A Strategic Audit of the WalMart

Corporation
What is WalMart's Distinctive Capability?

WalMart has the goal of providing "quality goods at low prices, responsible manufacturing, and opportunities for growth"

(www.walmartstores.com). Due to their expansive nature and broad customer base, they are able to provide a large discount on many of their products. They are also

the leading employer in the United States of African Americans, Hispanics, women and senior citizens.

What Business Are We In?

WalMart is in the business of providing high quality products at affordable prices. They do this through three branches: WalMart Stores, Sam's Club and their

International Division. WalMart is the leading provider for many different corporations, such as Proctor and Gamble. They provide the opportunity for one stop

shopping and economic value.

Who Are Our Customers?

WalMart's customers are the individual, the family, and the small business owner. They provide the ability for an individual to get their tires and oil changed while

shopping for everything from groceries to diapers to school clothes to toys. They also provide a pharmacy, a makeup area, jewelry and even furniture.

Through their Sam's Club subsidiary, WalMart provides bulk items to individual members and special benefits for their small business owners. Purchases from Sam's

Club include food, restaurant supplies, furniture, hardware, office supplies, pharmaceutical supplies, jewelry, electronics and other items based upon season.

The International Division focuses on globalization. There are very few areas in non-third world countries that an individual would have to drive more than sixty miles

to the nearest WalMart. With the exception of Germany, WalMart has permeated the European market and is established somewhere on every continent except

Antarctica.

Costs

WalMart has many ways in which it makes its subsidiaries cost effective investments. Companies such as Proctor Gamble actually have a stocking agreement with

WalMart. This agreement means that they keep track of their supplies in the WalMart warehouses and re-stock shelves as products ship. This saves WalMart in

manpower and technological expenses.

Another way in which WalMart saves costs is sheer volume. Because they are often a company's largest distributor of goods, those companies find it beneficial to

supply WalMart their products at a good value. WalMart even has its own 'off-brands' such as Sam's Choice and Home Trends. By effectively managing the supply

chain, they keep costs to a minimum.

WalMart also makes deals with towns that are more rural. In exchange for providing employment and products and investing in the local economy, they receive tax

breaks. WalMart has employee programs through which they donate money into the community. This gives them tax deductions, as well.

Corporate Culture

WalMart has a strong corporate culture. Under the leadership of Sam Walton, it was based on Christian principles and focused on quality, integrity in business and

marketplace manners. Sam Walton's vision was personal service on a large scale. Their new CEO has moved the corporation into a more liberal place and expanded

their product line, but tried to maintain the standards of quality instituted by the founder.

Strategic Assets

WalMart's strategic assets are its leadership, its reputation, its value and its variety. Its leadership, first by Sam Walton and then by successive CEOs, have consistently

kept WalMart as a leader in its field. Its reputation is for great prices and one stop shopping. As one person said, "If you can't get it at WalMart, you don't need it!"

The value found at WalMart is competitive pricing, customer service and products. The variety of products found in the store are also a huge draw.

Fit

As with any firm, WalMart must within the market in which it is doing business. This fit is defined by an organization's "distinctive capability." WalMart's niche is

carved out by several factors. It is considered a family store. Every product for every room is available. Its organizational structure makes things easy to find and there

is also a flow through the store layout. The final niche that WalMart has created for itself is that no one can compete with their prices. WalMart will actually decrease

their profit margins on some products to get people into the store and the value on these products is often enough for the customers who frequent their stores.

Leadership

WalMart's senior officers and board of directors is comprised of a variety of different backgrounds and experiences. Sam Walton's visionary approach is what set

WalMart apart from Target and Kmart which were started the same year. Sam Walton believed that discount retailing should be available to every person, not just

local people. He also believed that it could be done with a focus on family values and valuing employess.

New Economy

WalMart has bowed to technology and embraced the changes in their business infrastructure caused by the focus on it. A person can place their business order for

Sam's Club online and pick it up in store. One can also access the store inventories and order online and pick things up in store or have them delivered. Photos can be

ordered and printed and mailed to one's doorstep.

WalMart is also embracing RFID technology. Through this new technology, WalMart can literally scan an entire eighteen-wheeler's trailer full of inventory and know

exactly what is on board. It can also inventory entire store rooms. This technology will soon be worldwide because they will be moving towards making it a

requirement for all products.

Strategic Directions

WalMart's competitors used to be J.C. Penney's, Kmart and Target. Now, they are largely the only store who in their league. Target is moving towards adding grocery
departments, but has not instituted it on a global basis. Also, WalMart is one of the only 24-hour places in most towns. They will continue to do weekly price

comparisons on their local competitions and adjust their own product prices accordingly.

I. Current Situation
A. How did the corporation perform the past year overall in terms of return on investment,
market share, and profitability?
B. Strategic Posture
What are the corporation’s current mission, objectives and strategies, and policies?
1. Are they clearly stated or are they merely implied from performance?
2. Mission: what business(es) is the corporation in? Why?
3. Objectives: what are the corporate, business, and functional objectives? Are they
consistent with each other, with the mission and with the internal and external
environments?
4. Strategies: what strategy or mix of strategies is the corporation following? Are they
consistent with each other, with the mission and objectives, and with the internal and
external environments?
5. Policies: What are they? Are they consistent with each other, with the mission,
objectives, and strategies, and with the internal and external environments?
6. Do the current mission, objectives, strategies, and policies reflect the corporation’s
internal operations whether global or multi-domestic?
II. Corporate Governance
A. Board of Directors.
1. Who is the board? Are they internal or external members?
2. Do they own significant shares of stock?
3. Is the stock privately held or publicly traded? Are there different classes of stock
with different voting rights?
4. What do the board members contribute to the corporation in terms of knowledge,
skills, and background, and connections? If the corporation has international
operations, do board members have international experience?
5. How long have they served on the board?
6. What is their level of involvement in strategic management? Do they merely
rubberstamp top managements proposals or do they actively participate and suggest
future directions?
B. Top Management
1. What person or group constitutes top management?
2. What are top managements chief characteristics in terms of knowledge, skills,
background, and style? If the corporation has international operations, does top
management have international experience? Are executives from acquired
companies considered part of the top management team?
3. Has top management been responsible for the corporations performance over the past
few years? How many managers have been in their current position for less than
three years? Were they internal promotions or external hires?
4. Has it established a systematic approach to strategic management?
5. What is its level of involvement in the strategic management process?
6. How well does top management interact with lower level manager and with the board
of directors?
7. Are strategic decisions made ethically in a socially responsible manner?
8. What role do stock options pay in executive compensation?
9. Is top management sufficiently skilled to cope with likely future challenges?
1. Finance
a. What are the corporation’s current financial objectives, strategies, policies, and
programs?
i. Are they clearly stated or merely implied from performance or budgets?
ii. Are they consistent with the corporation’s mission, objectives, strategies,
policies, and with internal and external environments?
b. How well is the corporation performing in terms of financial analysis?
(Consider ratios, common size statements, and capitalization structure.) how
balanced, in terms of cash flow, is the company’s portfolio of products and
businesses?
i. What trends emerge from this analysis?
ii. Are there any significant differences when statements are calculated in
constant versus reported dollars?
iii. What was the impact of these trends on past performance and how might
these trends affect future performance?
iv. Does this analysis support the corporation’s past and pending strategic
decisions?
v. Does finance provide the company with a competitive advantage?
c. How well does this corporation’s financial performance compare with that of
similar corporations?
d. Are financial managers using accepted financial concepts and techniques to
evaluate and improve current corporate and divisional performance? (Consider
financial leverage, capital budgeting, ratio analysis, ad managing foreign
currencies.).
e. Does finance adjust to the conditions in each country in which the company
operates?
f. What is the role of the financial manager in the strategic management process?
g. VII. Implementation
A. Programs
1. What kinds of programs (e.g. restructuring the corporation or instituting
(TQM) should be developed to implement the recommended strategy?
2. Who should develop these programs?
3. Who should be in charge of these programs?
B. Budgets
 1. Are the programs financially feasible?
2. Can pro forma budgets be developed and agreed upon?
3. Are priorities and timetables appropriate to individual programs?
C. Procedures
Will new standard operating procedures need to be developed?

VIII. Evaluation and Control

A. Information System
1. Is the current information system capable of providing sufficient feedback on
implementation activities and performance? Can it measure strategic factors?
2. Can performance result be pinpointed by area, unit, project, or function?
3. Is the information timely?
4. Is the corporation using benchmarking to evaluate its functions and activities?
B. Control Measures
1. Are adequate control measures in place to ensure conformance with the
recommended strategic plan?
2. Are appropriate standards and measures being used?
3. Are reward systems capable of recognizing and rewarding good performance?

Strategic audits are examinations and evaluations of strategic management processes including
measuring corporate performance against the corporate strategy. Whenever a deficiency is noted
or performance of an organization is sub-par, the organization may elect to perform a strategic
audit. This may be done with in-house auditors, or an audit firm may be contracted to perform
the audit.

The auditors will audit performance of the organization against the current corporate strategy and
seek to identify problems within the current strategy that may be tied or can be traced to poor
performance. Upon completion of the audit, a report will be created regarding the auditing firm
or group’s findings and submit the report with recommended remedies to the management of the
organization. The organization will then seek to implement the proposed remedies with hopes of
increasing organizational performance.

strategy - the strategic audit

In our introduction to business strategy, we emphasised the role of the "business environment" in
shaping strategic thinking and decision-making.

The external environment in which a business operates can create opportunities which a
business can exploit, as well as threats which could damage a business. However, to be in a
position to exploit opportunities or respond to threats, a business needs to have the right
resources and capabilities in place.
An important part of business strategy is concerned with ensuring that these resources and
competencies are understood and evaluated - a process that is often known as a "Strategic
Audit".

The process of conducting a strategic audit can be summarised into the following stages:

(1) Resource Audit:

The resource audit identifies the resources available to a business. Some of these can be owned
(e.g. plant and machinery, trademarks, retail outlets) whereas other resources can be obtained
through partnerships, joint ventures or simply supplier arrangements with other businesses. You
can read more about resources here.

(2) Value Chain Analysis:

Value Chain Analysis describes the activities that take place in a business and relates them to an
analysis of the competitive strength of the business. Influential work by Michael Porter
suggested that the activities of a business could be grouped under two headings: (1) Primary
Activities - those that are directly concerned with creating and delivering a product (e.g.
component assembly); and (2) Support Activities, which whilst they are not directly involved in
production, may increase effectiveness or efficiency (e.g. human resource management). It is
rare for a business to undertake all primary and support activities. Value Chain Analysis is one
way of identifying which activities are best undertaken by a business and which are best
provided by others ("outsourced"). You can read more about Value Chain Analysis here.

(3) Core Competence Analysis:

Core competencies are those capabilities that are critical to a business achieving competitive
advantage. The starting point for analysing core competencies is recognising that competition
between businesses is as much a race for competence mastery as it is for market position and
market power. Senior management cannot focus on all activities of a business and the
competencies required to undertake them. So the goal is for management to focus attention on
competencies that really affect competitive advantage. You can read more about the concept of
Core Competencies here.

(4) Performance Analysis

The resource audit, value chain analysis and core competence analysis help to define the
strategic capabilities of a business. After completing such analysis, questions that can be asked
that evaluate the overall performance of the business. These questions include:

- How have the resources deployed in the business changed over time; this is "historical
analysis"
- How do the resources and capabilities of the business compare with others in the industry -
"industry norm analysis"
- How do the resources and capabilities of the business compare with "best-in-class" - wherever
that is to be found- "benchmarking"
- How has the financial performance of the business changed over time and how does it compare
with key competitors and the industry as a whole? - "ratio analysis"

(5) Portfolio Analysis:

Portfolio Analysis analyses the overall balance of the strategic business units of a business. Most
large businesses have operations in more than one market segment, and often in different
geographical markets. Larger, diversified groups often have several divisions (each containing
many business units) operating in quite distinct industries.

An important objective of a strategic audit is to ensure that the business portfolio is strong and
that business units requiring investment and management attention are highlighted. This is
important - a business should always consider which markets are most attractive and which
business units have the potential to achieve advantage in the most attractive markets.

Traditionally, two analytical models have been widely used to undertake portfolio analysis:

- The Boston Consulting Group Portfolio Matrix (the "Boston Box");

- The McKinsey/General Electric Growth Share Matrix

(6) SWOT Analysis:

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis
is an important tool for auditing the overall strategic position of a business and its environment.
Read more about it here.