Report

On
Wal-Mart

Submitted by
MMS -B
KAJAL DUBE (12)
AKSHAY PHADKE (36)
PRANAV SHUKLA (54)
NEELAM BHATTARAI (68)
MEERA PANCHAL (97)
SNEHA FATE (81)
GAURAV SINGH (109)
 INTRODUCTION OF WAL-MART
Wal-Mart Stores, Inc is an American public corporation that runs a chain of large discount
department stores and a chain of warehouse stores. The company was founded by Sam Walton in
1962, incorporated on October 31, 1969. Revenue of Walmart was 482.13 Billion dollars with a
Net profit of 14.69 billion dollars in 2016. Wal-Mart has 8500 stores in 15 countries, with 55
different names. The company operates under its own name in the United States, including the
50states. It also operates under its own name in Puerto Rico. Wal-Mart operates in Mexico as
Walmex, in the United Kingdom as Asda in Japan as Seiyu, and in India as Best Price. It has
wholly-owned operations in Argentina, Brazil, and Canada.

GLOBAL EXPANSION
MARKET ENTRY AND MARKET EXIT
Wal-Mart entered Germany by an agreement with the Mann family to acquire the Wertkauf
hypermarket chain. The attractiveness of an investment in Germany resulted from the size and
the location of this market. Germany is the biggest market in Europe, centrally placed on the
continent, and hence also contiguous to the fast-growing states of central and Eastern Europe
(e.g., Arnold, 1999; Christopherson, 2007; Fernie, Hahn, Gerhard, Pioch, & Arnold, 2006). The
acquisition of the 21 Wertkauf hypermarkets was completed on 30 December 1997. One year
later, on 9 December 1998, Wal-Mart announced that it had reached an agreement to purchase 74
units of the Interspar hypermarket chain from Spar Handels AG, a German company that owns
multiple retail formats and wholesale operations throughout the country. According to Bob L.
Martin, the then President and Chief Executive Ofcer of Wal-Mart International, the acquisition
demonstrated Wal-Marts commitment to invest in Germany and its continued optimism about
this market. The acquired Interspar hypermarkets had combined annual sales of about US$ 1.7
billion and the average unit provided 73,000 square feet of selling space. They were hence
smaller than an average Wal-Mart store in the US as well as an average Wertkauf store. In
addition, the size of the acquired Interspar stores varied considerably (Gerhard & Hahn, 2005).
The combined companies of Wal-Mart Germany employed more than 14,000 people. The former
Interspar headquarters in Wuppertal became the seat of Wal-Mart in Germany. The acquisitions
allowed Wal-Mart a comparably fast entry into the German market (Aoyama & Schwarz, 2006).
The entry mode by acquisitions may have, among other things, been chosen because of rather
disappointing joint venture experiences in South America and Asia (Arnold, 1999). In addition,
starting the business from scratch was not a viable option because of the highly regulated and
protracted issue of building licenses in Germany (Aoyama & Schwarz, 2006; Gerhard & Hahn,
2005; Hurth, 2003). Due to these transactions, Wal-Mart became the fourth largest operator of
hypermarkets in Germany. However, with regard to sales and market share, Wal-Mart was not
even ranked among the top 10 German retailers (Gerhard & Hahn, 2005). In 2002, the turnover
amounted to about EUR 2.9 billion. This corresponds with a stagnating market share of just 1%
(Knorr & Arndt, 2003). As a result, Wal-Marts impact on the German market has been marginal
(Fernie et al., 2006).

From the beginning, Wal-Mart faced severe difculties in the German market. A few scholars
have attributed these failures primarily to external circumstances rather than company-specic
decits. For instance, Shugan (2007) refers to anti-trust regulations that do not allow products to
be sold at a price below the cost of production, to limited shopping hours and to the (obstructive)
exercise of trade unions in Germany. Whereas these forces may hamper competition to some
degree at least partly in accordance with their underlying intention to protect fair competition
and employees interest, they can, by no means, explain Wal-Marts failure because its
competitors faced identical environmental conditions. Therefore, management problems have to
be taken into consideration too (Gerhard & Hahn, 2005; Hurth, 2003; Knorr & Arndt, 2003).
More specically, the acquisition targets turned out to be rather weak (Christopherson,2006).In
particular, many Interspar stores were in poor locations, suffered from low protability and were
in need of renovation(Aoyama &Schwarz, 2006;Gerhard&Hahn,2005; Hurth, 2003). The
management did not succeed in integrating the two separate acquired chains with their different
organizational cultures and a rather heterogeneous portfolio of stores (Fernie et al 48 T.
Talaulicar 2006). Moreover, the management style lacked sensitivity for business, cultural and
legal peculiarities within the German setting. Consequently, Wal-Mart remained unable to attract
German customers to its value proposition. The rm did not achieve low-price leadership due to
a lack of scale economies, inefcient cost structures and the dominance of hard discounters in the
German market. Limited awareness of cultural and legal specics also led to bad publicity, as
Wal-Mart was violating social and legal norms (Christopherson, 2007). A number of different
CEOs appointed to Wal-Mart Germany were unable to improve the standing of the rm within
this market.

BUSINESS ENVIROMENT
Environment

Internal External
Environment

MICR MACRO
O
 INTERNAL ENVIRONMENT
Wal-Mart is the largest non-government employer and corporation in the world. The main Wal-
Mart's Internal Environment is as given below,
SWOT ANALYSIS

MICRO EXTERNAL ENVIRONMENT

Supplier Power
The suppliers power is highly influences Wal-Mart. When multiple suppliers are
producing a commoditized product in retail industry, the company will make its purchase
decision based mainly on price, which tends to lower costs. On the other hand, if a single
supplier is producing something the company has to have, the company will have little
leverage to negotiate a better price. The retail company is much larger than its suppliers,
 and purchases in large quantities, and then the supplier will have very little power to
negotiate. There are some reasons when suppliers are more powerful such as;

(a). Supplier concentration

The fewer the number of suppliers for a products in retail, the more power they will have
over the retailers. This is a real life situation.

(b). Switching costs

Suppliers of retail stores become more powerful as the cost to change to another supplier
increases.

(c). Uniqueness of product

Suppliers that produce products specifically for a retailers and retailers will have more
power than product suppliers.

Customer
There are two types of customer in retail. The first is related to the customers price
sensitivity. If each brand of a product is similar to all the others, then the buyer will base
the purchase decision mainly on price. This will increase the competitive rivalry,
resulting in lower prices, and lower profitability. The other type of buyer power relates to
negotiating power. Large quantity buyers tend to have more influence with the firm, and
can negotiate lower prices. Some factors affecting buyer power are as follows,
(a). Size of customer
Larger quantity buyers will have more power over suppliers in retail industry.

(b). Number of buyers

When there are a small number of buyers, they will tend to have more power over
suppliers. The Department of Defense is an example of a single buyer with a lot of power
over suppliers.

(c). Purchase quantity and quality

Consumer can buy high quantity of product, if there will low price of product, because of
the low price factors consumer will neglect quality factor.

(d). Consumers mentality

Mostly Rural Indian consumers buy products from local suppliers like, Kirana stores and
urban consumers prefer both sources of supplier.
 (e). Discount factor

It makes the consumer to buy product through internet from different companies with
different types of discount like gift, cash discount etc.

Competitors

In 2001, a consumer study showed that Wal-Marts prices were 11-25% higher than its
German rivals. This can be explained by many of its competitors simple business model
to minimize costs even if it is to reduce customer service levels. Many of its competitors
focused on providing minimal customer service and using minimal labor in order to
minimize costs. Before Wal-Marts entry, the retailers burdened with high labor costs and
the need to keep prices low had decided not to invest in store design, IT systems, or
merchandising. However, after Wal-Mart entered, an increasing number of German
retailers began utilizing advanced scanner systems and increased their pressure in dealing
with suppliers to lower shelf prices.

Higher costs, lower margins, smaller stores, undeveloped supply chain relationships, and
price sensitive customers loyal to German chains forced Wal-Marts stores to only have a
margin of less than 1% while Wal-Marts ASDA had 6-8% in the UK. Yet, this problem
also affected other foreign companies such as GAP and Marks & Spencer, who both
decided to leave the German market.

MACRO EXTERNAL ENVIRONMENT

PESTEL:

POLITICAL:

Wal-Mart made sure that they knew of the political situation of every country they have operated
in and the company has made sure that it has a good position with regards to political issues.
Wal-Mart is every time ready to face any problems concerning the political sector. Some times
Wal-mart spent money in political issues.

ECONOMIC:

Wal-Mart is economically stable for the past years. Its economical environment is doing well so
they can try to improve their products and able to give best to their clients. Wal-Mart checks first
the economic status of the country they are operating in before they decide to open the branch in
that country.

ENVIRONMENTAL:

Wal-Mart makes sure that the products they sell are proven to cause very less harm to the
environment. Wal-Mart has developed certain regulations on what type of product they will sell
in their store. Wal-Mart has also introduced better waste management systems that aim to reduce
pollutants and provide a cleaner environment for the future.

SOCIAL

Wal-Mart makes sure that the products they offer should be accepted by the society where they
are operating in. Wal-Mart does not authorize the delivery of some products they know will
cause outbursts or complains from different groups in the society. Wal-Mart is maintaining very
good relationship with different sectors in the society although some sectors have problems with
them. Wal-Mart also participates in social activities that tend to develop a better relationship
between them, the clients and the society they are operating in.

TECHNOLOGICAL

Wal-Mart offered new innovations in its technological aspect and introduced new concepts with
regards to its industry. Wal-Mart is using advanced cash register and better performing slot
machines. Wal-Mart is using better security system. Since technology rapidly changes Wal-Mart
keeps updating to up to date technology and keep an eye on the technology how its changes. If
other companies use new technologies to provide services, Wal-Mart has a capability to adopt
those technologies.

The Internet and e-commerce greatly influence the overall performance of Wal-Mart. Thus, it
results the company to launch its online stores which enables the company to be connected with
the customers. Just like the employees, as of now, customers are also changing in demands,
particularly in the ways of buying and availing products and services. E-commerce or the process
of buying and selling goods and services over the internet had opened a new way of connection
between the buyers and the sellers.

LEGAL

Wal-Mart makes sure that it follows the different laws of a country where they are doing their
transaction. The company doesnt want to risk their clients welfare and company image by
breaching local and international laws Wal-Mart makes sure that the in the country where they
are doing transactions in will have a legal basis and will be sanctioned by local or international
legal organizations.