Walmart Case
CONTEXT (p.1)
DATA
* David Glass (CEO); Don Soderquist (COO) * ROA= 33% ; Sales growth= 35% * 1993. market value= $57.5 billion * Sales/square foot= $300 vs. $210 of competitors * Total sales: $16B (1987) → $67B (1993) * Earnings quadrupling: $628 million → $2.3B * Revolutionized many aspects of retailing + heavy investment in information technology. * Main Challenge: “HOW TO SUSTAIN THE COMPANY’S PHENOMENAL PERFORMANCE.” * Growth in 1993: (7%–8%) range, First time below 10% since 1985. (WHY??)
INDUSTRY (p.2) * 1950s. Supermarkets start selling food at unprecedentedly low margins * Discount stores extended approach to general merchandise: charging 10%–15% lower margins than conventional stores * To compensate, discount stores cut costs to the bone (p.2) * ADEQUATE CONDITIONS FOR DISCOUNT STORES: * Better informed consumers + Supermarkets educated them about self-service * Many categories of general merchandise matured * Government standards bolstered consumers’ self-confidence→ many were ready to try cheaper options
DATA
* Sales (annual growth rate): 25% → $2 billion (1960) to $19B (1970) * CAUTIOUS APPROACH TO EXPANSION → Trend toward fewer new store openings (focus on refurbishment of old stores) * 1970s. Industry growth= 9% ; # of stores 5% * 1980s. 7%, only 1%; * 1990s 11.2%, nearly 2% * Increasingly Concentrated Industry (many failed, others were acquired) * 1986: 5 top accounted 62% of industry sales, * 1993 they accounted for 71% (companies operating 50+ stores accounted for 82%).
WAL-MART (p.3) * COGS= ¾ of revenues → distributors were not falling-over to serve them like competitors in larger towns * Only alternative: Build own warehouse→ so to buy in volume at attractive prices → Store the merchandise * Since
DATA
* David Glass (CEO); Don Soderquist (COO) * ROA= 33% ; Sales growth= 35% * 1993. market value= $57.5 billion * Sales/square foot= $300 vs. $210 of competitors * Total sales: $16B (1987) → $67B (1993) * Earnings quadrupling: $628 million → $2.3B * Revolutionized many aspects of retailing + heavy investment in information technology. * Main Challenge: “HOW TO SUSTAIN THE COMPANY’S PHENOMENAL PERFORMANCE.” * Growth in 1993: (7%–8%) range, First time below 10% since 1985. (WHY??)
INDUSTRY (p.2) * 1950s. Supermarkets start selling food at unprecedentedly low margins * Discount stores extended approach to general merchandise: charging 10%–15% lower margins than conventional stores * To compensate, discount stores cut costs to the bone (p.2) * ADEQUATE CONDITIONS FOR DISCOUNT STORES: * Better informed consumers + Supermarkets educated them about self-service * Many categories of general merchandise matured * Government standards bolstered consumers’ self-confidence→ many were ready to try cheaper options
DATA
* Sales (annual growth rate): 25% → $2 billion (1960) to $19B (1970) * CAUTIOUS APPROACH TO EXPANSION → Trend toward fewer new store openings (focus on refurbishment of old stores) * 1970s. Industry growth= 9% ; # of stores 5% * 1980s. 7%, only 1%; * 1990s 11.2%, nearly 2% * Increasingly Concentrated Industry (many failed, others were acquired) * 1986: 5 top accounted 62% of industry sales, * 1993 they accounted for 71% (companies operating 50+ stores accounted for 82%).
WAL-MART (p.3) * COGS= ¾ of revenues → distributors were not falling-over to serve them like competitors in larger towns * Only alternative: Build own warehouse→ so to buy in volume at attractive prices → Store the merchandise * Since