The development of international strategic capabilities: Wal-Mart Stores Inc and Seiyu Ltd
Content
Executive Summary
The details of the acquisition
Introduction Wal-Mart
- Strategy, resources, history
Introduction Seiyu
- Post new investment initiatives
the expansion of Wal-Mart in foreign markets
M & causes A and the effects
Corporate Strategic Analysis Part I
Environmental Analysis
- Definition market
- Market analysis
- Market value
- Market Segmentation I
- Market Segmentation II
- Competitive Landscape
Analysis of the Japanese retail landscape
- Competition
- Supply
- Byers side
- Consumption patterns
- Barriers to entry
Industry analysis; Wal-Mart
Five forces analysis
- Barriers to entry
- Energy Suppliers
- Power Buyers
- Substitutes
- Competition
Key Success Factors
Conclusions
SWOT Analysis Transitional
- Evaluation of strategic choice
- Attraction Test
- The cost of entry test
- The better-off test
Financial Strategy II
Overall Performance
Market reaction to investment
Dividend policy analysis
Risk analysis and predictive failure
Ratio analysis
- PER
- Liquidity
- Efficiency
- Capital structure and cash flows
Conclusions
Change Management Part III
Introduction
Planning and Emergent Approach
National cultures
- V Process Results
- Auto Community V
- Hierarchy disorder V
- Commitment of distrust V
Changes structural
Leadership changes
Conclusions
Concluding remarks
References
Executive Summary
The purpose of the document will be to investigate the acquisition of minority stake holding Seiyu Ltd from Wal-Mart Inc, focusing on the question that asks if it has generated wealth for current and future shareholders. In addition, we recommend if Wal-Mart rational to continue with their investment as stated in the terms of the agreement.
There could be no denying the fact that change always has been accelerated until recently this has been slow enough to allow people to adapt well to the occasional tinkering or accumulation of the need to do and have fun to the next generation. In the past, because the change did not push a lot of people who did not receive much of their attention. Today, the presses hard and therefore is attended a. His current rate is so great that the delays in responding to it can be very costly, even disastrous. Adapting to rapid current changes require adjustments frequent and large what we do and how we do it. As the eminent scholar of management Peter Drucker (1968) put it, "managers must now manage discontinuities. "One of the unique features of the change brought to our attention by Schön (1971) is that as the exchange rate increase, the complexity problems also increases the most complex of these problems are, the longer it takes to solve them. The more the rate of increase of the changes, more problems we face the change and the shorter the life of the solutions we find for them. So the time to find solutions to many of the problems facing us, the problems have changed so much that our solutions to them are no longer relevant or effective
One of the changes that occur in the business environment is M & A and its growth rate shows considerable difficulty and complexity never seen before. While there is considerable research in the area is fragmented, leaving gaps to be addressed. In the 1990s the popularity of this type of strategic expansion increased dramatically (Shimizu et al 2004), but the results do not correspond with his popularity, a recent study by KPMG found a distance that only 17% of cross-border acquisitions that create value for shareholders, while 53% destroyed it in The Economist (1999). It is logical to assume that the principles for change outlined above apply with ease for M & A framed as discontinued occurring changes. The fragmentation of academic research accompanying M & A across disciplines (strategic management, finance, management human resources, international trade) suggests that further research and intergraded approach is required to identify and implement solutions and therefore increase their effectiveness and success of them.
This project has been such intergraded approach, see our acquisition through the lens of strategic management, finance and management of change we will try to collect evidence that will help us celebrate our opening question.
The details of the acquisition
In 2003 Wal-Mart (WMT) bought an additional 192.8m shares, equivalent to a 27.9% share of Seiyu Ltd., Tokyo, Japan, owns and operates a chain of supermarkets, at a price of JPY270/share. The acquisition will increase the participation held by WMT from 6.1% to 34%. According to the association, is directed towards the adoption business knowledge and financial resources to improve structure. (Reuters 2006)
Introduction Wal-Mart
WMT Inc. is the largest retailer in U.S. and has been number one on the Fortune 500 by Fortune magazine, and larger than any other retailer in the world. Currently operates more than 4150 points sale around the world. In addition, the company is the dominant retail store in Canada, Mexico and the United Kingdom (www.walmart.com). The company is classified as the second most admired company in the world by Fortune Magazine (www.fortune.com) WMT has four parts of their corporate strategy
1. Dominance in the retail market
2. The expansion in the U.S. and international markets
3. Creating positive brand, recognition of the company
4. Diversifying into new sectors of Retail
WMT provides general merchandise: family apparel, health and beauty, household needs, electronics, textiles, toys, crafts, jewelry, lawn and garden, and shoes. (Www.walmart.com).
corporate governance strategy is built on WMT sale of high quality and brand name products at the lowest price. In order to keep prices low, the company reduces costs by using advanced electronic technology and storage. Also negotiating deals with the merchandise directly with manufacturers, eliminating middlemen.
Strategy, resources and history
After the end of the Second World War, the style of retailing in the U.S. changed in merchandise discount. It took the form of retail departments. A discount store retail and WMT can provide cheaper goods to consumers at lower prices by allowing tighter margins, while the sale of more freight.
The industry in the 70s became highly competitive, but at the same time the nation's economy weakened due to inflation. WMT grew rapidly during the 80s due to the diversification that focused on small cities first and then expanded to major cities. This elapsed while other retail centers focused on larger cities. However, when the economy was a decline, consumers require low-priced stores. Moreover, as consumers became mobile, they moved to the suburbs and small town were willing to travel farther to buy low-priced products.
Through the 80's, chambers of commerce WMT supported by the fact that he believes that the company helps local economy by providing low prices and good quality products. Critics argue that the success of the current damage WMT local traders.
- Wal-Mart Stores,
- super centers,
- Sam's Club stores
- Neighborhood Markets
Its core retail business can be divided into four retail divisions:
Note that most employees do not get paid WMT "Generous" wages. They are part-time workers the minimum wage is offset. Most employees are not entitled to any benefit, since has a part-time employee for five years to qualify for benefits, such compensation benefit-sharing, or otherwise. Therefore a high percentage rotation between them, which means most do not reach the necessary level of seniority. In many cases the minimum wage is far below the poverty line.
Introduction Seiyu
Seiyu Group is a Japanese operator of supermarkets, department stores and shopping centers operating in the last 36 years. It is also the second largest retailer in the world in terms of its own stores (400), but the lower ranks by sales, with over 34,000 employees who ranks sixth in the Japanese market. In addition to its Japanese operations, Seiyu also has department stores operating under its name in Singapore and Hong Kong. WMT is from 2003 Seiyu's largest shareholder and is working closely with the Seiyu to regain its focus on customers and its core retail operations and in their transition at a low cost, low price structure of operation. (Www.YahooFinance.com)
Post new investment initiatives
The investment areas WMT to increase the financial stability of Seiyu, and most importantly, Seiyu to benefit from the superior services and sophisticated experience the world's largest retail sales. (Seiyu Annual Report 2003)
For more than six months, and WMT Seiyu studies and analysis of the current situation and trends in Seiyu in the Japanese market. This information will enable Seiyu to incorporate the experience of WMT, the world's largest retailer, in areas such as:
- shop operation
- store development,
- logistics
- market analysis and
- management, and
- to use Wal-Mart's global procurement of goods.
In addition, in August 2003, Seiyu plans to introduce a system of information store providing high efficiency and accurate forecasts of demand for the release of sales and inventory data to manufacturers and wholesalers. Taking into account the characteristics the Japanese market and consumer trends, follow this gradual, step by step for processing.
In January 2003, Seiyu suffered a structural reorganization in which eleven divisions were simplified. In Mar, five new directors were appointed WMT on the board. Under the new organization, the company is working to integrate WMT expertise to become the "New Seiyu" in all aspects of its operations, including product line, store environment and customer relationships. They have also begun to "everyday low cost" the cost-cutting efforts to offer "low prices every day" products. With the integration of considerable WMT know-how, these initiatives aim to elevate the standards WMT company and create added value both went to his shareholders. (Seiyu Annual Reports 2002-2005)
"Wal Mart's expansion into foreign markets
WMT is expanding in the global market. The retailer has about 400 stores in Europe, especially in the United Kingdom and Germany (dir.yahoo.com).
- Seiyu will introduce Japanese customs WMT to better prepare the retail giant for possible acceptance by individual consumers (biz.yahoo.com).
WMT is of course not the first retailer trying to enter Japan, but it is the first to try to work closely with a company based in Japan and the transition itself in the market. The market retail in Japan is weak, but he sang. If WMT adapts quickly, have a good chance of survival. On the first day of the alliance, Seiyu shares rose 21%, augurs well for the entry WMT (biz.yahoo.com). On the other hand. Seiyu executives have a strong resistance-WMT is not nonsense, of reduction of economic strategy, but that's not a surprise, and it is too early to predict this company a failure. (The Economist 2004)
M & causes A and the effects
Liberalization, deregulation and market integration led to the globalization and increasing interdependence of them. This internationalization of business activities led to an increasing proportion of the workforce of the world is in the international trade-related activities. At the same time, M & A led to the emergence of large global and regional wholesalers and retailers. Yet, the consolidation had wide repercussions, trade Retail increasingly international in scope and retailers in developed countries expanded into other countries, both developed and developing countries. (Organization International Labour Office, 2003)
Since the markets had become more saturated in many developed countries (the U.S. is considered a market mature) for various reasons, companies are increasingly looking for new opportunities to expand outside their domestic markets.
Focus on markets mature encourages competitive strategies based on bargain prices, which eliminates the costs that were reinvested in the price cuts. A pricing strategy oriented like this demanded that the sales base to expand and, as it rarely could be achieved through organic growth in mature markets, M & A became the only way for increased market share .- a fact that Wal-Mart's experience so trying to expand globally. (International Labour Organization, 2003)
Looking at our case study the following quotes capture the reasons behind the strategy of diversification of Wall-Mart in Japan, Mike Duke, vice-president WMT, said, "Seiyu is a valuable addition to Wal-Mart and gives us a significant presence in the second largest market in the world. (www.wal-Mart.com)
"Being recognized as a truly global retailer, we should be in Japan, the second largest economy in the world, "said Charles Holley, chief financial officer of Wal-Mart International. (Www.wal-Mart.com)
Ed Kolodzieski for the management of the new Japanese unit said: "The company makes this investment because it sees a lot long-term, bright possibility, from our perspective, there is an incredible opportunity. Clearly there are a lot of consumption in this country. "(Www.news.bbc.co.uk)
The above discussion reflects some of the strategic rationale behind WMT diversification and long-term expectations, but research made no mention is made of financial expectations or any quantification of benefits to illustrate the improvement of shareholders value. We recognize that the cost of operation is substantial for a company the size of WMT, but never less than a company is accountable to its shareholders at all times and adequate grounds and demonstration of value to any decision must be analyzed and reported. (Pike and Neal 2006)
Corporate Strategic Analysis
Environmental analysis
The first step of analysis to the answer to our main question is the use of PEST Framework (Grant 2005), the list that follows is a synthesis topical issues relating to the environment two companies girth, but also considerable attention given to the industry and its historical context. Influences is considered mainly represented by the Japanese and U.S. macro environment, although some of them can be considered global. The range of factors is quite large, so trying to parse all of them is quite unproductive and undesirable. All influences are considered the monitoring of the impact along three dimensions, residing in the industrial environment:
- Related Searches
- Competitors
- Customers
Furthermore, analysis provide critical insights into the threats and opportunities faced two companies before and after the 2003 increase in reserves of the minority. Indeed this part shows the actual and potential benefits derived from their WMT strategic option therefore answer our original question.
Global Framework scanning Environmental-PEST
Political
- Commercial Code on M & A (Japan)
- Corporate Governance
- Zoning rules (Japan)
Economic
- M & A
- Oil prices
- Energy prices
- The rebellion markets in Asia and the Pacific
- Transportation costs
- Consumer spending and confidence
- Interest rates
- Inflation
- Employment
Social
- Obesity dimension
- Population growth and changing structure
- Changes in patterns of consumer behavior
- Corporate culture
Technological
- food innovation, new technologies driving the development of new products
- Increased automation and the importance of technology information.
- Internet applications.
The starting point of any analysis of the industry is what determines their level of profitability. The basic premise underlying the analysis of the industry is that the profitability level is neither random nor the result of the whole industry influences specific-is determined by systematic influences the structure of the industry. (Grant 2005)
Market definition
Industry Retail food is the total revenue generated by sales of food from:
- supermarkets,
- hypermarkets,
- cooperatives
- discount stores
- convenience stores
- independent businesses,
- Bakery
- butchers,
- fishmongers and
- all other retailers of food and beverages for consumption off the premises. (Global – May Retail Data Monitor 2006)
Market Analysis
The global food retail industry and has worked well over the past five years and is expected to continue growing at rates between 3% and 4%. The industry growth has been attributed primarily to increased sales of luxury and premium items, such as organic food, despite the ever-lower cost of everyday items due to significant pricing pressure due to high levels strong competition. The global food retail industry generated revenues totaling $ 2928.4 b in 2005, representing a CAGR compound annual growth of 3.4% for the five year period 2001-2005.
The main source of profits for the retail industry is the segment of supermarkets, which has generated total revenues of $ 1179.9 in 2005 b, equal to 40.3% of the total market value. By contrast, the food industry was worth $ specialists 392.1b, representing 13.4% of the value of market share. The EU is the biggest market in the food industry, retail, generating $ 1102.3 in 2005 b, equivalent to 37.6% of the global industry value. While the Asia-Pacific market is only marginally smaller bo generating $ 1002.5 34.2% of the global food industry retail and growing at a faster rate than the EU market, mainly due to the rapid expansion of food distribution in India and China.
Looking ahead, industry is forecast to accelerate its current performance, with a CAGR of 3.9% forecast for the period of five years from 2005 to 2010 industry forecast to grow to a value ba $ 3546.7 end of 2010. The upward trend in organic foods, coupled with the increasingly wealthy consumers in poor weather, the purchase of raw food prepared, is expected to be a key factor behind the overall industry growth, which in addition to the rapid expansion of emerging markets in Asia and the Pacific. (Report retail food Datamonitor 2006)
MARKET VALUE
The global food industry retail grew 3.8% in 2005 to give a value of $ 2928.4 b. The CAGR of the industry in 2001-2005 was 3.4%.
MARKET SEGMENTATION I
Supermarkets account for 40.3% the value of the industry. Food specialists such as bakers and fishmongers, generate a further 13.4% of industry revenues.
SEGMENTATION MARKET II
Europe generates 37.6% of total industry revenue. Asia-Pacific represents a 34.2% increase in the value of global industry
COMPETITIVE LANDSCAPE
The food sector retail overall is becoming increasingly polarized. However, discount retailers are also enjoying high growth in developed markets, a fact that will soon be true for developing regions of Asia and the Pacific, several supermarket chains implement an aggressive expansion inorganic (see Wal-Mart, Carrefour). However, market players are still facing significant cost pressures. Prices Oil continued to deduct from the margins of food retailers, increasing the costs of energy, transport and packaging. The consumers' disposable income has also been affected by rising gasoline prices, which affect revenue streams and contracting consumer spending.
Virtual Supermarket Online creation of a small portion of the retail landscape. Although the trend is increasing, this concept of the purchase is still under development. All large food retailers are developing or have developed web platforms shopping to get market share in this expanding sector. In the U.S., sales online food amounted to $ 2,400,000,000 in 2004 and is expected to reach $ 6.5b by 2008 is equivalent to annual growth rate of 42%, shopping Online is the fastest growing segment in the food sector retail. (Datamonitor Retail Report 2005)
Obesity levels are increasing market worldwide and restaurants combine to revitalize a negative impact on the volume of food sales. More and more companies are therefore diversifying into Retail non-food, offering services such as credit cards and insurance.
analysis of Japanese retail landscape
Japan sales has the second largest economy in the world, and retailed more than $ 1ta years, surpassed only by the U.S. In addition, per capita consumption expenditure households and retail sales are among the highest in the world, and the Japanese market is one that is very attractive to foreign retailers. Furthermore, as the region Asia-Pacific continues to grow as an astonishing pace and economic integration in the region is growing, Japan has all the qualities required in international business to become a center of Asia.
Given the revival of economic activities, countries and regions of East Asia urban areas in particular, are increasingly coming to share purchasing preferences and lifestyle requirements that are becoming more standardized. Consumer goods, clothing and cosmetics tend to spread throughout the East and Asia after first becoming popular in Japan. Japan is therefore an important center for marketing activities range of companies to enter the East Asia market as well, the country is very stable in terms of social and geographical proximity to countries of East Asia makes an excellent choice for the location of regional headquarters in East Asia. (JETRO 2005 revision).
In the 80s, the share of East Asia World GDP grew by 16%. That figure now stands at almost 30% due to economic growth in East Asian countries with Japan continues to have a strong presence.
Although, when looking at the recent economic situation and consumer shows in the 90s after the collapse of the bubble, as well as stagnation consumption, consumer prices have declined from a peak of 148t yen in 1997, retail sales fall. Annual sales of the retail industry were135t yen in 2002, and a significant decrease of 6.1% of the figures in the last survey (1999).
Source: Ministry of Economy, Trade and Industry, Census of Commerce, various years
Competition
A prominent feature of the market is the fact that a large number of retailers to very small scale exists, and one result has been restructured small portion of the market by major retailers, compared with the U.S. and the United Kingdom
There are many variables that contribute to this: the rapid growth of the 1980s increased the market size, and ensured opportunities sufficient market for even small merchants who were allowed to remain in business:
- consumers are still buying patterns of products often fresh in local shops;
- systems to protect and grow small and medium retailers;
- regulations as the Law on Measures by Large Scale Retail Stores in place to prevent the opening of large-scale stores.
However, from 1991-2002, supermarkets and home centers have increased their share of the market with companies that have opened convenience store chains and pharmacies, and the composition of sales by type of business has changed dramatically. Furthermore, consolidation in the mass distribution is at hand, and sales of large-scale retailers have increased dramatically, well, partly as a result of mergers and acquisitions.
Moreover, the proportion of small and medium scale retailers in total sales is decreasing quickly. (Ministry of Economy, Trade and Industry, Census of Commerce)
Some of the top 3 retailers in the domestic markets retail (by country)
Supply
Changes are also evident in the industry of wholesale. Until recently, a major characteristics of the Japanese distribution structure extended the number of wholesalers, and numerous levels. This structural feature is due to the large number small-scale stores to supply, therefore primary wholesalers were unable to cover the whole market enough, resulting in a secondary layer of wholesalers forming. This network of powerful wholesalers, distributors contribute to high product prices in Japan, and each level of distribution requires a total price cut the product. However, the decline of smaller stores has forced many small and medium businesses out of business. (Ministry of Economy, Trade and Industry, Census of Commerce)
Another crucial point to be mentioned is the logistics infrastructure, which is one of the best in the world facilitating the movement of goods and people in all categories (roads, railways, ports, airports).
national labor market in Japan has with many highly qualified human resources. In addition, the increased liquidity of the labor market is to facilitate the recruitment of highly qualified personnel.
Productivity is increasing every year in a total of 60 million people and has one of the highest rates of college attendance among developed countries. Talented highly educated human resources are available in abundance. Also in the general relations among workers in Japan are very positive, allowing companies operating smoothly
Byers side
After 90 years, household consumption has been depressed. As household income still increased the burden of education expenses for children, rental or home loans, and medical fees continue to rise, and the level of unrestricted income each housing decreases. This environment is encouraging consumers' desire for cheap goods, and resulted in the intensification of the retail price wars. The trend has indeed set the stage for discount retailers Western-style mass to enter the market.
Although many families are feeling the effect in terms of revenue, the average savings per household is more than 12 m ($ 112,000) yen, and while the purchasing power today is in low due to depression, it should be noted that the average household purchasing power has great potential. A trend can be seen that households are reducing expenses whole, and focusing their disposable income on certain items, you can buy more expensive products.
Consumption in Japan Feature
A defining characteristic is that Japanese consumers are very particular about quality. For this reason, the quality of fresh food has a great impact on the reputation retail stores. The differentiation between the preferences of consumers also exhibited at the regional level and types of fish and vegetables preferred by consumers can vary greatly. Consumers tend to look for a place to shop where they can get good fresh food like fish and vegetables, which is why supermarket chains regional exist throughout the country. Even among younger consumers, the trend is to buy in bulk, and there is a tendency for products that is purchased with less frequency. However, the tendency of consumers to buy small quantities of products, often in order to obtain fresh produce remains high.
On the other hand, the increasing rate of female participation in the workforce is changing shopping patterns. The percentage of households preparing the days meals week is diminishing, and instead, an increasing number of people buying food at supermarkets or department stores. For items, excluding fresh food well, the Japanese are particular concerns the quality, and products that are low cost, although of doubtful quality is not easy to gain acceptance in the market.
Recognition of brand names is especially high among consumers, especially those of the manufacturers. With few exceptions, there has been little market penetration observed by the private labels backed by retailers. (Datamonitor Retail Report 2004)
Barriers to entry
As the corporate culture Japan becomes more similar to that of the EU and the U.S. (JETRO 2005 Revision), Japanese companies are less inflexible than before the layoffs and the sale of operations. In response to economic globalization and other factors, Japan has been advancing reforms of the main elements of its economic and legal framework. The stock structure cross-holding, which had prevented M & A, has also disintegrated. The revision of the Commercial Code in 2006, will be easier for companies foreigners to acquire Japanese firms through equity-swap.
Moreover, the adoption of new accounting standards based on international accounting standards it becomes easier to make comparisons between companies in Japan and the parent companies abroad. Other matters relating to the costs of doing business in Japan are:
House prices
Communications:
Labor and interest rates:
Logistics costs and tax rates:
Finally, some indicators of FDI and the average return on assets to foreign affiliates
Printing that occurred as a result of the above data is that the environment of Japan is changing rapidly to accommodate economic development and foreign investment. According this writer, Wal-Mart is well considering these factors before entering Japan and realized that the existing infrastructure and the restructuring may provide opportunities to take advantage forehead.
Although the above data to build a positive image acquisitions of Japanese companies well run could continue to be difficult to light from past experiences with no bids.
ote: Figures in parentheses are the number of companies leaving the market
Source: Prepared by Saison Research Institute on the basis of Nihon Keizai Shimbun, Inc., "The Age of Global Retailer: to and from Asia," 2001 by Ross Davis and Toshiyuki Yahagi
Many foreign retailers have entered the Japanese market in the 1970s and 1980s has long since left the market. Background reasons for leaving the market include:
- an inability to deliver products that meet the needs of Japanese consumers
- differences in strategy with business partner
- differences of opinion in the stores location and product line
- restructuring partner company forcing a tie-up to dissolve, etc (JETRO Japanese Market Report 2004)
The conditions have changed dramatically from the 90's. A important issue that was highlighted by the United States, Japan, structural impediments initiative in 1989 that the Japanese distribution systems and complex practices commercial and regulations of the store at the opening of the Large-Scale Retail Stores Law, were acting as non-tariff barriers to the Japanese market, and this in turn led to large-scale Retail Stores Law in the reform process. In addition, improvements in business practices especially for Japan, such as discounts and recommended retail prices and falling retail prices as the bubble burst, both contributed to an atmosphere much more conducive to foreign retailers to enter.
The late '90s saw a marked increase in overall global retailers specializing in foods on the market. This started with Costco in 1998, and was followed by Carrefour, Metro, Wal-Mart and Tesco. All have been companies in the Japanese market for a short period of time, and there are questions of business yet are not progressing as planned, but hopefully the market entry of these companies that have a significant effect on trade practices and distribution system manufacturers. Also recently, the big retailers have continued to fail, and the current environment, with low stock prices, is one that is conducive to business acquisitions. (Wal-Mart Case Study)
Industry Analysis Wal-Mart
Now we have a good understanding of our company resources and capabilities (see also the financial analysis), the industry environment and the domestic environment the next part is used analysis to explore Wal-Mart sources of competitive advantage and how these can be applied to the Japanese market. The strategic fit if there is evidence to bring our main question.
Study of Resources and capabilities
Financial Resources
Physical resources reputation
capabilities functional
General management skills
The Environment industry
key success factors
The domestic environment
Natural resources and capabilities
National market conditions
Government Policies
Related industries and Support
Competitive Advantage
Source (Grant 2005)
In order to determine whether Wal-Mart maintains sustainable competitive advantages within the industry retail, it was necessary to conduct an analysis of five forces (Porter, 1987).
The competitive advantage comes from two sources and the cost advantage that the products are practically the same and differentiation of products exploiting these to create value for shareholders (Pike and Neal 2006). The strength of the five sources of stress competition will be determined by a number of key structural variables The aim is to build on understanding the competitive forces of the industry to plan strategies effective and develop a competitive advantage over its rivals in the organization and, more specifically, within the Japanese environment as we have mentioned above, the transfer potential competitive advantages means that Wal-Mart will be able to add value to their operations and ultimately increase shareholder wealth.
Wal-Mart Competitive Analysis: Five Forces
WMT is operating in the retail industry as the dominant low-cost carrier. WMT strategy is structured around its philosophy of providing EDLP price. WMT wide variety of merchandise that offers one-stop shopping and high levels products in stock to give customers confidence that WMT will have what they need, and long hours of service that allows customers to shop at your convenience.
To prevent the entry barriers
Immediate-ear are relatively low since:
- opening a retail store is relatively low density capital
- fixed costs are low, and
- specific knowledge of operating a retail store is unrealistic to think you can get.
Although, when you open a store around WMT, smaller retail property are often driven out of business because WMT has the ability to command prices below the average operating cost of a long-term small retail owner. WMT is able to do that because, as the retailer largest in the world, its average cost of long-term operation is much lower due to economies of scale realized.
Energy Suppliers
supplier power on WMT is pretty nonexistent. As the world's largest retailer, maintains a tremendous amount of buying power to dictate volume discounts from suppliers. In many cases, companies WMT represents a large volume of business at any one provider, further enhancing the ability to WMT demand from their suppliers discounts.
power providers point of view of human capital is also very low since most positions within WMT can be classified as unskilled jobs. Furthermore, WMT does not respond to labor unions and the union is not represented in business WMT.
WMT avoid bottlenecks in the distribution for the exploitation of their distribution networks. WMT is well known for its proprietary "pull" management system inventory that allows you to ignore a buildup in inventories and shortages, the system can help mitigate and any supplier of energy.
Power buyers
The philosophy of the client retains ultimate bargaining power for WMT. WMT EDLP pricing is provided constantly to attract consumers WMT trust that will provide the lowest prices and also to avoid erratic changes in prices due to promotional activity. Being the most consistent and the lowest cost in the market shop, WMT business strategy appeals to the consumer.
Substitutes
A major substitute for shopping in stores to online shopping. Trends show that online shopping is growing rapidly year after year. WMT provides online purchases at www.walmart.com but the threat of online shopping cannibalizing sales has not been a major problem at this time.
Competition
Competition is intense within industry as evidenced by very narrow margins:
Ave Gross Margin (Retail Industry / Market: 26.5% vs 48.3%);
Ave Margin OS (Retail Industry / Market: 8.5% vs 12.6%);
Ave Net Margin (Retail Industry / Market: 3.4% vs 7.0%).
Source: Reuters 2006
WMT compete within several different sub-sectors, retail discount, department, drug, variety and specialty stores and supermarkets, many of which are national and international operations. WMT also compete with retailers for new store sites. In 2005, the segment ranked first, WMT, based on net sales among all retail chains in the department and among all discount store chains.
Following Kenichi Ohmae (1983) reasoning that try to summarize the key success factors (CSFs) in the industry, resulting from our external and internal analysis. The adaptation of the external environment with the resources of the business effectively reveals the (FCE) on the market.
8.0Key Success Factors (CSF) in Industry
Customers
- Differentiation through tangible and intangible assets (brands, ethical products, store formats)
- High quality / features of the low prices (health issues, pricing policies,)
- Superior Service customer.
- Good work / relationships
Competition
- The ability to expand into non-food areas business.
- Supplier relations
- Size and location of the store
- Market Dominance
Corporation
- Low cost of operations
- Economies of scale
- Innovation in terms of products and processes
- Employee involvement and development.
Conclusions
On the basis of lower cost and a single business model WMT maintains a strong advantage, sustainable competitive in a highly competitive. WMT realize many cost advantages through its very high bargaining power that is generated by its sheer size. WMT business model that works with demand final consumers "for items consistent retail low cost and helps to reduce buyer power. Meanwhile, constantly WMT can eliminate competition even if the low pricing and then competition leads to bankruptcy.
SWOT Analysis
The same is true the link between Wal-Mart and its external environment that is a strategic fit? Grant (2005) argues that a successful strategy must be consistent with external environmental characteristics of the company and its characteristics of internal environment of the company and its goals, and values, resources and capacities and the structure and systems (Lynch 2005). We can establish this by bringing together our knowledge of the internal characteristics of the two companies, PEST analysis and industry analysis for draw conclusions from the original question.
Strengths
- Reputation as a global company
- Strong management and employee development programs
- Excellent logistics system
- Global procurement
- Aggressive growth strategy
- Ultra strong financial position
- Extremely high purchasing power
Weaknesses
- limited international presence compared to main competitors
- High employee turnover
- Reputation
Opportunities
- Japan is the second largest retail market in the world.
- Deregulation (Law of Large Scale Retail Store Location)
- The lack of consolidation in the Japanese market.
- Emerging markets in Asia and the Pacific
Threats
- consumer preferences (quality of products, stores and services)
- Supply networks
- Japanese corporate culture
- Weak Japanese economy
- History of failed corporate entry
Strengths
Reputation as a global company
WMT has a truly global presence, measuring their self as the largest company in the world. Is expected to open more than one new store every day 2004, their presence continues to grow internationally with nearly 1,300 locations in Mexico, Canada, the United Kingdom, Germany, Asia and S. America, in addition to 400 stores Seiyu in Japan. In addition to its reputation can effectively influence the political and economic institutions in their favor, creating new opportunities for growth. (Datamonitor, February 2006)
strong management and a program of employee development.
WMT management structure has been consistently strong and efficiently, keeping the company in constant motion in the right direction. WMT has designed programs to identify individuals with high potential and develop assets of the company. A good percentage of the employees began their time with WMT as hourly employees. The workforce is not represented by a union. This allows flexibility WMT decisions regarding labor productivity over and is not threatened by strike action.
Excellent logistics system
WMT has a superior logistics system that continues to offer exceptional performance. In the U.S., the goods are moved from distribution centers around 85 WMT property. This brings a very effective advantage of global sourcing. This provides a competitive advantage because it has much to gain WMT cost of supply of cheaper location. Since account operating infrastructure providers in Japan over the force can provide the basis for the efficiency of energy costs that purchases and finally, competition advantage over local competition.
Global procurement
WMT has recently structured its business with global procurement capacity. He began to take chances a few years ago, and is moving quickly now. Because of its size in the country, and because it sells many of the same products in several countries realize WMT economies of scale to purchase an asset. WMT management believes that global sourcing significantly increase gross margins for a period of approximately five years. Once again the strength can translate into cost advantages and differentiation of its products against local competition, revealing once again the nature of Japanese consumers increasingly price sensitive, low prices of Wal-Mart, which can obtain contribute to its success.
aggressive growth strategy and financial prowess
Despite its clear leadership, WMT growth shows little sign of abating. In 2003, the company allocated around $ 11 b in capital projects, adding nearly 48m square feet of commercial space. In late 2003 Super Centers 4000 WMT required to meet the growing customer demand. Supercenters have driven WMT to become the largest food retailer. This type of stores to attract consumers in a wide radius, including several discount stores WMT neighbors. It is logical to assume that WMT will not sit waiting for results only Seiyu and potentially can try new acquisitions as rumors suggest. In addition to the laws in relation to super-stores that are the main vehicle for growth in the U.S. market are being gradually relaxed therefore lowering the barriers input thus allowing the company to be aware of their strengths.
Weaknesses
Insufficient in comparison with exposure Major international competitors
For example, a massive undertaking in the capital markets and number of operating units, the company still maintains a relatively small international presence. WMT is currently present in eleven countries around the world and is well known, WMT operations in three countries – Canada, United Kingdom and Mexico – account for over 90% of its international business and effectively all their worldwide income. So, although apparently a very "global" operation, most of WMT revenue still comes from North America and the UK.
Carrefour – 31 countries.
Ahold – 26 countries.
Metro Group – 26 countries.
Ito-Yokado – 13 countries.
Tesco – 13 countries.
Wal-Mart – 11 countries.
Kroger – a country.
Meta – a country.
Albertsons – 1 country
Kmart – a country.
Source: M + M Planet Retail
High employee turnover
WMT gets competitive advantage from its inventory of systems and relationships with suppliers that keep their costs – and prices – low. Voucher sentence at the lower end of the scale of compensation and high turnover experience of nonunion labor.
On the other hand Japan has a great offer staff well-rounded but labor costs are also comparatively higher than in other countries a fact that can be problematic given that a source of competitive advantage for the company are paid low wages. Consequently, the fact that labor costs increased in the transition from the age of employees is a big problem. By Moreover, it is very easy to find capable and well trained housewives to work part time.
Within Seiyu, over seventy percent of employees are part-time workers. Seiyu is the adoption of Wal-Mart shipping and visualization methods to increase labor productivity, and their mode of distribution, logistics and relations with suppliers to increase competitive advantage (Troy 2003).
Reputation
Despite the aforementioned problems, a relationship with the community strength "are bound to exist with a company the size of WMT. Not a big surprise, WMT has developed a long list of critics, including trade unions, human rights organizations, religious groups, environmental activists, community organizations, small business, academic, children rights groups, and institutional investors. These groups have criticized the company's illegal tactics to destroy unions, their violations the laws of a lot of overtime, child labor abuse, exploitation of migrant workers, discrimination against gender, working conditions in factories horrible suppliers, and environmental degradation. This is an issue of concern in the Japanese environment can have adverse reactions that could lead a strong opposition in their operations.
Opportunities
Second largest economy in the world
Japan is attractive to be the second largest economy, with the second increase in retail sales second only to the U.S., as well as its market is growing at a faster rate faster than the EU market. Discount retailers are enjoying a boom in the developed markets, a fact that will soon be true in developing countries Asia-Pacific regions. Wal-Mart has successfully entered the Japanese market with a low risk investment and expected consumption rates to recover its restructuring Seiyu of its strengths while learning about their new market. prospect of Wal-Mart's strategy is to enter markets where they can earn so targeting other industries that are fragmented, high volume sales, price inelastic and less efficient supply chains. retail food and goods from Japan Mass meets all the criteria above.
A consolidated market
The market structure is the presence of very small retailers in comparison with the U.S. and other developed markets, a trend that has been assisted by the purchase of fresh produce culture and legislation, such as large-scale stores that became very difficult for large retailers to provide better facilities for environmental reasons and size and competition. Wal-Mart can effectively take advantage of the lack of concentration and increase the pressure for everyone in an increasingly competitive market thereby increasing their chances of getting a greater share of market.
Deregulation
The removal and deregulation of the legislation along side the changes in consumer preferences and the structure of consumers are creating opportunities that Wal-Mart taking advantage of the opening of its first super center in Numazu, the retailer expects to be a model for the tents of the archipelagos. With the economy finally recovering Wal-Mart management is convinced he can capture a large portion of Japan's $ 1, 3t retail market.
Asia-Pacific region
The above analysis clearly shows that 34.2% of worldwide revenue in the food industry, retail is generated within the Asia-Pacific region and forecasts show that the trend will continue to increase. In addition, Japan is a trendsetter in the region and a model for many countries to monitor the presence of Wal-Mart in the region effectively can result in various benefits such as the establishment of its brand for the whole region, drawing on the experience gained in the Japanese market and effective throughout the region, which can be transferred to other markets, increased opportunities for collaboration with other perspectives. In conclusion, if a company wants to establish a presence in the region and the possibilities of a long-term presence and development, it could not find a better place than Japan.
Threats
Consumer preferences
Compared with other countries, Japanese consumers tend to pay more attention to details such as the quality of products, stores and services as well as design, rather than focusing solely on price. They tend to demand perfect products, and this can be Installation cost for the management of the required quality, Japanese consumers can not be satisfied without regard to quality. However, according to the product or industry, there are cases that focus on low prices over quality and design, and market entry, market research, detailed and comprehensive can not be waived. WMT attention is not focused on the design or quality often focuses on the basics and low prices and this is your business model. In the economic depression other and changing consumer preferences can help the company to take action on this issue. localized preferences is also an issue that Consumers have very different preferences through something Japan WMT so far can not successfully accommodate given its business model standardization products and services.
Weak economy
Although the Japanese economy is beginning to show slight recovery, consumer spending remains cautious and the confidence level is low. The stagnation in consumption has brought retail sales up in 1997 to 148t 135t yen in 2002 to a significant change 6.1%. The weak economy has led to low stock prices, creating an environment in which purchases of other companies and the entry of foreigners in the market are easy – a condition that WMT took off with its investment in Seiyu. Moreover Seiyu's performance in the last five years is a disappointment for interested in progress and part of the explanation is that general economic conditions.
The supply network
The supply system in Japan which is supposed to be one of the most complicated and more difficult in the world, with multiple layers of wholesalers detracts from the retailers' profit margins. The condition has been proliferated by the large presence of small scale retailers. With increased industry consolidation, deregulation and globalization, the supply network is increasingly smaller and less powerful so the opportunities for retailers to increase their dominance increases. WMT with basic capabilities in global procurement, distribution, purchasing power and information systems infrastructure is really trying to avoid or change the existing balance of power and maintain a competitive advantage over competitors and even the restructuring of the market in terms of the existing complex business practices.
business failures
Although there are a lot of progress in the conditions of entry and structural reforms in the Japanese market, which remains a challenge and a threat to all the world who want resistance to penetration and establish a long-term presence. Taken as a paradigm s the main reasons for failure outlined above and compare them against WMT's approach leads to some conclusions.
WMT entered the market very carefully and gradually while its share in Seiyu, which illustrates the need for careful consideration of the variables surrounding the market, at the same time reducing their investment risks and buying time to establish how several environmental forces will evolve, as consumption patterns and rules mentioned above. WMT actually makes use of long-term view on their investment, which have received injections of additional investment to raise its stake in a progressive and worth mentioning at predetermined prices. Meanwhile, their learning, and prepares for the reorganization of the economy and other conditions to be more favorable.
Corporate culture
Again, the reasons contrasting with the main failure is the earlier, WMT has selected the vehicle for this company that Seiyu, a 37th year old sixth largest retailer in the industry, which implies a good knowledge of market practices and establish relationships with various stakeholders. In addition an important cultural property seems WMT taken into account is that business relationships in Japan are based on the profitability of an agreement, but in obtaining benefits for both parties as a point of view much more time. Other evidence to act with care in cultural sensibilities is the fact that the CEO of Seiyu Board maintains a majority of its original members which means WMT is being given to effective management structures, of course there are other reasons such as existing expertise and relationships that these members have with the community at large and are considered active in the Japanese retail business environment.
Strengths
Worldwide reputation as a company
WMT has a truly global presence, measuring their self as the biggest company in the world. Is expected to open more than one new store every day in 2004, its presence continues to grow internationally with nearly 1,300 locations in Mexico, Canada, the United Kingdom, Germany, Asia and America, as well as 400 Seiyu stores in Japan. In addition to its reputation of efficiency can be influenced by political and economic institutions in their favor, thus creating new growth opportunities. (Datamonitor, February 2006)
strong management and employee development program.
WMT management structure has always been strong and effective, keeping the company constantly moving in the right direction. WMT has programs designed to identify individuals with high potential and develop the company's assets. A good percentage of employees began their time with WMT as hourly employees. The workforce is not represented by a union. This allows flexibility in more resolutions WMT labor productivity, and is not threatened by strike action.
Excellent logistics system
WMT has a superior logistics system still providing exceptional performance. In the U.S., the merchandise is moved from about 85 distribution centers owned WMT. This brings a very effective advantage of global sourcing. This provides a competitive advantage because it has much to gain WMT cost of supply of the cheapest location. Given that infrastructure providers operate in Japan over the force can serve as a basis for cost efficiencies and greater purchasing power finally competitive advantages
Global procurement
WMT has recently structured its business with global procurement capacity. Opportunities began some years ago and is progressing rapidly now. Because of its size in the country, and because it sells many of the same products in several countries, WMT realize economies of scale when you make a purchase. management WMT believes that global sourcing significantly increase gross margins for a period of about five years. Again, the force can be translated in cost advantages and differentiation of its products against local competition, showing once again the nature of Japanese consumers, because increasingly price sensitive, low prices of Wal-Mart, which can obtain contribute to its success.
Aggressive growth strategy and financial prowess
Despite its clear leadership, WMT growth shows little sign of abating. In 2003, the company allocated about $ 11b projects capital, adding about 48m square feet of commercial space. In late 2003 Super Centers 4000 WMT required to meet the growing customer demand. Supercenters have driven WMT to become the largest food retailer. This type of stores to attract consumers in a wide radius, including those of several neighbors WMT discount stores. It is logical WMT assume that not only would wait the results of Seiyu and potentially can try new acquisitions as rumors suggest. In addition to laws, in connection with super-shops, which are the main vehicle for growth in the U.S. market are being gradually relaxed, therefore lowering the barriers to entry thus allowing the company to be aware of their strengths.
Weaknesses
Insufficient in comparison with exposure Major international competitors
For such a massive corporation in the capital markets and number of operating units, the company has yet a relatively small international presence. WMT is currently present in eleven countries around the world and is well known, WMT operations in three countries – Canada, United Kingdom and Mexico – account for over 90% of its international business and effectively all their international income. So, although apparently a very "global" operation, most of WMT revenue still comes from North America and the UK.
Carrefour – 31 countries.
Ahold – 26 countries.
Metro Group – 26 countries.
Ito-Yokado – 13 countries.
Tesco – 13 countries.
Wal-Mart – 11 countries.
Kroger – 1 country.
Objective – a country.
Albertsons – 1 country
Kmart – a country.
Source: M + M Planet Retail
High employee turnover
WMT gets competitive advantage from its inventory of systems and relationships with suppliers that keep their costs – and prices – low. It's worth at the lower end of the scale of compensation and high turnover experience of nonunion labor.
On the other side Japan has a wide range of personal well-rounded but labor costs are also comparatively higher than in other countries, a fact that can create problems considering that a source of competitive advantage for the company are paid low wages. Consequently, the fact that labor costs increased in step with the age of employees is a big problem. It is also quite easy to find capable and well trained housewives to work part time.
Within Seiyu over seventy percent of employees are part-time workers. Seiyu is taking delivery of Wal-Mart and visualization methods to increase productivity work as well as their mode of distribution, logistics, and supplier relationships to drive competitive advantage (Troy 2003).
Reputation
Although the problems mentioned above as a force for community relations "are forced to exist with a company the size of WMT. Not a big surprise, WMT has developed a long list of critics, including unions, human rights organizations, religious groups, environmental activists, community organizations, small business groups, academics, child rights, and institutional investors. These groups have criticized the company's illegal tactics to destroy unions, their violations of the laws of many overtime, child labor abuse, exploitation of workers migrants, gender discrimination, working conditions in factories of their suppliers horrible, and environmental degradation. This is a worrying aspect that in the Japanese environment reactions can cause side effects that could result in strong opposition to its operations.
Opportunities
Second largest economy in the world
Japan's attractiveness is to be the second largest world economy, with the second increase in retail sales second only to the U.S., in addition to its market is growing at a faster rate than the EU market. Discount retailers are enjoying a boom in the developed markets, a fact soon to be true in the developing regions of Asia-Pacific. Wal-Mart has successfully entered the Japanese market with a low risk investment and expected consumption rates to recover its Seiyu restructuring of its strengths and at the same while learning about their new market. prospect of Wal-Mart's strategy is to enter markets where they can win so that the orientation of other industries that are fragmented, high turnover, constant prices, less efficient supply chains. Retail food of Japan and mass merchandise meets the above criteria.
A consolidated market
The market structure is the presence of very small retailers compared to the U.S. and other developed markets, a trend that has been assisted by the culture of buying fresh produce and legislation, such as large stores scale made it difficult for large retailers to provide better facilities for environmental reasons and size and competition. Wal-Mart can take advantage of the absence effectively concentration and increase pressure for the increasing market competition and increase your chances of obtaining a greater share of market.
Deregulation
The removal and deregulation of the legislation along side the changes in consumer preferences and consumer structure are creating opportunities that Wal-Mart is taking advantage of the opening of its first super center in Numazu, the retailer expects to be a model for the tents of the archipelagos. With the economy finally recovering Wal-Mart management is convinced he can capture a large slice of Japan's $ 1, 3t retail market.
Asia-Pacific region
The above analysis clearly shows that 34.2% of worldwide revenue in the food industry generates retail within the Asia-Pacific region and t
About the Author
Kiriakos Mpaxevanis holds a BA in Business Economics from Kingston University and an MBA in International Business from Brighton University. He currently works for American Express as a project manager an he is also the co-founder along side his wife of
http://www.little-jasmine.com.
