WALMART

INTRODUCTION
The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. Wal-Mart, headquartered in Bentonville, Arkansas, is the largest majority private employer Walmart is also the largest grocery retailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business. It also owns and operates the Sam's Club retail warehouses in North America. Walmart has 8,500 stores in 15 countries, under 55 different names. The company operates under its own name in the United States, including the 50 states. It also operates under its own name in Puerto Rico. It operates in Mexico as Walmex, in the United Kingdom as Asda, in Japan as Seiyu, 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, while it was forced to pull out of Germany and South Korea when ventures there were unsuccessful.

History

Samuel Moore "Sam" Walton was a businessman and entrepreneur born in Kingfisher, Oklahoma best known for founding the retailers Wal-Mart and Sam's Club. Sam Walton, a businessman from Arkansas, began his retail career when he started work on June 3, 1940, at a J. C. Penney store in Des Moines, Iowawhere he remained for 18 months. In 1945, he met Butler Brothers, a regional retailer that owned a chain of variety stores called Ben Franklin and that offered him one in Newport, Arkansas. Walton was extremely successful in running the store in Newport, far exceeding expectations.[8] However, when the lease came up for renewal, Walton could neither come to agreementontheexistingstore'[Link],heopenedme." There,heachievedhighersalesvolumebymarkingupslightlylessthanmostcompetitors. OnJuly2, Walton opened the first Wal-Mart Discount City store located at 719 Walnut Ave. in Rogers,

Arkansas. The building is now occupied by a hardware store and an antique mall. Within five years, the company expanded to 24 stores across Arkansas and reached $12.6 million in sales.[10] In 1968, it opened its first stores outside Arkansas, in Sikeston, Missouri and Claremore, Oklahoma

Incorporation and growth

The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. In 1970, it opened its home office and first distribution center in Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2 million. It began trading stock as a publicly held company on October 1, 1970, and was soon listed on the New York Stock Exchange. The first stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart 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 $340.3 million. Wal-Mart opened its first Texas store in Mount Pleasant on November 11, 1975

In the 1980s, Wal-Mart continued to grow rapidly, and by its 25th anniversary in 1987 there were 1,198 stores with sales of $15.9 billion and 200,000 associates. This year also marked the completion of the company's satellite network, a $24 million 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 the time, it was the largest private satellite network, allowing the corporate office to track inventory and sales and to instantly communicate to stores. In 1988, Sam Walton stepped down as CEO and was replaced by David Glass. Walton remained as Chairman of the Board, and the company also rearranged other people in senior positions In 1988, the first Walmart Supercenter opened in Washington, Missouri. Thanks to its superstores, it surpassed Toys "R" Us in toy sales in the late 1990s. The company also opened overseas stores, entering South America in 1995 with stores in Argentina and Brazil; and Europe in 1999, buying Asdain the UK for $10 billion In 1998, Walmart introduced the "Neighborhood Market" concept with three stores in Arkansas. By 2005, estimates indicate that the company controlled about 20% of the retail grocery and consumables business. In 2000, H. Lee Scott became President and CEO, and Walmart's sales increased to $165 [Link] 2002, it was listed for the first time as America's largest corporation on the Fortune

500 list, with revenues of $219.8 billion and profits of $6.7 billion. It has remained there every year, except for 2006. In 2005, Walmart had $312.4 billion 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 1.6 million "associates" worldwide. Its U.S. presence grew so rapidly that only small pockets of the country remained further than 60 miles (100 km) from the nearest Wal-Mart 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 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." In the aftermath of Hurricane Katrina in September 2005, Walmart was able to use its logistical efficiency in organizing a rapid response to the disaster, donating $20 million 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. An independent study by Steven Horwitz of St. Lawrence University found that Walmart, The Home Depot and Lowe's made 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. While the company was overall lauded for its quick response amidst the criticisms of the Federal Emergency Management Agency several critics were nonetheless quick to point out that there still remain issues with the company's labor relations

Operating divisions Walmart's operations are organized into three divisions: Walmart Stores U.S., Sam's Club, and Walmart International.[42] The company does business in nine different retail formats: supercenters, food and drugs, general merchandise stores, bodegas (small markets), cash

and carry stores, membership stores and restaurants.

warehouse

clubs, apparel stores,

soft discount

Walmart Stores U.S. Walmart Stores U.S. is the company's largest division, accounting for $258 billion, or 63.8% of total sales for financial year 2010. 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 Walmart's online retailer, [Link]. In September 2006, Walmart announced a pilot program to sell generic drugs at just $4 per prescription. The pilot program was launched at stores in theTampa, Florida area, 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. While it's little known outside of the drug industry, many of Walmart's low cost generics are imported from India and made by drug makers in that country including Ranbaxy and CIPLA. 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. The service was discontinued on December 21, 2007, due to low sales.

Walmart Discount Stores Walmart discount stores are discount department stores with size varying from 51,000 square feet (4,738.1 m2) to 224,000 square feet (20,810.3 m2), with an average store covering about 102,000 square feet (9,476.1 m2). They carry general merchandise and a selection of groceries. Many of these stores also have a garden center, a pharmacy, Tire & Lube Express, optical center, one-hour photo processing lab, portrait studio, a bank branch, a cell phone store and a fast

food outlet. Some also have gasoline [Link] first Walmart store opened in Rogers,Arkansas [Link], usually Subway or McDonald's. In 1990, Walmart opened its first Bud's Discount City location in Bentonville. Bud's operated as a closeout store, much like Big 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. As of October 2010, there were 750 Walmart discount stores in the United States. In 2006, the busiest in the world was one in Rapid City, South Dakota.

Walmart Supercenter

Walmart Supercenters are hypermarkets with size varying from 98,000 to 261,000 square feet (9,104.5 to 24,247.7 m2), with an average of about 197,000 square feet (18,301.9 m2). These stock everything a Walmart discount store does, and also include a full-service supermarket, including meat andpoultry, baked goods, delicatessen, frozen foods, dairy products, garden produce, and fresh seafood. Many Wal-Mart Supercenters also have a garden center, pet shop, pharmacy, Tire & Lube Express, 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 have Woodforest National Bank branches), and fast food outlets usually Subway, but sometimes Dunkin' Donuts, McDonald's or Blimpie. Some also sell gasoline distributed by Murphy Oil Corporation (whose Walmart stations are branded as "Murphy USA"), Sunoco, Inc. ("Optima"), or Tesoro Corporation ("Mirastar"). The first Supercenter opened in 1988, in Washington, Missouri. A similar concept, Hypermart USA, opened in Garland, Texas a year earlier. All of the Hypermart USA stores were later closed or converted into Supercenters. As of October 2010, there were 2,843 Wal-Mart Supercenters in the United States. The largest Supercenter in the United States, covering 260,000 square feet (24,154.8 m2) and two floors, is located in Crossgates Commons in Albany, New York. Since the introduction of the new Walmart logo in 2008, the company has been phasing out the "Supercenter" portion of the name on these stores, simply referring to these stores as "Walmart.

Neighborhood Market by Walmart Neighborhood Markets by Walmart are grocery stores that average about 42,000 square feet (3,901.9 m2).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 of general merchandise. The first Neighborhood Market opened in 1998, in Bentonville, Arkansas. As of October 2010, there were 181 of them in the United States. Neighborhood Market by Walmart now has the same logo as Walmart does. However, this change took place a few months after the new logo was introduced on June 30, 2008. Supermercado de Walmart Walmart opened "Supermercado de Walmart" locations to appeal to Hispanic communities in the United [Link] first one, a 39,000 square feet (3,600 m2) store in the Spring Branch area of Houston, opened on Wednesday April 29, 2009. The store was a conversion of an existing [Link] also planned to open "Mas Club," a warehouse retail operation patterned after Sam's Club

Marketside Marketside is a new chain of grocery stores opened in October 2008, the stores are said to be less than half the size of a conventional supermarket, as stated in the backgrounder found on Walmart's official homepage. As of October 2010, there were four Marketside stores, all within the state of Arizona. Each of these stores is open from 7 a.m. to 10 p.m Sam's Club Sam's Club is a chain of warehouse clubs which sell groceries and general 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. Some locations also sell gasoline. The first Sam's Club opened in 1983 in Midwest City, Oklahomaunder the name "Sam's Wholesale Club". Sam's 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 attact a more diverse member base. In March 2009, the company announced that it plans to enter the electronic medical records business by offering asoftware package to

physicians in small practices for $25,000. [Link] in this new venture.

Wal-Mart

is

partnering

with Dell and

Sam's Club's sales during 2010 were $47 billion, or 11.5% of Walmart's total sales. As of October 2010, there were 607 Sam's Clubs in the United States. Walmart also operates more than 100 international Sam's Clubs in Brazil, China, Mexico, and Puerto Rico. Competition In North America, Wal-Mart's primary competition includes department stores like Kmart, Target, ShopKo and Meijer, Canada's Zellers, Hart the Real Canadian Superstore and Giant Tiger, and Mexico's Comercial Mexicana and Soriana. 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 Dollarand 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 rebranded the Wal-Marts as E-mart 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.

SWOT ANALYSIS
Strengths
Financial Strength: Wal-Mart is the world's largest retailer with a turnover of more than $137 billion in 1998. CEO of Carrefour, Mr. Bernard said that, "but now, to be global you need money. Not only to invest in new markets, but to keep up with the competition at home.

Computer System: Wal best Retail Link computer systems to keep in check inventories that have provided it a definite edge over its competitors over the years.

Culture: Strong work ethics and commitment towards consumers made every employee an asset for the company. Buying power: : Wal-Mart enjoys huge economy of scale as it has tremendous buying power, most of its suppliers are working on international scenario like P&G, therefore, the company can have even more bargaining power when whole operation netted into one.

Weakness
Liquidity Ratio and Financial Stability Ratio: : Due to recent acquisitions in Germany, South Korea, Canada, expansion of operations in USA and other countries and $ 2 billion share buyback have resulted in very low quick ratio, also Debt Equity Ratio is well above the critical level of 1 and is still going up.

Continuation of its aggressive expansion in the food business, and further penetration in US and other global markets, may cost them lack of Financial Capital.

Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.

Since 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

Opportunities
Growing American Economy: Recently American retail industry is experiencing very high rate of growth that can act as a growth engine for investments in other countries.

Introduction of EURO: : On January 1, 1999, France and 10 other European countries introduced EURO as their common currency and are trying to create one single market. As WalMart has already entered the German market, and France shares borders with Germany, it is just a normal step to expand to the French Market..

Threats
Hidden Legal Barriers: As the France governments have imposed significant legal barriers to control the growth of department stores and hypermarkets to save traditional small shops and for saving beauty of the environment caused by sign boards (what are they called).These Trade barrier poses significant treat for Wal-Mart to grow in France.

Economic and Political Turbulence in Europe: Banana war: The ongoing economic war between European Union and USA popularly known as Banana War, have lead to increase in import tariffs for more than 200 items including daily

use consumer items, both by European Union and US government. It can lead to significant rise in cost for Wal-Mart, for the products they import from their traditional suppliers in U.S.

War in Kosovo: The recent turn in events like war with Yugoslavia can pose a regional threat, the war is still in very early stage and nobody knows what shape it can take in the near future. . Political Turbulence in Germany: Germany which is the entrance point of Wal-Mart in Europe, is politically not very stable right now, its Finance Minister Mr. Oskar Lafontaine resigned on 14th March 1999 Germany is also on the verge of getting into recession and it would depend upon the economic reforms that would be passed on 1st April 1999. It is still not clear what reforms would be passed and how effective they would be. As Germany was expected to act as a search engine in Europe for Wal-Mart, recession in Germany can hit hard on company's ambition in Europe. Change in Currency Exchange Rates: Since the introduction of Euro on 1st January 1999, the initial exchange rate was 1 against $1.15 but EURO has declined ever since and it stands as 1.0751 as on 28th March 1999. There is still no fixed sentiment in which way EURO will go in near future. Once Wal-Mart invests in France, any more devaluation in EURO can result in loss of millions of USD for the company.

Porters Five Forces Model

Competition between the rival companies: The French retail industry is highly competitive and in the past few years major acquisitions had taken place. The top retailers are Intermarche, the worlds 6th largest retailer (1998 Sales: US$ 32.5 billion, Number of stores: 3,819, with presence in Belgium, Germany, Italy, Portugal and Spain), Promodes, number 7 worldwide (1998 Sales: US$ 28.6 billion, Number of stores: 4,921, with presence in Belgium, Dubai, Germany, Greece, Italy, Mauritius, Morocco, Taiwan, Turkey, Portugal and Spain), and Carrefour, which is the eighth largest global chain (1998 Sales: US$ 28.3 billion, Number of stores: 4,921, with presence in Argentina, Brazil, China, Colombia, Hong Kong, Indonesia, Italy, Malaysia, Mexico, Poland, Portugal, Singapore, South Korea, Spain, Taiwan, Thailand and Turkey).

Especially Carrefour and Promodes are considered to be close to being global companies. Carrefour, for instance, has introduced its hypermarket (big stores with an average area of 250,000 square feet) concept to Spain as early as 1973. In 1997, Carrefour had total sales of USD 28 billion and a net income of USD 595 million. The return on equity for that year was 18.8%, the current ratio 0.69 and the quick ratio 0.36. Carrefour strength is that it pursues international expansion with such strong determination than few other retailers. It operates 369 hypermarkets in 20 countries and 600 supermarkets. Carrefour also owns discount and convenience stores and frozen food outlets. Promodes had total sales of USD 18.4 billion and a net income of 269 million. The return on equity was 19.87%, the current ratio 0.82 and the quick ratio 0.53. Daniel Bernard, chairman of Carrefour, believes market share and volume are the keys to future success. Metro AG, a German company, the second largest retailer in the world, with $ 32.6 billion in sales, also has entered France. Food retailer Promodes has been acquiring food chains for nearly two decades. A leading food retailer in France and Europe, it operates more than 4,700 hypermarkets, supermarkets, convenience stores, and discount stores.

Threat of new entrants: France is a big market experiencing significant growth in retail industry in recent years. Strong economy, stable government, favourable government policies for foreign investment and well-developed infrastructure and with introduction of EURO as a common currency and same international laws, makes France a very attractive place to be in. But at the same time the entry and exit levels are high and it is getting mature quickly and have low profit margins.

Substitute products: . As the retail industry sells products of daily common use, there are no direct substitutes; the only substitute products that can be threat are the products from gray market, which can harm the sales of branded products. Department and discount stores also faces stiff competition from specialized retail shops such as garments, electronics etc.

Suppliers: Because of the diverse product range that is distributed by retailers there are many different suppliers. Suppliers include both domestic and international manufacturers and as the

products are more or less standardized in nature, retailers and wholesalers have low switching costs, the powers of supplier are moderate to low.

Buyers: The consumers are now more sophisticated and mature. As said by Carrefour, they want it now and they want it with the best service and the best quality. Consumers enjoy increasing choice of products and increased price competition, and they demand better and wider choices. They also exert pressure on manufacturers and retailers to give more relevant product information.

External Environmental Conditions: Unfavorable. y The U.S. retail market is becoming very saturated, so Wal-Mart needs to compete globally to sustain its leadership in the industry. y The pressure for local adaptation in foreign countries is high. Wal-Mart prides itself on its excellent customer service. In order to have excellent customer service in a foreign country, Wal-Mart needs to understand the local culture very well. y Local regulations and laws need to be clearly understood and followed. In Germany, Wal-Mart got bad publicity because they did not follow some important German laws and regulations. Internal resources and capabilities: Excellent and creating differentiation. y Tangible resources. Wal-Mart operates the worlds biggest private satellite communications system. This system allows it to track sales, replenish inventory, process payments, and regulate store temperatures all in real-time. Wal-Mart already has built many stores in foreign countries. Now it just needs to manage them efficiently and adapt to the local culture.

y Intangible resources. Wal-Mart has exceptional brand reputation in the U.S. which is primarily due to emphasis on customer and community service. Wal-Mart also has excellent employee loyalty because it gives its employees profit-sharing and stock ownership plans. This helps employees to think and behave like an owner of the company. y Financial Resources. Wal-Mart has plenty of financial resources because it is the United States leading retailer. The profits that the domestic stores produce will help Wal-Mart to improve its global operations. y Capabilities. Wal-Marts core competencies are its supply chain management and customer value focus. The hub and spoke distribution system allows Wal-Mart to quickly replenish stock in its stores and to minimize unproductive space. Wal-Marts state of the art information systems track in-store sales and transmit the information to the suppliers. The customer value focus puts emphasis on customer service which helps to improve brand recognition. Wal-Mart can very easily transmit its supply chain abilities overseas but customer service in a foreign country requires extensive research into the local culture.

Summary: Wal-Mart needs to successfully compete globally to sustain its leadership in the retail industry. Its current international division is no where near as profitable as the domestic division. The domestic success is primarily due to Wal-Marts excellent customer service, supply chain management, and brand recognition. Wal-Mart has not successfully adapted to foreign markets and this is why their customer service and brand recognition is not very strong in foreign countries.

Implementation: Wal-Mart needs to obtain a transnational strategy because it will help WalMart to deal with the pressures to adapt locally and keep prices low. This international strategy will allow Wal-Mart to obtain economies of scale, adapt to local markets, locate activities in optimal locations, and increase knowledge flows and learning. Wal-Marts knowledge and learning of foreign markets is very important if it wants to have excellent customer and community service in foreign countries. In addition to obtaining a transnational strategy, Wal-Mart should only enter into joint ventures until their knowledge of foreign markets is strong. Joint ventures with companies in foreign countries will help Wal-Mart to adapt locally. The foreign company can help Wal-Mart understand the countrys laws and regulations as well as customs and culture.

Conclusions and Recommendations Wal-Mart will be able to sustain its leadership in the industry if they can find a way to be profitable globally. The pressures in foreign countries for local adaptation and to lower costs are high. To cope with these pressures Wal-Mart should obtain a transnational strategy. This international strategy will enable Wal-Mart to adapt to local markets, locate activities in optimal locations, attain economies of scale, and increase knowledge flows and learning.