Wal-Mart Stores, Inc.

1. Wal-Mart Stores, Inc. Team B Michelle Barnes Sharl Flowers Alex Layton Andrew Miller AnhLinh Tran

2. STRATEGIC AUDIT CURRENT SITUATION STRATEGIC MANAGERS EXTERNAL ENVIRONMENT INTERNAL ENVIRONMENT ANALYSIS OF STRATEGIC FACTORS ALTERNATIVE AND RECOMMENDATION IMPLEMENTATION EVALUATION AND CONTROL

3. I. Current Situation Current Performance Declining Share Price, good financials, decline in quarterly profits for first time in 10 years, limited growth potential in domestic market. Continous growth in sales and earnings Declining share prices Great international expansion B. Strategic Posture Mission Saving people money so they can live better regardless of background or where they may live and to build a better life. Objectives “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.” “To increase Strategies Policies

4. Strategic Managers Board of Directors 13 members, eleven are outsiders. 2 board members controlled close to 41% of the shares outstanding. Outstanding diversity Each director attended at least 75% of meetings. 2. Top Management Lee Scott was only the third CEO in the entire history of Wal-Mart when he was selected to the position. During the 12 years David Glass, the previous CEO held the position, sales grew from 16 billion to 16.5 billion annually. Uniquely qualified individuals

5. III. External Environment (EFAS) Opportunities and Threats (SWOT) Natural Environment One of the first retailers to embrace the idea of “green” marketing. Societal Environment Economic With quarterly losses in 2006, things still looked impressive for Wal-Mart stores as international growth increased. Rising fuel prices and terrorist attacks have cut into profits for the global giant. Global Markets continue to combine into the U.S. domestic market, giving Wal-Mart a variety of options to carry out overseas activities. Technological Most sophisticated inventory control system Carefully selected distribution centers that were also used as a network to carefully analyze buying trends.

6. External Environment Cont. c. Political-Legal • Increasing tension between employees and Wal-Marts low pay and stingy benefits has created an uproar among former employees. • In 2003, raids on stores around the country found illegal immigrants working in their factories and stores. • Outsourcing has also been a key factor of concern between employees and customers in the U.S. • Customers were found to no longer pleased with the way Wal-Mart was conducting their business abroad and in the U.S. d. Sociocultural • Geared towards the low-income customer. C. Task Environment (Industry Analysis) • Wal-Mart has significant influence over its suppliers, therefore they are ready to supply. • Threat of substitutes is high and entry barriers are high • With companies such as Target, Costco, and other retail giants nipping at their heels, the rivalry in such a business is tough at the top. • Specialty companies are cutting into Wal-Marts share of profits by providing specialized products, such as companies like Burlington Coat Factory and Bass Shoes. • Bargaining power of buyers is high. • Relative power of other stakeholders is medium: Many groups and local communities have begun to oppose the groups entry into markets where they have not been. Many organizations have been active promoting fair labor and union laws for the companies employees.

7. IV. Internal Environment (IFAS): Strengths and Weaknesses (SWOT) Corporate Structure Structured into three business units, Wal-Mart Stores USA, Sam’s Club, and Wal-Mart International. Corporate Culture Down to earth, and committed to being the very best there is from top to bottom Culture comes from the Sam Walton spirit, or known as the philosophy that people are the way to success from top to bottom. Buying out companies overseas seems to be a way into international markets for Wal-Mart. Resources Financially Stable and buying power Organizational Structure Logistics, inventory management, trucking fleet Innovation and expansion strategy Reputation and Brand name Store location Distribution Centers

8. Internal Environment Cont… D. Capabilities • Distribution centers and logistics • Point of Sales data through management • Production of products • Research and innovation • Exploits opportunities E. Core Competencies • Ability to exploit opportunities • Distribution and logistics management

9. V. Analysis of Strategic Factor (SFAS) Key Internal and External Strategic Factors (SWOT) Strengths Management of distribution and logistics Exploitation of opportunities Weaknesses Cultural roots in large cities and other countries Customer satisfaction Opportunities Inventory control system International Growth Treats Low pay and stingy benefits for employees Specialty companies and rivals Review of Mission and Objective Mission is appropriate The objectives are too vague and focus on what is/has taken place. They need to be more specific, quantified and met in a specified amount of time.

10. VI. Alternatives and Recommendations Strategic Alternatives – pros and cons Horizontal Growth: expand operations into more international locations and offer more fashionable merchandise both domestically and internationally. Pros: Joint Ventures and acquisitions offer greater opportunity into the international market. Cons: Wal-Mart has already entered quite a few international markets and some of them have failed due to inadequate geographical and demographical research.

11. Alternatives/Recommendation Cont. 2. No-Change Strategy: It is not necessary for any major changes. At this point Target is their main competitor and no major adjustments are needed yet. • Pros: They are already on the right track and wouldn’t need to make any major changes to stay in the running with Target. • Cons: Target could easily manipulate their strategies and move up on the fortune 500 list which could hurt Wal-Mart real quick. • Turnaround Strategy: Improve operational efficiency through contraction by cutting back costs and eliminating a percentage of the employees. • Pros: Improved competitive position by employees getting involved with productivity improvements then company will emerge from this period much stronger and better organized. • Cons: If this strategy is not properly conducted many key employees may leave the corporation. Too much emphasis on cutting costs and downsizing may hurt the company worse.

12. Alternatives/RecommendationCont. B. Recommended Strategy • Recommend horizontal growth strategy for the next few years, because Wal-Mart already has the domestic market majority in their favor. • Forming a joint venture with one of the countries Wal-Mart has not entered yet gives them the opportunity to expand internationally with the potential of new product lines in those countries. • Wal-Mart can further increase their range of products and services by adding new production lines with more fashionable merchandise. • Moving into the international market gives Wal-Mart the opportunity to develop new products with the technology other countries have. This could potentially bring new products to domestic market.

13. VII. Implementation The way to increase profit further is to expand into international markets. Wal-Mart needs to enter into an agreement and enter into the Australian market, which in turn could result into a 15% increase in revenue for the company. With the logistics system Wal-Mart has, implementing this program would be very smooth for the company. Wages and job relocation are delicate subjects to consider for this move.

14. Implementation Continued • Acquisitions may be key to entering this venture into Australia. • Developing a standard operating procedure will be essential to making the joint venture work.

15. Evaluation and Control