Wal-Mart's Growth Conundrum : Should its Business Model be Changed?



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Code :BSM0062P

Year :
2007

Industry : Retailing

Region : Global

Teaching Note:Available

Structured Assignment :Available

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Wal-Mart's Retail Innovation: Profits and Perils Wal-Mart's evolution can be traced back to 1960s when Sam Walton along with brother J L Walton opened the first Wal-Mart discount City in Arkansas in 1962. Wal-Mart worked out a strategy of operating in small towns that were sparsely populated and being catered by only one store. Wal-Mart adopted the 'everyday low prices' strategy whereby it offered deep discounts for branded goods. Wal-Mart usually sold goods which were 15% cheaper than what other stores had to offer...

Wal-Mart's Increasing Popularity: Decreasing Growth Wal-Mart had been facing growth slowdown since the mid 1990s. The changing retail landscape and growing saturation in the US market affected Wal-Mart's fortunes.

Wal-Mart had no choice but to grow and open new stores to achieve increased sales volumes in its quest to offer lower prices to its customers. The company had a major presence in smaller towns of the US. However, Wal-Mart opened stores at such close proximity that it ended up cannibalising on itself. As per David Abella, an analyst, "It's the main reason why same-store sales have been flat".

Can Wal-Mart Bounce Back? Wal-Mart undertook several initiatives in a bid to achieve the desired growth rates and market share. Wal- Mart scaled back on its ambitious plans to market the upscale Metro 7 clothing line from 1500 stores in 2006 to 1000 stores in 2007 and decided to focus on its core customers rather than wooing the more affluent lot. It categorized its customer base into three groups namely 'brand aspirationals', 'price-sensitive affluents' and 'value-price shoppers' and said that its product centric decisions would be based on the above mentioned categories...

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