WALMART Executive Summary

1
WALMART Executive Summary

• Returning growth to 1992 levels

2
The WALMART Formula

• Founded by Sam Walton in 1962, the first retailer
  to put big stores in small towns
• Invest into the IT infrastructure
• Create partnerships with suppliers, cross-docking
  and EDI
• Foster loyalty in associates
• Diversify with Supercenters (Grocery) and Sams
  Club (warehouse)

3
WALMART Results

• Results for 1993
• 57.7 Billion dollars in sales
• 300 dollars per square foot in sales
• 2.3 Billion dollars in earnings

4
Trouble ahead

• Comparable stores sales growth projected at 7-8
  (first time below 10 since 1985)
• Gross Sales growth down 40 from 1991
• Expansion into small towns being challenged in
  court

5
Issue Statement

• WALMART same store sales have fallen below 10
  for the first time since 1985 and there has been
  a 40 decrease in gross sales growth during the
  last two years due to a failure to maximize
  gross revenue per customer, a failure to expand
  into foreign markets and a minimal marketing
  strategy.

6
SMART Goal

• Return same-store sales growth to greater than
  10, and gross revenue growth to greater than
  30, within the next five years.

7
Recommendation

• Establish a cluster of new international stores
  in a single geographic region through the
  implementation of the following steps
• Conduct a study to determine the most profitable
  target countries for expansion.
• Hire locally known and respected managers to lead
  business growth in each country targeted for
  expansion.
• Build governmental and supplier relationships in
  the targeted countries to support operations.

8
Recommendation (Continued)

• Create the Bank of WALMART and launch a
  branded cash-back credit card.

9
Recommendation (Continued)

• Execute an advertising campaign celebrating Sam
  Waltons legacy and the history of WALMART.
• Declare Sam Waltons birthday, March 29, a
  WALMART Holiday and commemorate it annually
  with a same-day sale.

10
Scope

• This alternative is comprised of three modest to
  small-scope initiatives designed to bring in more
  customers and generate more revenue from the
  customer base.
• The first initiative refocuses efforts on
  WALMARTs current international expansion
  initiative.
• The second boldly moves WALMART outside of the
  discounter realm and into the world of banking
  services.
• The final two steps strive to reconnect WALMART
  with the legacy of Sam Walton and the goodwill
  associated with his name and iconic status.

11
Resources

• The resources required for international
  expansion would be considerable. Studies would
  need to be funded. Negotiations would have to be
  undertaken. And infrastructure would have to be
  built.
• This alternative also would require the hiring of
  senior personnel with banking experience.
• The creation and execution of a new advertising
  campaign would require a sizeable financial
  outlay, but the cost would not be prohibitive.

12
ORGANIZATIONAL FACTORS

• Modest increase in the number of WALMART
  employees.
• Furthers WALMARTs mission of selling a wide
  variety of goods to people who could not
  otherwise afford them.
• Requires forging several new supplier
  relationships, which may in turn lead to lower
  cost avenues for procurement.
• Requires building and developing a staff in bank
  operations, something that has not historically
  been a core competency for WALMART.

13
ORGANIZATIONAL FACTORS (Continued)

• The advertising campaign and Sams Day Sale
  depart from WALMARTs typically low-key,
  no-nonsense norm
• Stresses Waltons legacy inside and outside the
  company should only serve to reinforce WALMARTs
  founding values. Last,
• Depending upon the region selected for expansion,
  there might become a need for a regional office
  outside of Bentonville, Ark. This would deviate
  from WALMARTs tradition, but the time
  differences between the regional operations and
  headquarters might necessitate such an office to
  ensure proper communication.

14
EXTERNAL ENVIRONMENT

• Diversifying WALMARTs investment is deemed
  prudent given the risks in the various
  initiatives.
• International expansion is expected to be a major
  source of growth for the company as the United
  States economy makes up less than one-third of
  the total global retail economy (see Alternative
  2).
• Creating the Bank of WALMART, meanwhile, would
  take a crucial step toward increasing revenue per
  customer because, according to statistics from
  the Federal Reserve, credit-card sales average
  89 per transaction while debit-card sales
  average only 42.
• The advertising campaign could bolster a crucial
  weakness in public perception for WALMART, which
  has endured much negative press of late.

15
COST EFFECTIVENESS

• International expansion in a single region would
  be cheaper than a full-scale, global push.
• Creating a Bank of WALMART, meanwhile, would
  require only a modest investment in new
  technology and personnel.
• WALMART already has a sizeable advertising
  budget. Thus, this alternative involves only a
  minor increase in overall funding.

16
CONTINGENCIES

• International financial dealings and activities
  always involve a host of unforeseen risks, which
  are detailed in Alternative 2.
• Perhaps the biggest risk to WALMART entering the
  banking business is established banks who might
  try to block WALMARTs entrance.
• The advertising campaign could prove ineffective
  in changing peoples opinion of the company.

17
Summary and Conclusion

• WALMART is the world-wide leader in discount
  merchandising
• WALMART is fighting some perception issues
• WALMARTs founder Sam Walton has recently passed
  on.
• Comparable store sales growth is projected down
  to 7 or 8
• Gross Sales growth is down 40 since 1991

18
Summary and Conclusions (Continued)

• To ensure WALMARTs position as the global
  leader in discount retailing WALMART must do the
  following
• Increase Comparable Store Sales
• Expand Internationally
• Strengthen the public perception of the link
  between Sam Walton and WALMART

19
Alternative 2

• Undertake an aggressive international expansion
  by simultaneously initiating retail operations in
  four geographically distinct regions.
• Create a C-level position for international
  expansion and operations.
• Create a task force to determine the best regions
  and countries outside North America for
  expansion. As part of this effort, commission a
  third-party data analysis group to determine the
  key criteria for selecting countries for
  expansion.
• Select one beach head country in each
  geographic region.
• Hire a locally known and well-respected business
  leader for each beach head country and begin to
  develop key supplier and governmental
  relationships.
• Create an internal forum in which regional teams
  could share best practices and lessons learned.

20
Alternative 2 (Continued)

• Reasons for not choosing
• Does not address Comparable Store Sales Growth
• Requires massive resources

21
Alternative 3

• Obtain a banking license, thereby saving millions
  of dollars in monthly credit- and debit-card
  transaction fees. WALMART could then expand into
  other financial services and apply its low price
  strategy in the banking industry.
• Offer checking and savings accounts with minimum
  deposit requirements.
• Offer credit cards with 1 cash back on WALMART
  purchases.
• Use customer deposits to invest in auto loans and
  mortgages.
• Strategically place ATMs with low, to no fees in
  local communities.

22
Alternative 3 (Continued)

• Reasons for not choosing
• More effective as a cost savings device than a
  sales growth driver
• Banking not a WALMART core competency

23
Alternative 4

• Undertake an aggressive, two-pronged advertising
  and public-relations campaign to reassure
  industry analysts, investors and customers that
  WALMART remains committed to Sam Waltons
  guiding principles and that the company, despite
  Waltons death, will continue to operate under
  the foundational beliefs he cherished.
• Develop a television advertising campaign
  designed to play like a series of short
  documentaries. Each segment would tell a short
  story about Walton, highlighting a specific
  character trait or value that distinguished his
  way the WALMART way from the pack.
• Educate and inform opinion makers at leading
  business publications such as The Wall Street
  Journal and BusinessWeek about WALMARTs vision
  under CEO David Glass by proactively, and
  selectively, offering one-on-one interviews.
• Recognize Waltons birthday, March 29, with an
  annual Sams Day Sale in which prices at all
  WALMART stores would be cut by 10 and all
  customers would receive a coupon for 10 off any
  item in stock, redeemable for the next calendar
  year.
• Purchase the original building in which Walton
  opened his first WALMART in Rogers, Ark., and
  turn it into a WALMART museum, complete with
  Walton memorabilia.

24
Alternative 4 (Continued)

• Reasons for not choosing
• Not deemed a sufficiently powerful sales driver
  to succeed alone.

25
Alternative 5

• Compete in retailing discount designer softgoods
  market (apparel, linens, fabric) by diversifying
  apparel line to include dress, all occasion and
  business attire and by adding variety and sizes
  in all categories.
• Form partnerships with designers willing to
  market under a WALMART Designer Label TramLaw
  the finest threads at the lowest cost.

26
Alternative 5 (Continued)

• Reasons for not choosing
• Not deemed strong enough to achieve goals on its
  own
• Unsure of market for haute couture from WALMART

27
Action Plan SMART Goal

• Return same-store sales growth to greater than
  10, and gross revenue growth to greater than
  30, within the next five years.

28
Action Plan Statement of Recommendation

• Establish a cluster of new international stores
  in a single geographic region through the
  implementation of the following steps
• Conduct a study to determine the most profitable
  target countries for expansion.
• Hire locally known and respected managers to lead
  business growth in each country targeted for
  expansion.
• Build governmental and supplier relationships in
  the targeted countries to support operations.
• Create the Bank of WALMART and launch a
  branded cash-back credit card.
• Execute an advertising campaign celebrating Sam
  Waltons legacy and the history of WALMART.
• Declare Sam Waltons birthday, March 29, a
  WALMART Holiday and commemorate it annually
  with a same-day sale

29
Action Plan Strategies and Policies

• WALMART is global leader in discount retailing,
  must continue to realize high sales growth
• Locating and hiring skilled professionals in
  international locations will be a key success
  factor
• Bank of WALMART products should be cross-sold in
  WALMART stores
• Ad agency must be selected for Walton Legacy
  marketing campaign

30
Action Plan Standards and Activities

• Recommendation is a blended approach to hedge in
  case of failures
• Bank of WALMART credit card launch should be
  timed to coincide with the holiday season
• International expansion should be timed to
  coincide with regional holiday season
• Advertising campaign should be launched during
  the first quarter so WALMART can compare year
  over year trends more meaningfully

31
Action Plan Schedule

• See Appendix XXX

32
Action Plan Contingency Plans

• Recommendation is a contingency plan in itself
  pursuing multiple pathways at once
• Largest capital requirement is international
  expansion component. The cost is reduced by
  planning expansion in a manner that allows
  sharing of infrastructure
• Largest schedule risk is founding the Bank of
  WALMART. Established banks may fear WALMART as
  a competitor and move to block founding.
• Advertising campaign is low risk. If ineffective
  then WALMART can revert to current marketing
  plans