Professional Documents
Culture Documents
RM - Case 1 - Walmart
RM - Case 1 - Walmart
Team - iStore
Anupam Bara P.Swetha Pritesh Shikha Singh Vinay Dhok Saurabh Jain
Population in Sunbelt rose faster than other areas, competitors are encroaching on WalMarts areas
Rapid expansion has increased logistics cost from 2.8% in 1984 to 4% in 1985
As Wal-Mart moves into larger, more contested town, rentals have risen by 0.1% and might increase further
Convincing Analysts
Increasing Competition
Hard Goods constituting 28% of Wal-Marts sales had lower margins despite higher sales per sqft and lower markdowns.
Satellite Technology, UPC Technology and changing computation technology might cause higher spending on technology upgrades
People purchased price sensitive categories from Wal-Mart but were not influenced by it in apparel, hardware and consumer electronics
Technology changes
Handling Shrinkage
Over 100 warehouses of 12+ competitors have been established, while the market is profitable only for players with high economies of scale
Only 2 companies have made any profit in warehouse club business. Wal-Mart is one of them, however, competition was rapidly rising
Competition in nearby locations meant that the early mover got the advantage
Due to saturation, Sams Warehouse Clubs were started beside a Walmart Discount Store in 3 markets. This meant an internal competition and also unnecessary additional costs
Cannibalization
Diversification
High Bargain Power as no more than 1/5 of volume purchased from 1 vendor
Good Human Resource Management, High Power to Managers ensured good implementation
Net Sales License Fee and other income Cost of Goods Sold Payroll Expense@ Advertising Expense* Rental Expense# Miscellaneous Expense^ Operating Income Net Income
8451 100.00% 55 0.65% 6361 75.27% 678.53 8.03% 54.33 0.64% 160.57 1.90% 591.57 7.00% 605.00 7.16% 327.00 3.87% CAGR Sales and Net Income have reduced in 1984-85 compared to historical data
Revenue from License fee and other income has reduced while COGS has increased. Has Wal-Mart reduced licensing at the cost of Gross Margin?
Net Margin has reduced in 1985 compared to 1984, yet it is higher than industry average
1976 - 1985
1984 - 1985
CAGR Sales
CAGR Net Income
37.57%
39.83%
32.03%
20.66%
*Assuming TV Ad Expense is 30% of total Promotion Expense #Taking rental expense at 1.9% as per data in case text ^Miscellaneous expense has been considered slightly less than industry value at 7% @Payroll Expense = Admin & Other Expense from Exhibit Ad Expense Rental Expense Miscellaneous Exp calculated as detailed above