Sams Club

Case Analysis
GROUP MEMBERS:
1. DIEN TRUONG 1289490 5. PHAM MINH DUC 1357001
2. LUU THI VAN 6. PHAM QUANG HUY - 1314116
3. NGUYEN THI THUY TRANG 1357299 7. LY NHU - 1356979
4. PHAN HOANG ANH - 1273205

Contents
I. Key Issues
II. Sams club current strategy and its effectiveness
III. External Analysis
IV. Internal Analysis
V. SWOT Analysis
VI. Conclusion
VII. Recommendation
VIII. Implementation issues



How can Sams club maintain its
competitive advantage and captivate
more market shares in the tough
competition with strong direct and
indirect competitors ?
I. Key Issue
II. Current strategy and its
effectiveness
Low-cost leadership strategy
Accept lower profit margin to lower prices for its
members
Mission: to make saving simple for member by
providing them with exciting, quality merchandise and
superior shopping experience, all at a great value
Create a very good position in customers mind
Achieve the second biggest market share
Gain loyal customers: 41 million membership cards
Create a perception of their products in customers
mind with unbelievable cheap price with medium to
excellent quality
II. Current strategy and its
effectiveness
III. External Analysis
1. Macro environment
2. Porter five forces
3. Driving forces
4. Key success factors
1. Macro environment
Economic trend:
The global economic recession
at the end of 2007
-> gain customers
-> annual growth rate
increased 1.2% in 2008-2009
Technology
Point-of-sale system
Supply chain system
Inventory management
1. Macro environment
1. Macro environment
Demographic
gender, personal average income,
population, education and culture.
-> Strategies, target and segment audience
Rivalry among firms a strong competition forces
the rivalry among Costco, Sam and BJ is vigorous
switching costs are low
2. Porter five forces
Threat of substitute products
a strong competition force
the range of merchandise selection and the number of convenient
store locations of substitute retailer are much greater.
2. Porter five forces
Bargaining power of
suppliers
moderate

Threat of new entrants
a weak competition
force
Bargaining power of
buyers
a weak competition
force

2. Porter five forces
3. Driving forces
Technology
using throughout supply chain
retailers collect data at the
point of sale

Per capita disposable income
change in disposable income
cause change in warehouse
sale
Customers trend
understanding the cost of
opportunity of customers
to deliver superior value
4. Key success factors
Economies of Scale
Help the industry lower the
cost of doing business

Control of distribution
Having better control of
distribution facilities into
lower price
Ability to control stock on hand
Operators need to have
stringent control measures
to ensure that all the items
are available
Having a wide and
expanding product range
Range of products must be
wider than others.
IV. Internal Analysis
1. 4Ps
2. Operation analysis
3. Financial analysis
1. 4Ps
Price
sell merchandise at a very low profit margins
-> low price for members

$12 cheaper than Costco on 38 typical grocery items

40% lower in price compared to a traditional grocery store
(Cheapism.com)
1. 4Ps
Place
o more than 600 locations across the U.S
o 98 warehouses in Mexico, 9 wareshouse in Puerto Rico
o 3 warehouse in China.
o 7
th
most valuable retain brand
o adjacent to Walmart super centres



1. 4Ps
Products
o stocks brand-name merchandise such as Members Mark,
Baker & Chefs, Sams club.
o carries software, electronics, jewellery, sporting goods, toys,
tires, batteries, office suppliers and fresh-food departments.
o One-stop shopping: Sams caf, self-service gasoline pumps.
1. 4Ps
Promotion
o $35 primary membership card with a spouse card
available at no additional cost in every year
o has lower membership price than BJ with $55 and Costco
with $55
o minimize on advertising and focus on customer service
o provide excellent service for delivery, installation and
technical support.
1. 4Ps
Findings
o good price and intensive locations
o understand how compatible it would be to other competitors
o the high focused- customer service and well design, spacious
warehouse increase the customer experiences when customers
come to visit the stores.
2. Operation analysis
Inventory management

o Sams club operates on a perpetual inventory system.

o Sams club use SKU (Stock keeping unit) model.

o Sams club use P and Q system.

2. Operation analysis
Logistics
o The division at the companys core, keeping the business moving
and keeping millions of the products arriving.
o At Sams club, nonfuel merchandise from Wal-marts grocery
distribution.
o Its all designed to pass on savings to our customers and
communities.
o Some of distribution facilities of Sams club:
+ Greenfield, in 46140-3057. Phone: (317) 467-0495
+ Distribution Ctr 1911 Continental Blvd Charlotte, NC 28273. Phone
(704) 588-5240
o Sams club use cross docking techniques.

2. Operation analysis
Retail Technology

o Technology is a key of all activities in supply chain of Sams club

o Because of Walmart, Sams club also possesses the largest
information technology infrastructure.

3. Financial analysis
Net sales of Sams club increased 8.8% in 2011 to 2012 and growth 4.9% in 2012 to
2013.

_ In gross profit rate was flat in fiscal 2013 when compared to fiscal 2012.

_ The fiscal 2013 of operating expenses decrease was due to improved wage
management.

_Sams Club leveraged operating expenses during fiscal 2013 and 2012, operating
income was $2.0 billion, $1.8 billion and $1.7 billion for fiscal 2013, 2012 and 2011.
3. Financial analysis
Findings
Sams club has a healthy financial performance through the
year. This is a positive sign for all other aspects of the
company because healthy financial performance will be
able to support funding for other activities.
V. SWOT analysis
1. Strengths
First mover in retail technology
Supports workflow integration
Logistic
Effective & efficient logistic
Operating expenses shipment, delivery
Worldwide private distribution networks
Number of locations

Leverage Walmart




Effective marketing
Member card
Gold key program
Lower price
Variety product range
2nd biggest market share in US
41M members

V. SWOT analysis
2. Weaknesses
SKU management
Difficult collect, delivery

Limited global stores
Focus on US market
Only one market in Asia




Overlap with Walmart
Location
Consumers confused
Potential customers narrow


3. Opportunity
Technology Benefits
Development of E-commerce
Online trade
App
Growth in popularity of warehouse clubs
A chance expand market, loyalty customers, rise profit
Per capita disposable income Economy recovers

V. SWOT analysis
V. SWOT analysis
4. Threats
Strong competition direct and indirect
Macro economy increasing price
Regulation
Policy change
Tax/tariff - different price

External
Opportunities Threats
Strengths
S 0 Comparisons

Strong logistics + new technology
Strengthen logistics to keep the core
competency of the company


S - T Comparisons

Strong competitor Costco
Make good use of its two biggest
strengths : information technology
infrastructure and logistics
To maintain the market share
Weakness
es
W - O Comparisons
Not excellent in SKU
=> Turn this weakness into strength by the
support of new technology
W - T Comparisons

Costcos SKU is much more productive
than Sams club SKU
=> Support SKU by new technology
internal
VI. Conclusion
Warehouse Industry is a billion
dollar segment of retailing industry,
has grown strongly.
Costco, Sams club and BJ.

Demographic influences planning
and building strategies.

Growth of technology supports
inventory management
Low price with many benefits for
members.

4 key success factors: economies
of scale, control of distribution,
ability to control stock on hand;
wide and expanding product
range
VI. Conclusion
reduces operation cost => lower price

provides better memberships benefits

has stable and supportive financial performance


Competitive advantage
has largest distribution network
is first mover in retail technology

enhances the core logistic , (KFSs)

Workflow Integration
Strategic alternatives
invests in Information System (IS)


improves inventory management


opens new store in foreign country
refreshes product offerings

Enhances completive advantage,
capture more market shares
Reduces assortment, lower
employment cost
VII. Recommendation
should keep current strategy

Invests more on (IS) and improves inventory management
VI. Recommendation
extremely strong Costco rival
be more efficient thanks to retail technology

bases on strengths and opportunities to maintain competitive
advantage

Has more unique management softwares, IS based device
better tracking better logistic system

VI. Recommendation
provides different function management software in one
system
helps integrate all the related tasks
enhances competitive advantage
more efficient and effective in operating
cheaper product price
more market shares

VI. Recommendation
reduces assortment

lower employee cost

Better chance to attract E-comerce

VII. Implementation
fit with internal and external environment

healthy financial support

easy to do

time constraint