WALMART CHANGES

TACTICS TO MEET
INTERNATIONAL
TASTES
Wal-Mart Stores, Inc., a Top 100 company
AAHAN MALHOTRA
(2K16/ME/002)

DAKSH
(2K16/EE/043)

SANCHIT PRABHAKAR
(2K16/CE/096)

UTKARSH SINGH
(2K16/CO/342)
INTRODUCTION

An American public corporation that runs a chain of large discount

department stores & warehouse stores.
Founded : Arkansas, USA (1962) by Sam Walton
Headquarters : Bentonville, Arkansas, USA
Products : Discount Stores, Super centers, Neighborhood Markets
World’s largest public corporation by revenue.
Fourth largest utility or commercial employer.
Largest grocery retailer in United States (20%).
World’s biggest retailer.

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IMPORTANT KEY FIGURES

 Number of Walmart stores in the world : 11501

 Total number of Walmart stores in U.S. : 4756
 Walmart’s sales per store : 66.67m USD
 Net sales of Walmart U.S. : 341bn USD
 Walmart’s net sales worldwide : 520bn USD
 Weekly Customer visits worldwide : 265m

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NUMBER OF STORES IN 2019
HISTORY OF WALMART
1918 : Sam Walton born in a farmer’s family in Kingfisher,
Oklahoma.
1940 : Graduated from the University if Missouri
1950 : Gave up job and opened his first store in Arkansas
1962 : Walton brothers opened their first Walmart in Arkansas
1970 : Walmart becomes public
1990 : First National Retailer
1991 : International Expansion
1993 : Creation of Great Value
2003 : Largest Corporation in the world
2012 : 50th Anniversary
HOW WALMART
HANDLES SUPPLY CHAIN
First Step : Supplier Selection
Walmart directly connects with the manufacturer bypassing
intermediaries.
Walmart spends some considerable amount of time meeting vendors
and understanding their cost structure.
Walmart seals a deal only when it is fully confident that the product
being bought is not available else where at a lower price.
It also ensures that the supplier meets the US laws & standards. GFSI
– Global food safety Initiative standards. FDA – Food and Drug
Administration Standards. USDA – United States department of
Agriculture. MSC -- Marine Stewardship Council Certified
HOW WALMART
HANDLES SUPPLY CHAIN
Second Step : Transportation
 Walmart directly ships its products from the manufacturer with its
own fleet of trucks.
 Hub and Spoke System – It purchases orders in huge quantities and
distributes them on its own.
 The drivers have a very stringent selection process – Eg.300,000
accident free miles.
 The unloading process is carried out with equally spaced intervals
(2hrs).
 Lead time at Walmart is 48hrs compared to 5 days in other
companies.
 Use of IT in Supply Chain Management
Walmart invested heavily in IT & communications systems to effectively track
sales & merchandise inventories in stores.

Retail links System Voice based order filling RFID

(VOF)
• Implemented this in • In 1998, VOF’s were installed in • This one was
1991 all groceries distribution implemented In 2003,
• Used to monitor the center. where they planned to
• Persons responsible for order replace bar code tech
sales of their goods at
picking provided with with RFID.
stores & replenish microphone, connected to VOF • Lesser labor
inventories. system. requirements.
• More than 10000+ • Used to guide items locations • Would help enhance
Retailers impacted in the distribution centers. JIT inventory
management.

1991 1998 2003

Over 2 decades, Walmart invested lot into leading to less labor requirements ,
reduce in stock out situations , increase in sales & able to do real time tracking.
 COMPETITORS

Amazon Costco Kroger Walgreens The Home Depot Tesco Best buy
 PRICING STRATEGY
Walmart continues to offer very low prices and this is possible due
to following reasons:

Leveraging of its bargaining power to force suppliers to

lower prices.

A supply chain management system that maximizes

efficiencies and reduces outlays.

Its huge volume of sales that's possible due to the spread

of its operation and its wide customer base.

Minimization of overhead and operational costs.

THE BUSINESS STRATEGY
OF WALMART
LOW COST LEADERSHIP STRATEGY
Walmart’s value proposition is based on offering
Everyday Low Price (EDLP). This is the core of Walmart’s
Business Model and the rest of the key features of
Walmart’s Business Model are aligned to keep the
everyday low price.

PRESSURE OVER VENDORS

To deliver low price, Walmart exchanges information on
sales and inventory levels based on “Vendor
Partnership” concept. It has its own distribution
channel which is a major distribution channel for many
vendors.
 INVESTMENT IN TECHNOLOGY
Walmart invested heavily on technology to help enhance
communication between headquarters, stores, and
vendors. As a result inventory costs decreased and
inbound logistics became more efficient.

HUMAN RESOURCE POLICY

Walmart was recognized as one among 100 best
companies to work for in America. It used to offer a
percentage of store profit as incentives to store managers.

LOCATION SELECTION
Walmart focused on rural suburban areas ignored by other
companies. Establishing stores close to distribution center, it
developed a dense distribution network that allowed the
firm to spread costs and exploit economies of density.
PRODUCT SELECTION
Walmart gives its customers a wide range of selection. It
offers grocery items in super centers. Sam’s club caters to
the wholesale purchase need of customers.

COST CONSCIOUSNESS
Walmart developed a cost conscious culture for the
company to reduce costs whenever possible. It
controlled costs by systematic elimination of superfluous
expenses.

CUSTOMER SERVICE
Walmart implemented policies to create friendly shopping
environment for customers. It started its “Aggressive
Hospitality” program in 1984, where customers were received
by “people greeters” and they enjoyed benefits such as
extended opening hours, free parking, no hassle refund and
exchange policies, speedy checkout lanes, wider aisles, and
clean stores.
 TECHNOLOGICAL INNOVATION FOR BETTER
CUSTOMER SERVICE

 Walmart has a global E-Commerce segment with its base

in Silicon valley, California that leads all the online and
mobile innovation for Walmart. 
 The innovation center of Walmart creates a seamless
experience for shoppers whether they are shopping
online, mobile or in stores.
 Data scientists work to deliver a more personalized
experience to its customers and in this way, it has
transformed the shopping experience for its customers.
 TECHNOLOGICAL INNOVATION FOR BETTER
CUSTOMER SERVICE

 Its main website receives more than 100 million unique

visitors every month and this number has kept growing
every year.
 Walmart has also worked to connect the online and in-
store experience and  using its mobile apps and shipping
options like Home free, site to store, pick up today, shop
from store and same day delivery, the brand has made
shopping even convenient for the customers. 
 Customers have unique needs and Walmart is using a
variety of services to fulfil these unique needs.
WALMART CHANGES TACTICS TO MEET
INTERNATIONAL TASTES
• In Brazil and Argentina, Wal-Mart has offered locally popular items and
goods that are cheaper than in US stores.
• Brutal competition, alienation of local suppliers and employees, WalMart’s
own mistakes, and inability to achieve efficiency through economies of
scale have led to losses.

DEEP POCKETS
• Growth opportunities in domestic market dwindling, Wal-Mart is targeting
South America, China and Indonesia in a global expansion drive
• The main hope “lies overseas”
• It sees South America as a “low hanging fruit” with a market wide open to
them
• Annual revenue of $105 billion and profits of $3 billion have made it possible
to open multiple new stores in mid size cities with lesser competition
A SMALL OPERATION SO FAR
• After 6 years, international operations make up only 4.8% of sales, majority
of which comes from Mexico and Canada
• International unit had the first profitable year in 1996, with profit of $24
million, up from a loss of $16 million the previous year
• In Canada and Mexico, customers were familiar with Wal-Mart because of
cross border shopping trips, but the South American market already
competitor presence and Wal-Mart has to build from scratch
LOSSES FORECAST
• Growth opportunities in domestic market dwindling, Wal-Mart is targeting
South America, China and Indonesia in a global expansion drive
• The main hope “lies overseas”
• It sees South America as a “low hanging fruit” with a market wide open to
them
• Annual revenue of $105 billion and profits of $3 billion have made it
possible to open multiple new stores in mid size cities with lesser
competition
DISTRIBUTION PROBLEMS
• Sophisticated inventory management system and optimizing costs in
supply chain is not possible in Brazil. Company does not have its own
distribution network
• Timely deliveries are not happening because of heavy traffic and
contract truckers, over whom there is no control. Some shipments have
disappeared between port and stores
• Local suppliers cannot always meet Wal-Mart’s standards. Some
suppliers are angry with aggressive pricing policies and temporarily
refused to sell goods
• Heavy reliance on imports, due to problems in local supply is a problem
that can become worse of Brazil’s economic stabilization policies falter
• Due to all these logistic and supply issues, Wal-Mart cannot implement
its crucial ‘everyday low pricing’ strategy, which requires squeezing out
costs in supply chain
VARIOUS MISTAKES
• Company initially imported items popular in USA but that are not at all
used in Brazil
• Technical problems also arise – stock handling equipment did not work
with local pallets, computerized system not suited for complicated
taxation laws.
• Slow response to change in payment methods that competitors were
quick to adapt, like post dated checks that are the most common
method of credit
• Sam’s Club, the bulk selling warehouses, which require membership
fees were unpopular because customers do not want to pay
membership fees and have no place to store bulk purchases
• Argentinean small businesses are reluctant to sign up as they fear Wal-
Mart will give their tax information to the authorities.
PROBLEMS CALLED TEMPORARY
• Management says problems are temporary and inevitable when
entering a new market
• Customer enthusiasm to supercentre openings, profitability of
international units and building of new warehouses to reduce
distribution problems are seen as positive signs.
• Wal-Mart aims to recruit good managers and train them, calling it
lengthy process
• Developing a strong group of young executives which has not seen
turnover
• Executive with experience in this field believes the criticism of Wal-Mart
go too far.
• Company is optimistic and expects international operations to account
for a third of increase in sales and profit within three years
Other than the need to expand, what other reasons
could Walmart have for opening stores globally?
• Saturation of domestic market and demand
• Counterattack competing firms which are trying to enter Walmart’s domestic market
• Earn more revenue
• To expand its brand value globally
• Desire to hedge its revenue and profits. For example, if there is economic downturn in
USA and sales fall, they have offset or safety cushion of sales in global locations

Why would it be beneficial for Walmart to have

suppliers in different countries?
• Local suppliers have better knowledge of local culture, taxes, laws etc.
• They have contacts in government, police, tax officials etc.
• They can offer goods at lower price than US suppliers.
• Transportation cost and logistic problems can be avoided
• Some countries may have high import duty making it expensive to supply goods from
abroad
Why would Walmart want strong centralized control and strong
local control of stores?

Centralized Control

• To calculate demand forecasts with ease

• To be able to adjust orders from various suppliers according to
shift in customer demand across different locations
• To maintain standards and uniformity in all stores

Local Control

• To adapt better to local tastes, culture, and demand

• To better monitor local competitor behaviour (ex. Ads and flyers
announcing discounts) and respond effectively and quickly
What pitfalls other than those mentioned in the Wall
Street Journal article would Walmart face over the
next few years?

• Walmart may not be able to adapt to South American lack of infrastructure, poor
logistics, deliveries not on time etc. to implement their “everyday low pricing”
model
• Declining performance in domestic market may force Walmart to close global
operations and focus on US market.
• As internet usage grows, customers may develop a preference for e-commerce
and order goods from websites like amazon.
• Weakening of the US Dollar against local currency may make it expensive to pay
local suppliers.
• State of the economy and South American taxation policy may adversely affect
global ventures
What are the sources of risk faced by the global
supply chain and how can the firm mitigate the
various risks?

Sources of Risk
• Forecasting inaccuracy
• Suppliers performance
• Economic downturn
• Competitor behaviour
• Currency Fluctuation
• Natural disaster, terrorist attack
Mitigation Strategies
• Hedging by having operations in different countries. Poor revenue in one
country will be offset by other countries.
• Investing in Redundancy in Supply Chain – keeping excess capacity at little
overhead cost in order to have backup in case of unforeseen events.
• Increase velocity in sensing and responding – having smooth and timely
communication and quick decision-making capabilities make is possible to
mitigate the loss incurred during unexpected supply problems.
• Create and adaptive supply chain- over-reliance on one supplier can cause
whole production to stop in event of supply stopping.
• Creating a community of suppliers can help better react to crisis. Having
multiple suppliers in different countries and excess manufacturing capacity.
THANK YOU