Wal-Mart

Vision Statement (proposed)

To become the worldwide leader in
retailing.

Mission Statement (proposed)

Our first responsibility is to provide all consumers (1) the best products and
services with guaranteed satisfaction under one roof. Wal-Mart provides a
wide array of products like toys; electronics; groceries; jewelry; ladies, mens,
and childrens apparel; and hard goods (2) at reasonable prices. We will continue
to offer scholarships to deserving high-school graduates (8) in hopes of
providing students with a well-deserved education. Consumers have been
conveniently provided not only with the use of online shopping (4) to show
without ever leaving home, but also with the concept of one-stop shopping. The
Wal-Mart team is devoted to everything that Wal-Mart has accomplished as a
universal competitor (3). We are dedicated in recruiting, rewarding, and
retaining employees of good moral standing (9) providing benefits for
excellent performance, providing clean environments to work in, and
providing equal opportunity for all individuals (7). We will continue to offer
the highest quality products at the lowest price (6) to strive to be the best in
the retail industry (5).

Mission Statement Components

1.
2.
3.
4.
5.
6.
7.
8.
9.

Customer
Product or services
Markets
Technology
Concern for survival, growth, profitability
Philosophy
Self-concept
Concern for public image
Concern for employees.

Competitive Profile Matrix

Critical Success Factors Weight
Market share
Price
Competitiveness
Financial position
Product quality
Consumer loyalty
Total

0.20
0.30
0.10
0.20
0.20
1.00

Wal-Mart
Rating
Weighted
Score
3
0.60
4
1.20
4
2
2

0.40
0.40
0.40
3.00

KMart
Rating
Weighted
Score
2
0.40
2
0.60
2
2
2

0.20
0.40
0.40
2.00

JC Penny
Rating Weighted
Score
2
0.40
1
0.30
2
3
2

0.20
0.60
0.40
1.90

EFE Matrix
Key External Factors
Opportunities
Consumers want ease of shopping
Internet shopping growing
Kmart and other stores struggling
Similar shopping patterns worldwide
Retail sales expected to increase
Environment conscious consumers
Elderly population growing
Asian market virtually untapped by retail
European market untapped by retail
Threats
Regulation of Wal-Mart pharmacies
Small towns do not want entry of Wal-Mart
Bad media exposure for Kathie Lee brand
Variety of competition nationally, regionally, and
locally
Substitute products more easily because of intense
competition
TOTAL

Weight

Rating

Weighted Score

0.08
0.10
0.20
0.05
0.05
0.04
0.04
0.06
0.07

4
3
4
3
3
1
3
3
3

0.32
0.30
0.80
0.15
0.15
0.04
0.12
0.18
0.21

0.10
0.02
0.04
0.05

3
3
3
3

0.30
0.06
0.12
0.15

0.10

0.20

1.00

3.10

Ratios (July 2002)

Company

Sector

S&P 500

29.06
54.62
23.22
0.94
0.99
5.33
6.67
18.74
81.82
50.40

26.46
49.38
17.59
0.91
2.22
3.59
5.20
15.66
42.80
46.78

26.91
49.97
17.42
1.00
2.92
4.32
7.12
18.16
33.51
60.76

0.63
0.50
21.67
18.30

0.83
0.66
16.64
17.06

2.35
1.38
4.98
16.11

2.17
1.32
7.93
29.70

14.11
14.24
15.66
20.13
9.61
17.46
25.97

13.41
12.23
14.32
28.90
9.23
16.77
22.06

8.81
9.37
19.41
13.55
6.38
11.31
16.26

0.03
1.59
12.16
9.46
-1.57
8.38
10.33

Valuation Ratios
P/E Ratio (TTM)
P/E High - Last 5 Yrs
P/E Low - Last 5 Yrs
Beta
Price to Sales (TTM)
Price to Book (MRQ)
Price to Tangible Book (MRQ)
Price to Cash Flow (TTM)
Price to Free Cash Flow (TTM)
% Owned Institutions

30.55
59.13
24.82
0.93
0.94
5.88
7.71
20.29
91.53
36.05

Dividends
Dividend Yield
Dividend Yield - 5 Yr Avg
Dividend 5 Yr Growth Rate
Payout Ratio (TTM)
Growth Rates %
Sales (MRQ) vs Qtr 1 Yr Ago
Sales (TTM) vs TTM 1 Yr Ago
Sales - 5 Yr Growth Rate
EPS (MRQ) vs Qtr 1 Yr Ago
EPS (TTM) vs TTM 1 Yr Ago
EPS - 5 Yr Growth Rate
Capital Spending - 5 Yr Growth Rate

Industry

Ratios
Company
Financial Strength
Quick Ratio (MRQ)
Current Ratio (MRQ)
LT Debt to Equity (MRQ)
Total Debt to Equity (MRQ)
Interest Coverage (TTM)
Profitability Ratios %
Gross Margin (TTM)
Gross Margin - 5 Yr Avg
EBITD Margin (TTM)
EBITD - 5 Yr Avg
Operating Margin (TTM)
Operating Margin - 5 Yr Avg
Pre-Tax Margin (TTM)
Pre-Tax Margin - 5 Yr Avg
Net Profit Margin (TTM)
Net Profit Margin - 5 Yr Avg
Effective Tax Rate (TTM)
Effective Tax Rate - 5 Yr Avg
Financial Strength
Quick Ratio (MRQ)
Current Ratio (MRQ)
LT Debt to Equity (MRQ)
Total Debt to Equity (MRQ)
Interest Coverage (TTM)

Industry

Sector

S&P 500

0.14
1.01
0.51
0.63
9.89

0.39
1.35
0.70
0.87
8.86

0.82
1.39
0.77
0.96
5.86

1.15
1.68
0.67
1.04
8.54

21.33
21.18
6.94
7.18
4.92
5.13
4.92
5.13
3.15
3.24
36.02
36.78

25.11
24.92
8.02
8.22
5.45
5.67
5.34
5.56
3.38
3.47
36.54
37.42

40.29
40.12
22.49
22.48
11.29
12.18
8.99
12.49
6.16
8.01
36.58
39.45

46.81
47.69
20.65
22.14
17.29
18.39
14.34
17.37
9.27
11.39
33.51
35.77

0.14
1.01
0.51
0.63
9.89

0.39
1.35
0.70
0.87
8.86

0.82
1.39
0.77
0.96
5.86

1.15
1.68
0.67
1.04
8.54

Ratios
Company
Management Effectiveness %
Return on Assets (TTM)
Return on Assets - 5 Yr Avg
Return on Investment (TTM)
Return on Investment - 5 Yr Avg
Return on Equity (TTM)
Return on Equity - 5 Yr Avg
Efficiency
Revenue/Employee (TTM)
Net Income/Employee (TTM)
Receivable Turnover (TTM)
Inventory Turnover (TTM)
Asset Turnover (TTM
www.investor.stockpoint.com
July 2002

Industry

Sector

S&P 500

8.54
8.96
13.07
13.58
20.39
21.60

7.84
8.33
11.59
12.31
19.03
20.46

5.04
6.74
6.96
9.27
11.29
15.83

5.74
7.97
9.42
12.81
16.83
21.63

163,894
5,161
127.92
7.40
2.71

182,920
6,981
12.08
6.48
2.35

803,839
69,051
16.26
16.25
1.20

555,950
78,474
9.42
10.26
0.97

Net Worth Analysis (Year-end 2001)

1. Stockholders Equity +
Goodwill
2. Net income x 5 = $6,671 x 5
3. Share price = $56 /EPS =
$1.55 x Net Income ($6,671)
4. Number of Shares
Outstanding X Share Price =
4,450 x $56
Method Average

35,697

$
$

33,355
241,016

249,200

139,817

IFE Matrix
Key Internal Factors
Strengths
Customer oriented
SAMS Club customers able to buy in bulk
Supercenters offer one-stop shopping
Satisfaction guaranteed programs promoting customer
goodwill
Buy from local merchants when possible
Stock ownership and profit sharing with employees
Leads industry in information technology
Ongoing development of its employees
Strong community involvement
Weaknesses
No formal mission statement
Membership only for SAMS Club
Keep poor-performing employees on hand
Old-fashioned store policies
Few women and minorities in top management
TOTAL

Weight

Rating

Weighted
Score

0.250
0.100
0.100
0.025

4
4
4
3

1.00
0.40
0.40
0.08

0.025
0.025
0.025
0.100
0.025

3
4
4
4
3

0.08
0.10
0.10
0.40
0.08

0.012
0.100
0.100
0.013
0.100
1.00

2
2
1
2
1

0.02
0.20
0.10
0.03
0.10
3.19

TOWS Matrix
Strengths
1. Customer oriented
2. SAMs Club consumers able to
buy in bulk
3. Supercenters offer one-stop
shopping
4. Satisfaction guaranteed
programs promoting customer
goodwill
5. Buy from local merchants when
possible
6. Stock ownership and profit
sharing with employees
7. Leads industry in information
technology
8. Ongoing development of its
employees
9. Strong community involvement

Weaknesses
1. No formal mission statement
2. Membership only for SAMS
Club
3. Keep poor-performing
employees on hand
4. Old-fashioned store policies
5. Few women and minorities in
top management

TOWS Matrix
Strengths
1. Customer oriented
2. SAMs Club consumers able to
buy in bulk
3. Supercenters offer one-stop
shopping
4. Satisfaction guaranteed
programs promoting customer
goodwill
5. Buy from local merchants when
possible
6. Stock ownership and profit
sharing with employees
7. Leads industry in information
technology
8. Ongoing development of its
employees
9. Strong community involvement

Weaknesses
1. No formal mission statement
2. Membership only for SAMS
Club
3. Keep poor-performing
employees on hand
4. Old-fashioned store policies
5. Few women and minorities in
top management

TOWS Matrix
Threats
1. Regulation of Wal-Mart
pharmacies
2. Small towns do not want entry
of Wal-Mart
3. Bad media exposure for Kathie
Lee brand
4. Variety of competition
nationally, regionally, and
locally
5. Substitute products more easily
because of intense competition

S-T Strategies
W-T Strategies
1. Buy from local merchants to
1. Allow consumers to buy in
promote unity in the community
smaller bulk without having
(S5, T4)
membership to SAMS
2. Build more Supercenters for the
Club (W2, T5)
increased demand for one-stop
shopping (S3, T4)

SPACE Matrix

Y axis
Financial strength
Environmental stability

+5
-2

+1 worst to + 6 best
-1 best to 6 worst

Y axis: 5 + (-2) = 3

X axis
Industry strength
Competitive advantage

5
-2

1 worst to 6 best
-1 best to -6 worst

X axis: 5 + (-2) = 3

Conservative

FS

Aggressive

CA

IS

Defensive

ES

Competitive

Grand Strategy Matrix

RAPID MARKET
GROWTH
Quadrant II

Quadrant I

WEAK
COMPETITIVE
POSITION

Wal-Mart

Quadrant III

Quadrant IV
SLOW MARKET
GROWTH

STRONG
COMPETITIVE
POSITION

The IE Matrix
The IFE Total Weighted Score

High
3.0 to 3.99

Strong
3.0 to 4.0

Average
2.0 to 2.99

Weak
1.0 to 1.99

II

III

Wal-Mart

Medium
The EFE Total 2.0 to 2.99
Weighted Score

IV

VI

Low
1.0 to 1.99

VII

VIII

IX

Grow and Build

QSPM
Key Internal Factors
Weight
Strengths
Customer oriented
SAMSS club consumers able to buy in bulk
Supercenters offer one-stop shopping
Customer goodwill
Buy from local merchants when possible
Stock ownership and profit sharing with employees
Leads industry in information technology
Ongoing development of its employees
Strong community involvement
Weaknesses
No formal mission statement
Membership only for SAMS Club
Keep poor-performing employees on hand
Old-fashioned store policies
Few women and minorities in top management
SUBTOTAL

0.25
0.10
0.10
0.03
0.03
0.03
0.03
0.10
0.03
0.01
0.10
0.10
0.01
0.10
1.00

Strategic Alternatives
Build additional
Improve
Supercenters
SAMS Club
nationwide and
operations
worldwide
AS
TAS
AS
TAS
--------1.00
0.10
4.00
0.40
4.00
0.40
1.00
0.10
------------------------2.00
0.05
3.00
0.08
2.00
0.20
1.00
0.10
----------1.00
1.00
1.00
1.00

--0.10
0.10
0.01
0.10
1.06

--2.00
2.00
2.00
2.00

--0.20
0.20
0.02
0.20
1.30

QSPM
Key Internal Factors
Weight
Opportunities
Consumers want ease of shopping
Internet shopping growing
Kmart and other stores struggling
Similar shopping patterns worldwide
Retail sales expected to increase
Environment conscious consumers
Elderly population growing
Asian market virtually untapped by retail
European market untapped by retail
Threats
Regulation of Wal-Mart pharmacies
Small towns do not want entry of Wal-Mart
Bad media exposure for Kathie Lee brand
Variety of competition nationally, regionally, and
locally
Substitute products more easily because of intense
competition
SUBTOTAL
SUM TOTAL ATTRACTIVENESS SCORE

Strategic Alternatives
Build additional
Improve
Supercenters
SAMS Club
nationwide and
operations
worldwide

0.08
0.10
0.20
0.05
0.05
0.04
0.04
0.06
0.07

4.00
3.00
4.00
4.00
3.00
----4.00
4.00

0.32
0.30
0.80
0.20
0.15
----0.24
0.28

3.00
4.00
3.00
3.00
2.00
----3.00
3.00

0.24
0.40
0.60
0.15
0.10
----0.18
0.21

0.10
0.02
0.04
0.05

2.00
3.00
--3.00

0.20
0.06
--0.15

1.00
2.00
--2.00

0.10
0.04
--0.10

0.10

---

---

---

---

1.00

2.70
3.76

2.12
3.42

EPS/EBIT Analysis
EPS-EBIT Analysis for Wal-Mart (in $millions at 12-31-01)
$Amount Needed: $5,000
Stock Price $56
EBIT Range $10,000 to $15,000
Tax Rate 3,897/10,751 = 36%
Interest Rate 5%
#Shares Outstanding 4,450
Common Stock Financing
EBIT ($10,751 in 2001)
Interest (5%)
EBT
Taxes 36%
EAT
# of Shares Outstanding
EPS

High
$15,000
0
15,000
5,400
9,600
4,539
2.115

Low
$10,000
0
10,000
3,600
6,400
4,539
1.41

Debt Financing
High
$15,000
250
14,750
5,310
9,440
4,450
2.121

Low
$10,000
250
9,750
3,510
6,240
4,450
1.40

Conclusion: Wal-Mart should use debt to raise the $5,000 million on the Low EBIT estimate but should
use stock on the High EBIT.