...REV: APRIL 12, 2007 PANKAJ GHEMAWAT Wal-Mart Stores’ Discount Operations In October 1985, Forbes declared Sam Walton the richest person in the United States. With his four children, he owned stock worth $2.8 billion. That put him $1 billion ahead of the next person on the list, H. Ross Perot. By the end of April 1986, Walton’s net worth had swelled by another $1.6 billion. Walton’s fortune consisted of a 39% stake in Wal-Mart Stores, a retailer that had focused historically on the Sunbelt. Although Wal-Mart had begun to diversify into other areas, discounting still accounted for 91% of the company’s sales in 1985 and 96% of its pretax profits. Wal-Mart had consistently led other discounters in both profitability and growth. Exhibit 1 summarizes Wal-Mart’s history over the past decade; Exhibit 2 compares its performance with that of its competitors. As a result of such comparisons, Wal-Mart’s market value in early 1986 was twice K mart’s, even though it was only a third as large. Analysts thought that Wal-Mart would overtake K mart as the largest discounter by the turn of the century, but they were divided over whether Wal-Mart stock remained a good buy at a price-earnings multiple of 26. This case describes discount retailing and the distinctive features of Wal-Mart’s discount operations. It also sketches the areas into which Wal-Mart was diversifying in the mid-1980s. Discount Retailing Discount stores emerged in the United States in the mid-1950s. They...
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...ECON 172 REPORT METHODOLOGY “What weights should society apply to cost and benefits occurring in future time periods relative to the present period?” INTRAGENERATIONAL DISCOUNTING * Consumption rate of interest cum shadow price of capital method (CRI-SPC Method) * The level of public investment should be based on individual preference for present consumption vs. future consumption * The marginal rate of time preference * Investment is simply a means of using resources that are potentially available for consumption now in order to increase consumption later * Individuals typically have a positive rate of time preference * They demand compensation when forgoing present for future consumption * SDR = rate of time preference * If the future increase in net benefits > present costs (via consumption rate of interest, CRI) = project passes a potential compensation test * Possible for the winners to compensate the losers * Still have sufficient gains to allow for pareto efficiency * Ex. Net return available to individual savers is 2% per year Project cost (to taxpayers) = $1M this year Net benefit = $3.2M in 50 years * forgoing current consumption of $1M and lending at 2%, return = $2.72M in 50 yrs * therefore, the $3.2M benefit will be preferred * If we ignore intragenerational redistributions, we can suggest that this project would improve social welfare * If individuals seek to maximize their own...
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...References……………………………….…….page 13 Student: Faculty Member: Kara Groff Dr. David J. Burns 2015 Cleneay Ave. Xavier University Marketing Department Norwood, OH 45212 3800 Victory Parkway (419)-656-1234 Cincinnati, OH 45407 GroffKC@Xavier.edu (513)-745-3956 Burnsd@Xavier.edu Overview Wal-Mart was founded in 1962 by Sam Walton when he and his brother James “Bud” Walton opened the first Wal-Mart Discount City in Rogers, Arkansas. Since then, Wal-Mart has grown to be the second largest company in the world. In the United States, the company includes Wal-Mart discount stores, Supercenters, Neighborhood Markets, and Sam’s Club warehouse membership clubs. The company also has many international operations. Wal-Mart is considered a variety store which focuses on low prices featuring apparel as well as hard goods, and has been committed to upholding their basic value of customer service. Advances in technology have contributed a great deal to the growth of Wal-Mart. Highly automated distribution centers were implemented and Wal-Mart was able to drastically cut the costs of shipping and delivery time. Sophisticated computer systems were installed to track inventory which resulted in quicker checkout time and reordering. More recently, wire-less in-store systems have been used to increase customer service. Beginning in the early 1990s...
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...Firstly, my evaluation on the external environments of discount stores in the U.S in 70S and 80S is as [A right timing for entering but the market was very competitive]. I’d like use couple of frame works to explain my evaluation as following. Let me use the PEST frame work to analysis the Macro-Environment at first. On Politics (Positive for discount retailers expanding) It seems fiscal policy has been heavy on spending on 70S&80S. According to my research, the average spending deficit in this period is around 3% of the GDP and which is a very high level and also trending upwards. Also, the national debt was also increasing from around 1.8 Trillion USD (1975) to over 3 Trillion USD (1985) on this period. I think the government’s focus on growth of the economy must led to massive subsidies to incentivize Wal-Mart’s expansion Also, on the monetary policy point, interest rates throughout this time period (1970-1985) upward form a low under 4% to high of just above 18% as following Chart 1. It was just a good timing for Wal-Mart borrowed money it needed to lease new stores in its initial expanding period, and correlate with its high growth periods from the bank. [pic] Chart 1 Then, on the trade policy, from 1976, the importation of goods surpassed the exportation (kick start trade with China from 1971 and US/China each other most-favored-nation status in 1979) that means for the retailers, they had more selection on purchasing from development country what should...
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...Foi verificado que a cultura organizacional da rede Wal-Mart é baseada na simplicidade, ou seja, o modelo de administração da Wal-Mart é um modelo simplista que obteve sucesso e que perdura como filosofia cultura desde a sua criação. Entretanto, enganam-se aqueles que pensam que esse modelo foge aos métodos e técnicas da inteligência competitiva pelo fato de estar calcado numa administração simplista. É notória a utilização de diversas técnicas de inteligência competitiva associado ao modelo de administração da Wal-Mart. Wall-Mart 50th anniversary celebrations - 2012 First store in Rogers, Arkansas. About 6,000 shareholders and employees (including 2,000 from Wal-Mart’s international operations) gathered at the University of Arkansas’s Bud Walton Arena to be hosted by Chairman Rob Walton (son of the founder) and entertained by Justin Timberlake, Lionel Ritchie, Juanes, and Celine Dion. The “one big happy family” festive atmosphere typical of Wal-Mart events had been overshadowed by employee and shareholder disquiet over the Mexican bribery scandal that had erupted in April 2012 concerning payments by Wal-Mart Mexico On May 17, Wal-Mart had reported results for the first quarter of its financial year. Sales were up 8.6% on the previous year, operating income was up 8.3%, and return on equity for the 12-month period was 18.1%. The day before the shareholders’ meeting, Wal-Mart’s stock hit an all-time high. With 2.2 million employees, it was the world’s biggest private-sector...
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...The founder of Walmart Sam Walton opened his first store format franchised from the Ben Franklin in 1945. Since he opened his store, started following the idea of high volume and low price which lead him to open first discount store in Rogers, Arkansas and number of stores increased to 17 by 1970. Walmart founder had clear idea in his mind Cost-leadership strategy (“everyday low prices”). For example, expenses should not exceed 1% value of purchase, EDI transactions, backward integration of goods, and retail link. Also, motivates employees by providing healthcare benefits, stock options, and discounts. Moreover, the company had the different policy in operating its business, such as, returning goods, and greeter services. Secondly, Untapped market segment which means the company was not opening its store in big cities but also in suburb area. They were paying close attention to the city demographic so that they know what kinds of good they need to sell at those places. This company also distorted the traditional boundaries between discount retailers and traditional market. This provides us the clear idea that the company was paying full attention to its pricing policy “ Everyday low prices”. Walmart supply chain systems in early 2000’s was excellent only 8% of the products were out of stock, walmart biggest supplier was P&G, but soon walmart made huge shift towards Chinese market and China became the largest supplier of goods to walmart at cheaper prices. Walmart opened...
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... The capitalization mix alternatives have been narrowed to two: (1) $10 million in debt and $40 million in equity and (2) $30 million in debt and $20 million in equity. Income before interest and taxes will be $8 million. The interest rate on debt is 8% and the income tax rate is 40%. Calculate the net income and return on shareholders’ equity for both alternatives. Explain how this will ratios as well with the idea that the company is seeking to be bought our by a larger corporation. 2. Effective use of Cash: a. Company is considering using discounts to generate more cash flow. b. The Hawthorne Manufacturing Company offers credit customers a 2% cash discount if the sales price is paid within 10 days. Any amounts not paid within 10 days are due in 30 days. These repayment terms are stated as 2/10, n/30. On October 5, 2016, Hawthorne sold merchandise at a price of $20,000. The customer paid $13,720 ($14,000 less the 2% cash discount) on October 14 and the remaining balance of $6,000 on November 4. Use the gross method of accounting. c. Company is sitting on a large amount of receivable but is cash strapped. What options do we have have? Discuss the options and accounting ramifications for each. 3. Accounting for Major Sale: a. Company has major sale with an energy company which is semi-regulated by the state. Thus the terms of the contract do not specify the price but only a range which needs to be approved by the regulator agency. The product has already be delivery to...
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...Scott C. Kearns MGT6890 6/20/12 Kmart and Sears: Still stuck in the middle? Just two years after filing bankruptcy, Kmart Corporation stunned the retail industry with the acquisition of Sears in November of 2004. The acquisition of Sears for Kmart was a part of a growth strategy to help build and strengthen the once dominant giant discount retailer. Between the 1960’s and through the 1980’s Kmart was the number one leading retailer in the discount department store industry. For 30 years Kmart seemed to be doing everything right but as they were growing they were also slipping into a deep hole. Many factors played into their eventual retrenchment but supply chain management was their biggest fault. During the 1990’s growing competitors like Target, Sears, and Home Depot took a piece of Kmart’s market place pie with Wal-Mart taking the biggest slice. As sales declined over time due to the increased competition, management also was neglecting the company’s supply chain operation. This neglect created a surplus of goods doomed for blue light specials that would have to be stored in semi-trucks beds behind the store because the current products on the shelves weren’t moving. By the start of 2000, Kmart locations looked like they had been foreclosed on with giant cement parking lots filled with maybe a dozen cars on a good day. Eventually retrenchment day came Kmart filed for bankruptcy in January of 2002. Kmart was able to regain control of the company and emerge from...
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...to increase its profits and rely on the beliefs that got them to the point they are at. In 1962, Sam Walton opened the first Wal-Mart store in Rogers, Arkansas. Wal-Mart was at one time included in Fortune’s list of the “10 most admired corporations.” The Wal-Mart Philosophy-Wal-Mart is successful not only because it makes sound strategic management decisions, but also for its innovative implementation of those strategic decisions. Many trace discount entrepreneur birth to1962, the first year of operation for Kmart, Target and Wal-Mart. But by that time, Sam Walton's tiny chain of variety stores in Arkansas and Kansas was already facing competition from regional discount chains. Sam traveled the country to study this radical, new retailing concept and was convinced it was the wave of the future. He and his wife, Helen, put up 95 percent of the money for the first Wal-Mart store in Rogers, Arkansas, borrowing heavily on Sam's vision that the American consumer was shifting to a different type of general store. Wal-Mart is a national discount retailer offering a wide variety of general merchandise to customers. Wal-Mart stores offer pleasant and convenient shopping in 36 departments including family apparel, health and beauty aids,...
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...Walmart Stores with the concept of discount stores in small towns and brought the concept to the lofty stature of the biggest retailer in the US and then the world. In 2001, Walmart knocked off ExxonMobil to become the world’s biggest firm in revenues, with sales of $217.8 billion to ExxonMobil’s $187.5 billion. Walmart continued an aggressive expansion worldwide but some of its effort were not very successful. More than 80% of its revenue came from Canada, Mexico, and the U.K. The ingredients of success of Walmart were the management style and employee orientation. Mr. Walton cultivated a management style that emphasized individual initiative and autonomy over close supervision. To controlling costs and always keep the sticker price down, the corporation uses the state-of-the-art technology in its warehouses and distribution centers. Their attempt to expand to the banking business has encountered opposition from the banking industry, unions and consumer groups. However, the pharmaceutical side was a blast of success. The $4 drug program has forced all competitors to cut down on their price too. They achieve quickly what the US governments have striven for decades to accomplish unsuccessfully. That is a significant benefit to consumers. Questions 1.a – I would have diverse my stocks by selling different brands and having all kinds of items available. I would negotiate discounts with the manufacturers and suppliers and give promotional discounts to the consumer periodically in...
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...Alper Küçükaslan S000773 COCA-COLA WARS CASE ASSIGNMENT 1. Compare the economics of the concentrate business to that of the bottling business: why is the profitability so different? (Use 5-forces analysis for both industries) Concentrate business requires relatively less capital investments. This factor makes easier entering to the market. Less material usage and few input requirements also makes threat of substitutes and services more applicable however, Coke & Pepsi grants %72 of the market so that there is a high risk of market entrance in concentrate business. Also, high costs of marketing (advertisement & promotions) require a solid brand image and sustainable budget so that it’s hard to compete in such a market. Furthermore, customer loyalty and economies of scale makes this market profitable for huge players such as Cola and Pepsi. Bottler business on the other hand requires high investment capital and too much operational cost which makes harder for new entrances to the market. Bottlers’ gross margin exceed %40 whereas their operational margin is %8 which is 1/3 of concentrate businesses. Bottlers are responsible for their own logistics and sales forces territorially and they are bounded on their pricing strategy through their contract with suppliers (Coke & Pepsi) so that their operational profitability remains low. More inputs and operational costs weaken bargaining power of suppliers however; because of high sales volumes and solid brand image with...
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...distinguish themselves from its competitors and have the capability to conquer the foreign market. However, when entering to unfamiliar territories there are many challenges that companies ought to overcome such as cultures, regulation, communication barriers, and so forth. Currently, Wal-mart and Carrefour are dominating in China as the foreign discount stores but they have different strategy to compete in China. Background In 1959, Carrefour was created in Southern France and became international by 1969. “It innovated with the hypermarket format in France in 1963 where it introduced the idea of one stop shopping for food, clothing, electronics, appliances, etc. Although it does not compete in the USA, it has adapted successfully to Latin American and Asia markets” (Arnold, 2002, p. 563). “Now, it serves over 2 billion clients per year in its more than 9,000 stores, which are present in 32 countries across 3 geographic zones. Carrefour is not only the second but also the most internationalized retailer worldwide” (Shiue, Der-Juinn, & Yeh, 2006, p. 171). In 1962, Wal-mart began its story in Northwest Arkansas as the discount store and quickly expanded to the largest family owned business. “It is active in 11 countries and has stores in North and South America, Europe and Asia. It has over 4,400 stores, of which three quarters are in the USA and that still account for 80% of its growth” (Arnold, 2002, p. 564). Currently, Wal-mart Stores is the...
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...Walton's visionary leadership, along with generations of associates focused on helping customers and communities save money and live better. (1) The Walmart U.S. segment includes the Company's mass merchant concept in the United States operating under the Walmart or Wal-Mart brands, as well as walmart.com. Walmart U.S. is the Company’s largest segment, having generated approximately 59% of the Company’s net sales during the year ended January 31, 2014 (fiscal 2014). Walmart U.S. operates retail stores in various formats, including its online retail operations, walmart.com. The Walmart U.S. segment operates retail stores in all 50 states, Washington D.C. and Puerto Rico, with supercenters in 48 states, Washington D.C. and Puerto Rico, discount stores in 43 states and Puerto Rico and...
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...Korea and was eventually sold out to a Korean discount chain, Shinsegae, for $882 million dollars. Reasons why Wal-Mart fails in these countries occur from the lack of strategic plan, other than the duplication of the U.S. strategy. The strategy of low prices, keen inventory control, and a huge selection of goods was not a success in German and Korean markets. The culture was also a factor that Wal-Mart needed to consider and alter their strategy before entering Germany and South Korea. For example, in Germany the company had American managers that like in the U.S. offer to bag groceries while Germans like to bag their own groceries. Also, the customer service was translated into being overly friendly with customers where smiling and greeting is not a norm in Germany. In addition, Wal-Mart never established relations with labor unions. In Korea, the racks were taller than that of competitors which raised a problem for people having to use ladders to reach items and the infrastructure also turned customers off with ceilings that showed pipes while their competitor E-Mart had decorated ceilings. Having failed to the tastes of South Korean and German consumers, the business philosophy also failed even though it has always worked so well in America. There was inability to compete with already established discounters and Wal-Mart was not aggressive enough in expanding their networks in the countries. In Germany the smaller discount stores Aldi and Lidl dominate the grocery business...
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...operating expenses than the industry average. The primary cost advantage is Wal-Mart’s superior distribution capability (location of stores, inside-out growth patterns, cross-docking, superior information management). Quantitative details on cost advantage are set forth in Section 3 below. • High Volume: Industry analysts watch Wal-Mart’s growth of sales figure very closely. Wal-Mart’s prices are low by the industry standard, which, combined with its lower costs, indicates a strategy that aims at growth in volume through grabbing increased market share (cf. Dell). • Customer Satisfaction: Low prices, advanced data management and extremely motivated employees (“10 ft rule”, “sundown rule”) means a better customer experience than at other discount retailers, even though Wal-Mart remains a self-service retailer. In addition, the large size of the traditional Wal-Mart stores adds convenience by offering a one-stop solution by offering a wide range of products. In the words of Sam Walton, “Wal-Mart’s aims at creating a loyal customer base by lowering their cost of living through offering quality and other products at significantly lower prices, while surprising them on the convenience and service level side.” It’s worth mentioning that Wal-Mart acquired volume through a careful consideration of locations, away from competition. Today, however, Wal-Mart is experimenting with extending its original strategy. There are three avenues being considered: internationalization, different...
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