Strategy Decision sheet format

1. Decision Making Situation

Industry-Discount Retailing
Discount retailing which came into existence in mid 1950s followed model of supermarkets
and extended the concept of discounting and selling goods at very low margin to general
merchandise. People were ready to try self-service , cheaper buying experience in the US.
Discount retailing flourished as a result of this mindset of people. The sales saw an
unprecedented growth from $2 billion in 1960 to $68 billion in 1985. This growth trend
continued till 2000. But many players entered on local as well as national level to harness
the opportunity of the sector and the number of stores increased by 64% with 144% sales
growth of the sector. But in late 1970s and early 1980s this growth ceased to only 8% and
many large retail chains failed in this period.
Company-Walmart
Walmart evolved in 1969 although the roots of it can be traced to 1962 when 16 variety
stores were opened by Walton and his brother. Regional entry by discount stores compelled
them to open 30 discount stores in rural areas of US. It had one third stores located in
metropolitan areas and it also enjoyed monopoly in many places where it accounted for
10%-12% of total sales. Due to increase in sales, it gradually increased the size of its stores
from 42000 sq. ft. to 100000 sq.ft. It used centralized purchasing system and used in store
terminals to wire merchandise request to a central computer which in turn would send
request to the distribution center. It maintained a high bargain power with its suppliers and
broke their monopoly by purchasing with many. The inbound logistics brought the
merchandise in the distribution center and sorting was being done to deliver to stores. In
return, trucks used to carry supplies to cut costs. Each distribution center served up to 175
stores within a 150-300 mile radius. Stores ran 12 hours a day and seven days a week
generally. Maximum of gross area was used for sales and there was no need to back room
storage due to high inventory turns as well as quick logistics of the goods from distribution
center to stores. It had all total of 70000 SKUs and it led the industry by installing
computerized inventory tracking system.

2. Decision Sheet
Identify key decision questions (issues which requires/required strategic intervention)
1. Whether Walmart should focus on Sams wholesale clubs in near future as it is cost
cutting also (SG&A expenses reduced)?
2. Sams wholesale clubs have caused 1% decrease in gross margin, a matter of concern for
walmart?
3. Discount stores have been backbone for the company in the past and in present also but
Sams stores may help in clearing stock pileups, where to focus?
4. There may be Supply chain issue between two types of stores for Walmart as both may
compete internally for the goods and services of the company internally?
5. Chances of channel conflict cannot be negated for both type of stores, how to resolve
it?
6. Walmart has done exceptionally good in Sams stores as compared to competitors,
whether it should focus on it? But it may happen that it may cannibalize its conventional
discount stores business.


My decisions (its rationale, feasibility, effects, and tradeoffs):
What are my
decisions
(qualitative and
quantitative)?
Rationale and
feasibility of
implementing my
decision
What is the impact
of my decisions
and how will it
make a difference
to my inheritance?
What are the
trade-offs in the
decisions
(qualitative and
quantitative)?


Walmart should
continue operating
its discount stores
as of now and
should focus on
Sams stores in
smaller areas
where customer
traffic is high and
customers
purchasing
frequency for
particular type of
good can be traced.


It is popular in
smaller areas with
high customer
traffic. Can be used
as the platform to
clear stockpiles in
the inventory. Also
it will not
cannibalize the
discount stores
operating in urban
areas.
Both type of stores
will run parallel in
different
demographic areas
and conflict will be
minimized.
Company will be
able to generate
cash inflows from
both type of stores
smoothly.
Chances of
Cannibalizing still
exist. Also company
may not focus on
particular type of
store which may
cause lack in its
effectiveness. Also
it should see for
viability of Sams
stores in various
regions as it is also
causing lowering of
gross margin
although SG&A
expenses are
reduced.



















Specify measures to mitigate the negative consequences
The company should focus on the Sams stores in smaller areas and discount stores in metropolitans. It
should devise a strategy for both type of stores to minimize the supply chain and logistical conflicts and
should work on improving both on parallel basis. It should advertise and portray both in such a way that
business of one may not eat business of the other type of store.


Vishwa Bhaskar
ABM09030
Section-G