Report On Strategic Management

Table of Contents

Particulars Page No.

Executive Summary I. Current Situation 1 A. Current Performance 1 B. Strategic Position 1 1. Mission 1 2. Objectives 1-2 3. Policies 2 4. Strategies 2-3 II. Strategic Managers 3 A. Board of Directors 3 B. Top Management 3-5 III. External Environment: Opportunities And Threat (Swot) 5 A. Natural Environment B. Societal Economy 1.Economic 5 2.Technology 5 3.Political-Legal 6 4.Socio-cultural 6 C. Task Environment IV. Internal Environment 7 A. Corporate Structure B. Corporate Culture C. Corporate Resources 1.Marketing 8 7

5 5

7 8 8

2.Finance 9 3.R&D 9 4.Operations 9 5.Human Resources 10 6.Information Systems 10 V. Analysis of Strategic Factors 11 A. Situational Analysis 1.Strengths 2.Weaknesses 3.Opportunities 11 4.Threats 12 VI. Strategic Alternatives and Recommended Strategy 12 A. Strategic Alternatives B. Recommended Strategy VII. Implementation 14-15 VIII. Evaluation and Control 15 IX. Appendix 16-17

11 11 11

12 13-14

Executive Summary

Wal-Mart was founded in 1962 by a man named Samuel Moore Walton. He was considered one of the most influential retailers of the century (Wheelen & Hunger, 740). Sam Walton started his retail career in management in 1940 with J.C. Penney Co. His training and hard work at J.C. Penney Co. led him to his great Wal-Mart idea. He decided that small town populations would welcome, and make profitable, large discount shopping stores. When Sam Walton created Wal-Mart in 1962, he declared that three policy goals would define his business: respect for the individual, service to customers, and striving for excellence (Walmartstores.com). Wal-Mart stores sold nationally advertised, well-known-brand merchandise at low prices in austere surroundings (Wheelen & Hunger, 738). The 1970s marked significant growth for Wal-Mart with its first WalMart Distribution Center as well as the Wal-Mart Home Office. By the end of

1979, there were 276 Wal-Mart stores in 11 states and in 1991, the firm had 1,573 stores in 35 states to include the international market. Wal-Mart sales growth continued into the 1980s. Wal-Mart was divided into three business segments: Wal-Mart stores, Sams Clubs, and the International Division. In 1983 the company opened its first three Sam's Wholesale Clubs and began its expansion into bigger city markets. Wal-Mart Supercenters were large combination stores that included a full-line grocery center, a general merchandise discount store, banks and some even offered a food court of restaurants. Wal-Marts international expansion accelerated managements plans for expansion and notoriety. In 2000, Fortune magazine named it as one of the 100 Best Places to Work and in 2002, Wal-Mart officially became the worlds largest company based on its $245 billion in sales (Wheelen & Hunger, 731). Wal-Marts winning strategy in the United States was based on selling brand products at low cost while still offering the customer a quality product. Wal-Mart is in the business of selling everything customers need in their everyday lives. This includes the consumer goods listed above as well as food-service items. Wal-Mart took pride in its domestic strategies and

programs that were based on a set of two priorities: 1) Customers would be provided with what they want, when they want it, all at a value.

2) Treating each other as we would hope to be treated, acknowledging our total dependency on our Associate-partners to sustain our success (Wheelen & Hunger, 747). In the year ending January 31, 2006, Wal-Marts financials reflected the following: (all dollar amounts are in millions)

Total revenue - $315, 654 Net income - $11,231 Total assets - $138,187 Total liabilities - $48,826 Total shareholders equity - $53,171. According to the 2006 consolidated balance sheets total liabilities and shareholders equity equaled $138,187 not just totals shareholders equity as previously shown.

Wal-Mart History
Wal-Mart was founded in 1962 by Samuel Moore Walton. He was considered one of the most influential retailers of the century (Wheelen & Hunger, 740). Sam Walton started his retail career in management in 1940 with J.C. Penney Co. His training and hard work at J.C. Penney Co. led him to his great Wal-Mart idea. He decided that small town populations would welcome, and make profitable, large

discount shopping stores. When Sam Walton created Wal-Mart in 1962, he declared that three policy goals would define his business: respect for the individual, service to customers, and striving for excellence (Walmartstores.com). Wal-Mart stores sold nationally advertised, well-known-brand merchandise at low prices in austere surroundings (Wheelen & Hunger, 738). The 1970s marked significant growth for Wal-Mart with its first Wal-Mart Distribution Center as well as the Wal-Mart Home Office. By the end of 1979, there were 276 Wal-Mart stores in 11 states and in 1991; the firm had 1,573 stores in 35 states to include the international market. Wal-Mart sales growth continued into the 1980s. Wal-Mart was divided into three business segments: Wal-Mart stores, Sams Clubs, and the International Division. In 1983 the company opened its first three Sam's Wholesale Clubs and began its expansion into bigger city markets. Wal-Mart Supercenters were large combination stores that included a full-line grocery center, a general merchandise discount store, banks and some even offered a food court of restaurants. WalMarts international expansion accelerated managements plans for expansion and notoriety. In 2000, Fortune magazine named it as one of the 100 Best Places to Work and in 2002, Wal-Mart officially became the worlds largest company based on its $245 billion in sales (Wheelen & Hunger, 731). Wal-Marts winning strategy in the United States was based on selling brand products at low cost while still offering the customer a quality product. Wal-Mart is in the business of selling what customers need in their everyday lives. This includes the consumer goods listed above as well as food-service items. Wal-Mart took

pride in its domestic strategies and programs that were based on a set of two priorities: 1) Customers would be provided with what they want, when they want it,

all at a value. 2) Treating each other as we would hope to be treated, acknowledging our total dependency on our Associate-partners to sustain our success (Wheelen & Hunger, 747). In the year ending January 31, 2006, Wal-Marts financials reflected the following: (all dollar amounts are in millions)

Total revenue - $315, 654 Net income - $11,231 Total assets - $138,187 Total liabilities - $48,826 Total shareholders equity - $53,171. According to the 2006 consolidated balance sheets total liabilities and shareholders equity equaled $138,187 not just totals shareholders equity as previously shown.

Wal-Mart Strategic Audit

I. Current Situation
A. Current Performance Wal-Mart (WM) is divided into three business segments: Wal-Mart Stores, Sam's Club, and the International Division. In 2002, Wal-Mart officially became the worlds largest company based on its $245 billion in sales (Wheelen and Hunger 19-1). As of January 31, 2006, the company had over 6,100 stores worldwide, bought products from 70 countries, and 20% of its business was generated outside of the United States (Wheelen and Hunger 19-2).

1. 2006 fiscal year sales of $312.4 billion, a 9.5% year over year increase. 2. $11.2 billion net income, up 9.4% to $2.68 per share. 3. Stock price of $46.11, down from $56.98 on January 31, 2002. (Likely due to better competition and future expected growth slowdown.)
B. Strategic Position 1. Mission Wal-Mart Stores, Inc. is a global retailer committed to improving the standard of living for our customers throughout the world (Annual Report 2006). 2. Objectives

Comparative store sales indicates the performance of our existing stores by measuring the growth in sales for a time period corresponding to the prior year period

Operating income growth greater than net sales growth has long been a measure of success for us.

Inventory growth at a rate less than that of net sales is a key measure of our efficiency.

With an asset base as large as ours, we are focused on continuing to make certain our assets are productive. It is important for us to sustain our return on assets (Annual Report 2006).

3. Policies

We earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices (EDLP) while fostering a culture that rewards and embraces mutual respect, integrity and diversity. Putting Our Customers First.

EDLP is our pricing philosophy under which we price items at a low price every day so that our customers trust that our prices will not change erratically under frequent promotional activity.

Our focus for SAMS CLUB is to provide exceptional value on brand-name merchandise at members only prices for both business and personal use. Internationally, we operate with similar philosophies (Annual Report 2006).

4. Strategies

We have developed several initiatives to help mitigate this pressure and to grow comparable store sales through becoming more relevant to the customer by creating a better store shopping experience, continual improvement in product assortment and an aggressive store upgrade program to be instituted over the next 18 months.

Our expansion programs consist of opening new units, converting discount stores to supercenters, relocations that result in more square footage, as well as expansions of existing stores.

Sams Club - We believe that a greater focus on providing a quality in-club experience for our members will improve overall sales, including sales in these categories.

International A shift in the mix of products sold toward general merchandise categories which carry a higher margin (Annual Report 2006).

II. Strategic Managers

A. Board of Directors

Thirteen members, four affiliated with the company, nine independent, three women, two African Americans, two Hispanic Americans.

Chairman of the Board, S. Robson Walton (son of founder.)

B. Top Management

Eduardo Castro-Wright Executive Vice President, President and Chief Executive Officer, Wal-Mart Stores Division U.S.

M. Susan Chambers Executive Vice President, People Division Patricia A. Curran Executive Vice President, Store Operations, Wal-Mart Stores Division U.S.

Douglas J. Degn Executive Vice President, Food, Consumables, and Hardlines, Wal-Mart Stores Division U.S.

Linda M. Dillman Executive Vice President, Risk Management and Benefits Administration

Johnnie Dobbs Executive Vice President, Logistics and Supply Chain Michael T. Duke Vice Chairman, Responsible for Wal-Mart International Joseph J. Fitzsimmons Senior Vice President, Treasurer John E. Fleming Executive Vice President, Chief Marketing Officer, Wal-Mart Stores Division U.S.

Rollin L. Ford Executive Vice President and Chief Information Officer David D. Glass Chairman of the Executive Committee of the Board of Directors Mark D. Goodman Executive Vice President, Marketing, Membership and E-commerce, SAMS CLUB

Craig R. Herkert Executive Vice President, President and Chief Executive Officer, The Americas, Wal-Mart International

Charles M. Holley, Jr. Senior Vice President, Finance Thomas D. Hyde Executive Vice President and Corporate Secretary Lawrence V. Jackson Executive Vice President, President and Chief Executive Officer, Global Procurement

Gregory L. Johnston Executive Vice President, Club Operations, SAMS CLUB C. Douglas McMillon Executive Vice President, President and Chief Executive Officer, SAMS CLUB

John B. Menzer Vice Chairman, Responsible for U.S. Thomas M. Schoewe Executive Vice President and Chief Financial Officer H. Lee Scott, Jr. President and Chief Executive Officer

Gregory E. Spragg Executive Vice President, Merchandising and Replenishment, SAMS CLUB

S. Robson Walton Chairman of the Board of Directors Claire A. Watts Executive Vice President, Product Development, Apparel and Home Merchandising, Wal-Mart Stores Division U.S.

Eric S. Zorn Executive Vice President, Wal-Mart Realty (Annual Report 2006).

III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREAT (SWOT)

A. Natural Environment Raw materials availability.(O) Land availability. (O) Electricity usage. (T) Oil and Gas usage. (T) Water scarcity. (T) Hazardous waste storage, transportation and disposal. (T?)

B. Societal Economy 1. Economic Interest rate increases may signal end of economic expansion (T). Economic deterioration may mean more frugal shopping habits. (T) Increasing commodity costs. (T) Increasing transportation costs. (T)

Currency fluctuations. (T) Slowing national economy (T)

2. Technology Increased usage of RFID for inventory management. (O) Internet presence allows for customer options. (O) Information technology increasingly important. (O)

3. Political-Legal Regional trade pacts are making free trade available between countries. (O) Differing laws between countries may evoke compliance issues. (T) Potential unionization of workforce. (T) The Company is involved in a number of legal proceedings. In accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, the Company has made accruals with respect to these matters, where appropriate, which are reflected in the Companys consolidated financial statements (Annual Report 2006). (T) The Company is a defendant in numerous cases containing class action allegations in which the plaintiffs have brought claims under the Fair Labor Standards Act (FLSA), corresponding state statutes, or other laws (Annual Report 2006). (T) 4. Sociocultural Aging U.S. demographics. (O) Slowing U.S. population growth. (T) Wal-Mart seen as a reason for closing of mom and pop stores. (T)

International cultural differences. (T) Green environmental movement. (O)

C. Task Environment United States market saturation. (T) Expansion into Europe, China, South America, Canada, and Mexico. (O) Rivalry High. Target, Sears, K-Mart (T) Chance of new entrants low. (O) Purchasing power high. (O) Substitute power high. (T) Government regulations power medium. (T)

IV. Internal Environment

A. Corporate Structure Three business units, Wal-Mart Stores USA, Sams Club, and Wal-Mart International (Wheelen and Hunger 19-12). (S) o Wal-Mart Stores unit had 3,289 locations and included the companys supercenters, discount stores, Neighborhood Markets in the US, and walmart.com. o Sams Club unit had 567 locations and included the warehouse membership clubs in the US plus samsclub.com. o Wal-Mart International had 2,285 locations in 10 countries. The International total was increased in February 2006 by purchasing a majority control of

CARHCO with 360 locations in five Central American countries (Wheelen and Hunger 19-12). B. Corporate Culture In-depth employee involvement in company affairs. (S) Trained employees to be merchants by being responsible for the performance of their own departments. (S) Reflection of the founders values. (S) Conservative values create some problems when expanding to larger cities. (W) Non-Union stance is viewed unfavorably is some areas. (W) Offered $8.5 million worth of grants from its Safe Neighborhood Heroes program to recognize emergency professionals. (S) Donated $3 million in supplies when Hurricane Katrina devastated Americas Gulf Coast. (S) C. Corporate Resources 1. Marketing Advertising costs are expensed as incurred and were $1.6 billion in 2006. Advertising costs consist primarily of print and television advertisements (Annual Report 2006). Buy American campaign. (S) Green marketing offers the option of buying products which were better for environment. (S) Offers quality brand names at lower-than-competitive prices (Wheelen and Hunger 19-19). (S)

Introduced a Value Plan benefits plan to its employees at premiums ranging from $11 to $65 a month. (S)

2. Finance $312.6 billion in annual sales. (S) $11.2 billion net income. (S) $2.68 earnings per share. (S) 8.9% return on assets. (S) 11.4% increase in sales and operating income for the international business (Wheelen and Hunger 19-24). (S) 3. R&D More involved with the development side. (W) Focusing on expansion and development of already established business model. (W)

4. Operations Wal-Mart USA. We are intent on driving comparative store sales by being relevant to our broad customer base and by improving our cost structure and inventory flow to strengthen return on investment. (S) Sams Club. We remain committed to serving the needs of our members where pennies matter by leveraging productivity improvements and lowering expenses, so that we can provide the products and services they want at the lowest prices in the industry. (S)

Wal-Mart International. Our approach to ensuring continued profitable growth includes three dimensions new markets with multiple formats, new store growth in existing markets and increasing sales at existing stores (Annual Report 2006). (S)

5. Human Resources Employees are called associates. (S) Employee stock ownership and profit-sharing program. (S) Decentralized approach to retail management development. (S) Utilizes the Total Quality Management approach. (S) Discourages unionization (Wheelen and Hunger 19-23). (W)

6. Information Systems Leader in RFID technology. (S) Good internet presence. (S) Utilizes satellite communications, data centers, and handheld devices. (S)

V. Analysis of Strategic Factors

A. Situational Analysis 1. Strengths International brand name. Financial position. Market leadership.

2. Weaknesses

Market saturation. Public opinion. Adjustment to cultural differences after entering a foreign market. Supplier alienation. Past employee discrimination. Employee health benefits. International supplier employee violations.

3. Opportunities International expansion. Environmental leadership. Workers rights leadership. Community involvement. Social initiatives.

4. Threats Strong U.S. competition. Changing demographics. Economic uncertainty. Current litigation. Employee unionization.

VI. Strategic Alternatives and Recommended Strategy

A. Strategic Alternatives

Adopt a friendlier corporate attitude and image o Pro. Improved customer service o Pro. Business growth o Pro. Stronger relationships with its suppliers and customers o Con. The negative image tarnishes their moral and ethical image

Con. Popular image is that Wal-Mart comes to town and locally-owned retailers shrivel up and die (Parnell, 2008).

Ease into foreign and domestic markets instead of barging in o Pro. Create a more positive corporate image by not devouring every business in sight. o Pro. Creates an image with integrity o Pro. Customer loyalty o Pro. Increase friendlier competition o Con. Creates ill-will among smaller businesses o Con. Viewed as a bully corporation

Expansion o Pro. Provides a new source of tax revenue for the community

o Pro. Creates more jobs o Pro. Promotes community expansion and individuals who will patronize from other communities o Pro. Opportunities for employee growth in the organization o Con. Associates may receive unjust wages due to the compensation of lower cost products o Con. Purchasing practices require most suppliers to manufacture goods in third world countries o Con. Reduces the value on competing businesses B. Recommended Strategy Continue to expand the brand and operations in to urban & rural areas and foreign countries. The companys reputation of being a bully needs to be eliminated by implementing social awareness/advancement programs similar to Boys and Girls clubs or the Police Athletic League. The goal of such a program will be to invite the community to take part in Wal-Marts growth by mentoring, providing training, internships and/or jobs that will aid the community. Mom and Pop establishments should not be taken for granted. It is not the intention of Wal-Mart to take from anyones dream, but to it is Wal-Marts goal to provide cost savings to its consumers. A possible strategy for easing the anxiety of many small business owners on the onset of Wal-Mart entering the community is offering these owners the opportunity to become a part of Wal-Mart staff in a capacity that would

provide them sense of security. Offering small business owners a position will not only eradicate the discontent of loyal customers but will display Wal-Marts willingness to enter a community and enhance it. With the attitude of business is a dog eat dog world, Wal-Mart has been able to enter the market eat stores that have tried to follow its precedence but have not been able to attain Wal-Marts recognition. Entering into foreign markets may be extremely difficult, as many nations are known for their loyalty and enriched cultures. Unlike the United States, countries like China and Japan are accustom to living with less, so the attractiveness of buying more due to cost savings may not be received as well as in the United States. It is in the best interest of Wal-Mart to establish stores in foreign markets, but to adopt the culture of the area and continue to maintain its mission of enhancement not degradation.

VII. Implementation
Management needs to be open to change regarding clashes with grass-roots movements that push to keep new construction of Wal-Mart stores in rural America. While many residents welcome a new Wal-Mart, there will always be opposition and by developing ways to appease those that oppose the giant retailer, they will be more welcome to the neighborhood. Wal-Mart has been steadily reaching into every corner of the earth, but not always with successful results. Upper management is making the assumption that every culture will welcome box stores and the American culture of which Wal-Mart is known. As has been proven time and again, this is not always true. There needs to be committees established that can perform thorough research.

Several lawsuits have been filed regarding the treatment of employees. Wal-Mart needs to develop a way to ensure employees are getting the right benefits that are equal to the retail industrys average worker.

VII. Evaluation and Control

Wal-Mart needs to develop scout teams that can visit locations of opportunity and solicit the communities concerns if Wal-Mart builds nearby. Implement incentivized customer satisfaction surveys and employee surveys, which will increase the chance of them being completed. Monitor industry trends in foreign countries of interest. Shift from monopolizing to publicly displaying how important Mom and Pop establishments are to our society and how Wal-Mart can effectively and efficiently incorporate these individuals and there keen sense of business into the large picture of providing consumers cost savings.

EFAS (External Factor Analysis Summary)

Key Internal Factors Opportunities International expansion Environmental leadership Workers rights leadership Community involvement Social initiatives Threats Strong U.S. competition Weight Rating Weighte d Scores .60 .10 .10 .20 .20 .60 Comments

.20 .05 .05 .10 .10 .15

3 2 2 2 2 4

Required to remain competitive & #1 in market Will take time Will take time and initiative to steer towards a win - win Ensures community buyin and acceptance Fosters relationships Kmart and Target are capturing an opposing niche while Wal-Mart remains a catch all of convenient shopping

Changing demographics Economic uncertainty

.10 .05

3 3

.30 .15 Domestic recession, lower discretionary spending, increasing unemployment

Current litigation Employee unionization

.10 .10

3 3

.3 .3

Total Scores

1.0

2.85

IFAS (Internal Factor Analysis Summary)

Key Internal Factors Weig ht Ratin g Weighte d Scores .60 .60 .60 Comments

Strengths International brand name Financial position Market Leadership Weakness

.15 .15 .15

4 4 4

Grew stronger as the economy grew weaker

Market saturation Adjustment to cultural differences Supplier alienation Past employee discrimination Employee health benefits Total Scores

.15 .10 .20 .05 .05 1.0

3 3 3 2 2

.45 .30 .60 .10 .10 1.55

Embarking on international opportunities

SFAS (Strategic Factor Analysis Summary)

Key Strategic Factors International brand name Market saturation Supplier alienation International expansion Social initiatives Strong U.S. competition Weig ht .15 .15 .20 .20 .10 .15 Ratin g 4 3 3 3 2 4 Weighte d Score .60 .45 .60 .60 .20 .60 Duration S I X X X X X X X Comments L X X X X X X Community outreach programs Kmart and Target are capturing an opposing niche while Wal-Mart remains a catch all of convenient shopping Domestic recession, lower discretionary spending, increasing unemployme nt Name Recognition

X X X X

Economic uncertainty

.05

.15

TOTAL SCORES

1.00

3.20

Wal-Mart, Inc. Executive Summary

An in-depth strategic audit was conducted on Wal-Mart, Inc. by Strategic Audit Team Two and several recommended alternatives and strategies have been recommended. The purpose of this executive summary is to detail those strategies and recommendations that are discussed in three different phases: Strategic Alternatives and Recommendations, Implementation and Evaluation and Control.

Strategic Alternatives
In order for Wal-Mart to maintain its course to becoming the global retail leader, we have determined several Strategic Alternatives as well as Recommended Strategies. For this summary, we will examine the pros and cons of the three alternatives we have decided as having the most importance. Many towns and communities see Wal-Mart as an aggressive corporation that has done nothing to the community except destroy existing small businesses. One strategic alternative is to develop a friendlier corporate image in dealing with the public as well as its employees. Management could get more involved with community charities or provide employees with better benefits. Employees that are more content on the job will likely provide better customer service. Wal-Mart will also be accepted into the communities more easily, rather than having to struggle against grass-root movements, petitions and lawsuits.

A negative side-effect could be lower profits as employee wages and benefits increase as well as prices. Everyone comes to expect low prices but in order to appease employees and the community, prices will have to rise. The second strategic alternative that our team has agreed upon is incorporating changes into the methodology of Wal-Marts expansion in global markets. In the past, Wal-Mart has made bad decisions regarding product choices in a foreign country. For example, certain products didnt sell well in countries like Mexico and Argentina. Mistakes were also made upon entering the foreign markets and trying to maintain a presence. German Wal-Marts were managed by American executives who caused German managers to quit. Brazilian Wal-Marts were not wholly accepted by the local populace due to unfamiliarity with the Wal-Mart brand. Wal-Marts in China were tightly managed and highly restricted by local laws which did not allow for growth. And South Korean Wal-Marts simply closed their doors when they were deemed unsuccessful with consumers. By taking the time and assigning a task force to research the new market, Wal-Mart would be able to ease into a new global market instead of its common method of simply barging in and buying up chains of existing retail stores and simply slapping the Wal-Mart brand onto the store. This easement would allow time for the local populace to accept Wal-Mart as just another retail store instead of a retail bully. This in turn would create a more positive corporate image in the foreign market. Also, by slowly establishing itself it could allow for friendlier competition with existing retail firms. The downside of slowly easing into a new market is not being able to establish its place in the retail business. Large chains will still have the advantage of loyal customers that may stay clear of Wal-Mart which would quickly cut into profits. Many foreign consumers may not be familiar with the Wal-Mart brand and

by not establishing a solid foothold in their country, they never will. Also, the supply chain that Wal-Mart is well known for is not as established in the global market. The last strategic alternative is Wal-Marts future expansion. In order for WalMart to stay competitive against its nearest rival, Target, and other big box type retailers, it must continue with building new stores. Even though many communities do not approve of Wal-Mart moving in, many residents agree that the new store provides jobs and in some rural areas where joblessness is high, this is a big benefit. Many large companies, Wal-Mart included, provide tax revenues that allow the community to grow and develop. Without a large company, smaller communities do not have the resources to put towards new parks or infrastructures. Wal-Mart stores provide competition which allows lower prices for common, everyday items, and in times of recessions, this is always a big plus in areas where mid to lower income families live. Unfortunately, there are many disadvantages to expansion. By building too many new Wal-Mart stores, the market will become saturated and stores will earn less profit per location. Local businesses will always suffer in the shadow of a new Wal-Mart which will bring some community resentment. New stores will provide many jobs, but usually at the lowest pay allowed by law. Wal-Mart will always have to deal with petitions, lawsuits and other legal issues prior to and during any construction.

Recommended Strategies:

Wal-Mart needs to continue to expand the brand and operations into urban and rural areas as well as foreign countries. The companys reputation of being a bully needs to be eliminated by implementing social awareness/advancement programs similar to Boys and Girls clubs or the Police Athletic League. The goal of such a program will be to invite the community to take part in Wal-Marts growth by mentoring, providing training, internships and/or jobs that will aid the community versus hinder it. Mom and Pop establishments should not be taken for granted. It is not the intention of Wal-Mart to take from anyones dream, but it is Wal-Marts goal to provide cost savings to its consumers. A possible strategy for easing the anxiety of many small business owners on the onset of Wal-Mart entering the community is offering these owners the opportunity to become a part of Wal-Mart staff in a capacity that would provide them a sense of a security. Offering small business owners a position will not only eradicate the discontent of loyal customers but will display Wal-Marts willingness to enter a community and enhance it. With the attitude of business is a dog eat dog world, Wal-Mart has been able to enter the market and eat stores that have tried to follow its precedence but have not been able to attain Wal-Marts recognition. Entering into foreign markets may be extremely difficult, as many nations are known for their loyalty and enriched cultures. Unlike the United States, countries like China and Japan are accustomed to with less, so the attractiveness of buying more due to cost savings may not be received as well as in the United States. It is in the best interest of WalMart to establish stores in foreign markets, but to adopt the culture of the area and continue to maintain its mission of enhancement not degradation.

Implementation:
Management needs to be open to change regarding clashes with grassroots movements that push to keep new construction of Wal-Mart stores in rural and urban America. While many residents welcome a new box style retailer, there will always be opposition. By developing ways to appease those that oppose the giant retailer, they will be more welcome to the neighborhood. Wal-Mart has been steadily reaching into every corner on earth, but not always with successful results. Upper management is making the assumption that every foreign culture will welcome box stores and the American culture for which Wal-Mart is known. As has been proven time and again, this is not always true. Management needs to develop executive steering committees with a single goal of researching the host country to establish the local customs. Otherwise, Wal-Mart will continue to experience local opposition on foreign land. Several lawsuits have been filed regarding the treatment of Wal-Marts employees, as well as local communities. Some of the employee key issues are pay and benefits. Human Resource Management should develop a strategy that would evaluate the pay and benefits of employees to ensure fair treatment. Studies should be conducted that would evaluate the average pay and benefits being offered at other competing retailers and make changes as necessary. This would greatly increase Wal-Marts image in local communities just by providing better than minimum wage to associates.

Evaluation and Control:

In order for Wal-Mart to continue its global growth, scout teams should be developed that could visit locations of opportunity and solicit the communitys concerns if Wal-Mart builds nearby. This may require surveys or town-hall meetings. Implement incentivized customer satisfaction surveys as well as employee surveys. These surveys will encourage completion which would be able to help WalMart to better serve its customers as well as its employees. This holds true in both the United States and other countries. Surveys would greatly help establish what needs are required to be met to have a successful store built domestically as well as in a foreign country. Customer surveys would also helpful in determining products, layouts and demands of the customers. As industries shift here in the United States as well as overseas, trends need to be monitored to ensure future strategies can be developed. If trends are not monitored, production and operations could shift which could affect overall sales. Shift from monopolizing local markets to publicly displaying how important Mom and Pop establishments are to our society. Wal-Mart can effectively and efficiently incorporate these individuals and their keen sense of business into the large picture of providing consumers cost savings.

A continuous evaluation of strategic systems, such as production and distribution, will be required to ensure all goals are being met. For example, product placement is the key in determining what sells and what the customer wants/needs. There may also be laws governing particular regions in regards to what products might be restricted to sell.

Works Cited

Parnell, John A., and Donald L. Lester. Competitive strategy and the Wal-Mart threat: positioning for survival and success. Bnet. Web. Wheelen, Thomas L., and J. David Hunger. Strategic Management and Business Policy: Achieving Sustainability. Upper Saddle River: Prentice, 2010. Print. Walmart 2006 Annual Report

I. Current Situation
A. Current Performance Wal-Mart (WM) is divided into three business segments: Wal-Mart Stores, Sam's Club, and the International Division. In 2002, WM officially became the worlds largest company based on its $245 billion in sales (Wheelen and Hunger 19-1). As of January 31, 2006, the company had over 6,100

stores worldwide, bought products from 70 countries, and 20% of its business was generated outside of the United States (Wheelen and Hunger 19-2). 4. 2006 fiscal year sales of $312.4 billion, a 9.5% year over year increase. 5. $11.2 billion net income, up 9.4% to $2.68 per share. 6. Stock price of $46.11, down from $56.98 on January 31, 2002. (Likely due to better competition and future expected growth slowdown.) B. Strategic Position 1. Mission Wal-Mart Stores, Inc. is a global retailer committed to improving the standard of living for our customers throughout the world (Annual Report 2006). 2. Objectives

Comparative store sales is a measure which indicates the performance of our existing stores by measuring the growth in sales for such stores for a particular period over the corresponding period in the prior year.

Operating income growth greater than net sales growth has long been a measure of success for us.

Inventory growth at a rate less than that of net sales is a key measure of our efficiency.

With an asset base as large as ours, we are focused on continuing to make certain our assets are productive. It is important for us to sustain our return on assets (Annual Report 2006).

3. Policies We earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices (EDLP) while fostering a culture that rewards and embraces mutual respect, integrity and diversity. Putting Our Customers First. EDLP is our pricing philosophy under which we price items at a low price every day so that our customers trust that our prices will not change erratically under frequent promotional activity. Our focus for SAMS CLUB is to provide exceptional value on brand-name merchandise at members only prices for both business and personal use. Internationally, we operate with similar philosophies (Annual Report 2006). 4. Strategies We have developed several initiatives to help mitigate this pressure and to grow comparable store sales through becoming more relevant to the customer by creating a better store shopping experience, continual improvement in product assortment and an aggressive store upgrade program to be instituted over the next 18 months. Our expansion programs consist of opening new units, converting discount stores to supercenters, relocations that result in more square footage, as well as expansions of existing stores.

Sams Club - We believe that a greater focus on providing a quality in-club experience for our members will improve overall sales, including sales in these categories.

International A shift in the mix of products sold toward general merchandise categories which carry a higher margin (Annual Report 2006).

II. Strategic Managers

A. Board of Directors Thirteen members, four affiliated with the company, nine independent, three women, two African Americans, two Hispanic Americans. Chairman of the Board, S. Robson Walton (son of founder.)

B. Top Management Eduardo Castro-Wright Executive Vice President, President and Chief Executive Officer, Wal-Mart Stores Division U.S. M. Susan Chambers Executive Vice President, People Division Patricia A. Curran Executive Vice President, Store Operations, Wal-Mart Stores Division U.S. Douglas J. Degn Executive Vice President, Food, Consumables, and Hardlines, WalMart Stores Division U.S. Linda M. Dillman Executive Vice President, Risk Management and Benefits Administration Johnnie Dobbs Executive Vice President, Logistics and Supply Chain Michael T. Duke Vice Chairman, Responsible for Wal-Mart International

Joseph J. Fitzsimmons Senior Vice President, Treasurer John E. Fleming Executive Vice President, Chief Marketing Officer, Wal-Mart Stores Division U.S.

Rollin L. Ford Executive Vice President and Chief Information Officer David D. Glass Chairman of the Executive Committee of the Board of Directors Mark D. Goodman Executive Vice President, Marketing, Membership and Ecommerce, SAMS CLUB

Craig R. Herkert Executive Vice President, President and Chief Executive Officer, The Americas, Wal-Mart International

Charles M. Holley, Jr. Senior Vice President, Finance Thomas D. Hyde Executive Vice President and Corporate Secretary Lawrence V. Jackson Executive Vice President, President and Chief Executive Officer, Global Procurement

Gregory L. Johnston Executive Vice President, Club Operations, SAMS CLUB C. Douglas McMillon Executive Vice President, President and Chief Executive Officer, SAMS CLUB

John B. Menzer Vice Chairman, Responsible for U.S. Thomas M. Schoewe Executive Vice President and Chief Financial Officer H. Lee Scott, Jr. President and Chief Executive Officer Gregory E. Spragg Executive Vice President, Merchandising and Replenishment, SAMS CLUB

S. Robson Walton Chairman of the Board of Directors

Claire A. Watts Executive Vice President, Product Development, Apparel and Home Merchandising, Wal-Mart Stores Division U.S.

III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREAT (SWOT)

D. Natural Environment Raw materials availability.(O) Land availability. (O) Electricity usage. (T) Oil and Gas usage. (T) Water scarcity. (T) Hazardous waste storage, transportation and disposal. (T?)

E. Societal Economy 1. Economic Interest rate increases may signal end of economic expansion (T). Economic deterioration may mean more frugal shopping habits. (O) Increasing commodity costs. (T) Increasing transportation costs. (T) Currency fluctuations. (T) Slowing national economy (T)

2. Technology Increased usage of RFID for inventory management. (O)

Internet presence allows for customer options. (O) Information technology increasingly important. (O)

3. Political-Legal Regional trade pacts are making free trade available between countries. (O) Differing laws between countries may evoke compliance issues. (T) Potential unionization of workforce. (T) The Company is involved in a number of legal proceedings. In accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, the Company has made accruals with respect to these matters, where appropriate, which are reflected in the Companys consolidated financial statements (Annual Report 2006). (T) The Company is a defendant in numerous cases containing class action allegations in which the plaintiffs have brought claims under the Fair Labor Standards Act (FLSA), corresponding state statutes, or other laws (Annual Report 2006). (T) 4. Socio-cultural Aging U.S. demographics. (O) Slowing U.S. population growth. (T) Wal-Mart seen as a reason for closing of mom and pop stores. (T) International cultural differences. (T) Green environmental movement. (O)

F. Task Environment United States market saturation. (T) Expansion into Europe, China, South America, Canada, and Mexico. (O) Rivalry High. Target, Sears, K-Mart (T) Chance of new entrants low. (O) Purchasing power high. (O) Substitute power high. (T) Government regulations power medium. (T)

IV. Internal Environment

D. Corporate Structure Three business units, Wal-Mart Stores USA, Sams Club, and Wal-Mart International (Wheelen and Hunger 19-12). (S) Wal-Mart Stores unit had 3,289 locations and included the companys supercenters, discount stores, Neighborhood Markets in the US, and walmart.com. Sams Club unit had 567 locations and included the warehouse membership clubs in the US plus samsclub.com.

Wal-Mart International had 2,285 locations in 10 countries. The International total was increased in February 2006 by purchasing a majority control of CARHCO with 360 locations in five Central American countries (Wheelen and Hunger 19-12).

E. Corporate Culture In-depth employee involvement in company affairs. (S) Trained employees to be merchants by being responsible for the performance of their own departments. (S) Reflection of the founders values. (S) Conservative values create some problems when expanding to larger cities. (W) Non-Union stance is viewed unfavorably is some areas. (W) Offered $8.5 million worth of grants from its Safe Neighborhood Heroes program to recognize emergency professionals. (S) Donated $3 million in supplies when Hurricane Katrina devastated Americas Gulf Coast. (S) F. Corporate Resources 7. Marketing Advertising costs are expensed as incurred and were $1.6 billion in 2006. Advertising costs consist primarily of print and television advertisements (Annual Report 2006). Buy American campaign. (S)

Green marketing offers the option of buying products which were better for environment. (S)

Offers quality brand names at lower-than-competitive prices (Wheelen and Hunger 19-19). (S)

Introduced a Value Plan benefits plan to its employees at premiums ranging from $11 to $65 a month. (S)

8. Finance $312.6 billion in annual sales. (S) $11.2 billion net income. (S) $2.68 earnings per share. (S) 8.9% return on assets. (S) 11.4% increase in sales and operating income for the international business (Wheelen and Hunger 19-24). (S) 9. R&D More involved with the development side. (W) Focusing on expansion and development of already established business model. (W) 10. Operations Wal-Mart USA. We are intent on driving comparative store sales by being relevant to our broad customer base and by improving our cost structure and inventory flow to strengthen return on investment. (S)

Sams Club. We remain committed to serving the needs of our members where pennies matter by leveraging productivity improvements and lowering expenses, so that we can provide the products and services they want at the lowest prices in the industry. (S)

Wal-Mart International. Our approach to ensuring continued profitable growth includes three dimensions new markets with multiple formats, new store growth in existing markets and increasing sales at existing stores (Annual Report 2006). (S)

11. Human Resources Employees are called associates. (S) Employee stock ownership and profit-sharing program. (S) Decentralized approach to retail management development. (S) Utilizes the Total Quality Management approach. (S) Discourages unionization (Wheelen and Hunger 19-23). (W)

12. Information Systems Leader in RFID technology. (S) Good internet presence. (S) Utilizes satellite communications, data centers, and handheld devices. (S)

V. Analysis of Strategic Factors

B. Situational Analysis 5. Strengths International brand name. Financial position. Market leadership.

6. Weaknesses Market saturation. Public opinion. Adjustment to cultural differences after entering a foreign market. Supplier alienation. Past employee discrimination. Employee health benefits.

International supplier employee violation

7. Opportunities International expansion. Environmental leadership. Workers rights leadership. Community involvement. Social initiatives.

8. Threats Strong U.S. competition. Changing demographics. Economic uncertainty. Current litigation. Employee unionization. .

VI. Strategic Alternatives and Recommended Strategy

C. Strategic Alternatives Adopt a friendlier corporate attitude and image

Pro. Improved customer service

Pro. Business growth Pro. Stronger relationships with its suppliers and customers Con. The negative image tarnishes their moral and ethical image

Con. Popular image is that Wal-Mart comes to town and locally-owned retailers shrivel up and die (Parnell, 2008). Ease into foreign and domestic markets instead of barging in

Pro. Create a more positive corporate image by not devouring every business in sight.

Pro. Creates an image with integrity Pro. Customer loyalty Pro. Increase friendlier competition Con. Creates ill-will among smaller businesses

Expansion

Pro. Provides a new source of tax revenue for the community Pro. Creates more jobs Pro. Promotes community expansion and individuals who will patronize from other communities

Pro. Opportunities for employee growth in the organization Con. Associates may receive unjust wages due to the compensation of lower cost products

Con. Purchasing practices require most suppliers to manufacture goods in third world countries

Con. Reduces the value on competing businesses

D. Recommended Strategy Continue to expand the brand and operations in to urban & rural areas and foreign countries. The companys reputation of being a bully needs to be eliminated by implementing social awareness/advancement programs similar to Boys and Girls clubs or the Police Athletic League. The goal of such a program will be to invite the community to take part in Wal-Marts growth by mentoring, providing training, internships and/or jobs that will aid the community. Mom and Pop establishments should not be taken for granted. It is not the intention of Wal-Mart to take from anyones dream, but to it is Wal-Marts goal to provide cost savings to its consumers. A possible strategy for easing the anxiety of many small business owners on the onset of Wal-Mart entering the community is offering these owners the opportunity to become a part of Wal-Mart staff in a capacity that would provide them sense of security. Offering small business owners a position will not only eradicate the discontent of loyal customers but will display Wal-Marts willingness to enter a community and enhance it.

With the attitude of business is a dog eat dog world, Wal-Mart has been able to enter the market eat stores that have tried to follow its precedence but have not been able to attain Wal-Marts recognition. Entering into foreign markets may be extremely difficult, as many nations are known for their loyalty and enriched cultures. Unlike the United States, countries like China and Japan are accustom to living with less, so the attractiveness of buying more due to cost savings may not be received as well as in the United States. It is in the best interest of Wal-Mart to establish stores in foreign markets, but to adopt the culture of the area and continue to maintain its mission of enhancement not degradation.

VII. Implementation
Management needs to be open to change regarding clashes with grass-roots movements that push to keep new construction of Wal-Mart stores in rural America. While many residents welcome a new Wal-Mart, there will always be opposition and by developing ways to appease those that oppose the giant retailer, they will be more welcome to the neighborhood. Wal-Mart has been steadily reaching into every corner of the earth, but not always with successful results. Upper management is making the assumption that every culture will welcome box stores and the American culture that Wal-Mart is known for. As has been proven time and again, this is not always true. There need to be committees established that can perform thorough research before just barging onto foreign land.

Several lawsuits have been filed regarding the treatment of employees. Wal-Mart needs to get involved with developing a way to ensure employees are getting the right benefits that is equal to the retail industrys average worker.

VIII. Evaluation and Control

Wal-Mart needs to develop scout teams that can visit locations of opportunity and solicit the communities concerns if Wal-Mart builds nearby. Implement incentivized customer satisfaction surveys and employee surveys, which will increase the chance of them being completed. Monitor industry trends in foreign countries of interest. Shift from monopolizing to publicly displaying how important Mom and Pop establishments are to our society and how Wal-Mart can effectively and efficiently incorporate these individuals and there keen sense of business into the large picture of providing consumers cost savings.

IX. Appendix
EFAS (External Factor Analysis Summary)
Key Internal Factors Opportunities International expansion Environmental leadership Workers rights leadership Community involvement Social initiatives Threats Strong U.S. competition Weight Rating Weighte d Scores .60 .10 .10 .20 .20 .60 Comments

.20 .05 .05 .10 .10 .15

3 2 2 2 2 4

Required to remain competitive & #1 in market Will take time Will take time and initiative to steer towards a win - win Ensures community buyin and acceptance Fosters relationships Kmart and Target are capturing an opposing niche while Wal-Mart remains a catch all of convenient shopping

Changing demographics Economic uncertainty

.10 .05

3 3

.30 .15 Domestic recession, lower discretionary spending, increasing unemployment

Current litigation Employee unionization

.10 .10

3 3

.3 .3

Total Scores

1.0

2.85

IFAS (Internal Factor Analysis Summary)

Key Internal Factors Weig ht Ratin g Weighte d Scores .60 .60 Comments

Strengths International brand name Financial position

.15 .15

4 4

Market Leadership Weakness Market saturation Adjustment to cultural differences Supplier alienation Past employee discrimination Employee health benefits Total Scores

.15

.60

Grew stronger as the economy grew weaker Embarking on international opportunities

.15 .10 .20 .05 .05 1.0

3 3 3 2 2

.45 .30 .60 .10 .10 1.55

SFAS (Strategic Factor Analysis Summary)

Key Strategic Factors International brand name Market saturation Supplier alienation International expansion Social initiatives Strong U.S. competition Weig ht .15 .15 .20 .20 .10 .15 Ratin g 4 3 3 3 2 4 Weighte d Score .60 .45 .60 .60 .20 .60 Duration S I X X X X X X X Comments L X X X X X X Community outreach programs Kmart and Target are capturing an opposing niche while Wal-Mart remains a catch all of convenient shopping Domestic recession, lower discretionary spending, increasing unemployme nt Name Recognition

X X X X

Economic uncertainty

.05

.15

TOTAL SCORES

1.00

3.20