Case Assessment

Walmart, a discount retailer, was started by Sam Walton in the small town of Rogers, Arkansas, in 1962. By
2014, Walmart had become the world’s largest retailer, with more than $476 billion in revenues and 10,942
stores. More than one-quarter of Walmart’s revenues came from outside of the United States as it continued
to take its low-cost business model around the world. Traditional discount-retailing competitors, including
Sears, Kmart, and Target, were now dwarfed by the size of Walmart’s operations (see Exhibits 1 and 2).
Fiscal year ending Jan 31, 2007 2011 2013 2015 9-year Growth
Walmart Stores Segment
—Net Sales $226,294 $260,261 $274,433 $288, 049 27%
—Operating Income $17,029 $19,914 $21,491 $21,336 25%
—Operating Inc. % Sales 7.6% 7.8% 7.8% 7.4%
International Segment
—Net Sales $77,116 $109,232 $134,748 $136,160 77%
—Operating Income $4,259 $5,606 $6,617 $6,171 45%
—Operating Inc. % Sales 5.1% 4.9% 4.9% 4.5%
Sam’s Club
1
What Is Business Strategy? Page 1 of 14
https://edugen.wileyplus.com/edugen/courses/crs12076/ebook/c01/dyer9781119411697c0… 3/18/2019Fiscal year ending Jan 31, 2007 2011 2013 2015 9-year Growth
—Net Sales $41,582 $49,459 $56,423 $58,020 40%
—Operating Income $1,512 $1,711 $1,960 $1,976 31%
—Operating Inc. % Sales 3.6% 3.5% 3.5% 3.4%
Source: Walmart Annual Reports
Exhibit 1Walmart’s Sales and Income by Segment (in millions)
Fiscal year ending in: 2007 2011 2013 2015 9-year Growth
Domestic Discount Retail
Kmart
—Net Sales $17,256 $15,285 $15,593 $10,188 −41%
—Operating Income $402 $-34 $353 −$292 −14%
—Operating Income % Sales 2.3% N/A 2.3% −2.9%
Target
—Net Sales $63,367 $69,865 $72,596 $73,785 16%
—Operating Income $5,272 $5,322 $4,229 $4,910 −7%
—Operating Income % Sales 8.3% 7.6% 5.8% 6.6%
Warehouse
Costco
What Is Business Strategy? Page 2 of 14
https://edugen.wileyplus.com/edugen/courses/crs12076/ebook/c01/dyer9781119411697c0… 3/18/2019—Net Sales $63,088 $87,048 $102,870 $113,666 80%
—Operating Income $1,609 $2,439 $3,053 $3,624 125%
—Operating Income % Sales 2.6% 2.8% 3.0% 3.2%
International Discount Retail
Tesco
—Net Sales £42,641 £60,931 £64,800 £62, 284 46%
—Operating Income £2,648 £3,811 £2,188 −£5,792 −319%
—Operating Income % Sales 6.2% 6.3% 3.4% −9.3%
Carrefour
—Net Sales €82,148 €81,271 €74,888 €76,945 −6%
—Operating Income €3,338 €2,182 €2,238 €2,445 −27%
—Operating Income % Sales 4.1% 2.7% 3.0% 3.2%
Exhibit 2Competitors’ Financial Performance Results (in millions)Source: Company Annual Reports
However, as the new century began, Walmart faced some new competitors and new challenges. Costco had
entered the discount-retailing market, offering low prices on products that were generally deemed to be of
higher quality than many products sold at Walmart and Sam’s Club. Aldi, a new discount retailer out of
Germany, offered lower prices than Walmart by using a business model that was even more bare-bones than
Walmart’s. But the biggest threat came from Amazon.com, the dominant player in the fast-growing online
segment of the discount retailing business. Amazon.com was growing rapidly by selling large volumes of
goods online at prices that usually matched—or beat—Walmart’s prices, with the additional advantage of
zero sales tax. Walmart’s success in the future would require responding effectively to the growing trend
toward online purchases and the emergence of Amazon.com as a major competitor.
Walmart’s History