main retail stores in the United States. They are including Wal-Mart, Target, Costco Wholesale and Carrefour. Wal-Mart has almost $400 billion sales in 2010. Compared to other competitors, annual sales for Wal-Mart was much higher than other companies. Carrefour annual sale in 2010 was around $100 billion. Annual sales for Target and Costco were just around $50 billion in 2010.2010 Net Profit Margin (Figure2-2)(SourceHoovers,2011,http//0subscriber.hoovers.com.leopac.ulv.edu/H/company360/competitiveLandscape.html?compa nyId=11600000000000)In Figure 2-2, net profit margin in 2010 for Wal-Mart was 2.98%. Target was higher than Wal-Mart which had 3.69% net profit margin in 2010. Other two competitors, Costco and Carrefour were both under 1.84% in net profit margin in 2010.Figure 2-3(SourceHoovers,2011,http//0subscriber.hoovers.com.leopac.ulv.edu/H/company360/competitiveLandscape.html?companyId=11600000000000)The Return on summation ratio is useful in measuring how efficiently a company uses its pluss to generate profit. By definition, ROA is calculated by dividing the Net Income by the total asset of a company. Refer to Figure 2-3, ROA for Wal-Mart from 2006 to 2010 are much higher than its competitors. Wal-Marts ROA were around 9% to 10% each year, compared to its competitors which were all much lower than Wal-Mart. This basically heart that Wal-Mart utilizes its assets well enough to generate profit in comparison with their competitors. However, ROA in 2007 for Target is higher than Wal-Mart, Ta rget 9.29%, Wal-Mart 9.05%. Targets major competitive advantage over Wal-Mart lies in its customer base the average household income for Target customers is about $50,000 a year, whereas the average yearly income for a Wal-Mart customer is only $35,000Figure 2-4(SourceHoovers,2011,http//0subscriber.hoovers.com.leopac.ulv.edu/H/company360/competitiveLandscape.html?companyId=11600000000000)The outcome on Stockholders Equity (ROE) ratio measures the percentage of profit earned on stockholders investment in the company. In other words, return on equitymeasures a corporations profitabilityby revealing how muchprofit a company generateswith the money shareholders have invested. In Figure 2-4, ROE for Wal-Mart were around 20% from year 2006 to 2010, compared to other competitors which are higher than others.Figure 2-5(SourceHoovers,2011,http//0subscriber.hoovers.com.leopac.ulv.ed