Walmart

Copyright by Authors Tom Koplyay and David Goldsmith July 1998 5-1

Strategic ManagementStrategic Fit


S1

S2

S3

S4

S5

W1

W2

W3

W4

W5

O1

O2 (supplier position)

O3

O6 (customer)

T1

T2

T3

T7

S

W T

OInternal External

Potential Strategic Ideas

(S2, S3, S4) - Basis for core competency, T1, T2 - Big threatscore capability T3, T7 - Not major problemsS5 - doesn’t contribute (W1, W2, W3, W4) - Need toW5 - No problem be addressed

SWOT Analysis


SWOT Summary

Confront Avoid

Exploit Search

Threats

Internal Factors

Opportunities

Strengths

ExternalEnvironment

Weaknesses


SWOT Analysis

R&D, high tech Worldwide presence

Deep pockets Expansion

Infrastructure Buy U.S.

Luxury car/ truck dominance Leverage tech. and financial know-how

Infrastructure/ small cars Better segmentation

Distribution network Cloning Saturn

Joint Ventures Coopetition

Lead times Competition

Differentiated models Labour unrest

Platform madness Brand loyalty disappearance

Productivity, efficiency, costs Perception, quality, reliability, durability

Bureaucracy/ leadership Consumer social awareness

Incentive system Rising costs

Vertical integration Supplier backlash

STRENGTHS (Internal)

WEAKNESSES (Internal)

OPPORTUNITIES (External)

THREATS (External)


SWOT Analysis - Wal-Mart

Meets change proactively Low margins

STRENGTHS (Internal) WEAKNESSES (Internal)

OPPORTUNITIES (External) THREATS (External)

Leadership High cost of distributionDistribution Centres High cost of travel for executivesStandardization of stores High dependency on technologyUse of technology Non personalized purchasingCorporate culture Dependency on Sam’s leadershipParticipation of associatesFinancial strengthSupplier support and networkingInventory control and distribution

“Buy American” strategy Economic environmentBackward expansion Many discount businessesCatalog Shopping Competition from other discountersProduct packaging Cable “home shopping”Expanding store formatPotential technology for home shopping


SWOT Analysis: Pros and Cons

ProsPros• It is a powerful tool to evaluate and

prioritize the factors of the company• It provides a good framework for

reviewing strategy, position and direction

• It offers a systematic approach of introspection into both positive and negative concerns

• It enables proactive thinking, • It provides direction and serve as a

basis for the development of marketing plans

• It helps to set the organizational goals and objectives

ConsCons• It has a tendency to oversimplify

the situation by classifying the company’s environmental factors into categories in which they may not always fit.

• It does not generate a company’s strategy.

• It can be very subjective. • It often represents a view

particular to a specific point in time.

• It is a starting point for strategy development.


Tech-Check(Based on SPACE Analysis)

AcquireCapability

Grow/ProtectCapability

OutsourceCapability

MaintainCapability

Company Capability

HighLow

High

Low

TechnologyPotential

Wal-Mart


SWOT Analysis - Wal-Mart

Confront Avoid

Exploit Search

CompetitionThreats

Internal Factors

Opportunities

Strengths

ExternalFactors

Weaknesses

Bad economy

PotentialexpansionAssociatesSam

backwardexpansionstandardizedstores

distributiontechnology corporateculture


SWOT Analysis - AECL CANDU

Confront Avoid

Exploit Search

Size

Threats

Internal Factors

Opportunities

Strengths

ExternalFactors

Weaknesses

Safety concerns

PUburnCANDU

design

safetyrecord

3rd worldpoor risks

Fossil fuelpollution


Growth Vector Analysis

Market penetration

Discount City

Product variants; imitations Product line extension

Aggressive promotion Market segmentation, productdifferentiation

Vertical diversification

Market development Market extension Conglomerate diversification

Mar

ket O

ptio

ns

Existing Market

ExpandingMarket

NewMarket

Product AlternativesPresent Products Improved Products New Products

Sam Wholesale Club

Product Testing

Video Shopping Separate VAN Group “Vendor Store”

S uper Centre Hypermart USA

Existin

g

Strate

gies

New

Strategies


Growth Vector Analysis - AECL

Market penetration

CANDU 6SPEL



Mac Store4:1 Ratio nicheRefurbishment


Market development

PU Burn - US

Market extension Conglomerate diversification

Mar

ket O

ptio

ns

Existing Market

ExpandingMarket

NewMarket


CANDU 3large CANDU

Short-termwaste mgt

Long-termwaste mgt

PU Burn - Russia PU Burn - Int’l


Growth Vector AnalysisCore Automotive Sector

Market penetration

Current (in-house) product lines- GM 10 lines - comm. vehicles


- imported products tofill gaps- sport utility

- hi performance




- electric vehicles- ATV- power boats- light aircraft

Mar

ket O

ptio

ns

Existing Market

ExpandingMarket

NewMarket


New reengineered products (Saturn)

- Developing countries(Asia, E. Europe, etc.)

- specialty products:- heavy truck, industrial

- urban commuter- electric vehicle


Growth Vector AnalysisElectronics Sector

Market penetration

GM-Hughes automotive electronicsGM-Hughes aerospace (not considered)


Advanced automotiveinstrumentation anddisplay systems (HUD)


Specialty Stores



Remote instrumentationand data collection

Mar

ket O

ptio

ns

Existing Market

ExpandingMarket

NewMarket



Growth Vector AnalysisFinancial Services Sector

Market penetration

GMAC new carfinancing


Auto insurance atpoint of sale (GMdealership only)


- fleet services(lease and Maint.)- new car leasing(separate storefront)



- general capital equip.leasing- general insurance

Mar

ket O

ptio

ns

Existing Market

ExpandingMarket

NewMarket


Bundled services (warrantyextension, maint. Plan, vehicle replacement

New car financing(through any

dealership)

Auto insurance (separate storefront)


Growth Vector Analysis - Newbridge

Electronic switches Multiplexers

Public T1, F1 Link

Hybrid(Private & public)

ATMLANM

arke

t Opt

ions

Existing Market

ExpandingMarket

NewMarket

Product AlternativesMarket Penetration Product Variation Product Expansion

Present Products Improved Products New Products

(private) (voice & data) (voice, data, video)Multiplexers

(telco) Network Management


Growth Vector Analysis: Pros and Cons

ProsPros• It provides a systematic evaluation of

the market, competitive conditions, and market growth

• It reviews the different product alternatives available to a company in relation to its market options

• It shows potential areas where core competencies can be mapped into generic strategies

• It helps to establish strategy according to marketing trend

• It can be used as a roadmap to formulate strategies and plans of action

ConsCons• It does not give any

indication on whether the company is doing better or worse

• It does not provide any comparison between the company and its competitors

• It assumes that the company is indeed growing and then ignores some strategic alternatives related to downsizing or withdrawal from some areas of business


Directional Policy Matrix

Diversification MarketSegmentation

MarketLeadership;Innovation

PhasedWithdrawal;Merger

Maintain Position;MarketPenetration

Expansion;ProductDifferentiation

Divestment Imitation;PhasedWithdrawal

CashGenerationC

ompa

ny C

apab

ility High

Normal

Low

Unattractive Average Attractive

Market Potential

Wal-Mart


PIMS- Based Evaluation of AECL’s CANDU Reactor

Checklist Ratings

1. Market Share Low Medium High2. Relative Market Share Low Medium High3. Product Quality Low Medium High4. Market Growth Low Medium High5. Vertical Integration Low Medium High6. New Product Activity Low Medium High7. R&D/Sales Ratio Low Medium High8. Marketing/Sales Ratio Low Medium High9. Productivity Low Medium High10. Capacity Utilization Low Medium High11. Investment/Sales Ratio Low Medium High12. Inventory Level Low Medium High


(Cash Generation)

Indu

stry

Gro

wth

Rat

e(C

ash

use)

BCG Growth Share Matrix

High

Low

Low Relative Market Share High

? ??? ?

$


McKinsey’s Industry Attractiveness - Company Strengths Analysis

S tr e

n gt h

of C

omp a

ny

Industry Attractiveness

Low High

High

Low

Divest, Withdraw

Maintain positionConcentrate on segment

Invest, Grow

Wal-Mart


SPACE

Factors determining environmental stability:

Technological changes Many 0 1 2 3 4 5 6 FewRate of inflation High 0 1 2 3 4 5 6 LowDemand variability Large 0 1 2 3 4 5 6 SmallPrice range of competing products Wide 0 1 2 3 4 5 6 NarrowBarriers to entry into market Few 0 1 2 3 4 5 6 ManyCompetitive pressure/rivalry High 0 1 2 3 4 5 6 LowPrice elasticity of demand Elastic 0 1 2 3 4 5 6 InelasticPressure from substitute products High 0 1 2 3 4 5 6 Low

Average - 6 = 2.5 - 6 = -3.5


Factors determining financial strength:

Return on investment Low 0 1 2 3 4 5 6 HighLeverage Unbalanced 0 1 2 3 4 5 6 BalancedLiquidity Unbalanced 0 1 2 3 4 5 6 SolidCapital required vs available High 0 1 2 3 4 5 6 LowCash flow Low 0 1 2 3 4 5 6 HighEase of exit from market Difficult 0 1 2 3 4 5 6 EasyRisk involved in business Much 0 1 2 3 4 5 6 LittleInventory turnover Slow 0 1 2 3 4 5 6 FastEconomies of scale and experience Low 0 1 2 3 4 5 6 High

Average = 4.2

SPACE


Factors determining industry strength:

Growth potential Low 0 1 2 3 4 5 6 HighProfit potential Low 0 1 2 3 4 5 6 HighFinancial stability Low 0 1 2 3 4 5 6 HighTechnological know-how Simple 0 1 2 3 4 5 6 ComplexResource utilization Inefficient 0 1 2 3 4 5 6 EfficientCapital intensity Low 0 1 2 3 4 5 6 HighEase of entry into market Easy 0 1 2 3 4 5 6 DifficultProductivity, capacity utilization Low 0 1 2 3 4 5 6 HighOther: Manufacturers’ bargainingpower Low 0 1 2 3 4 5 6 High

Average = 3.8

SPACE


Factors determining competitive advantage:

Market share Small 0 1 2 3 4 5 6 LargeProduct quality Inferior 0 1 2 3 4 5 6 SuperiorProduct life cycle Late 0 1 2 3 4 5 6 EarlyProduct replacement cycle Variable 0 1 2 3 4 5 6 FixedCustomer loyalty Low 0 1 2 3 4 5 6 HighCompetition capacity utilization Low 0 1 2 3 4 5 6 HighTechnological know-how Low 0 1 2 3 4 5 6 HighVertical integration Low 0 1 2 3 4 5 6 HighOther: Speed of new productintroductions Slow 0 1 2 3 4 5 6 Fast

Average - 6 = 3.8 - 6 = -2.2

SPACE


SPACE (Wal-Mart)

Defensive

FinancialStrength

Competitive(Differentiation)

Aggressive(Cost Leader)

Conservative(Focus)

IndustryStrength3.8

-3.5

EnvironmentalStability

CompetitiveAdvantage -2.2

4.2

(0.7, 1.6)


SPACE ConsequencesAggressive (Cost Leadership)

• concentric diversification• concentration• vertical integration

WIDEN COMPANY!

Competitive (Differentiation)• concentric merger• conglomerate merger• turnaround

NARROW MARKET!

Conservative (Focus)• Status Quo• Diversification for competitive skills acquisition• Diversification to use cash flow financial portfolio basis

WIDEN MARKET!

Defensive• liquidation• retrenchment• divestment

NARROW COMPANY!


SPACE: Pros and Cons

ProsPros• It summarizes a large number

of strategic issues on a few dimensions.

• It clearly shows the current strategic position of the company

• It clearly shows the direction or type of strategy the company need to go.

• It is a high accuracy representation.

ConsCons• It is based on a survey which

could appear as a lack of objectivity

• It may not be applicable to all kind of sectors.

• It can be totally misleading if factors were wrongfully weighted

• It requires intensive information and extensive inputs.


Choice of Generic Strategy

Strong

Weak

Market Position

Strategic OutlookFocused(Protected)

Growth(Competitive)

Niche(Focus)

Unique(Differentiated)

Defensive(Survival)

Cost Leader(Dominance)

Wal-Mart


Strategic Options andGeneric Strategies

FS

ISCA

ES

Focus OverallCost

Leadership

Defensive Differentiation

Gamesmanship Competitive

Conservative Aggressive

ConcentricDiversification

Concentration

VerticalIntegration

ConcentricMerger

ConglomerateMerger

Turnaround

Status Quo

ConglomerateDiversification

Diversification

Divestment

Liquidation

Retrenchment

Wal-Mart


Prod Diff

Focus

Niche

Cost Leadership

Competitive

SPACE changesalong the curve

“bowling alley”

“chasm”

Zone ofuncertainty

“tornado”

“main street”

ConservativeAggressive

“Leader”

Aggressive

“Market Follower”

1: Exit Strategy1,2: Exit and Disappear (dog)

3: Exit to other markets

12 3

Late Market Behaviour- dominant players

are aggressive- rest are competitive


Strategic Profile: Design Factors

• Sustainability• Uniqueness• Value Added• Enhancement• Flexibility• Stability• Fit• Performance• Consistency• Stretch

Walmart

Documents

Transcript of Walmart