Walmart, Inc.

SWOT ANALYSIS

Kreston Thomas

Banner ID: 830038724

November 30, 2010

Fayetteville State University

MKTG 311- 46 11 Fall 2010

HoEun Chung Table of Contents 2 Introduction...... 2

Situational Analysis...... 4

Internal Analysis...... 4

Company image ...... 4

Organizational structure ...... 5

Key staff ...... 5

Environmental Goals ...... 6

Operational efficiency ...... 6

Operational capacity...... 6

Brand awareness...... 7

Market share...... 8

Exclusive contracts ...... 9

Patents and trade secrets...... 10

External Analysis...... 1O

Customers ...... 10

Competitors ...... 10

Market Trends ...... 11

Social Changes ...... 11

New technology ...... 12

SWOT ANALYSIS ...... 12

Current Issues and Problems ...... 13

Recommendations ...... 14

References...... 17

Introduction Wal-Mart Stores Inc began operations in 1962 as a local discount store in Rogers, Arkansas. It is 3 founded by Sam who successfully ran a retail store called "Walton's Five and Dime", an extension of a franchise store called Ben Franklin. After five years, Mr. Walton completed 24 stores across Arkansas with annual sales of $12.6 million. In 1968, Wal-mart expanded outside the state to Missouri and Oklahoma. In October 31, 1969, Wal-Mart was incorporated as Wal-

Mart Stores, Inc.(walmartstores.com, 2010) The next year, the retailer consisted of 38 stores with 1,500 employees with sales totaling $44.2 million. Wal-mart became public trading company on NYSE with a stock split the following year at $47 per share. By 1975, sales totaled

$340.3 million and growing rapidly. The store celebrated its 25th anniversary in the 1980's, highlighting its sales of $15.9 billion and 200,000 employees. Wal-Mart invested $24 million for new technology of a satellite network to track inventory and sales to its corporate office in

Bentonville, Arkansas. This gave a great competitive edge as they developed its first superstore which opened in Washington, Missouri. By late 1990s, the store expanded operations to overseas as well as surpassed domestic competitors such as Toys R Us in toy sales. In the UK,

Wal-mart purchased retailer for $10 billion. In 2000, Wal-mart sales grew to $165 billion.

Two years later, it was listed as America's largest corporation by the Fortune 500 list. In 2010,

Wal-mart has expanded greatly across the globe and continues to lead retailers as a price leader and innovative retailer. It has over 4,112 stores and more than 680, associates in 14 countries outside America. Wal-mart earned $408 billion in revenue in FY2010 which is an increase of 1% of the previous year. Its total stores worldwide are 8,416. (Walmartstores.com, 2010)

The mission statement for Wal-mart is a simple statement to focus on consumer needs.

"We save people money so they can live better"

Sam Walton is quoted in saying, "If we work together, we'll lower the cost of living for everyone.we'll give the world an 4 opportunity to see what it's like to save and have a better life."

Today, Wal-mart is the world's largest retailer and grocery chain company by sales with 50% more than its 5 closest competitors, such as Target and Sears.

Situational Analysis

Internal Analysis

Wal-mart's company culture includes a list of values and beliefs it establishes through its management and employee relations. This culture includes an Open Door Policy in which management believes open communication critical to understanding and meeting our associates' and our customers' needs. Associates can trust and rely on the open door; it's one of the most important parts of our culture. Sundown Rule is a rule that management attempts to answer request by the close of business. Grass Roots Process is a belief that associates' ideas, suggestions and concerns matter. The 10-foot Rule is a customer service tactic that greets and engages customers that are within 10 feet distance. Servant Leadership is a policy Wal-mart uses to listen to their partners and associates in an attempt to create morale and teamwork. Teamwork is a big part of their store culture as believes in the power of teamwork to help grow at the pace of modern life. Wal-mart Cheer is incorporated by all associates by shouting enthusiastically inside the store to show pride in the company. Lastly, Wal-mart reads associates' stories to carry out their beliefs and values as well.

Company image

Wal-mart aims to help customers save money to improve their purchasing power to live better. The company's marketing efforts are to establish awareness that they are the price leaders in 5 their market. In recent times, the company has focus on becoming involved more in local communities by charity and service.

Organizational structure

Wal-mart was incorporated in 1969 and is now globally present in 15 countries.

Key staff

Wal-mart consist of leaders of multiple industries and a board of Sam Walton's family members.

The following executives help operate the success of the company: (.com, 2010)

Aida M. Alvarez Gregory B. Penner Former Administrator of the U.S. Small Business General partner at Madrone Capital Partners, an investment Administration and member of President Bill Clinton's management firm Cabinet in 1997 to 2001 From 2002 to 2005, he served as Wal-mart's Senior Vice Director of the Office of Federal Housing Enterprise President and Chief Financial Officer - Japan Oversight, the financial regulator of Fannie Mae and Former financial analyst for Goldman Sachs Freddie Mac, from 1993 to 1997 A member of the board of directors of Baidu.com, Inc. A director for UnionBanCal Corporation Board of directors of 99Bill Corporation A member of the diversity advisory board for Deloitte & A member of the board of directors of Cuill Touche LLP A member of the board of directors of Global Hyatt Corp. Aida joined the board in 2006 Greg joined the Board in 2008

James W. Breyer Steven S Reinemund The Managing Partner of Accel Partners Dean of Business and Professor of Leadership and Strategy A director of RealNetworks, Inc., Marvel Entertainment, at Wake Forest University Inc., and several private companies Retired Chairman and CEO of PepsiCo, Inc. Jim joined the Board in 2001 A director of Exxon Mobil Corporation, American Express Company, and Marriott International, Inc. M. Michele Burns Steve joined the Board in 2010 Chairman and CEO of Mercer Human Resource Consulting, a subsidiary of Marsh and McLennan H. , Jr. Companies, Inc. Chairman of the Executive Committee of the Board of A director for Cisco Systems, Inc. Directors of Wal-Mart Stores, Inc. and Former Chief Michele joined the Board in 2003 Executive Officer Lee has been a member of the Board since 1999 James I. Cash, Jr. Retired James E. Robison Professor of Business Arne M. Sorenson Administration at Harvard Business School Executive vice president and chief financial officer of Former Senior Associate Dean and Chairman of HBS Marriott International, Inc., a position he has held since Publishing 1998. A director of The Chubb Corporation, General Electric Former partner in the law firm of Latham & Watkins in Company and other private companies, and former Washington, D.C. director of Microsoft Corporation. Arne joined the Board in 2008 James joined the board in 2006 Jim C. Walton Roger C. Corbett Chairman of the board and CEO of Arvest Bank Group, Inc. Retired CEO and Group Managing Director of Chairman of the board of Community Publishers, Inc. Woolworths Limited, a retail company in Australia Jim joined the Board in 2005 6 A director of The Reserve Bank of Australia, Fairfax Media Limited, and Chairman of the board of directors S. Robson Walton ALH Group Pty Limited. Chairman of the Board of Directors Roger joined Wal-mart's Board in 2006 Rob has been a member of the Board since 1978

Douglas N. Daft Retired Chairman of the Board and CEO of The Coca- Christopher J. Williams Cola Company Chairman and CEO of The Williams Capital Group, L.P. A director of The McGraw-Hill Companies, Inc. Chairman and CEO of Williams Capital Management, LLC Doug joined Wal-mart's Board in 2005 A director of Harrah's Entertainment, Inc. Chris has been a member of the Board since 2004 Michael T. Duke President and Chief Executive Officer, Wal-Mart Stores, Linda S. Wolf Inc. Former chairman of the board and CEO of Leo Burnett Mike joined the Board in 2008 Worldwide, Inc., a division of Publicis Groupe S.A. A trustee for investment funds advised by the Janus Capital Group, Inc. Linda been a member of the Board since 2005

Environmental Goals

Wal-mart currently has 3 environmental goals: (Walmart.com, 2010)

1. To be supplied 100 percent by renewable energy

2. To create zero waste

3. To sell products that sustain people and the environment

Operational efficiency

Wal-mart has a focus on growing its return on investments through development of gross margin improvements, inventory management, and disciplined capital allocation processes. The company has developed ways to increase labor productivity by its associates which helps to leverage the operating expenses. Wal-mart has grew operating income faster than sales; 5.2% to

$19.5 billion. It has also achieved strong sales and gaining market share in many countries by using innovation combined with its competitive advantages.

Operational capacity

Wal-mart is a large retailer with many stores, distribution centers, and communication technology to effective operates at its large scale. Its supercenters average roughly 185,000 7 square feet as well as include grocery section. By 2010, Wal-mart had 2747 Supercenters at the end of 2010, which is an increase of 135 stores from the previous year (most were converted from Wal-mart discount stores). Discount Stores have a size of 108,000 square feet in size with a variety of general merchandise while some carry limited grocer items. Wal-Mart operated 803

Discount Stores in 2009. Neighborhood Stores average around 42,000 square feet in size including general merchandise and a full grocery section. Wal-Mart operates 158 Neighborhood format stores in 2010.

Brand awareness

Wal-mart has great focus on establish brands within its stores. The retail giant's major merchandise lines include house wares, consumer electronics, sporting goods, lawn and garden, health and beauty, apparel, home fashions, paint, bedroom, hardware, automotive repair, maintenance items, toys and games, and grocery. Their current brands are listed below: (Wikipedia.org/walmart, 2010)

• Sam's Choice, originally introduced as Sam's American Choice in 1991, is premium retail brand in food and selected hard goods. Compared to Great Value products and to other national brands, Sam's Choice is positioned as a premium retail brand and is offered at a price competitive with standard national brands. • Great Value was launched in 1993 and forms the second tier, or national brand equivalent ("NBE"), of Wal-mart's grocery branding strategy. • Equate is a brand used for consumable pharmacy and health and beauty items, such as shaving cream, skin lotion, over- the-counter medications, and pregnancy tests. • Ol' Roy is Wal-mart's store brand of dog food. Its namesake comes from Sam Walton's bird dog, and has become the number-one selling brand of dog food in the United States, surpassing Nestle's Purina. Ol' Roy was created in 1983 • Parent's Choice is the Wal-mart store brand for baby products, including food, diapers, formula, and accessories. Like other Wal-mart store brands, its design and packaging was relaunched in 2010. • is a brand for women's clothing, footwear, and basic jewelry. • George is a brand of more formal clothing for men, women and children. It also consists of dress shoes, wallets, belts, and neckties. It was created by the British retailer ASDA in 1990, and since Wal-mart acquired ASDA in 1999, it has maintained and expanded it to other markets, notably the United States, Canada, and Japan. The George brand was named after George Davies, who was its original chief designer • Faded Glory is a brand for basic men's, women's, and children's clothing and footwear. It is Wal-mart's primary clothing brand. • Jesse James Industrial Workwear is a brand of men's work clothing, named for the motorcycle builder Jesse James. • No Boundaries, usually abbreviated as NOBO, is a line of apparel targeted at teenagers and young college students. • Simply Basic was previously a brand used for health and beauty items, but is now used primarily for women's sleepwear. • Better Homes and Gardens is a product line with designs inspired from the popular magazine of the same name. • Canopy is a home product line that features coordinated solutions for rooms and other domestic goods. Some Canopy products are made with organic cotton. • Hometrends products include small furniture, tableware and various home decor accessories, such as rugs and faux 8 plants. • Mainstays products include curtains, bedding, some small home furnishings, and various other products, including office supplies and kitchen utensils. • your zone is a home product line that tailors toward teenagers and college students. • @ the Office is a brand used for office supplies and stationery. • Best Occasions is a brand used for party decorations and accessories, such as candles and hats. • Clear American is used for carbonated and flavored water. Was previously known as Sam's Choice Clear American. • Color Place is the brand used for paint and painting tools. Color Place paint is made by Valspar. • Douglas is the brand used for budget priced tires. Models include Xtra-Trac and Touring. Some models are made in a Goodyear plant. • EverStart is the brand for automotive and lawn mower batteries. The brand is also used for battery related accessories, such as jumper cables. • Fire Side Gourmet is used for pre-cooked burgers and steaks, and was previously under the Sam's Choice label. • Gold's Gym is used for athletic and exercise equipment such as weights. Named after and licensed from the chain of fitness centers. • Holiday Time is used for Christmas items such as Christmas trees, decorations, and wrapping paper. • Kid Connection is used primarily for children's toys, but was also used for children's clothing and shoes. • is a brand of fresh foods usually found in Wal-mart's deli, produce, and bakery departments, such as salads, soups, breads, and sandwiches. • Ozark Trail is a brand used for outdoor equipment and footwear. • Protege is a brand consisting of luggage and travel accessories. • Special Kitty is a brand of cat food and litter. • SuperTech is Wal-mart's brand of motor oil. The brand is also used on other consumable automotive products, such as oil filters, windshield wiper fluid, and transmission fluid. • Wal-mart Family Mobile is Wal-mart's exclusive cell phone (postpaid) service provided through the T-Mobile cellular network. • World Table is a brand consisting of foods inspired by international cuisines, such as sauces, snacks, and frozen foods.

Former Brands • Athletic Works was a brand for athletic clothing, such as gym shorts and running shoes, and has been partially replaced by the Gold's Gym brand. The brand was also used for sports equipment and watches. The brand was also on men's and women's socks, and men's underwear. • Durabrand was a brand used for home electronics such as televisions and DVD players. The brand was also used on various small kitchen appliances. • ilo was another brand of home electronics, consisting of more upscale items such as plasma televisions and digital music players. • Metro 7 was an upscale brand of women's apparel, that was released in the fall of 2006. • Puritan was a brand for men's basic clothing including shirts, pants, undergarments, socks, ties, and some accessories. In late 2010, the brand was phased out and replaced by Faded Glory (with undergarments) and George (with ties, shirts, and pants

Market share

Wal-mart is dominant in many merchandising markets and quickly expanding into new ones. As the largest retailer in America, it has surpassed its closest competitors by great lengths. The company generates revenue from its different subsidies across the world, including:

Wal-Mart Stores 63.8% of Total Revenue Sam's Club 11.5% of Total Revenue 9 Wal-Mart International 24.7% of Total Revenue

Wal-Mart Inc., STOCK: WMT 53.85 0.11 (0.20%) as of November 30, 2010

Valuation Measures Income Statement Market Cap (intraday)5: 195.64B Revenue (ttm): 419.24B Enterprise Value (Nov 30, 2010)3: 240.56B Revenue Per Share (ttm): 112.71 Trailing P/E (ttm, intraday): 13.42 Qtrly Revenue Growth (yoy): 2.60% Forward P/E (fye Jan 31, 2012)1: 12.18 Gross Profit (ttm): 103.56B PEG Ratio (5 yr expected)1: 1.25 EBITDA (ttm): 33.04B Price/Sales (ttm): 0.46 Net Income Avl to Common (ttm): 15.11B Price/Book (mrq): 2.97 Diluted EPS (ttm): 4.03 Enterprise Value/Revenue (ttm)3: 0.57 Qtrly Earnings Growth (yoy): 6.10% Enterprise Value/EBITDA (ttm)3: 7.28 Balance Sheet Financial Highlights Total Cash (mrq): 10.62B Fiscal Year Total Cash Per Share (mrq): 2.94 Fiscal Year Ends: Jan 31 Total Debt (mrq): 56.79B Most Recent Quarter (mrq): Oct 31-10 Total Debt/Equity (mrq): 86.68 Current Ratio (mrq): 0.87 Profitability Book Value Per Share (mrq): 18.12 Profit Margin (ttm): 3.59% Operating Margin (ttm): 6.08% Cash Flow Statement Operating Cash Flow (ttm): 26.07B Management Effectiveness Levered Free Cash Flow (ttm): 12.59B Return on Assets (ttm): 8.86% Return on Equity (ttm): 22.69% **Data provided by Y ahoo Fina nc e and Capitai/Q.com.

Exclusive contracts

Wal-mart has purchased 2 million shares of Green Dot, a prepaid debit-card seller, in June 2010.

(NYTimes, 2010) This gives the retail giant a look at commercial banking as Green Dot has managed their prepaid card business for years. Wal-mart also has contract with which sells and rents downloadable movies and TV shows on-demand. (Kharif, 2010) This is a web based business but looks to expand to devices where web connectivity and home entertainm1ent 0 intersect, such as Netflix, Time Warner Cable, Apple, Amazon, and video gaming systems. Wal-

mart has announced in September 2010 a Family Mobile service which is a cellular phone plan

with its own branding. This was feasible via T-mobile USA networks and offers unlimited

calling plans to compete with other cell phone service providers.

Patents and trade secrets

Wal-mart has trademarked the name Wal-mart (excluding dash) and has requested all financial

reports use the original hyphenated version.

External Analysis

Customers

Wal-Mart's main customer base has an average annual income of $35,000. The company appeals

to a mass market as it offers a variety of merchandise at a very affordable cost in comparison to

other retailers.

Competitors

Target is Wal-Mart's most direct competitor with similar merchandising formats and

supercenters. Target's advantage over Wal-Mart is its customer base which averages around

$50,000 per year. This is significantly higher than Wal-mart. Kmart is the third discount retailer,

but has seen steadily declining sales since 2000. It has lost major market share in its attempt to

restructure and compete with a large-scale retailers. , Wal-Mart competes with other specialized

retailers, such as Safeway in groceries, Best Buy in consumer electronics, and department stores

such as Macy's.