2007
EXECUTIVE SUMMARY
Team B
Michelle Barnes
Sharl Flowers
Alex Layton
Andrew Miller
Anh Linh Tran
WAL-MART STORE INC.
1/31/2007
TABLE OF CONTENTS
INTRODUCTION
2
BACKGROUND
2
I.
CURRENT SITUATION
OVERVIEW
II.
STRATEGIC MANAGERS
III.
EXTERNAL ENVIRONMENT
IV.
INTERNAL ENVIRONMENT
V.
ANALYSIS OF STRATEGIC FACTORS
VI.
STRATEGIC ALTERNATIVES AND RECOMMENDED
STRATEGY
VII. IMPLEMENTATION
VIII. EVALUATION AND CONTROL
This report discusses an evaluation of Wal-mart’s strategic management. The purpose of
this evaluation is comparing and analyzing our performance in the last five years that helps us
better measuring our operation and financial conditions as well as enable us to accomplish our
future objectives and to continue growth of business in the hypercompetitive environment. This
is a review in depth the strengths and weaknesses of each area of Wal-mart’s domestic and
international strategies and programs in identify and enhance all effective programs. Also defect
any defect (external intervention) that prevents us from leading the competition and continuing
growth and make necessary adjustment.
BACKGROUND
I.
Current situation
A. Corporation performance: Overall there is an increase in sales and cash flow from
operating activities. Also there is a growth in national and international business
expansion. Although, there is a limited growth potential in domestic market compared
with strong sales. In contrast, there is a decline in share price and a decline in quarterly
profits for first time in 10 years. Here are some keyed terms in 2006
 Continuous growth in sales and earnings. Great international expansion for the
last five years. As of 2006, there were “1,200 discount stores, 1980 supercenters,
567 Sam’s Clubs, and 100 neighborhood markets throughout all 50 states (19-9),”
and 2,285 international stores located outside the United States.
 Financial: Current ratio is 0.9%. Earnings per share increased from $2.41 in
2005 to $2.68 in 2006.
 Performance: increase in sales of 9.5% comparing to last year. Increase cash
flow from operating activities to $11,231 million comparing to $10,267 million
and $8,861 in 2005 and 2004 respectively. However, low return on assets of
8.91%, which is less than 9.3% in 2005, and low return on shareholders’ equity
with 22.5%, which is less than 22.6% in 2005, as well as the negative priceearnings per share ratio caused a decline in share price from $56.98 in 2002 to
$46.11 in 2006.
B. Strategic posture:
Mission:
 Wal-mart’s current mission is “always low price.” The company’s mission statement
is saving people money so they can live better regardless of background or where
they may live and to build a better life.
Objectives:
 The firm’s current objectives include “Lines extension and stores expansion.” That is
“Increasing sales with low prices under one roof…to be the very best in the business
by putting the associates first…Emphasis on everyday low prices, corporate growth,
concern for people, and loyalty to the company.”
Strategies:
 Wal-mart’s current strategies focuses on “customer satisfaction and team spirit” and
implemented with
 Domestic strategies and programs:
 The Supercenters with full general merchandise discount store stocked
with full-line grocery, food court, and services such as banking, video
rental, beauty salons, new store openings, expansion to more states.
 Add larger space to the Sam’s Clubs locations with features include
services such as food court and catering, auto sales and tires services,
home improvement, photo developing and personal check and
business stationary printing.
 Most outstanding was the “Green” marketing concerning environment
sustainability (manufacturing, use, and disposal).
 A private brand program with Wal-mart’s private labels such as Ol
Roy dog food, Sam’s Choice, Great Value, Equate, and Spring Valley
on groceries and household products.
 A fashion program emphasizes on the clothing line.
 An inventory control program using high-speed computer system,
RFID technology, and data warehouse to link all stores to the
headquarters and the distribution centers that automatically to keep
track with merchandise from checkout counter to real-time update
inventory in the warehouse, sales, and reports (management tools) that
reduces out-of-stock issue 16%.
 International strategies and programs:
 Acquisition: Woolco discount stores in Canada (successful); 74 stores
of Interspar in Germany; 232 ASDA stores (Briain’s 3rd largest
supermarket group) in England; more than 360 CARHCO
supermarkets in Central America (Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua); 3 retail chains stores in Europe; Seiju
general merchandise stores in Japan; and other retailers in Korea but
later withdrawn from French, Japan, and Korea.
 Mergers of joint ventures with 599 stores, 105 Supercenters, and 70
Sam’s Clubs in Mexico; 51 Supercenters, 3 Sam’s Clubs, and 2
Neighborhood Markets in China;
Policies:
 In supporting our mission of “satisfaction guaranteed, provide the customer with a
lean, pleasant, and friendly shopping experience, and “maintain the highest standards
of honesty, morality, and business ethics (19-9);” Wal-mart’s current policies include
cheerfully gave refunds, store credits, and rain check.
OVERVIEW
The dataset utilized in this situation analysis includes comparison the corporate
performance in the five-year period (2001-2006) and analyzing the effectiveness and efficiency
of its output, behavior, and input controls. That is based on the external and internal
environment conditions. The corporation performance was represented by the current ratio
(liquidity), earnings per share and return on equity (profitability), assets turnover ratio (activity),
and price-earnings per share ratio. This comparison indicated that Wal-mart’s current ratio was
.9%, assets turnover was 8.91%, and negative price/earnings per share ratio. Also an analysis
indicated our stock price increase of 9.9% in the last five years but our stock price considered
low increase rate comparing to the stock price increase of our competitors: “Costco Wholesale,
Target, and J.C. Penny of 12.4%, 49.6%, and 367% respectively (19-4).”
II.
Strategic Managers
A. Board of Directors: (chapter 2 - ownership structure & influence, financial stakeholder
rights and relations, financial transparency and information disclosure, board structure
and process)
a. 13 members, 11 are outsiders.
b. Organized into 5 committees
o The Audit Committee
o The Compensation, Nominating, and Governance Committee (CNGC)
o The Executive Committee (EC)
o The Stock Option Committee (SOC) and
o The Strategic Planning and Finance Committee (SPFC)
c. 2 board members controlled close to 41% of the shares outstanding.
d. 2 chair/CEOs may have potential conflict of interest as “research shows that
corporations with a combined Chair/CEO have a greater likelihood of fraudulent
financial reporting when CEO stock options are not present(54).”
e. One member, David D. Class, is 70 and facing retirement age
f. Outstanding diversity
g. Each director attended at least 75% of meetings.
B. Top Management (CEO involve in developing an analysis of the mission, objectives,
strategies, & key activities + getting things accomplished and to meet the corp. objectives)
a. 25 corporate officers, CEOs assigned to each business unit (Wal-mart U.S., Sam’s
Club, and Wal-mart International)
b. Lee Scott was only the third CEO in the entire history of Wal-Mart when he was
selected to the position.
c. During the 12 years David Glass, the previous CEO held the position, sales grew
from 16 billion to 16.5 billion annually.
d. Uniquely qualified individuals
III.
External Environment (chapter 4 - scan and assess the external environment to
determine the strategic factors that pose opportunities and threats using STEEP
analysis)
a) Natural Physical Environment
o Although it didn’t mention much about Wal-mart’s natural environment in the
reading, we do know that Wal-Mart is rising to the challenge of sustaining a green
culture in its operations, which will keep them up to the challenges they may face in
the future with their natural environment.
b) Societal Environment
o Economic
 Although rising fuel prices and rising competition increase throughout the
industry, Wal-Mart still maintains a decent share of the market, with international
growth advancing at a rapid rate. Quarterly losses for the first time since 2006
have put a damper on things, but Wal-Mart looked impressive with gains in the
next quarter. Global markets continue to seem the way for future growth for the
corporation, but only time will tell if they can influence an already oversaturated
market with practices that helped them grow in the U.S.
o Technological
 Having a sophisticated inventory system allows for Wal-Mart to keep threats low
and opportunities open for Wal-Mart. This system, designed to help track
inventory and keep prices low, also allows for warehouses to analyze buying
trends in markets where almost everything seems trendy. The data warehouses
which Wal-Mart strategically places allow for merchandise to selectively enter
stores closest to them at a fast pace. To be one of the best, you must have the best,
and Wal-Mart seems to have it in the technological department.
o Political-Legal
 Wal-Mart has come under attack recently, closely associated with the way they
have been doing business outside the United States. Raids on stores and even
factories in other countries have found illegal workers working for the company.
Low pay and stingy benefits also has Wal-Mart on their toes dealing with the
public. The strength of opposition groups is growing with Wal-Mart, opposing
their foreign business practices and even more concerning is the recent opposition
against them opening new stores in the U.S.
o Sociocultural
 Wal-Mart has centered its operations on the low income customer, but recent
changes to stores have been including many other demographic types into the
plan.
c) Task Environment
o Threats of new entrants are a difficult thing to discuss for such a giant as Wal-Mart.
Specialty retail stores could open with very little barriers and cut into Wal-Mart’s
share of profits in a particular section such as clothing. But, to compete with stores
such as Wal-Mart, Target, and Costco the entry barriers are high. Substitute products
are easily found, generally within just a few miles of each other, as there are many
stores offering the same products as Wal-Mart.
o The bargaining power of suppliers is low. Goods can be purchased from many
different locations and suppliers.
o Rivalry in the market that Wal-Mart competes in is at an all time high. Many
companies are beginning to grow and expand into markets and areas which Wal-Mart
has been in for years, and as the growing population of special interest groups
expands, so does the dislike for Wal-Mart’s greedy business actions.
IV.
a)
b)
c)
d)
Internal Environment [chapter 5- scan and assess the internal corporate
environment to determine the strategic factors that are strength (core competencies)
and weakness]
Corporate Structure
o Wal-Mart is structured into three business units. Wal-Mart USA, Sam’s Club, and
Wal-Mart International. Most share is held by family members of the corporation
leading to a hierchial structure within the organization. Control is from the top down
with the headquarters out of the Bentonville home.
Corporate Culture
o The corporate culture of the organization stems from one man that built the company
from the ground up, and that is Sam Walton. Sam Walton believed that the reason for
success was because of people that worked for him and that still do.
Corporate Resources
o Wal-Mart’s financial stability puts them in a position to increase the business they are
seeing now. It allows for maximum buying power, and allows Wal-Mart to do things
others simply can’t financially afford, such as moving into other countries.
o By many standards Wal-Mart remains in excellent financial shape, reaching sales of
$312.4 billion in 2006, a big gain from $204 billion in just 2002. Though, quarterly
profits declined for the first time in 2006, Wal-Mart’s sales for the first quarter in
2007 were an increase of 12.3%, showing that it may as well have been a fluke
quarter in 2006.
o Supply chain management is still a main reason why Wal-Mart is in the financial
situation they are in. Everything from logistics, to the trucking fleet, to the scanners
they use to control inventory is extremely precise and accurate with the consumer in
mind. The distribution centers are strategically placed for maximum efficiency and
for cost cutting. Wal-Mart’s supply chain management allows the ability for staff to
be innovative and also allows the potential to see new growth in areas others can’t
find.
o The ability to find opportunities in the market and exploit them has kept Wal-Mart
one step ahead of the game. Just as they have integrated their point of sale systems
and supply chain management systems, they have found new ways to stay ahead of
competition and create a competitive advantage with other ventures, such as the
overseas market.
Summary of Internal Factors (Core Competencies)
o Many other companies can copy many of the things used to make Wal-Mart such a
successful company. What they cannot copy is how Wal-Mart uses this technology to
create a logistics and supply management chain that is unmatched by any. With this
technology, Wal-Mart is able to find opportunity in a market or place of the world
that has been previously suited as unreachable or unattainable.
The current financial condition shows there is a strategic inflection point or a
performance gap exists in the firm’s strategies and programs and the emphasis of behavior and
input controls are needed. This requires a comprehensive analysis of the market that includes
analyzing of strategic factors using the Strengths, Weaknesses, Opportunities, and Threats
(SWOT) analysis and Strategic Factor Analysis Summary (SFAS) Matrix.
V.
Analysis of Strategic Factors (chapter 6 + 7 - pinpoint problem areas and review an
revise the corporate mission and objectives)
Wal-mart has established a program to ensure awareness of our long-standing “Open
Door” policy and encourage our associates report all ethics concerns to the management and
encourage managers to complying with the policy and with the law. We also established a new
position of Senior Director of Stakeholder Engagement to play a critical role for oversight and a
Director of Global Ethics, who is responsible for a global ethics management, including to
accomplish the company’s “global ethics strategy and oversee ethics-related infrastructure,
administration, and training (19-28)” and observes as well as administers an ethics hotline.
Wal-Mart has many internal and external strategic factors which are identified through
the SWOT analysis. SWOT divides into four situations: strengths, weaknesses, opportunities and
threats. In this analysis we focus on the most important factors for each situation which is
described below.
A. Key Internal and External Strategic Factors (SWOT)

Strengths: Wal-Mart’s most important strengths (internal factor) are defined in
the management of distribution and logistics. Wal-Mart always built the
distribution centers first and then placed stores around it. Most of the stores
were less than a six-hour drive from one of the company’s warehouses. WalMart also had one of the most sophisticated inventory control systems in
retailing. “A high speed computer system, which electronically logged every
item sold and automatically reordered goods, linked all stores to headquarters
and their distribution centers” (19-19). This helped management detect sales
trends quickly. All of this gave them many opportunities of advancement
further than any other competitor.

Weaknesses: The most important weaknesses (internal factor) found in the
company relates to cultural roots and customer satisfaction. As Wal-Mart
started to go international there were some countries such as South Korea that
they failed in. They sold all 16 stores in South Korea because they failed to
research South Korean tastes and likes. Many customers became very
unsatisfied as Wal-Mart entered larger cities and did not provide the
fashionable products many customers wanted. Customer ratings of the staff
dropped more than 20% in terms of courtesy and friendliness.

Opportunities: Wal-Mart’s inventory control system and international growth
are both excellent opportunities (external factor) for the company. With the
inventory control system Wal-Mart is able to speed up the market reaction
time and better detect buying trends in a timelier manner. This concept was
new to the industry and Wal-Mart has already adapted. Expanding into the
international market is a huge opportunity for Wal-Mart to increase income
and capital by a large percent. This will further their advantage over
competitors.

Threats: Wal-Mart faces many threats (external factor) as well. Employees are
offered stingy benefits and receive lower pay than many other employees in
the same industry. Poor benefits and low pay is a great way to lose employees
rather quickly especially if they could easily get a job elsewhere. This is a
major threat for the company especially if they try to open new stores and
nobody wants to work for them. Healthcare is not cheap and can become very
expensive the more kids you have. The other major threat is the rivals and
specialty companies that are becoming more popular. Target is one of the
biggest threats to Wal-Mart because they are known for their more highquality and fashionable merchandise at a comparable price.
We conducted a strategic audit that includes examination, evaluation, and analyzing; and
the qualitative finding leads us to the strategic alternative and a recommended strategy is
presented along with implementation and evaluation and control as follows:
VI.
Strategic Alternative and Recommended Strategy (chapter 7 & 8 - rare,
consequential, directive)
MICHELLE…………………..
Select the best alternative strategy
Consequential: (strategic decisions commit substantial resources and demand a great
deal of commitment from people at all levels).
VII.
Implementation (chapter 9 & 10)
SHARL………………………….
Via programs, budgets, and procedures
VIII. Evaluation and Control (chapter 11 & 12)
ALEX?
Via feedback systems, and the control of activities to ensure their minimum deviation
from plans.