NOTE: Free essay sample provided on this page should be used for references or sample purposes only. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. To get a completely brand-new, plagiarism-free essay, please use our essay writing service.
One click instant price quote
... textual customer base of 76, 000 people were needed to generate the volume to break even -operating margins were smaller due to narrow margins on food in general -remained concentrated in small towns and rural areas - less competition -consumer target by income ($ 75, 000 to greater than $ 25, 000) Neighborhood Markets - small Marts - 49 Stores (limited drug and grocery) -stores focused on groceries but also offered limited lines of general merchandise and photo processing -enter space constrained suburban areas -consumer target by income (greater than $ 75, 000 to $ 25, 000) SAM's Clubs - 525 Stores (large format) -warehouse clubs - bulk buying and rapidly changing assortments of relatively few SKUs in warehouses -not industry leader - COSTCO -addresses a more affluent market segment than either Supercenter's or Neighborhood Markets -consumer target by income (greater than $ 75, 000 to $ 40, 000) Walmart. com -access to higher income consumers (earning $ 75, 000 and above) It is important to note that Wal-Mart not only targeted specific customers based on income, but targeted specific markets based on population, as this would be the key factor in deciding what store format could be developed. In the future, Wal-Mart should focus its efforts on expanding the Supercenter store format because of the following reasons: -Long run sales are expected to be higher for the Supercenter store than the Discount store and even when you incorporate initial investments, the Supercenter is substantially more profitable (Sales $ 75 million / year compared to $ 39 million / year) -Even if operating margins are slightly lower (2 %) in the Supercenter, the additional volume will increase NPV per store - Exhibit 7 -Has substantial room for upgrading or expanding its current 1, 568 Discount stores -There is substantial room for expansion of new Supercenter's: "Wal-Mart planned to open 1, 000 more in the US along in the next five years. " (Pg. 20) -Estimates show you only need 76, 000 people to generate break-even volume, which facilitates expansion in both small communities and elsewhere This particular expansion does have drawbacks as the overall growth of the core business and food in the U. S. is expected to taper off from 15 % to 10 % over the next decade.
As well, the Supercenter's' operating margins are also currently at 6. 6 %, and although they do expect to get better as the operations mature and improve, efficiencies would have to drive this margin to at least 7. 5 - 8 % to see significant increases in NPV per store, which is feasible. Having evaluated the various alternatives, it is felt that Wal-Mart should continue to seek ways to improve its operations to be as efficient and effective as possible, while focusing on the expansion of its Supercenter's both through new site developments, as well as, upgrading and expanding its current Discount sites. Cannibalization can occur with the expansion and upgrading of this strategy, however, by the examination of the Neilson Panel Data, it clearly demonstrated that sales growth in the Supercenter's were mainly derived from new shoppers, increased purchases from existing shoppers, competing shoppers and less than a quarter were actually from other Wal-Mart division stores. Thus, it can be concluded that new sites, which would be established in various new locations (not near other stores), would not significantly cannibalize other stores's ales. As well, by expanding Discount stores, cannibalization would also be reduced, as they would not be building new competing sites, but merely expanding product and service offerings. Question # 3 On examining the proposed financial services opportunity Wal-Mart is considering, one would suspect that this strategy would not only be a great complement to the various other services Wal-Mart currently provides, it could easily be facilitated very effectively and efficiently.
On discussing this opportunity, this paper will highlight various factors in why Wal-Mart should pursue this growth option. The first factor of why Wal-Mart should pursue this strategy is that it can be easily facilitated in its current operations. Wal-Mart has thousands of stores, to facilitate this new in-store service; stores would only have to be slightly modified. Which again, could be even easier facilitated if they choose to have this service in a kiosk, or in the middle of their store, like the photo labs. Such expansion would not be costly, and any mistakes made early on in the roll out of such services, could easily be fixed for subsequent roll outs. The second factor is that Wal-Mart has absolutely transformed and redefined the operational excellence strategy, as well as the customer intimacy strategy.
It has very effectively implemented cost savings both from the supplier and customer side and has initiated a variety of information technology systems that have driven these strategies. The financial services could easily be added incorporating this strategy, whether it be through modifying their current IT systems or tailoring specific sites to offer specific products, depending on the target markets, Wal-Mart's core strengths would make this service effective. The third factor is that by implementing yet another service, such as financial services, it will not only give customers more convenience; this service will truly be a complementary service. For example, if a customer has to go to the bank and do groceries, they would be very inclined to do it all under one roof, again adding to the operational excellence strategy of providing customers convenience. In examining the difficulties or threats with providing such services, three immediate concerns must be addressed.
Currently, references have been made to various regulatory problems that Wal-Mart has encountered. These must be evaluated because if regulatory problems are going to be a battle in every state, it would make the roll out of such services very costly, especially if Wal-Mart had to continually lobby state and federal governments or hire lawyers for litigation proceedings. The second issue involves IT security issues. Although, they currently have industry leading IT systems in place, the nature of the financial services sector, would undoubtedly require a variety of additional security measures, which would also have to be addressed. The third issue involves the human resource function in the employment of financial service representatives.
Would their required skill levels be higher than other employees? The skill level of employees would also dictate, what services could be offered at the various branches, which leads into what financial services entails. Does financial services simply mean a financial institution where you can have a savings, checking or credit card accounts and have other services such as payroll cheque cashing, money orders, etc. or would this encompass investment accounts, etc. in which employees would have to be very thoroughly trained and certified. Due to the limitations of the later, financial services would be deemed as the first description.
Although, on examining the Wal-Mart website's financial services page, it only offered credit cards, which is interesting. Was this the intended expansion strategy, or did other factors impede further product or service expansion?
Free research essays on topics related to: wal, 000 people, wal mart, discount stores, financial services
Research essay sample on Wal Mart Financial Services
