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WAL-MART EFFECT
PRESENTED BY:THE SHOW STOPPERS1.ANIK BANERJEE2.ANTARA GHOSH3. ARGHYA NAG4.ARINDAM NATH5.RAHUL MODI6.SAMRAT SANYAL7.SANANDA SANYAL
IN THE NEXT FEW MINUTES….
INTRODUCTION ABOUT WAL-MARTGLOBAL PROCUREMENT PROCESSADMINISTRATIVE FUNCTIONOPERATIONSFINANCEHRMMARKETING
INTRODUCTION The world’s largest
public corporation by revenue
The largest private employer in the world
The largest grocery retailer in the USA
The largest toy seller in America
Each year 93% of the American households do shopping in some Wal-Mart store at least once
In 2006 around 7,2 billions of people will enter some of the Wal-Mart stores
MISSION
“Wal-Mart’s mission is to help people save money so they can live better.”
VISION
“To become the worldwide leader in retailing”
VISION AND MISSION
VALUES
1. Respect for the Individual
3. Striving for Excellence
2. Service to our Customers
3 BASIC BELIEFS & VALUES
Strength WeaknessCost advantage Low price & customer-orientedStrong supply chainPeople are key to success
Ignore store decorationSince Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.
Opportunity ThreatBuild its own brandPut efforts on social welfare better imageNew locations and store typesOverseas markets
Other competitorsIntense price competition
SWOT ANALYSIS
Based in Shenzhen, China
Third busiest port in the world
Employs several hundred
80% of Wal-Mart’s 6000 global suppliers are located in China
Wal-Mart & China are a joint venture
GLOBAL PROCUREMENT CENTER
ADMINISTRATIVE FUNCTION
Planning OrganizingLeading Controlling Authority Decision making
PLANNING
In Wal-Mart’s strategic planning stage, they are highly regarded as visionaries.
they develop planning processes that enable the company to understand where they want to go, how they want to get there, and what things they must focus on along the way to drive the plan.
Part of their tactical planning was to figure out how to get customers to buy more once they were in the store.
they wanted to make sure that they improved the way that goods made it to store shelves so that the consumer bought them.
ORGANIZING
Two key factors helped with the success and expansion -knowledge and technology.
“If we work together, we’ll lower the cost of living of everyone… we’ll give the world an opportunity to see what it’s like to save and have a better life (Wal-Mart, 2010).”
LEADINGWal-Mart’s success grew
rapidly, extending throughout America and into several international markets (Wal-Mart, 2010).
Effective leadership stimulates associates to perform to lofty standards, in so doing, promoting outstanding achievement.
Leadership is an integral part of effective management, which Bateman and Snell (2009) define as “the process of working with people and resources to accomplish organizational goals”.
CONTROLLINGSam Walton believed in the
importance of control systems in an organization; as he established certain strategic control systems in the company.
Walton wanted everyone within the organization to be committed to Wal-Mart's goal "total customer satisfaction", and the strategic control systems were set accordingly.
Wal-Mart has a sophisticated satellite system used for their output control systems.
The company is using a linking performance to reward strategy in order to raise performance; where managers' performance and ability to meet goals and targets are linked to their pay raise promotion.
AUTHORITYTo control store operations, Wal-Mart has created a vertical operating structure
Based on clear definition of authority and responsibilityDecision making is highly centralized
Each store manager has the same book of rules and procedures and accounting standards.
Store managers are still given some flexibility – allows store managers to make decisions on their own.
Higher levels of management also rely on mutual adjustment when they have to decide on products or how to improve operations
DECISION MAKING Making decisions on the
basis ofexperience, feelings, and accumulatedjudgment.
It acknowledges both subjective and objective
thinking and blends analytical with intuitive
thinking. It requires only as much
information and analysis as is necessary to resolve a particular dilemma.
It encourages and guides the gathering of relevant information and informed opinion.
OPERATIONS
Introduction to operations management
Operations strategy
INPUT MaterialMachinesLaborManagementCapital
OUTPUT GoodsServices
TRANSFORMATION PROCESS
OPERATIONS AS A TRANSFORMATION PROCESS
Feedback
INPUT MaterialMachinesLaborManagementCapital
OUTPUT GoodsServices
TRANSFORMATION PROCESS
OPERATIONS AS A BASIC FUNCTION
IMPACT ON OPERATIONS MANAGEMENT
Industrial Revolution
Scientific Management
Human Relations or the lack thereof
Advent of Management Science
Quality Emphasis
Globalization of Supply Chains
Information Age/Internet Revolution
Productivity =OutputInput
Productivity improves when firms:
Become more efficient Downsize Expand Retrench Achieve breakthroughs
PRODUCTIVITY
Define a primary task Assess core
competencies Determine order
winners & order qualifiers Positioning the firm
STRATEGY FORMULATION
Provide support for overall strategy of a firm
Serve as firm’s distinctive competence
Must be consistentMust be consistent with
overall strategy
OPERATIONS ROLE IN CORPORATE STRATEGY
OPERATIONS
STRATEGY AT
WAL-MART
Products Processes and Technology
Capacity
Human Resources Quality
Facilities Sourcing
Services
Operating Systems
STRATEGIC DECISIONS IN OPERATIONS
Make-to-Orderproducts and services are made to customer
specifications after an order has been receivedMake-to-Stock
products and services are made in anticipation of demand
Assemble-to-Orderproducts and services add options according to
customer specifications
OPERATIONS STRATEGY: PRODUCTS AND SERVICES
Projectone-at-a-time production of a product to
customer orderBatch Production
systems process many different jobs at the same time in groups (or batches)
Mass Production large volumes of a standard product for a mass
marketContinuous Production
used for very high volume commodity products
PRODUCTION STRATEGY:PROCESSES AND TECHNOLOGY
Professional Servicehighly customized and very labor intensive
Service Shopcustomized and labor intensive
Mass Serviceless customized and less labor intensive
Service Factoryleast customized and least labor intensive
SERVICE STRATEGY:PROCESSES AND TECHNOLOGY
FINANCEFor the fiscal year ending
January 31, 2009, Wal-Mart reported a net income of $13.6 billion on $404 billion of revenue (3.4% profit margin).
Amidst the worst ever economic recession, Wal-Mart had a very strong quarter with sales being $97.6 billion, an increase of 7.5% over the same period last year.
One of Wal-Mart financial performance highlights has been to ensure that inventories grow at the half pace of sales.
Total sales increased by 6.1% in U.S segment.
HOME DEPOT
DELL
TARGET
WAL MART
COSTCO
KROGER
•Wal-Mart’s Win-Play-Show merchandising strategy went a great way in improving the sales particularly in apparels, electronics such as Flat TV,GPS units etc.
•There was a decrease in sales in Sam’s club segment due to rapid development of new stores in the International and Wal-Mart stores segments.
•The major increase in sales is attributed to inflation in food prices which led to people spending less on eating out and concentrating more in eating at home.
QUICK OVERVIEW
There was an increase in diluted earnings per share from $2.92 in 2007 to $3.16 in 2008.
This increase is attributed to decrease in capital expenditures.
The company paid a dividend of $0.88 per share in this fiscal year an increase of 31.3% with respect to previous year.
QUICK OVERVIEW (CONTD.)
Financial ratios are used by managers within a firm, by current and potential stockholders (owners) of a firm, and by a firm's creditors.
Values used in calculating financial ratios are taken from Wal-Mart’s balance sheet, income statement, cash flow statement and statement of equity.
RATIO ANALYSIS
2004200
5200
6200
7200
8 2009
Current Ratio 0.980.9
1 0.90 0.90 0.90 0.81
Quick Ratio 0.140.1
7 0.17 0.19 0.20 0.16
Cash Ratio 0.090.1
4 0.13 0.13 0.15 0.10
LIQUIDITY RATIOS
2004 2005 2006 2007 2008
Gross profit margin 23.17%
23.72%
23.86%
24.24%
24.36%
Operating Margin 5.81%
5.93% 6.00% 5.88% 5.81%
Return on Equity 21.85%
22.61%
22.88 %
21.97%
21.06%
Return on Assets 15.17%
15.33%
14.67%
14.34%
14.15%
It measures how well the firm controls its expenses to generate an acceptable rate of return or profit.
PROFITABILITY RATIOS
2004 2005
2006
2007
2008
Interest Burden Ratio 0.9520
0.9460
0.9382
0.9254
0.9165
Interest Coverage Ratio(Times Interest Earned)
20.84
18.51
16.19
13.41
11.97
Debt Ratio 0.59 0.59 0.62
0.59
0.60
It measures the firm's ability to repay long-term debt.
DEBT RATIOS
HRM: HUMAN RESOURCEMANAGEMENT
Skill levels required
Degree of autonomy
Policies
Profit sharing
Individual or team work
Supervision methods
Levels of management
Training
Wal-Mart employment problems are : Illegal immigrants mopping its floors
Sex discrimination
Low wages lead worker strike
Unions and community groups.
They were not being able to pay for health insurance and other benefits.
Wal-Mart workers generally gave the company high performances, but they never get proper pay and benefits.
Lack of human capital
HRM PROBLEMS
What services are provided by HREmployee screening and selectionTraining classes offeredCompensation levelsHealthcare benefits
The speed and utility of these servicesTime to hire new employeesTime to deliver training to employeesTime-to-performance for new hiresResponse to information requestsEmployee satisfaction with HR
HR OUTCOMES: SERVICE
Human resources staff per FTE Program administration costs
Advertising for recruitingTravel time for interviewsTest costsTraining materialsCompensation and benefits outlays
Managerial time performing HR administration
Litigation and settlement expenses
HR OUTCOMES: COSTS
Job satisfaction A pleasant feeling from doing work that fulfills one’s goals
Organizational commitment A desire to work towards your organization’s goals and objectives
Stress A feeling of psychological arousal that comes from pressure,
deadlines, expectations, etc.Absenteeism
Failing to report for work as scheduledTurnover
Voluntary and permanent departure from an organization
HR OUTCOMES: ATTITUDES
Productivity/task performance Effectiveness
Achieving assigned goals consistently Efficiency
Minimizing resource use Creativity
Finding new ways to do work, or defining new goals for work
Organizational citizenship behavior (OCB) Behavior that enhances the social and psychological environment
Firm performance Increased productivity Decreased costs Increased agility
HR OUTCOMES: PERFORMANCE
Employees 2,100.000 BenefitsStore Associate Positions
Medical Coverage
Exclusive, Everyday Savings
Grow Your Future
Wal-Mart Success = Your Success
Store Careers
Store Management Positions
Stores Training & Development
Driving Careers
MARKETING
Key strategies for growing Locate store in isolated
rural areas and small towns (population 5000~25000)
Pattern of expansion Always push from inside
outMid-1980s One third were located in
areas that were not served by any of its competitors
National Promotion Overlay Dream girls Dream girls VIP (Movie Premier)Sweepstakes National Print Advertising Internet Banner AdvertisingNational PublicityViral MarketingRetail Micro-siteWal-Mart TV Red Carpet
CorrespondentFour-market Top-spin ActivitiesDream girls Dream girls In-store Kiosk Community MarketingRegional PublicityUrban Radio & Print
Advertising
INTEGRATED MARKETING RECOMMENDATION
Promotional strategyEveryday-low-prices
Few promotions13 major circulars per year1993
Satisfaction guaranteed policy
Lower price
Maximize sales volume and industry
turnover
Minimizeexpenses
MERCHANDISING
Marketing slogan Lower price
Store managers set up prices
2-4% pricing differential between Wal-Mart and its best competitors in most markets in early 1990s
•Always the low price-Always
•Always low prices-Always
MERCHANDISING
The company utilizes product differentiation approach as their marketing strategy to ensure that with these new entrants their product will still be different, unique and full of quality to satisfy their target market.
it appeals directly to its customers with a basic price message and plays by its own marketing rules.
Wal-Mart ranked 57th in total broadcast and print advertising.
Wal-Mart has been able to adapt to the marketing environment because of its strong commitment of providing quality products and services for both of their business operations.
MARKETING STRATEGIES
These include cost leadership, differentiation, focused cost leadership and integrated cost leadership/differentiation.
Much of Wal-Mart's success has been ascribed to its stockless warehouse JIT distribution system.
The marketing concept has been defined as ‘the key to achieving organizational goals’ and the marketing concept rests on ‘market focus, customer orientation, coordinated marketing and profitability’.
MARKETING STRATEGIES (CONTD.)
Existing Products New Products
Existing Markets Wal-Mart focuses on
selling existing
products into existing
markets. These are
products that are
available also in the
other branches of Wal-
Mart.
Wal-Mart introduces
new products into
existing markets.
These could be
products that are
unique only to the
Chinese market.
New Markets Sell its existing
products into new
markets, e.g.,
introduce Wal-Mart
online shopping in
China.
Wal-Mart markets new
products in new
markets. This can be
done by offering new
products that are
available only online.
ANSOFF’S GROWTH MATRIX
First, understanding competitors will facilitate the firm’s management to understand their competitive advantage and disadvantages in relation to their competitors.
Second, understanding competitors will also generate understanding of the past, present and future strategies of the firm.
Third, it offers the firm an informed basis to develop strategies in order to gain or maintain competitive advantage against their competitors in the future.
Lastly, understanding competitors will also facilitate the firm in forecasting or predicting the financial returns that they made from future investments.
BENEFITS
Wal-Mart Strategic business goals and objectivesWal-Mart has always aimed at
increasing sales through its friendly prices. This image has stuck with the company for a very long time. Not only is the company associated with low prices, but it has a variety of items under one roof. These qualities favor the rural clientele.
Strategic marketing program marketing objectives, targeting and positioningThe Company needs to change
its marketing objectives in such a way that they can attract a different market segment
Affluent clients tend to shy away from the retail giant due to the misconception that Walmart's products are of lower quality
MARKETING STRATEGIESProduct:The company should not
abandon its idea of attracting the affluent client
Company had introduced Metro 7 stalls in 1,500 stores
The company should introduce expensive products only in stores located in affluent neighborhoods.
The focus should be on electronics.Place
The focus should be on international markets.
Wal-Mart should choose economically secure countries
PriceThe pricing aspect of Wal-
Mart's marketing mix is part of the reason why the company has done so well so far
The company should maintain their low pricing strategies but they should merge this with product choices.
They need to improve on the quality of service and their items
PromotionOne of the most notable
promotional strategies in Wal-Mart is the use of public relations.
The company takes part in charitable events and has marketed itself as a community based institution
they could offer their employees access to the in-house clinics
MARKETING STRATEGIES (CONTD.)
Wal-Mart's success as based solely on its "Everyday Low Prices focus,".
Fast, Friendly, Clean" demonstrates Wal-Mart's renewed focus, ensuring associates are friendly and providing a less cluttered shopping experience.
Wal-Mart New Statement “Now more than ever”
CONCLUSION
THANK YOU
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