Walmart

WAL-MARTS COST LEADERSHIP STRATEGY HISTORY OF WALMART ? 1962, surface-to-air missile Walton broachs WAL-MART ? In 5 years expanded to 24 stores revenue more than than 12. 6 million in sales ? 1972, listed in New York acquit Exchange MARKETS OF WAL-MART (2003) o Total Sale of Wal-mart o Total retail Area o Total Employers US $ 313 Billion 663 Million Sq. ft. 1700,000 sales & INCOME festering (PAST 12 MONTH) federation INDUSTRY SALES GROWTH INCOME GROWTH 12. 00% 5. 20% 11. 50% 5. 90% NET PROFIT MARGINS (%) COMPANY COMPANY 5YEAR AVG. INDUSTRY 3. 6% 3. 5% 3. 6% WAL-MART TODAY ? Operates 6, cholecalciferol stores in 15 lookries ?Serves more than 176 million customers nearly the globe ? Employs 1. 8 million oecumenic ? Health plans insure more than 1 million people ? Saves the average out Ameri sack up household more than $2,300 per year Let us start the journey. 1960s.. The Success Term was EDLP ? EVERY DAY scummy PRICING ? To provide customers a wide variety of high quality, brand and unbranded products at the concluding possible price, offering better apprise for their money EDLP The strategy ? To procure products in bulk at the lowest possible prices from the manufacturers ? Sharing the savings with customers ?Wal-Marts products were usually priced 20% dispirit than its competitors Wal-Marts advertisement describing EDLP said Because you work hard for your every dollar, you deserve the lowest price we wad offer every time you contain a purchase. You deserve our Every Day Low Price. Its not a sale its a great price you can count on every day to make your dollar go further at WalMart Explaining his pricing strategy Mr. Sam Walton said By cutting your price, you can boost your sales to a point where you watch far more at the cheaper retail price than you would have by selling the item at the higher price.In retailer language you can lower your markup but earn more because of the increased volume EDLP WAS A HIT ? This led to increase loyalty fro m priceconscious rural customers. ? The surplus generated was re- pulled in Building facilities of an efficient scale Purchasing modern business colligate equipment And employing the latest technology Other areas where the equal was checked ? The stores were set up in large buildings, while ensuring that the rent paid was minimal ? non much emphasis was laid on the interiors of the store ? Did not invest in standardized ordering programmes ?Did not even have a standard distribution outline in place ? Accounting data were manually written-up ? There was a high check in recruiting the provide 1970s. ? Wal-Mart became public-held confederacy ? Equipped with funds, it started reorganizationing its business activities. ? The foremost challenge was to regularise in place a standard distribution and interstore communication system ? So it came up with the most popular Hub And wheel spoke Structure The Hub And mouth Structure ? Goods were centrally ordered ? Assembled at the di stribution centerfield (hub) ?From where they were dispatched to the somebody stores (spokes) as per the orders received from stores. STORE STORE D. C. STORE STORE The benefits of Hub and Spoke structure ? Centralized purchase of goods in huge quantities ? Distribution of them finished its own fast and responsive logistics infrastructure to the retail stores ? By release all intermediaries, they managed to get the goods at lowest price ? The company was capable to replenish the store twice a week ? In 1978, Wal-Mart became the first of all company to establish a fullyautomated distribution centerClaude Harris once stated that tire outt ever feel sorry for a vendor. He evermore knows what he can sell, and we want his bottom price. We would tell the vendors dont leave in any room for a kickback because we dont do it here. Massive expansion strategy ? Strategy was to build stores around the distribution centers ? That is to be effectively served by the center and controlled by district managers and to management at Bentonville ? The store needs to be a utmost of a days drive away from the center Benefits of long expansion strategy Wal-Mart was able to accelerate its revenue product and soak up significant economies of scale ? As the number of store increased the popularity of the company increased ? Since the company generated tremendous word of mouth publicity, it was able to denigrate spending on advertising and promotion activities 1980s..Maintaining cost by means of re-investment ? In 1983, Wal-Mart ventured into the membership club business called Sams companionship ? Installed the Point of Sale (POS) scanning system to further reduce the cost Maintaining cost through re-investment (contd. ) In 1987, it installed a Satellite Communication ashes (SCS) ? In December 1987, Wal-Mart opened its first hyper-mart in the US 1990s.. ? Supercenters and Sams club were more focused to fuel the growth ? In 1994, Wal-Mart bought 99 Pace membership wareh ouses Wal-Marts store count (1991-2003) Format________ year 1991 1992 1993 1994 1995 Discount Sams club stores 1573 1720 1850 1953 1990 Super center 3 6 30 68 143 Neighbourhood grocery stores 148 208 256 419 428 1996 1997 1998 1999 2000 2001 2002 1995 1960 1921 1869 1801 1736 1647 433 436 443 564 721 888 1066 219 44 441 451 463 475 500 1 1 7 19 31 2003 1568 1258 525 49 source Wal-Mart Annual Report 2003 ? Employed improved inventory management practices and upgraded its IT systems ? electronic Data Interchange (EDI) AND THE RESULTS WERE GOOD. ? Amount of inventory reduced by an estimated $ 2 jillion ? Savings of $ 150 million on sake cost were generated 2000s.. ? Wal-Mart launched a programme called Store of the community ? globular Sourcing was initiated (2002) Strengths of Wal-Mart Wal-marts SUBSIDIARIES Discount stores Neighbourhood market Sams purchase order Super centerYearly sales Total employees across the globe (approximately) total of stores world(a) Number of new stores opened in 2003 (worldwide) Total number of suppliers Wal-Marts rank/position among all retailers across the globe (in terms of sales) Number of pallets shipped by Wal-Mart truck every week (2002) Total occupied al-Qaeda area of Wal-Mart (2002) Yearly advertising expenditure (2002) Highest one-day sales record coin bank date (November 28, 2003) Number of customers every week at Wal-Mart stores worldwide (approximately) Estimated market capitalization of Wal-Mart in 2020 Source Wal-Mart Annual Report 2003 244. 5 billion 1. 3 million 4,688 274 65,000 1 50 million 18. 3 material miles $498 million $1. 52 billion 138 million $11. 1 trillion tax income (%) of the major consumer goods companies in the US through Wal-Mart Company P&G Tandy Brands Accessories RJR Tobacco Dials Del Monte Foods Clorox Revlons % Share (As a % of total sales) 17 % 39 % 20 % 28 24 % 23 % 23 % Source BusinessWeek, October 2003 . and the journey still continues PRESENTED BY o o o o o o Prashant Wankh ede Prajakta sensible R. Maruthi Yeshwanth Vikram Gharmalkar Mehul Chheda Nitin Agrawal