Parth Dave BPS 4305

Walmart Executive Summary: Walmart started off as a small company in 1962 in Rogers, Arkansas founded by Sam Walton. Now Walmart is the largest retailer in the world which has operations in both America and countries around the world. Walmart has great supply logistics which cuts inventory costs and Walmart deals with supplier to get products for low costs; these savings are passed on to the consumer. This report will present the financial analysis which represents Walmarts profits and revenues. The external and internal analysis of the company will outline Walmarts strengths, weakness, opportunities, and threats. Also, a competitor analysis is shown to outline the positives and negatives of Walmart and their competition. The value chain analysis describes Walmarts simple yet effective supply chain management. Walmart is nearly incomparable against the competition with retailers such as Target, but Walmart can greatly increase their sales, profit, and revenue with a few simple techniques. Walmart can increase their online sales reach; they can also increase product variety and quality as well; Walmart can also greatly improve the treatment of workers. These steps can greatly help Walmart achieve even greater success. Currently Walmart is number one on the Fortune 500 list. CNN Money says that currently Walmart has over two million employees and earns a net income of about 16.99 billion currently. Sam Waltons cost cutting techniques are still used today and have earned Walmart large profits. Walmarts great supply logistics and great customer service has earned the company as being a formidable competitor in the retail market. Walmart does have some

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disadvantages compared to the competition which include limited product variety, meager employee benefits, and making bribes in global nations. Regardless, Walmart is still the number one retailer in the world, but fixing there issues can earn them greater sales. They can do this by including more product variety and improving their online shopping site. Financial Analysis: According to the website HowStuffWorks The frugal culture, established by Walton, also plays into Wal-Mart's success. The company has been criticized for the relatively meager wages and health care plans that it offers to rank-and-file employees. It has also been accused of demanding that hourly workers put in overtime without pay. This shows that Walmart keeps costs low, to decrease prices and this is a technique used to increase profits. The website also states Walmarts other cost reducing measures, such as the coordination of the temperatures of its stores point to Walmarts thrift loving strategies. Also Walmart forces suppliers to lower costs and this in turn benefits Walmart. According to the Walmart 2013 annual report Walmart has more than 10,700 retail operated in 27 countries; approximately 245M customers are served weekly at Walmart in 27 countries; Walmart has an increase of 59% in earnings per share; Increase of 123% in free cash flow; More than $60B returned to shareholders through dividends and share repurchases. Exhibit 1 shows how between the years of 2005 and 2012, revenue has steadily grown. The chart also shows that 2012 revenue is at around $450 billion. Exhibit 2 shows how Walmart is superior to the competition which includes Target. The chart shows how return on assets is 2.97% greater for Walmart than Target in 2010, which

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shows that Walmart uses its assets more efficiently. Also inventory turnover for Walmart is 2.65 greater than Target, which means that Walmart managers their inventory better. Walmart also has lower prices which greatly help consumers compared to prices at Target, at the same time Walmart has greater profits. Walmart has greater profits by working with their suppliers to lower costs. Walmart even strictly maintains temperatures in the store to save more money from energy. Exhibit 3 shows how sales at Walmart are $341,611 million greater than Target in 2010. Sales at Walmart in 2010 were at an outstanding $405,046 million; this clearly shows how Walmart beats the competitors and at the same time helps consumers buy products for low prices.

Internal Analysis:

Walmart has several benefits compared to the competition such as Target; this is represented through their high profit amounts. Walmart has cheaper prices, more departments, and a great range of products compared to the competition. Plus Walmart has a great global market reach; they have gone international to countries such as Mexico, China, and India. The website Strategic Insight lists several strengths that have made Walmart successful which include, Scale of operations, competence in information systems, wide range of products, cost leadership strategy, and international operations. These are several strengths that have allowed Walmart to maintain high revenue and profit, but at the same time it has allowed great customer satisfaction. Walmarts price match system lets customers match prices from local competitors, which has allowed Walmart to reach high sales. Also Walmart has great customer service; returning and exchanging items is a simple process that requires minimal

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hassle. Walmart has several departments including a garden center and auto center. They even have an online website where you can purchase items for cheaper than in- store. You can get these items shipped home or at your closest Walmart location. Another great benefit is that you can purchase a Walmart gift card and fill up gas at MurphyUSA which allows you to have 3 cents off per gallon of gas, which greatly helps when gas prices are high. They are also very open to promotions of associates. I currently work for Walmart and my current position is a customer service manager. I was promoted as a former cashier and they work with my hours since I am attending school full time. Walmart has a very diverse workforce that employs women and minorities without discrimination. An online article called 2012 Workforce Diversity shows that in 2012 there were 813,000 women hired at Walmart. 272,000 African Americans were employed at Walmart and 174,000 Hispanics as well. This shows that Walmart has a diverse workforce that provides every individual with opportunities.

On the other hand, Target has a few benefits that Walmart has a lack of. Target has more selection on items such as beauty supplies and electronics. Target also greatly excels in the apparel department, because they have name brand items which targets the younger generation. Strategic Insight continues to show Walmarts weaknesses, Labor related lawsuit, high employee turnover, little differentiation, and negative publicity. Compared to the competition, Walmart has a high employee turnover rate, which has caused many strikes throughout the nation. This is due to low wages, minimal health care benefits, and labor intensive work environments. Also Walmart keeps employee staffing at a minimum to save money which increases profits. This causes more stressful work environments for employees

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and increases customer complaints. Target excels in social media because they have coupons that can be used at the store. On the other hand, Walmart doesnt offer any incentives online; they only advertise their low prices. Walmart has had several lawsuits including the infamous lawsuit of making bribes in Mexico to build Walmarts there. The website Global Issues states that, The Walmart scandal erupted on Apr. 21, 2012 when the New York Times reported that the firm had paid 24 million dollars in bribes to Mexican officials between 2002 and 2005 to expedite the opening of new stores, a possible violation of the U.S. Foreign Corrupt Practices Act. This scandal has caused Walmart to lose millions and millions of dollars due to corrupt practices, especially in global markets.

External Analysis:

The website Strategic Insight states the opportunities that Walmart could utilize to increase sales. They include, Retail market growth in emerging markets, rising acceptance of own label products, trend toward healthy eating, and online shopping growth. Many Americans are moving toward the trend of eating healthier. Walmart has the opportunity to offer more organic choices in their stores. This has allowed Target to excel, because they offer much more organic food choices that many Americans are moving towards. Many Americans are also moving towards the trend of online shopping. Many people shop at Amazon because it is more convenient, saves gas, they can shop day or night, and consumers can shop for literally any product for low prices. Walmart has an online shopping website, and most prices are cheaper than in store. On the other hand, the product selection on Walmart.com is minimal and more expensive compared to Amazon. Also Target gets a great increase in sales by

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incorporating Starbucks in their stores. Many people enjoy Starbucks coffee and the convenience of having it in-store; this would greatly increase sales if Walmart incorporated Starbucks coffee at their stores.

Walmart has clearly identified itself as the largest retailer in the world. Walmart has minimal threats when it comes to new competitors entering the market. But Walmart still has some strong competitors such as Target and Amazon. Currently the trend toward online shopping is becoming more and more in demand. Shopping online is convenient and consumers can shop for cheaper than the retail store. Target and Amazon both have a great online shopping site that is much more interactive than the Walmart.com site. This is what gives Target and Amazon a competitive edge in the market compared to Walmart. Amazon and Target also provide discounts and online deals; this gives customers more incentives to shop at these sites. Walmart can target more consumers by making their online site more innovative and customer friendly. According to an article published in Daily Finance, consumers are getting creative when it comes to finding cheaper prices, and although Wal-Mart does promise to price match all of its items, its still not convincing enough. Many consumers are headed to Dollar Generals in efforts to find the lowest possible price they can find for an item. Not only that, but traffic has shifted from physical stores to online stores. In fact, a startling 50% of W al-Mart's customers now shop on Amazon.com (AMZN), versus just 25% five years ago. For Walmart to compete with online shopping sites like Amazon, they will have to offer a better website and also a wider range of products.

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Identifications of the firms strategy and its competitors strategies : Walmart has great supply logistics, because they have the lowest operating expenses, large volume production, and low prices. Walmart has price match program, good customer service, and customers are greeted when entering the store. Walmart does have a downside which includes, low quality, overdependence on IT firms and limited product variety. Target has a different strategy; they have better quality products, wider variety, and great social media presence. But Target has higher prices, less departments, and fewer locations. Amazon is another great competitor to Walmart. They have a wide range of selection of products, prices are lower, free returns and exchanges, and more convenient. Some of the consequences of shopping on Amazon are that you can only visualize the item and you have to wait for shipment. Exhibit 4 shows Walmarts strategies and positives and negatives of their key competitors. Another issue Walmart is facing is dealing with labor unions. Walmarts poor treatment of employees has caused several lawsuits throughout the years. Their mediocre health benefits, low wages, and bad work environments has caused high employee turnover rates which has led to labor unions. Walmart should make more efforts to preserve Sam Waltons values, one of them being respect for the individual. Walmart has also opened several new stores in areas with many small businesses. Walmart has greatly affected these small businesses by sapping their sales, and many have to close down from the consequences. Walmart needs to make more effort in making sure that they care about the community. Otherwise Walmart will continue to deal with strikes that have caused bad publicity.

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Primary Activities: One reason why Walmart is able to pass off great savings to customers is by keeping inventory carrying costs low. They use a hub and spoke method to keep inventory levels low in their distribution centers and backroom of retail stores. The distribution center receives products and then those products are delivered to the retail stores. This process reduces lead time and transportation costs which increases profits. Employees also have telxons that show if products are in the warehouse, in transit, or at their retail store. They can even order items that are low on the shelf. Walmart has a great range of products that are branded and even Walmarts own private brand called Great Value and Equate. Walmart carries brands such as Pioneer, Sony, Kicker, and even Apple. For food Walmarts own brand, Great Value costs cheaper than brand names so customers are able to save money. For health and beauty products, Walmart has their own generic label called Equate which is cheaper than brand names. This Walmart generic brand label helps to increase their revenue and helps consumers save money. Also Walmart store managers can make their own decisions related to sales and reducing costs. Most retail stores are controlled by corporate but with Walmart it is different. For example, certain policies are by store management discretion. I currently work for Walmart and Walmart has an ad match policy. Our store manager only allows four items of the same item to be price matched from competitors. This saves money for the company which increases profits. Walmart pushes their low cost persona to customers which drive more consumers to shop there. Their advertisements portray how prices are rolled back or, in other words, lowered. There advertisements also talk about how they match prices of several competitors

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including Target, Aldi, Kroger, Albertsons and many other grocery retailers. Walmart is also pushing their Walmart.com website. Customers can shop online on the Walmart.com website and they can ship to the store and or even to their house. This greatly reduces the hassle of going to a retail store. Walmart has great customer service that easily allows returns and exchanges; Customers can even refund items without a receipt. Most general items have a 90 day return policy with a receipt and even most electronic items such as laptops have a 15 day return policy with receipt. Walmart also offers customers with an extended warranty plan on the manufacturer warranty of products. Customers can pay an affordable fee that extends the value of their products that goes beyond what the original manufacturer offers. Support Activities: There are a plethora of Walmart stores throughout the nation and even in international countries, so having a communication system is essential in running the business smoothly. An online blog expresses that, Wal-Mart set up its own satellite communication system in 1983. This allowed the management to monitor each and every activity going on in a particular store at any point of the day and analyze the course of action taken depending on how the things went. By making use of Bar-coding & RFID technologies, different processes like efficient picking, receiving & proper inventory control of the products along with easy packing and counting of the inventories was ensured. This successful technique ensures that productivity stays up and inventory is kept as low as possible. Also items that are more in demand are kept better stocked in inventory to fulfill customer demand. Employees also have telxons which are used to scan items to check inventory, order items, make price changes, make price labels, and

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much more which is the heart of running the business within Walmarts. The blog continues talking about the telxons, Employees use Magic Wand, which is linked to in-store terminals through a Radio frequency network, to keep track of the inventory in stores, deliveries and backup merchandise in stock at the distribution centers. The order management and store replenishment of goods is entirely executed with the help of computers through Point of Sale (POS) system. Wal-Mart also makes use of sophisticated algorithm to forecast the quantities of each item to be delivered, based on inventories in the store. This tool greatly helps in keep inventories low but at the same time makes sure that items are kept in stock. It also helps to locate the departments of the item and the price of it as well. Also Walmart has a department manager, zone manager, assistant manager, co manager, and a store manager. This greatly ensures that the business is running smoothly from daily operations, helping to keep customers happy, and making sure that employees are taken care of. Walmart makes sure to exercise social responsibility by making sure to help communities and becoming more green to help the environment. The Walmart 2013 Global Responsibility Report shares their efforts on helping others. Walmart and the Walmart Foundation gave more than $1 billion to support organizations that impact local communities around the world; The Walmart Foundation became the first partner of Feeding America to donate 1 billion meals (since 2005); Renewable energy now provides 21% of Walmart's electricity globally, and we became the largest onsite green power generator in the United States This shows that Walmart makes efforts everyday to help the community and future generations by helping others and the environment. This indicates that social responsibility is of great importance to Walmart.

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Every employee hired at Walmart is taught Sam Waltons three beliefs, which are service for our customer, strive for excellence, and respect for the individual. These three beliefs keep Walmart customer service excellent. Employees are provided health benefits, bonuses, holiday pay, vacation, and leave of absence as well. The website SlideShare conveys how employees are hired, In recruiting new associates the company begins a comprehensive recruitment program in the community where the store is to identify candidates. Recruitment programs are well publicized and convenient, providing an opportunity for job applicants and the company to start getting acquainted. Sam Walton also believes that the customer is always right. This statement is taught to all the employees to keep customers happy and keeps customers shopping at Walmart year-round. Walmart has a computer-based technology that communicates information to warehouses to keep items in stock. This technique keeps inventory stock at a minimum. SlideShare talks more about Walmarts technology, As a products bar code is swiped at the checkout aisle, information is instantaneously sent to Walmarts data warehouse. The date warehouse projects when the item needs to be replenished and then places the order directly to the vendor or to a Walmart distribution center. This just in time inventory management reduces overhead associated boxes of unneeded merchandise sitting in warehouses and stock rooms. This helps keep inventory clutter at a minimum in the backroom of Walmart and reduces inventory costs. Walmart has its own distribution centers across the US which keeps stock of retail stores. This distribution centers keep lead times low and satisfies customer demand. Associates are supplied with telxons that gives them information if items are in the warehouse or in

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transit. An online blog talks about Walmarts procurement process, The distribution centers ensured steady flow & consistent flow of products. Managing the center is economical with the large-scale use of sophisticated technology such as Bar code, hand held computer systems (Magic Wand) and now, RFID. With this technology associates are able to scan products and see if item stock is in store, in the warehouse, or if they need to make orders to fulfill demand. The blog continues about the inventory process, Every employee has access to the required information regarding the inventory levels of all the products in the center. They make 2 scansone for identifying the pallet, and other to identify the location from where the stock had to be picked up. Bar codes & RFID are used to label different products, shelves & bins in the center. The hand held computers guide employee to the location of the specific product. This process is simple so employees can find items in the backroom, retrieve it, and then start filling up products on the sales floor. Associates will even have information if items are not in the backroom, so they can make orders on products. Management makes approvals of ordering products from warehouse, this will inventory levels are managed in the backroom of retail stores. Exhibit 5 shows how the procurement process works. Vendors deliver products to the distribution centers; distribution centers deliver items to retail stores; associates stock items on the sales floor. This process is simple to decrease lead times, keep inventory holding costs low, and customer satisfaction high. Walmart is able to retrieve items from suppliers at very low costs; this is due to Walmart being their largest customer. Competitor Analysis: Walmart has a great marketing strategy by using television ads and sales paper ads. The commercials are very realistic, which shows are people are able to save money from every day

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shopping. Target spends much more on advertising than Walmart. The Business Insider says that, This year, Target spent $1.62 Billion in advertising along with pitching Christmas ads starting October 11th becoming the first retailer to advertise for the holiday season this yea r. The Business Insider continues talking about how Walmart spent $1.89 billion on advertising this year. Television ads also compare product prices to competitors such as Target. They compare receipts from Walmart and Target to show how much consumers can save by shopping at Walmart. Temporal Comparison: Walmart has had a history of exploitation of workers, which has been the cause of several lawsuits on the company. The Work Place Fairness report talks more about the lawsuit against the company. A federal agency affidavit revealed that Walmart execut ives were aware of systematic hiring of illegal immigrants by Walmarts cleaning contractors. In 2003, immigration officials conducted a raid on 60 Walmart stores in 21 states, arresting 245 workers. Walmart settled the case for $11 million in March of last year, but claimed that corporate executives were unaware that illegal immigrants were hired. This lawsuit and many other ones have caused Walmart many issues and have decreased their revenue. Walmart has to make a change and make legitimate business dealing in order to put a stop to lawsuits and illegitimate business practices.

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Recommendations: Walmart has established itself as being the best retailer in the world. This is how Sam Walton envisioned the company to be with his great values and his mission of the company. Walmart has provided consumers with great products at low competitive prices for decades. But Walmart can make some improvements that will help the company prosper more in the years to come. Consumers are moving toward the trend of using more modern technology. This has led consumers to use online websites as a source of shopping instead of taking trips to a retail store. This is what makes Amazon so successful in the market because shopping online is more convenient. Walmart has an online site called Walmart.com that lets customers find and pay for products online; they can either have their items shipped to their local Walmart or their home. Walmart can improve their online site by offering more product variety and more interactive. This will attract more customers to shop online on the Walmart site. Walmart also makes very high revenue every year. They can easily increase employee benefits such as higher wages, better health benefits, and employee staffing. This will greatly decreas e Walmarts high employee turnover rate and decrease strikes that is causing the bad publicity against Walmart. Making this change will affect profits but it will help Walmart sustain better publicity and this change will follow Sam Waltons values. Walmart also should make sure to make efforts in legitimate business practices. For example, Walmart hired illegal immigrants in several of their stores and management knew about the situation as well. Another example would be that Walmart made bribes to Mexican officials to build Walmarts in their country. This caused many strikes and again caused bad publicity towards Walmart. These illegitimate practices will

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directly affect the company because it will decrease revenue and also this publicity puts a bad impression on consumer which decreases sales. The best recommendation for Walmart would be to improve the online site. Walmart should offer more product variety and better quality. Walmart can start off by having designer clothes, which will target more consumers. Target offers many designer clothes and great healthy and beauty product variety; this attracts the younger generation. Walmart can use this technique to attract more consumers especially those who are young and quality is there priority. If Walmart started selling designer clothing, they can integrate this in their online website so consumers can shop from the comfort of their home. More and more consumers are shopping online, because they can save gas, it is convenient, they can shop day and night, and prices are lower than in typical retail stores. Walmart can greatly take advantage of this new trend and make their online site more consumer friendly and attractive. Also Walmart online prices need to be set to compete with online shopping sites such as Amazon. Walmart should also offer deals like Amazon, such as free expedited shipping do drive more customer sales. This is especially helpful during holiday seasons when consumers want items to be shipped quickly. Forbes talks about Walmart and their online consumer reach, On the web, though, Wal-Mart lags. The Bentonville, Ark. chain doesnt break out its U.S. online sales in its financials, but e commerce chief Neil Ashe recently said the company aims to do $9 billion of its 2013 revenues on the internet. Thats 2% of its overall sales. Walmart needs to aim at improving their online reach to target consumers who are shopping online, because the demand to shop online is greatly increasing. Forbes continues stating, According to Nielsen, e-commerce will gain more ground than any other segment of the retail industry by 2017, with a compound annual growth

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rate of 11% each year. Supercenters of the kind pioneered by Wal-Mart come in second, with their growth rate projected at only about half that of we b shopping. This shows the great importance of online shopping, so Walmart has to make improvements to keep with formidable competitors like Amazon. Amazon also has great website functionality, ease of navigation, and great customer satisfaction. Walmart has to compete with loyal Amazon customers and they have to do this by making the site more interactive, improving appearance, and making sure customer service is a great priority. Walmart can make sure customer service is priority by making sure returns and exchanges are hassle free and offer free return shipping. Customers requiring help should be treated politely and service should be prompt. Sam Walton has rooted Walmart as a great retailer and has set an example to other companies on how a business should be run. From supply logistics to customer service, Walmart is a leader compared to other retailers. Walmarts competitors do have some advantages such as better product variety and quality. Walmart has still established itself as having low prices and their price match guarantee proves that. Walmart needs to make improvements to their online shopping experience to compete with e-commerce that consumers are moving towards. Making these changes will help Walmarts future in the upcoming years. Walmart has demonstrated to provide customers great savings time and time again.

Parth Dave BPS 4305 Charts and Graphs Exhibit 1 http://dividendmonk.com/wp-content/uploads/2012/07/walmart-revenue.png

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Exhibit 2 http://www.benetzkorn.com/wp-content/uploads/2011/08/Ratio-Analysis.jpg

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Exhibit 3
http://www.benetzkorn.com/wp-content/uploads/2011/08/Floor-Space1.jpg

Exhibit 4 Firm Walmart Strategy Low Prices Efficient Logistics Customer Service Better Quality Specialized Products Rational for Strategy More Sales More Profits Pros Lower Prices Cons Lower quality, more clutter of aisles, limited variety. Higher prices and less departments Cannot touch or feel the item which is essential for shopping

Target

Targets consumers that want better products Faster and easier and customers can shop new or used items

Organic foods and designer clothes Shop day or night, save gas, and cheaper

Amazon

Wide Variety Convenient Customer Satisfaction

Exhibit 5

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Sources

"InvestorCenter." DailyFinance.com. Ed. Adrain Westlyle. Daily Finance, 26 Mar. 2012. Web. 1 Nov. 2013. 2012 Workforce Diversity. N.p., n.d. Web. 14 Nov. 2013. <http://cdn.corporate.walmart.com/d5/34/df2a49394a7797f5399beeb67f9d/2012workforce-diversity-report.pdf>. Austin, Christina. "THE BILLIONAIRES' CLUB: Only 36 Companies Have $1,000 Million-Plus Ad Budgets." Business Insider. BI Intelligence, 11 Nov. 2012. Web. 5 Nov. 2013. Fortune 500. CNN Money, 20 May 2013. Web. 12 Nov. 2013. <http://money.cnn.com/magazines/fortune/fortune500/2013/snapshots/2255.html?iid =F500_sp_list>. Global Responsibility Report. Walmart, n.d. Web. 15 Nov. 2013. <http://corporate.walmart.com/global-responsibility/environment-sustainability/globalresponsibility-report>. Godoy, Emilio. Trade Unions Fight Walmart in Mexico. Global Issues, 24 Apr. 2013. Web. 13 Nov. 2013. <http://www.globalissues.org/news/2013/04/24/16402>. Jurevicius, Ovidijus. SWOT analysis of Walmart. Strategic Management Insight, 17 May 2013. Web. 13 Nov. 2013. <http://www.strategicmanagementinsight.com/swotanalyses/walmart-swot-analysis.html>. O'Connor, Clare. Wal-Mart Vs. Amazon: World's Biggest E-Commerce Battle Could Boil Down To Vegetables. Forbes, 23 Apr. 2013. Web. 19 Nov. 2013. <http://www.forbes.com/sites/clareoconnor/2013/04/23/wal-mart-vs-amazon-worldsbiggest-e-commerce-battle-could-boil-down-to-vegetables/>. The Good, the Bad, and Walmart. Work Place Fairness, n.d. Web. 18 Nov. 2013. <http://www.workplacefairness.org/reports/good-bad-wal-mart/wal-mart.php>. Walmart 2013 Annual Report. N.p., n.d. Web. 8 Nov. 2013. <http://az204679.vo.msecnd.net/media/documents/2013-annualreport_130108806067963477.pdf>.

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Walmart Value Chain Analysis. SlideShare, n.d. Web. 15 Nov. 2013. <http://www.slideshare.net/arpanghosh3760/walmart-value-chain-analysis>. Walmarts Value chain analysis. Phnom Penh, n.d. Web. 15 Nov. 2013. <http://khbuddhist.blogspot.com/2011/11/walmarts-value-chain-analysis.html>. Wilbert, Caroline. "How Wal-Mart Works" 26 April 2006. HowStuffWorks.com. <http://money.howstuffworks.com/wal-mart.htm> 24 October 2013.