Walmart Direction

Wal-Mart Review

Case Review and Recommendations

As we have reviewed and studied the strategy, culture, finances and the challenges and successes at Wal-Mart, there are many strategies we see that the company must undertake to hold its dominate position and drive further growth. Herein, we define our top four. These core strategies include: rebuild and recreate its reputation in the face of recent challenges; continue to show price leadership; improve the customer experience; and drive international growth.

The financial performance of Wal-Mart continues to be strong. It delivered another record year in 2008 as total net sales increased 8.6 percent to $375 billion. Yet, earnings growth rates and same store sales have slowed. And, the company faces a number of challenges to its operating procedures, reputation and growth prospects. Given the company’s stated objectives of “growing operating income faster than sales” and increasing shareholder value, the strategies we recommend will directly affect the company’s ability to overcome present challenges and meet these primary financial objectives.

Reputation and Brand

A key strategic objective, perhaps the most critical for the company going forward, is to rebuild and recreate its reputation. While brand and reputation are closely interlinked, author and business consultant, John Foley, differentiates the two attributes in this manner: “Brand is inside out. Reputation is outside in” (Foley 3).

Wal-Mart’s reputation has waned in the past several years and, according to Foley, “the company’s reputation problems are dragging down its brand and business performance” (Foley). This conclusion seems to be shared by a number of analysts. Further validation can be found in a recent report (written in May 2007) by the company’s former advertising agency, GSD&M. This report plainly states “Wal-Mart’s #1 overall business challenge is reputation.” Among the conclusions, the report states “(a) Wal-Mart’s consumer ratings as a “company I trust and respect” have steadily declined over the last two years, and (b) Shopping at Wal-Mart used to mean saving money and being patriotic, being a member of the community, being a part of the “American Dream.” Today, it just means saving money. All value - no values” (Kofinis).

So, with this challenge facing the company, there are several areas where the company can apply focus and action to help recreate and strengthen its reputation. Our recommendations for this strategic objective are:

 Ensure that “associates” are compensated fairly and receive proper benefits. Put programs in place to improve healthcare coverage for the workers in the stores and throughout the distribution network. Sam Walton’s insistence at the formation of the company on treating employees as partners, or associates, was heralded for years. This approach to managing must be reinforced through new benefits and compensation programs.

 Demonstrate leadership in societal issues including the environment, energy and healthcare. Wal-Mart’s power and influence are awesome and these forces can each be used to positively impact a broad number of initiatives around improving the environment, reducing carbon footprints and making healthcare more accessible and affordable to consumers. The company has started programs such as “Sustainability 360” in which it focuses on selling environmentally conscious goods. In 2007, US Stores “sold 145 million energy efficient light bulbs – enough to eliminate the need for three new coal-fired power plants in the United States.” In healthcare, Wal-Mart initiated a $4 prescription program to help consumers save money on critical prescription drugs. We recommend that programs like these be expanded in scale and that marketing and public relations dollars be increased to improve visibility to this work.

Companies possessing a strong brand can easily topple without the support of a strong reputation. Given this and our strong belief that brand and reputation are primary building blocks to company growth and customer loyalty, we absolutely believe that this is the #1 priority the company must address.

Price Leadership

The greatest area of emphasis in Wal-Mart’s brand and company history has always been “Low Prices – Always.” And, while this emphasis continues today, we believe the company must continue to demonstrate leadership in this area. Value shoppers still represent the largest consumer base at Wal-Mart stores. Fulfilling this strategy will involve