Wal-Mart – Competing in the Global

Market

Anjana Singh (07EP-010)

Raj Kumar Kesarwani(07EP-035)
Anshul Agarwal (07EP-011)
Ravinder Singh(07EP-037)
Kanishk Chhabra(07EP-022)
 What is Wal-Mart

• World’s biggest retailer

• Sells Grocery & General Merchandise
• One Hour Photo Studio
• Pharmacy & Optical Centre
• Tire & Lube Express
• Gasoline station
• Fast Food Outlet
• Garden Centre
• Pet Shop
• Also feature hair and nail salons, a video rental store, a
family fun center, a branch of a local bank
Wal-Mart Subsidiaries

• Wal-Mart Stores Division US

• Wal-Mart Discount Store
• Wal-Mart Supercenter
• Wal-Mart Neighborhood Market
• Sam’s Club
• Wal-Mart International
• Private Labels (Sam’s Choice , Great Value ,
Equate ,Smart Price)
Key Statistics on Wal-Mart

• Founder Sam Walson & Family – owns 40% of Wal-

Mart
• Headquartered at Bentonville , Arkansas , US
• Total No. of Stores – 6775 Stores
• Stores in US – 4065 Stores in US
• Outside US – 2701 Stores in 14 Countries
• Total Employees – 1.9 Million
• Total Sales – 348.6 billion in 2006
• Net Income – 11 billion in 2006
Wal-Mart’s growth in last 25 yrs

• Click the Video

• Diversified into Food & Grocery , Private Labels
and online store.
• Wal-Mart online is the e-commerce website.
• Has started selling online Music and Movies.
Some interesting figures

• First Store opened at Rogers , AR in 1962

• World’s largest Private Employer , fourth only to
China’s Army ,NHS of UK, and Indian Railways
• Wal-Mart sells 20% of retail grocery in US and 45%
of total Toys sold in US.
• Its bigger than Europe’s Carrefour , Tesco & Metro
AG combined.
Wal-Mart International

• Present in 14 countries
• Walmax in Mexico
• ASDA in UK
• The Seiyu Co. Ltd in Japan
• Wholly owned subsidiaries in
Argentina , Brazil , Canada ,Puerto
Rico
Wal-Mart – Market Share / Competitors
• Wal-Mart is three times big than
its nearest competitor Carrefour
SA
• z
Wal-Mart Marketing Strategy
Wal-Mart Corporate Values

• Constant Improvement
• Shared Passion, Vision & Organization Culture
• Customer Focus
• Speed
• Execution
• Improvements In Basic Operations
• Community Involvement
What Wal-Mart does to achieve those
values

• Competitively Reduced Cost (Puts All Gains &

Savings Into Reducing Prices)
• Consumer-centric Sales
• Localization
• Co-operated Suppliers
• Retail-tainment & Shop-ability: Aisles, Lighting &
Signs
• Store-manager Autonomy
Cont.
What Wal-Mart does to achieve those
values (Cont.)

• One- Stop Shopping

• Keep Customer Shopping: Added Food & Services
• Full Stock Register
• Full Product Line
• Merchandising Ladder
• Private Branding
 Wal-Mart
To give ordinary folk the chance to buy the same thing as rich people.
Mission/
Vision

1. Lowest prices across-board the product lines

2. Product USP: core competency
Product Strategy
•Low prices, In-stock positions, Customer service

1. Respect for the individual

2. High standards of service
Service Strategy
3. Constant strive for excellence

middle-class, lower middle

Segmentation

Consistent positioning- “Always low prices”

Positioning

1. Food retail
2. Non-Food retail
Activities
3. On-line food retailer

Intangibles Personalized customer service

Co-branding Co-branding with McDonalds

Sector Strategy: Diversification

Diversified into Wal-Mart

Tire & Lube Express, Wal-Mart Optical, Wal-

1. Non-food Mart Pharmacy, Wal-Mart Vacations, Wal-
Mart's Used Fixture Auctions

2. Discount format Wal-Mart Stores,

3. E-commerce WalMart.com

4. Wholesale Sam’s Club

5. Expansion abroad 12 international locations

Penetration/ Strategy

• Advertising Expenditure : 0.3% Of Sales Rev. Only

- By Word-of-mouth, In-store Promos
• Folksy Facade -Friendly Image
• Brick & Click Retailing Model
• Competitive Strategy:
- Pre-emptive Expansion
- Local Retailing Monopoly
- Mkt Penetration By Selecting
Most Convenient Locations
Acquired Or Constructed
• Global Buying For Relentless Pressure On Prices
• Logistic Efficiency: Speed To Market
Potential Development strategy

• Re-positioning: Complete Shopping Experience & Value-

for-money Deptt Store “Way Beyond Just Low Prices”
• Enhancing Product Range: Full-line Deptt Store
• Differentiation: Price-based - Best Quality At The
Charged Price
• Merchandising: Max. In-store Merchandise Display
• Market-broadening: Store-type Adaptations To Local
Culture
• Self-branding: Brand-name Is Extended To Popular Items
• Ancillary Business: Hair-cuts, Optics, Hearing aids
Consumer Global Brand Opportunities: Wal-Mart
SITUATIONAL ANALYSIS—GOING GLOBAL
WHY GLOBAL - To survive…

Why was growth so important?

• Capital market expectations-continuous sales and profits.

• Expectations of its own employees-ESOPS.
• Saturated domestic market.
• U.S. just 4% of world's population-(rest 96% -already dented)
• Emerging markets-tremendous opportunities.

What were its strengths?

• Tremendous buying power-P&G,Kelloggs,Nestlé,Coke,Pfizer,etc

• Domestic knowledge bases & competencies.
 SITUATIONAL ANALYSIS—GOING GLOBAL

STEP 1-DECIDING COUNTRY-specifics of the business,

competitive and economic environments

STEP 2-DECIDING STRATEGY

Joint Ventures(MX,BZ)
Acquiring
an existing player
(GM,CN,UK,SK,PR,JP)

Start greenfield*
Starting new stores operations .(AG,CH)
on own

*A new operation that is built from “the ground up”.  `

 SITUATIONAL ANALYSIS—GOING GLOBAL

Three successes out of ten….Successes 3/10

Country Mode of Strategy Fate of the deal

Entry

Canada Acquiring a Woolco 122 stores in 1992 VERY SUCCESSFUL

  (**290) weak Wiped out T.Eaton Company, a major player
  player
    Operated in areas that have high
  brand recognition
 
Operated in areas requiring
minimum cultural adaptation

Emphasised on customer service &

store design

UK(**337) Acquiring Acquired ASDA’s operations(232 SUCCESSFUL.

stores)1999 Competitors-Tesco’s and Sainsburys

Cashing on the M&A synergies

Mexico Joint Entered in 1997 JV with Cifra SUCCESSFUL.(50% of the market)

(**919) Venture
Local market knowledge Competition by Carrefour

Overcame cultural barriers

** no.of stores operating as on Jul2007

 SITUATIONAL ANALYSIS—GOING GLOBAL
Three successes out of ten…….. 3/10

Country Mode of Strategy What was the fate of the deal

Entry

Germany Acquiring   Acquired largest players Wertkauf and FAILED.

  Interspar Entered in 1997(21+74 stores);
  (**0-88) Exited in 2007
Similar business and HR models
-American Style Working practices
Met EU guidelines for business -High Labor Costs.
-Management-- Staff Rifts
-Competitors: ALDI and LIDI (cheap) .

Brazil 60-40 JV Leveraged experience of Mexican mkts When entered in 1995

   
  (**298)   Already Carrefour,P de A, and Sendas
    Emphasised on Customer service
So very tough competition(Pi was eaten)

Developed economies of Scale

Utilised Discount tactics

Argentina Greenfield Gained experience from Mexico & Brazil -Wrong anticipation of the Argentine
  (**15) Operation
  Economies of Scale -Competition by Carrefour

** no.of stores operating as on Jul2007

 SITUATIONAL ANALYSIS—GOING GLOBAL

Three successes out of ten ….… 3/10

Country Mode of Strategy What was the fate of the deal

Entry
S.Korea( Acquiring Entered in 1998 . FAILED. no personalization, quality first)
**0-16) majority
shares Acquiring majority shares in KOREA MAKRO -Exited in 2006,like NOKIA,NESTLE
GOOGLE and CARREFOUR. (unfair labor
standards, wages)
Puerto Acquiring a Entered in 2003 by acquiring -Faced a strong revolt from local small
Rico major Supermercados Amigo(31 stores). players.
(**54) player

Japan- Acquiring -Entered in 2002 - stake in Seiyu Ltd -Continuing losses every year ( US
(**392) -Competitors were Daiei,Sogo,Mycal marketing model)

China Greenfield Merchandising & store designs suiting the -Took much time
(**184) Operations consumers -Biggest Walmart Supplier.
   
Sourced stocks from international suppliers
 
who manufacture in China
-Forced to allow unionization of workers.
Sourced from local manufacturers who -Gender Discrimination
understand local tastes -Immigration law-suit
Met government trade & business laws

** no.of stores operating as on Jul2007

LATEST GLOBAL ENTRIES…(5nos)……

Retail Firm Date of

Country Units as on Jul2007 partner/acquired Entry

140 CSU(CARHCO) September 2005

Costa Rica

63 CARHCO September 2005

El Salvador

137 La Fragua(CARHCO) September 2005

Guatemala

44 CARHCO September 2005

Honduras

40 CARHCO September 2005

Nicaragua

*****
India
Supply chain integration in developing
countries
Strength in supply chain

• Efficient consumer response

• Vendor-Managed Inventory
• Enterprise resource planning
• Customer relationship management
• Sales force automation
 SWOT ANALYSIS (GLOBAL)
Strength
Weakness
• Efficient supply chain management
• Targeted marketing •Poor public image
• Service innovation and technology •Late entrant in international market.
• Growth through adaptability. •Unable to adapt to different countries
• E-tail’s continued development
•Ununionised & Strict labor laws
• Least cost of packaging
• strong penetration strategies •Were unable to handle media
• Infrastructure (financial strength) •High law suits against the company.
•Low penetration in European union

Opportunity
Threats
•Many countries are still left
•Terrorism
•Unorganized retail
•Competitors
•Globalization (diminishing trade
•Negative publicity
barriers)
•International laws against anti
•Cold Storage market
dumping
•Increase in consumer purchasing
•Campaign against anti competitive
power
practices
•E-business
•Unemployment
Wal-Mart in India
What brings Wal-Mart to India?

• A tremendous market
• Emergence of middle class – 300 million
• Consumer class of 105 million growing at rate of 10% &
with an annual avg household income of $3000
• Demographics – 60% of Indian population is in age group
of 20-30 & is more inclined towards modern shopping.
• Consumer spending growing rapidly –credit card
• Sales on per sq. ft. basis lowest in world
• GDP growing about 6-8%
Opportunities in India

• India’s retail trade is estimated at $206 billion

& growing at 5% annually
• Only 3% of market organized – shopping malls
• India as fastest growing sourcing market
• India’s vast market for food retailing
• Cold chain - Refrigerated distribution of fruits
n vegetables
• Can add value to customers by means of low
price and wide range of merchandise
Challenges in India

• Protests from small businesses (kirana )

• FDI restrictions.
• India’s poor infrastructure
• Poor public image – predatory pricing , unemployment
• India’s diversity and heterogeneity
• Competition from Indian Retailors
includingPantaloon,Shopper’s Stop ,Piramals
• Regional governments are very strong politically
Present Scenario

• Wal-Mart joint venture with Bharti

• 15 large wholesale outlets over the next seven years
• Entering as a wholesaler, because Indian law does not allow
multi-brand foreign retailers to sell directly to consumers
• Govt. of U.P forced several top retailers to shut shop after
local kirana stores triggered unrest.
• Other foreign retailers : Carrefour - Wadias ,Debenhams -
Future group
• ICRIER study – 12 million stores
Recommendation

 Understand Consumer behavior

 Market Segmentation
 Format of stores– super centers or hypermarkets
 Wal-Mart to adopt a blended model of its traditional
format tweaked to fit the reality of Indian real estate
Q & A Session
Web References

• www.walmartfacts.com
• www.gartner.com
• www.forrester.com
• www.hoovers.com
• www.wikipedia.com
• www.tsmg.com (Tata Strategic Management
Group)
• www.finance.yahoo.com
• www.ficci.com
Thank You