Table of Contents s340

2007 EXECUTIVE SUMMARY

Team B Michelle Barnes Sharl Flowers Alex Layton Andrew Miller Anh Linh Tran WAL-MART STORE INC. 1/31/2007 TABLE OF CONTENTS

INTRODUCTION 2 BACKGROUND

I. CURRENT SITUATION OVERVIEW

II. STRATEGIC MANAGERS

III. EXTERNAL ENVIRONMENT

IV. INTERNAL ENVIRONMENT

V. ANALYSIS OF STRATEGIC FACTORS

VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY

VII. IMPLEMENTATION

VIII. EVALUATION AND CONTROL This report discusses an evaluation of Wal-mart’s strategic management. The purpose of this evaluation is comparing and analyzing our performance in the last five years that helps us better measuring our operation and financial conditions as well as enable us to accomplish our future objectives and to continue growth of business in the hypercompetitive environment. This is a review in depth the strengths and weaknesses of each area of Wal-mart’s domestic and international strategies and programs in identify and enhance all effective programs. Also defect any defect (external intervention) that prevents us from leading the competition and continuing growth and make necessary adjustment.

BACKGROUND

I. Current situation

A. Corporation performance: Overall there is an increase in sales and cash flow from operating activities. Also there is a growth in national and international business expansion. Although, there is a limited growth potential in domestic market compared with strong sales. In contrast, there is a decline in share price and a decline in quarterly profits for first time in 10 years. Here are some keyed terms in 2006

 Continuous growth in sales and earnings. Great international expansion for the last five years. As of 2006, there were “1,200 discount stores, 1980 supercenters, 567 Sam’s Clubs, and 100 neighborhood markets throughout all 50 states (19-9),” and 2,285 international stores located outside the United States.

 Financial: Current ratio is 0.9%. Earnings per share increased from $2.41 in 2005 to $2.68 in 2006.  Performance: increase in sales of 9.5% comparing to last year. Increase cash flow from operating activities to $11,231 million comparing to $10,267 million and $8,861 in 2005 and 2004 respectively. However, low return on assets of 8.91%, which is less than 9.3% in 2005, and low return on shareholders’ equity with 22.5%, which is less than 22.6% in 2005, as well as the negative price- earnings per share ratio caused a decline in share price from $56.98 in 2002 to $46.11 in 2006.

B. Strategic posture:

Mission:  Wal-mart’s current mission is “always low price.” The company’s mission statement is saving people money so they can live better regardless of background or where they may live and to build a better life.

Objectives:  The firm’s current objectives include “Lines extension and stores expansion.” That is “Increasing sales with low prices under one roof…to be the very best in the business by putting the associates first…Emphasis on everyday low prices, corporate growth, concern for people, and loyalty to the company.”

Strategies:  Wal-mart’s current strategies focuses on “customer satisfaction and team spirit” and implemented with o Domestic strategies and programs: . The Supercenters with full general merchandise discount store stocked with full-line grocery, food court, and services such as banking, video rental, beauty salons, new store openings, expansion to more states. . Add larger space to the Sam’s Clubs locations with features include services such as food court and catering, auto sales and tires services, home improvement, photo developing and personal check and business stationary printing. . Most outstanding was the “Green” marketing concerning environment sustainability (manufacturing, use, and disposal). . A private brand program with Wal-mart’s private labels such as Ol Roy dog food, Sam’s Choice, Great Value, Equate, and Spring Valley on groceries and household products. . A fashion program emphasizes on the clothing line. . An inventory control program using high-speed computer system, RFID technology, and data warehouse to link all stores to the headquarters and the distribution centers that automatically to keep track with merchandise from checkout counter to real-time update inventory in the warehouse, sales, and reports (management tools) that reduces out-of-stock issue 16%. o International strategies and programs: . Acquisition: Woolco discount stores in Canada (successful); 74 stores of Interspar in Germany; 232 ASDA stores (Briain’s 3rd largest supermarket group) in England; more than 360 CARHCO supermarkets in Central America (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua); 3 retail chains stores in Europe; Seiju general merchandise stores in Japan; and other retailers in Korea but later withdrawn from French, Japan, and Korea. . Mergers of joint ventures with 599 stores, 105 Supercenters, and 70 Sam’s Clubs in Mexico; 51 Supercenters, 3 Sam’s Clubs, and 2 Neighborhood Markets in China;

Policies:  In supporting our mission of “satisfaction guaranteed, provide the customer with a lean, pleasant, and friendly shopping experience, and “maintain the highest standards of honesty, morality, and business ethics (19-9);” Wal-mart’s current policies include cheerfully gave refunds, store credits, and rain check. OVERVIEW

The dataset utilized in this situation analysis includes comparison the corporate performance in the five-year period (2001-2006) and analyzing the effectiveness and efficiency of its output, behavior, and input controls. That is based on the external and internal environment conditions. The corporation performance was represented by the current ratio (liquidity), earnings per share and return on equity (profitability), assets turnover ratio (activity), and price-earnings per share ratio. This comparison indicated that Wal-mart’s current ratio was .9%, assets turnover was 8.91%, and negative price/earnings per share ratio. Also an analysis indicated our stock price increase of 9.9% in the last five years but our stock price considered low increase rate comparing to the stock price increase of our competitors: “Costco Wholesale, Target, and J.C. Penny of 12.4%, 49.6%, and 367% respectively (19-4).”

II. Strategic Managers A. Board of Directors: (chapter 2 - ownership structure & influence, financial stakeholder rights and relations, financial transparency and information disclosure, board structure and process) a. 13 members, 11 are outsiders.

b. Organized into 5 committees o The Audit Committee o The Compensation, Nominating, and Governance Committee (CNGC) o The Executive Committee (EC) o The Stock Option Committee (SOC) and o The Strategic Planning and Finance Committee (SPFC) c. 2 board members controlled close to 41% of the shares outstanding.

d. 2 chair/CEOs may have potential conflict of interest as “research shows that corporations with a combined Chair/CEO have a greater likelihood of fraudulent financial reporting when CEO stock options are not present(54).”

e. One member, David D. Class, is 70 and facing retirement age

f. Outstanding diversity

g. Each director attended at least 75% of meetings.

B. Top Management (CEO involve in developing an analysis of the mission, objectives, strategies, & key activities + getting things accomplished and to meet the corp. objectives)

a. 25 corporate officers, CEOs assigned to each business unit (Wal-mart U.S., Sam’s Club, and Wal-mart International) b. Lee Scott was only the third CEO in the entire history of Wal-Mart when he was selected to the position.

c. During the 12 years David Glass, the previous CEO held the position, sales grew from 16 billion to 16.5 billion annually.

d. Uniquely qualified individuals

ALEX……………………..

III. External Environment (chapter 4 - scan and assess the external environment to determine the strategic factors that pose opportunities and threats using STEEP analysis)

ANDREW…….ADD YOUR PART HERE

IV. Internal Environment [chapter 5- scan and assess the internal corporate environment to determine the strategic factors that are strength (core competencies) and weakness]

ANDREW…………………….

The current financial condition shows there is a strategic inflection point or a performance gap exists in the firm’s strategies and programs and the emphasis of behavior and input controls are needed. This requires a comprehensive analysis of the market that includes analyzing of strategic factors using the Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis and Strategic Factor Analysis Summary (SFAS) Matrix.

V. Analysis of Strategic Factors (chapter 6 + 7 - pinpoint problem areas and review an revise the corporate mission and objectives)

Wal-mart has established a program to ensure awareness of our long-standing “Open Door” policy and encourage our associates report all ethics concerns to the management and encourage managers to complying with the policy and with the law. We also established a new position of Senior Director of Stakeholder Engagement to play a critical role for oversight and a Director of Global Ethics, who is responsible for a global ethics management, including to accomplish the company’s “global ethics strategy and oversee ethics-related infrastructure, administration, and training (19-28)” and observes as well as administers an ethics hotline.

MICHELLE,…………….ADD YOUR PART HERE

We conducted a strategic audit that includes examination, evaluation, and analyzing; and the qualitative finding leads us to the strategic alternative and a recommended strategy is presented along with implementation and evaluation and control as follows:

VI. Strategic Alternative and Recommended Strategy (chapter 7 & 8 - rare, consequential, directive)

MICHELLE…………………..

Select the best alternative strategy

Consequential: (strategic decisions commit substantial resources and demand a grea deal of commitment from people at all levels).

VII. Implementation (chapter 9 & 10)

SHARL………………………….

Via programs, budgets, and procedures

VIII. Evaluation and Control (chapter 11 & 12)

Via feedback systems, and the control of activities to ensure their minimum deviation from plans.