Walmart case analysis

1. Company Overview Income Statement Information

•Walmart’s Total Revenue January 31, 2014: 476,294,000 •Gross Profit January 31,2014: 118, 225,000 •Operating Income: 26,872,000 •Net Income: 16,022,000 •Net Income Applicable to Common Shares: 16,022,000 Walmart’s Growth Internationally •Prior to 1990, Walmart focused its growth within the United States •The Walmart International Division was created in 1993 as part of its expansion strategy •By 2009, Walmart has expanded to over 15 countries outside the United States through new-store construction and acquisitions •To name a few countries which Walmart operates; Argentina, Brazil, Canada, Child, China and Japan •Overall, they serve over 200 million times per week to international clients •Currently, Walmart’s grown within the United States borders is stalling. Thus, their strategy is to look for profits internationally. •8,000 retail units worldwide; 3,659 are outside the continental United States (46%) •Employ 680,000 people outside the United States

•In 2005, Walmart acquired 545 new stores and 50,000 workers in Japan and South America. •Walmart’s international division is responsible for 24.6% of Walmart’s sales. •In 2009, Walmart’s international division showed an increase of sales from the 2008 by 9.1% ($98.6 billion). •Walmart’s has had a hit-and-miss success rate internationally. •Walmart’s Failure: Japan, United Kingdom, Germany, South Korea Struggled in Japan to match consumer preferences and work successfully with suppliers.

Forced to withdraw from German and South Korean markets because they failed to generate profits. •Walmart’s Success in Canada since 1994: through acquisition of 122 Woolco stores, 254 Walmart stores, 58 Supercenters, and strong partnerships with Canadian suppliers. •Walmart’s Success in Mexico: 1,242 units include Sam’s Clubs, Bodegas, Walmart Supercenters, Superamas, Suburbias, VIP restaurants. Today Walmart is the largest retailer in Mexico. Competitors

•Competitors in the United States: Target Corp., Costco Wholesale Corporation, ALCO Stores Inc., Best Buy •Competitors in Mexico: Comerci, Gigante, Soriana Walmart’s Strategies and Techniques

•Powerful slogan: “Save Money Live Better”

•Differentiation: offering various types of products compared to its competitors •Advanced information system that allows Walmart to work closely with suppliers to reduce production costs •Bargaining power with suppliers: Lower production costs means more saving for Walmart, thus provides consumers with the lowest prices or “everyday day low pricing”

•Adequate distribution system, called Distribution Centers, are located in central locations •Bar code system allows Walmart’s merchandise to flow smoothly •Inventory information system ships its items via company owned or partner owned fleet •Internet provides easier access for its consumers: the Internet allows Wal-Mart to cut back on sales force costs. Walmart has a system that provides consumers with recommendations based on prior purchases •Uses the second most powerful computer in the world.

2. How has NAFTA helped Walmart become successful in Mexico? Walmart has been able to grow and prosper in Mexico over the years. Walmart would not have been able to succeed in Mexico if it were not for NAFTA, North American Free Trade Agreement. When Walmart first established themselves in Mexico they encountered problems such as poor infrastructure. NAFTA lowered tariffs and allowed Walmart to expand its business in Mexico. Walmart used to pay import fees on goods shipped to Mexico from overseas. However these countries began to build manufacturing plants in Mexico. This allowed Walmart to sell their items at a lower price because they no longer encountered high import or shipping fees.

Even though, Walmart had the opportunity to pocket the money that they saved from the reduction of import fees, they did not. Walmart’s slogan is “Every Day Low Costs”, meaning they strive to provide their customers with the lowest prices possible. In 1999, Walmart reduced 6,000 items at Supercenters by 14%. They closed for a day, losing potential sales; in order to keep their customers satisfied. Overall, NAFTA was Walmart’s catalyst in its growth in Mexico. Walmart took advantage of better infrastructure and lower tariffs provided by NAFTA to remain a step ahead from their competitors.

3. What has Comerci done to remain competitive? What else do they need to do? After Wal-Mart’s entrance to the market in Mexico, sales began to decline for Comerci. Comerci realized that in order to remain competitive and keep up with Wal-Mart they have to lower their prices. Although they tried to match the standard Wal-Mart had set for consumers, Wal-Mart was much better at getting lower prices due to multiple local and international suppliers. Comerci lacked variety in suppliers, hence was only able to lower their prices to compete with Wal-Mart on some products, but not all. Thus, Wal-Mart had the competitive advantage.

In 2011 Comerci decided to put new strategies into affect in order to remain competitive in the market. They opened new stores and entered in several strategic alliances, such as Costco Mexico. Comerci realized that Wal-Mart was a diverse business. Therefore, they needed to compete with Wal-Mart through diversification, which lead to the investment in the Restaurant Business and owned 72 restaurants in Mexico. Wal-Mart has a powerful distribution channel strategy, which is not easy to imitate.

Thus, other actions that Comerci should consider is seeking several small local suppliers who are willing to make products at a cheaper price and work directly with them, thus getting rid of the middleman. Other than prospecting for potential suppliers, they should examine the market and find ways to significantly differentiate themselves from Wal-Mart. They can benefit from the market opportunities provided by NAFTA, Wal-Mart already started taking advantage therefore it only makes sense for Comerci to consider it as well.

Comerci must perform internal and external analysis to look deeper into its organization. If they can find ways to improve their organization, strengthen their strategy, and clearly define what they expect from investors, then they can make wiser operative decisions to remain competitive amongst market leaders. Comerci could find success in the long run if it considers the consortium strategy. This strategy would allow them to be associated with two or more companies with similar objectives of pooling their resources to accomplish a mutual goal. This strategy will help Comerci increase their purchasing power significantly in order to lower their prices to compete with Wal-Mart in the long run.

Obviously they would have to increase their marketing strategy in order to ensure proper branding and brand recognition. Now that Wal-Mart is growing in popularity Comerci should make sure that consumers and investors do not forget about them. They need to maintain a firm and appealing company reputation for local and foreign investors who are interested in being part of a company who seeks to compete with Wal-Mart due to its growth and potential.

4. As Walmart expands globally, has it done any adjustments / modifications to adapt to the Economic and Cultural diversity of the host countries? If so, how, give example. As Wal-Mart expands globally they faced several problems that required tweaking. They faced import charges, which prevented their products from being as low as they had planned. Several unpopular items were sold without researching consumers’ preferences.

Due to rough and undeveloped streets and roads there were scarcity of deliver trucks. Wal-Mart also faced cultural clashes within management within their stores in Mexico. Hence, adjustments and modifications to adapt to the economic and cultural diversity was necessary. Wal-Mart had to make economical adaptations in order to successfully compete in the market. Wal-Mart’s frustration with import charges was easily solved through NAFTA, but also through purchasing with other companies who build manufacturing plants in Mexico.

This helped avoid import tariffs. In 2009 due to free trade agreements Wal-Mart purchased Wal-Mart Centro America, which meant more access to other suppliers and products. Thus, creating competitive advantage in the market and rising to be a market leader. Some necessary cultural adaptations took place as Wal-Mart set up a multi format operations approach to address different consumer segments.

This was their way of solving the issue of providing products not within the consumers’ preference. Now that they are well aware of consumers’ preferences and purchasing habits, they are able to address different consumer segments and expand in Mexico. In the United States, Wal-Mart created Latin themed warehouses stored in Houston, Texas called Màs. They have also incorporated products that are popular within the Hispanic community into their stores. These products are also imported into the United Stores for the United States Wal-Mart stores.