I.

Introduction

Wal-Mart Stores, Plc. as an organisation was first established in 1962 and Sam Walton at
Rogers was the founder of this multinational brand. During the span of seventeen years of
operation the business of retail had a huge growth with Wal-Mart and has been able to achieve
top annual sales of one billion USD. In the end January year 2002 Wal-Mart was recognised as
the world’s largest retailer with sales recorded as US $218 billion. Due to this huge and on-going
achievement this retail store was able to operate at global level (Govindarajan & Gupta, 2001).
The establishment of its global operation was first achieved when Wal-Mart opened its first
international store at Mexico City in1991.

II. SWOT Analysis

“SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of
planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses,
opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and
threats are external factors” (Philip Kotler ... [et al.], 2009)

SWOT Framework
Strengths:

Wal-Mart has a strong brand name representing value and quality in the retail industry.
This strength has made Wal-Mart able to attract new customers and hold the old customer’s
loyalty. Moreover, diversification of its products which they offer to the consumers is not the
only strength but the most importantly Wal-Mart offer convenience of easy shopping.

The Human resources of this firm employ a focused multi-local strategy. It also ensures
that its employees are well productive and efficient service providers. The firm also invest good
amount in training and development of staff, and this enable Wal-Mart to acquire a workforce
which is loyal to the organisation, and achieving the firm’s desired its set goals and objectives
(Miller, 2006).

The major strength Wal-Mart acquires is its globalisation in business. This added
advantage can be considered as strength and it’s helping the company in increasing the size
market share as well as diversification. The purchasing power of Wal-Mart as major retailer
company is also marked as company’s potential for strong global expansion and foreign setup
(Lorange & Roos, 1992).

Majority of Wal-Mart stores are equipped with latest technologies, this enables Wal-Mart
to handle its international logistics operations. Information technology has also been adapted in
many stores for effective procurement of the company, as well to overcome strong competition
in large market effectively.

Weaknesses:

Even though Wal-Mart is considered one of the largest retailer and serving a considerable
amount of huge consumer population both locally and internationally, however, the size of this
organisation’s operations depart the company from some weak aspects.

Due to several amounts of product lines which Wal-Mart offers restricts the flexibility of
being more focussed on single type of merchandise and due to this diversification is making
Wal-Mart’s supply chain more complicated, creating more frequent logistic issues and
problems. There is no doubt that Wal-Mart has its branches spread world-wide but only few
branches are developed in few countries therefore, does not entertain the ability of operating the
firm world-wide.
Opportunities

(Peters & Waterman, 1982) The opportunity for adapting strategy of establishing and
operating large super centres worldwide is very much accessible for Wal-Mart. The firm can
look forward for potential business and new types of stores in new sites. Thus, company can
enhance its opportunities to expand in the international market. Moreover, these days youth
consumers prefer internet to shop and there is huge opportunity that company can use this added
advantage to serve more customers and promote convenient internet shopping. Deal &
Kennedy, 1982 suggest that this opportunity may also be used by Wal-Mart for serving
consumers whose residence are too far from local Wal-Mart stores. In addition to that forming
strategic alliances, mergers and takeovers of other local and global retailers is another great
opportunity for Wal-Mart due to its strong financial performance and this can strengthen its
operations to overcome competitors and is reliable source for its future success.

Threats:

As a global market leader, Wal-Mart is targeted by several competitors both in the locally
and internationally. Hence, there is an immense pressure on the company especially in terms of
retaining its consumers as well to develop new and better business strategies to compete in this
competitive environment. Moreover, Wal-Mart has to follow foreign regulations and standards
so as to penetrate into foreign markets and due to this the company may be vulnerable to the
issues that would affect the country it chooses to operate stores in. With the ease of use of
outsourcing options available within developing countries, manufacturing expenses have run
down significantly. This is leading to results in intense price competition among retailers
worldwide.
Financial Analysis:

The ratio presented in below represent that there is two-point increase in the Cash
Management notch up and was due to the result of the Cash Conversion Cycle Time, in relation
to last year. Greater efficiency is indicated by lower durations and the leaner inventory in April
2009 than April 2008 has also helped.

Cash Management Apr-09 3 months prior 12 months prior

Current Ratio 0.8 0.9 0.8
LTD/Equity 50.80% 46.70% 49.70%
Debt/CFO 1.7 years 1.7 years 2.0 years
Inventory/CGS 41.9 days 41.6 days 44.1 days
Finished Goods/Inventory N/A N/A N/A
Days of Sales Outstanding (DSO) 3.0 days 3.4 days 2.9 days
Working Capital/Invested Capital -8.90% -6.50% -10.20%
Cash Conversion Cycle Time 10.3 days 9.6 days 11.8 days
Source: http://seekingalpha.com/article/138417-wal-mart-financial-analysis-through-april-2009

The rapidly contracting growth rates -- Cash Flow from Operations especially -- hurt the growth
estimate. The increase in Revenue relative to Assets softened the decline.

Source: http://seekingalpha.com/article/138417-wal-mart-financial-analysis-through-april-2009
Wal-Mart ($M) 30-Apr-09 30-Apr-09 31-Jan-09 31-Oct-08 31-Jul-08 30-Apr-08 31-Jan-08
(actual) (predicted) (actual) (actual) (actual) (actual) (actual)
Revenue $93,471 $95,551 $107,996 $97,634 $101,544 $94,042 $106,208
Operating Expenses
Cost of Goods Sold ($70,388) ($73,096) ($82,601) ($74,114) ($77,599) ($71,372) ($81,277)
Depreciation
Research & development
Selling, General & Administrative ($18,637) ($18,155) ($20,138) ($19,236) ($19,197) ($18,251) ($19,190)
Special operating charges
Operating income $4,446 $4,300 $5,257 $4,284 $4,748 $4,419 $5,741
Gains on investments
Gains on asset sales
Net interest and other income $304 $600 $628 $552 $609 $402 $595
Income before taxes $4,750 $4,900 $5,885 $4,836 $5,357 $4,821 $6,336
Provisions for income taxes ($1,603) ($1,676) ($1,959) ($1,690) ($1,826) ($1,670) ($2,125)
Net income before adjustments $3,147 $3,224 $3,926 $3,146 $3,531 $3,151 $4,211
Minority interests ($117) ($125) ($134) ($113) ($130) ($122) ($101)
Income from discontinued ops ($8) $105 $48 ($7) ($14)
Net income Net income $3,022 $3,099 $3,792 $3,138 $3,449 $3,022 $4,096
Earnings Per Share Earnings Per Share $0.77 $0.78 $0.96 $0.80 $0.87 $0.76 $1.02

Shares Outstanding Shares Outstanding 3930 3950 3950 3944 3958 3967 3998
Price per share Price per share $50.40 $47.12 $55.81 $58.62 $57.98 $50.74
Market Value Market Value $198,072 $0 $186,124 $220,115 $232,018 $230,007 $202,859

Revenue growth from year-earlierRevenue growth from year-earlier -0.60% 1.60% 1.70% 7.50% 10.40% 10.20%
Operating income growth from year-earlier
Operating income growth from year-earlier
0.60% -2.70% -8.40% 9.20% 10.90% 15.10%
Net income growth from year-earlier
Net income growth from year-earlier 0.00% 2.50% -7.40% 9.80% 16.80% 6.90%
EPS growth from year earlier EPS growth from year earlier 0.90% 3.00% -6.30% 13.00% 21.30% 11.30%

CGS/Revenue CGS/Revenue 75.30% 76.50% 76.50% 75.90% 76.40% 75.90% 76.50%

Gross Margin Gross Margin 24.70% 23.50% 23.50% 24.10% 23.60% 24.10% 23.50%
Depreciation/Revenue Depreciation/Revenue 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
R&D/Revenue R&D/Revenue 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
SG&A/Revenue SG&A/Revenue 19.90% 19.00% 18.60% 19.70% 18.90% 19.40% 18.10%
Income tax rate Income tax rate 33.70% 34.20% 33.30% 34.90% 34.10% 34.60% 33.50%

Revenue (TTM) Revenue (TTM) $400,645 $402,725 $401,216 $399,428 $392,620 $383,014 $374,307
Net Income (TTM) Net Income (TTM) $13,401 $13,478 $13,401 $13,705 $13,424 $12,927 $12,731
EPS (TTM) $3.40 $3.41 $3.39 $3.45 $3.36 $3.21 $3.13

Revenue growth year-on-year Revenue growth year-on-year 4.60% 5.15% 7.19% N/A N/A N/A N/A
Net Income growth year-on-year Net Income growth year-on-year 3.67% 4.26% 5.26% N/A N/A N/A N/A

Price/Revenue (TTM) Price/Revenue (TTM) 0.49 0 0.46 0.55 0.59 0.6 0.54
Price/Earnings (TTM) Price/Earnings (TTM) 14.78 0 13.89 16.06 17.28 17.79 15.93
Marketing Strategies Analysis:

Every Day Low Price (EDLP) campaign is one of the marketing strategies adopted by
Wal-Mart and is one of the success factors of this organisation. For example: if the list price is
£1.98, but Wal-Mart had paid only 50 pens, they would mark it up 30 percent, and that's it.
“Sam's philosophy was "No matter what you pay for it, if we get a great deal, pass it on to the
customer."

One of the other major campaigns is “Rollback” employed by Wal-Mart, which occurs
when firm lowers the already lowered (EDLP). To increase its customers, this strategy has been
very successful for Wal-Mart. It is very common that when customers shop they always look for
the beast available deals, and since (Lehmann & Winer, 2001) Wal-Mart is offering lower
prices with even rollback schemes attract out-price all of their competitors.

Wal-Mart is well known for its customer oriented approach and maintains one of the best
satisfaction guaranteed programs, this engage goodwill for Wal-Mart among customers. The
easy refund options available to customers with nearly no questions asked, also promote
goodwill among consumers. The engagement of tactics like "Ten Foot Rule" which is known and
created by Sam, which is simply an idea, that if a customer is in Wal-Mart an employee should
be within ten feet to greet them and ask if customer need any help. This is an evidence that
employees getting to know customers on a first name basis.

Finally, the most important marketing strategy applied by Wal-Mart is recognised into
ten distinct divisions i.e. Wal-Mart stores, SAM'S CLUBS, Neighbourhood International
Markets, Wal-Mart Optical, Walmart.com, Tire & Lube Express, Wal-Mart Pharmacy, Wal-
Mart's Used Fixture Auctions , Wal-Mart Vacations. White, (2006) suggest that through this
Wal-Mart market thousands of products gaining a better competitive advantage and leaving their
customers without having to stop at another store for anything that they would need.

PESTEL Analysis:

Political, legal, and government :

In terms of an opportunity the Asian market is still untouched by the retail world and Wal-Mart
has scope of using this unused market to expand. Moreover, this expansion can promise an
unlimited potential for growth and profits for Wal-Mart. However, there is a threat, because of
the Chinese regulations in China, which has one of the largest populations in the world. In
addition to that, Chinese government does not take kindly to opening their country to foreign
establishments.

Economic:

Free trade zone in existing economy is an available opportunity for Wal-Mart. However,
a threat is attached that the economy at present is very slow, has limited scope of change. The
recent financial crisis had impacted majority of industries including retail (Charan & Tichy,
1998) and profit margins have been reduced due to price-cutting and to attract more consumers.
There is an opportunity that, when the government may enter into new trade agreements with
foreign countries, it can develop the ability to offer products from these and can increase
increases markets availability to retailers.

Social, cultural, demographic, and environmental :

Changing trends in consumer’s attitude may provide an opportunity to the industry in

terms of want to ease of shopping. Looking at the current market situations, it can be assumed
that there is a threat of customer theft. Manufacturers of products have been developing time and
again embedded paper clip sized antitheft tags also known as electronic surveillance labels,
inside the packaging of products. Source tagging is one of the process which offer several major
benefits including merchandise tagged on the factory floor during manufacture or packaging.

The other threat is employee theft, due to which antitheft labels have now radio-
frequency circuits which are hidden in packages and are mostly unnoticed. They go off only
when the bar code scanner does not deactivate the circuit. This means it can prevent the two
forms of employee theft i.e. when an employee charge the customer less than the actual MRP
and secondly when the employee cover the barcode at sale point.

Technological :

As discussed by Mulligan, (2007) there is an opportunity for Wal-Mart to understand the

relation between the customers and that internet shopping is growing. The company can take
pure advantage of internet shopping and can provide a focus around the customer’s. Customer
friendly sites and efficient online order systems, professional customer response and fast delivery
are few objectives which can be added to technology adopted by Wal-Mart to increase its
potential existence in global market. However, the threat is that technological advances might
make a product total obsolete. Results of advances in technology may lead to products being sold
today might be gone tomorrow leaving retailers to sell fewer products.

BCG Matrix Model: For Wal-Mart Marketing Strategies--

Conclusion:

In the overall analysis we can say that Wal-Mart is the number one retailer in the United
States and expanding its opportunities in global market. Wal-Mart has expanded into many other
marketplace sectors which include groceries, electronics, gas stations and auto maintenance.
Every year Wal-Mart offer more services to its customers and hunting for new ways to grow.

The number of stake holders is also growing for Wal-Mart. In business, Wal-Mart has
been un-cuting many other local industries and getting more local businesses when it moves into
town. Wal-Mart because they encourage their workers not to form any unions due to which it
often face issues of court claims. Overall, Wal-Mart's is constantly growing in size and offering
variety of services to its consumers. The firm has become more widespread and is working
harder to maintain their goodwill in market. It is necessary for Wal-Mart to follow the company
strategy and achieve their key policy goals, in order to stay at the top of their game.

Managing New Product Development:

 Managing the new product development is an important factor in reducing cost, time and
risk. Over the time studies have showed that formal procedure of review points, clear new
products and a strong marketing orientation will helpful in greater success of the new product. In
any new product development process there are eight stages involved which are as follows:

1. Idea Generation: It is systematic search for new product ideas. Any company who launch a
new product has to generate many ideas in order to finalize a good one. It has been observed
by researchers that a company may spend millions in research and development for one new
product. There are two major sources for new-product development i.e
a) Internal Sources: Many studies found that over 60% of all new product ideas come from
with the company (Wheelwright & Clark, 1992). The companies’ sales people are other
good source because they are daily in contact with customers.
 b) Customers: For a company majority of ideas come from consumer’s behaviour to
products. The consumer surveys are one good source of information to get information
about their changing tastes and preferences and companies use this information to design
products accordingly.

2. Idea Screening: The reason of idea screening being important in new product development
stages is to spot good ideas and drop the poor ideas. In many companies it is the executive’s
responsibility to write up ideas on new products. Idea Screening is important to answer
questions like: Do we have people skills and resources to make it success? Does it mix well
with companies’ objectives and aims?

3. Concept Development and Testing: By this stage the ideas must be developed and its turn
to deliver the ides into concepts. A product idea is an idea that company is now planning to
offer to the market. On the other side product concept is a detailed description of the idea
which is meaningful for customers.

4. Marketing Strategy Development: The next step is marketing strategy development, it

involves three further steps: the first part is planning product positing and sales market share
and profit goals for first few years. The second part is the marketing statement outlines of the
product and planned price & distribution (Rogers, 1983). The third step is statement
description of the planned long run sales and profit goals and marketing mix strategies.

Kellogg’s New Product Development in Breakfast Cereal: “Just

Right”

Innovation for Kellogg’s-Why was the product developed?

Kellogg’s conducted a research that pointed out that there consumer was looking for some tasty
and healthy low fat cereal. Due to this they were looking for other companies alternative cereals,
which they preferred to be toasted and low in fat. These Cornflakes were apparent as heavy diet
by consumers and the variety available was limited.

Innovation model-How was the product produced?

The Marketing department at Kellogg's informed the Product Development department on the
specifications required for the new product which included:

A muesli-like breakfast cereal

Light in texture and flavour

Low in fat

Lower in salt and sugar than other breakfast cereals

Tasty.

Evolving the models of Process:

The importance of understanding innovation as a process is that this understanding helps

the way in which it can be tried and managed. The new opportunities give rise to find their
way to the market place and such approach are clear in practice and innovation can be
matched where interaction is critical element.
Kellogg’s understood the demands of consumers and started for product development. They tried
to develop flakes which can be maintained with crunchiness so they developed that spraying a
light sugar on flakes can help the flakes to remain crunchy for long time. This spray of sugar also
helped the cornflakes to be coated with less sugar and the sweet favour can be maintained.

The team managing the project co-ordinated with research team and provided their new product
with a different flavour. Just Right become the only breakfast cereal that include puffed rye. The
Gant Charts discussed is also an example of how technology was developed for puffing rye as
part of the process of product development.

The final product was created with high intergradient of dietary fibre. It also contains added
minerals and vitamins. As of now, Just Right contains essential contents of added niacin ,
riboflavin, iron and foliate.

Leadership in Kellogg’s for Product Development:

“Anybody can do things right, but it takes leadership to get people motivated to do the right
things’ (Bennis 1985:21)

Role of Leadership:

Through the power of our Global Human Resources Strategy, Kellogg’s had ongoing mission is
to: Build a ‘talent powerhouse’. This means we care a lot about attracting, developing and
retaining great talent. Develop a recognised leadership brand and invest in developing our
leaders for the future. Strengthen our culture, committing energy and passion to our company
values to ensure our employees feel engaged and proud to work here. Optimise our global HR
network to leverage the strength of our HR Team around the world.

Adair (1979) Task-centred leadership model:

Source: Lecture notes

Task Roles

• Initiator – to start things off

• Clarifier – interprets

• Information Provider – research, expertise

• Questioner – confronts basic issues

• Maintenance Roles
 • Summarizer – pulls things together

• Supporter – gives emotional support

• Joker – provides humour and light relief

• Experience sharer – uses feelings and experiences to open things up

• Process observer – stands back, free up bloackages

How Leadership affect in Creativity and Innovation:

• Democratic-participative style is conducive to creativity and innovation

• Supportive rather than controlling

• Create a working environment conducive to the generation and implementation of novel

and useful ideas (Amabile et al 1996)

• Elements that leaders need to possess:

- Expertise and technical skills – evaluate ideas, provide feedback, attract resources
and gain acceptance, competent facilitator

- Creating and articulating a vision – inspire others to ‘buy-in’, clear articulation,

open forum to voice viewpoints, sense of empowerment

- Setting the direction – environmental scanning, define the task in hand, manage
resources, co-ordinate teams to translate ideas into products

- Powers of persuasion – insightfulness, flexibility, social assessment skills

- Communication and information exchange – encourage discussion, vital element

in creative process

- Intellectual stimulation – interesting and complicated problems that require

intellectual skills to enable focus of energy and skills

- Involvement – allow choice and selection of projects

Conclusion:
If a business wants to make a product's total sales grow, it must carefully consider how best to
extend its life cycle. By creating the new product and providing the right sort of well researched
promotional support, Kellogg has been able to inject renewed vigour into a family of related
products. Through appropriate promotional activities and more relevant messages, Kellogg has
re-awakened consumers' interest in new products development that can play an important part in
developing a healthy diet in a health-conscious world. Regular campaigns of promotional
activity are helpful in enabling all organisations to sustain their own life cycle and those of their
brands and products.