Strategic Audit: Wal-Mart Stores, Inc.: On Becoming the World's Largest Company

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Resource Audit:
Current store counts and revenue for Fiscal Year Ending January 31, 2005 (revenue amounts in U.S. Dollars):
· Company Total: 5,246 stores (excludes Seiyu operations) (US$285.2 billion)
o Wal-Mart Stores USA (3,151 stores, excluding Puerto Rico) (US$191.8 billion)
§ Discount Stores: 1,353
§ Supercenters: 1,713
§ Neighborhood Markets: 85
o SAM'S CLUB (United States): 551 Clubs (US$37.1 billion total)
o International: 1,587 (US$56.3 billion total)
§ Argentina: 11
§ Brazil: 149
§ Canada: 262
§ China: 43
§ Germany: 91
§ South Korea: 16
§ Mexico: 679
§ Puerto Rico (United States insular area): 54
§ United Kingdom (ASDA): 282
ASDA in the United Kingdom is the largest of the international businesses by sales.
However,
Wal-Mart is accused of allowing right wing, conservative or religious values to influence its product selection. Critics claim this effectively forces the company's values on customers and suppliers.
· In 1999, Wal-Mart announced that it would not stock the morning-after pill in its pharmacies.
· In 2002, Wal-Mart announced that it would not carry magazines it deemed inappropriate or magazines that generated customer complaints. At the time of the announcement, Maxim, FHM and Stuff were removed from stores. Other titles deemed offensive by the company were moved to displays that obscured the magazines' covers. Magazines such as Redbook, Cosmopolitan and Marie Claire were among those magazines relocated. Editors and publishers of these titles criticized the action as an infringement upon editorial freedom.
· Wal-Mart does not carry music albums marked with RIAA's Parental Advisory Label. The store does carry edited versions of those albums. Record labels release edited versions with obscenities completely removed or overdubbed with less-offensive lyrics. Such versions, sometimes referred to as radio edits, are produced by music publishers to increase retail sales. Notably, albums critical of Wal-Mart itself have been removed from the shelves.
· In 2004 Wal-Mart sold the notoriously anti-Semitic The Protocols of the Elders of Zion on its website. Most scholars consider the text to be a forgery, but Wal-Mart's product description suggested the text was genuine. The company ceased selling the book in September 2004, citing "a business decision".

Value Chain Analysis:
As the single largest customer to most of its suppliers, Wal-Mart openly uses its bargaining power to negotiate lower prices from suppliers.
Some suppliers say Wal-Mart has demanded access to their financial statements in order to look for "excessive profit margins." This information can be used as leverage in pricing negotiations, leading to reduced profit margins for suppliers.
Former suppliers have stated that Wal-Mart threatens to cease carrying a supplier's entire product line unless the prices of specific products are lowered. This is analogous, but not identical, to the illegal practice of product tying practiced by manufacturers and suppliers. As a purchaser rather than a seller, Wal-Mart is not bound by regulations in this regard, so the practice is not illegal in the United States.
Economic theory suggests that suppliers will not supply products to Wal-Mart at loss-making prices over the long term. According to this analysis, Wal-Mart is a force for reducing waste and inefficiency from the supply chain. Suppliers, however, do not always behave according to economic theory, and Wal-Mart does not attempt to make them do so. In addition, suppliers may not have the long term relationship necessary to recoup any short term losses incurred.
Wal-Mart's supporters point out that gross margin has been consistent over time, fluctuating between 20.8% and 22.9% over the last ten years. By comparison, the entire department and discount retail industry has an average gross margin of 34.9%. UBS Warburg found that Wal-Mart's prices are 17% to 20% lower than other grocers.
There have been few, if any, documented allegations of non-payment by its suppliers. Generally, Wal-Mart is praised by suppliers for paying bills on time.

However,
As the single largest customer to most of its suppliers, Wal-Mart openly uses its bargaining power to negotiate lower prices from suppliers.
Some suppliers say Wal-Mart has demanded access to their financial statements in order to look for "excessive profit margins." This information can be used as leverage in pricing negotiations, leading to reduced profit margins for suppliers.
Former suppliers have stated that Wal-Mart threatens to cease carrying a supplier's entire product line unless the prices of specific products are lowered. This is analogous, but not identical, to the illegal practice of product tying practiced by manufacturers and suppliers. As a purchaser rather than a seller, Wal-Mart is not bound by regulations in this regard, so the practice is not illegal in the United States.
Economic theory suggests that suppliers will not supply products to Wal-Mart at loss-making prices over the long term. According to this analysis, Wal-Mart is a force for reducing waste and inefficiency from the supply chain. Suppliers, however, do not always behave according to economic theory, and Wal-Mart does not attempt to make them do so. In addition, suppliers may not have the long term relationship necessary to recoup any short term losses incurred.
Wal-Mart's supporters point out that gross margin has been consistent over time, fluctuating between 20.8% and 22.9% over the last ten years. By comparison, the entire department and discount retail industry has an average gross margin of 34.9%. UBS Warburg found that Wal-Mart's prices are 17% to 20% lower than other grocers.
There have been few, if any, documented allegations of non-payment by its suppliers. Generally, Wal-Mart is praised by suppliers for paying bills on time.

Core Competencies analysis:
Wal-Mart refers to its employees as "associates," and encourages managers to think of themselves as "servant leaders." Each shift at every store, club, and distribution center (theoretically) starts with a store-wide meeting where managers discuss with hourly associates daily sales figures, company news, and goals for the day.
All Wal-Mart stores have employees referred to as "People Greeters." They welcome people to the store and prevent shoplifting. At Sam's Club these employees inspect the contents of the shopping carts of every exiting customer and check them off item by item against the printed receipt; however, nonmember U.S. customers may legally refuse to reveal the contents of their purchase.
COO Lee Scott succeeded Glass as CEO in 2000; Glass stayed on as chairman of the executive committee. Wal-Mart later began ...