Transcript Analysis of Wal-Mart

ANALYSIS OF WAL-MART
Team 3
Jessica Sharpless, Andrew West, Andrea Lapotaire,
Andrew Stack, Taylor Carroll
Industry Environment


Industry environment can be defined as the exterior
forces which cannot be controlled by marketing may
have a significant impact on the success of
the product offering
This includes:
existing competition
 the threat of new competition
 price competitiveness
 changes in consumer tastes
 other economic factors.

Driving Forces for Change

There are six major forces that are driving change in
today’s world
1.
2.
3.
4.
5.
6.

Commoditization
The digital revolution
Social Media in today’s society
Globalization
The turbulent world
Acceleration
These forces may not be the most important for all
companies, but some combination of them can have
significant influence on a company and the strategic
choices that they make
Strength of Competitive Forces


A helpful and widely used framework for classifying
and analyzing the factors that determine levels of
competition in different industries was developed by
Michael Porter and is known as Porter’s Five Forces of
Competition Framework.
The five forces:
competition from substitutes
 threat from entry
 supplier power
 industry rivalry
 buyer power.

Competitive Positions of Companies in
the Industry
Key Success Factors


Sam Walton’s principles of beliefs
"If we work together, we'll lower the cost of living
for everyone...we'll give the world an opportunity to
see what it's like to save and have a better life."
ROA Analysis
ROA (TGT) vs Real GDP (%/yoy)
Walmart (ROA) vs Real GDP
3.0%
3.0%
6.6%
2.0%
1.0%
6.1%
0.0%
5.6%
-1.0%
-2.0%
5.1%
-3.0%
-4.0%
2006
2.0%
Real GDP
ROA (TGT)
%/yoy
Real GDP
1.0%
9.2%
8.9%
0.0%
8.6%
-1.0%
-2.0%
Walmart ROA
8.3%
-3.0%
4.6%
2008
2010
2012
Real GDP
-4.0%
8.0%
2006 2007 2008 2009 2010 2011 2012 2013
ROE Analysis
24.50%
24.00%
23.50%
23.00%
22.50%
22.00%
21.50%
21.00%
20.50%
20.00%
2006
TGT ROE v Real GDP
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
2008
2010
2012
-4.0
2014
Real GDP
WMT ROE %
WMT ROE v Real GDP
19.00%
3.0
18.50%
2.0
1.0
18.00%
WMT ROE
Real GDP
17.50%
17.00%
TGT ROE
-1.0
Real GDP
-2.0
16.50%
16.00%
2006
0.0
-3.0
2008
2010
2012
-4.0
2014
DuPont Analysis



Five-Component Disaggregation of ROE
 Decrease in operating profitability, measured by EBIT
Margin, is the main reason for reduction in ROE over 2013.
Four-Way Decomposition of ROA
 Decrease in operating profitability, measured by EBIT
Margin, is the main reason for reduction in ROA over 2013.
Decomposition of Net Profit Margin
 Decrease in operating profitability, measured by EBIT
Margin, is the main reason for reduction in Net Profit Margin
over 2013.
Current Situation and Outlook

Altman’s Z- Score
 4.33

Operating Capital
 TTC:
45.69
 TTC-Pay/ASPD: 15.87

Degree of Cash Leverage
.7237
SWOT Analysis

Strengths:
 Logistics and
information system
 Size
 Higher profitability
trend
• Opportunities:
– Asian markets
– Nutrition and low income
food supply
– Home delivery
• Weaknesses:
– Unsuccessful foreign
ventures (SK & Ger)
– Sales drop in 8
quartes
• Threats:
– Target
– Labor Unions
– Lawsuits
IDENTIFY/EVALUATE THE
COMPANY’S OPTIONS

Different formats:
 Express
 Neighborhood
market
Expanding Internationally


Running out of locations in the U.S.
Expected to grow more internationally than
domestically
 Especially
in developing nations
 More successful in some countries than others
 Customized stores for the country (smaller)
 Different


names: Walmex, Best Price, etc.
Get ahead of competition
There are currently 1269 international Wal-Marts
and that number is gowning.
Low-Cost, High-Volume Strategy

Low-Cost: smaller operating expenses than most
other companies in the industry
 Superior

distribution capability
High Volume: Selling a large quantity
Strategies


Focus on customer satisfaction
Low-Price leader
 “Save
money. Live better.”
 Formed
to place focus on customer
 Save Money: feature
 Live Better: Benefit


Criticized as to generic
Proof is in the numbers
Strategies Cont

Low prices. Every day. On everything.
 Places



renewed focus on customer
Should not make any major changes to strategy
Wal-Mart does a good job of listening to the
customer and reacting to their changing needs and
wants.
Focus on keeping competitive advantage
Strategies Cont.

Sustainability






Philanthropic work




Really focuses on sustainability
Suppliers must meet certain requirements
Using renewable energy where possible
Customers feel better buying from a company that focuses on not
harming the environment
Keep going with initiative
Already donates casts amount of money to good cause
Should expand on this
Customers like to support companies that give back
Diversity among employees

Gains trust from customers that they are a fair company
Ultimately,

Wal-Mart needs to do something to stay on top and
they are making strides towards doing that
Form a Strategy

Background
 Wal-Mart
has become notorious for bad employee
relations
 70% of Wal-Mart’s employees leave within their first
year
 Complaints are:
 Low
wages
 Poor working conditions
 Inadequate health care
Form a Strategy

Solution
 Researched
other companies’ strategies
 Google
 SAS
 Came
up with our own wellness program
Form a Strategy

SAS
 4%
turnover rate
 Named The Number One Company to Work For in 2010
(Rosenburg, 2010)
 Benefits:
 Day
care for young children on sight
 Exercise and fitness programs
 On site social workers
Form a Strategy

Google
 Known
as a “recruiting machine”
 Benefits:
 Free
massage and yoga
 Maternity and parental leave
 Back-up child care for parents when their regularly
scheduled child care falls through
 An onsite gym
Form a Strategy

Program Goals
 Point
system
 Earned
by sponsoring or participating in community events
 Points can go towards extra vacation days (up to three)
 Or tickets for weekly raffle items., such as:



Tickets to sporting events
Gift cards to restaurants
Etc.
Form a Strategy

Program Goals Cont.
 Flex-scheduling
 To
help with busy parents
 On-site
 Help
counselor
manage stress
 Off-site
gym
 Discounted
memberships at local gym
 Employees will become healthier and take less sick days
Wal-Mart the Magnificent





Has perfected distribution process
Has been mimicked but not replaced
Continues to adapt in order to maintain legacy
Looking to develop international markets
Currently bad reputation of employee
relationships, making steps to fix