Crafting and Executing Strategy- Walmart Case Analysis Essay

2287 Words Mar 13th, 2013 10 Pages
Crafting and Executing Strategy: Case Analysis of Wal-Mart Stores, Inc.
1.0 Source Problem Wal-Mart Stores, Inc. faces a plethora of problems in just the past five years including a barrage of public criticisms calling for a change in the management strategies of Wal-Mart. The underlying problem or fundamental issue is the cost-based competition that Wal-Mart intensified through its obsession for cost minimization. In a way, Wal-Mart commenced and intensified price wars. Wal-Mart achieved sales less than its target so that it cut back prices during the holiday season and other occasions on various items including back to school products. By decreasing its price, Wal-Mart intended to draw more customers to make more purchases
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Shifts in store sales directly affect profitability since revenue together with cost are the determining factors of Wal-Mart’s profitability. (Wal-Mart, 2008a)
Table 1: Total Sales of all Stores | FYE04 | FYE05 | FYE06 | January | 5.7 | 2.5 | 4.7 | February | 2.6 | 6.2 | 4.1 | March | 0.7 | 4.4 | 4.3 | April | 4.6 | 5.9 | 0.9 | May | 2.1 | 2.2 | 2.5 | June | 2.7 | 3.2 | 4.5 | July | 4.6 | 0.5 | 4.4 | August | 6.9 | 2.4 | 3.3 | September | 6.0 | 2.8 | 3.8 | October | 4.5 | 0.7 | 4.3 | November | 3.9 | 3.0 | 4.3 | December | 4.3 | 2.5 | 2.2 | Annual Average | 4.05 | 3.03 | 3.61 | In addition, Table 2 below also shows profitability through net sales. Although total store sales dropped in 2005 and picked up in 2006, profitability shows a consistent increase from 2004 to 2006, even in 2005 when store sales dropped. This means that if Wal-Mart experienced drops in revenue, it also took control of its costs in order to ensure an increase in profit. This supports the action of Wal-Mart of being aggressive in negotiating with suppliers and even rationalizing its labor cost and other expenditure areas. The continued increase in profit constitutes a justification of its strategies. (Wal-Mart, 2008b)
Table 2: Financial Highlights of Wal-Mart | 2004 | 2005 | 2006 | Net Sales | $252,792 | $281,488 | $308,945 | Cost of Sales | $195,922 | $216,832 | $237,649 | Income from

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