Assignment

Program : Executive MBA – Oil & gas Management Max. Marks: 100Subject : Business Policy and StrategySubject Code : MBCG743

Section A

Write short notes on any FOUR of the following. (4 X 5)

01. Competition is coming in from all directions.02. Strategic business unit structure.03. Core competencies.04. Strategic versus Financial objectives.05. Leveraged buyouts.

Section B

Answer any THREE of the following. (3 X 10)

01. Do you think hostile takeovers are unethical? Why and why not?02. Planning is often doomed before it ever starts, either because too much is expected of it or

because not enough is put into it. Discuss.03. A management truism says structure follows strategy. However, this truism is often ignored. Too

many organizations attempt to carry out a new strategy with an old structure.04. Organizing is what you do before you do something, so that when you do it, it is not all mix up.

Elaborate.

Section C

Read the case below and answer the questions that follow. (2 X 25)

Wal-Mart Stores, Inc.Founded by Sam Walton, the first Wal mart store opened in Rogers, Arkansas, in 1962. Seventeen years later, annual sales topped $ 1 billion. By the end of January 2005, Wal-Mart stores, Inc. (Wal-Mart) was the world’s largest retailer, with $ 288 billion in sales (See exhibit 1 for comparative financial data). In 1995, Wal-Mart sold no grocery; by 2005, the company was the market leader among supermarkets in US. Wal-Mart was the largest private sector employer in the world. The information technology that powered Wal-Mart’s supply chain and logistics was the most powerful, next only to the computer capability of Pentagon. The company owned over 20 aircrafts-which were used by managers to travel to its stores in far-flung locations. The number of miles flown by Wal-Mart managers in the company owned aircrafts would place Wal-Mart on par with a medium sized commercial airline. Wal-Mart had

the largest privately owned satellite communication network in the US and broadcasted more television than any network TV.

Wal-Mart’s winning strategy in the US was based on selling branded products at low cost. Each week, about 138 million customers visited a Wal-Mart store somewhere in the world. The company employed more than 1.6 million associates (Wal-Mart’s term for employees) worldwide through more than 3,700 stores in the US an more than 1,600 units in Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea, Germany and the UK. Wal-Mart also obtained 38% controlling shares in the Japanese retail chain Seiyu in order to capture a slice of the world’s second largest market estimated at $ 1.3 trillion.

In 2002, Wal-Mart was presented with Ron Brown award for corporate leadership, a presidential award that recognizes companies for outstanding achievement in employee and community relations. In 2004, Fortune magazine placed Wal-Mart in the top spot of its ‘Most admired Companies’ list for the second year in a row.

By 2005, Wal-Mart held an 8.9% retail store market share in US. Put simply, for every $ 100 that Americans spent in retail stores, $ 8.9 was spent in Wal-Mart. Procter & Gamble, Clorox and Johnson & Johnson were among its nearly 3000 suppliers; no single vendor constituted more than4 percent of its overall purchase volume. In order to drive up supply chain efficiencies, Wal-Mart had also persuaded its suppliers to have electronic ‘hook-ups’ with its stores and adapt to latest supply chain technologies like RFID which would increase monitoring and management of inventory.

Wal-Mart used a ‘saturation’ strategy for store expansion. The standard was to be able to drive from a distribution center to a store within a day. A distribution center was strategically placed so that it could eventually serve 150-200 Wal-Mart stores within a day. Stores were built as far away as possible but still within a day’s drive of the distribution center; the area was then filled back (or saturated back) to the distribution center. Each distribution center operated 24 hours a day using laser-guided conveyer belts and cross-docking techniques that received goods on one side while simultaneously filling orders on the other. Wal-Mart’s distribution system was so efficient that they incurred only 1.3% of sales as distribution costs compared to 3.5% for their nearest competitor.

The company owned a fleet of more than 6,100 trailer trucks and employed over 7,600 truck drivers making it one of the largest trucking companies in the US. Wal-Mart had implemented a satellite network system that allowed information to be shared between company’s wide network of stores, distribution centers and suppliers. The system consolidated orders for goods, enabling the company to buy full truck load quantities without incurring the inventory costs.

In its early years, Wal-Mart’s strategy was to build large discount stores in small rural towns. By contrast, competitors such as Kmart focused on large towns with population of more than 50,000. Wal-Mart’s marketing strategy was to guarantee ‘every day low prices’ as a way to pull its customers. Traditional discount retailers relied on advertised ‘sales’.

MANAGEMENT SYSTEMS

Each store constituted an investment center and was evaluated on its profits relative to its inventory investments. Data from over 5,300 individual stores on items such as sales, expenses, and profit and loss were collected, analyzed and transmitted electronically on a real-time basis, rapidly revealing how a particular region, district, store, department within a store, or item within a department was performing. The information enabled the company to reduce the likelihood of the stock outs and the need for mark downs on slow moving stock and to maximize inventory turnover. The data from ‘outstanding’ performers among 5,300 stores were used to improve operations in ‘problem’ stores.

One of the significant for retailers was shoplifting, or pilferage. Wal-Mart addressed this issue by instituting a policy that shared 50 percent of the savings from decrease in a store’s pilferage in a particular store, as compared to the industry standard, among those store employees through store incentive plans.

Early in Wal-mart’s history, Sam Walton implemented a process requiring store managers to fill out ‘Best yesterday’ ledgers. These relatively straight forward forms tracked daily sales performance against the numbers from one year prior. Recalled Walton, “We were really trying to become the very best operators, someone who wants to make things work well, then better, then the best they possibly can”. His organization was really a ‘store within a store’ encouraging managers to be accountable and giving them an incentive to be creative. Successful experiments were recognized and applied to other stores. One example was the ‘people greeter’, an associate who welcomed shoppers as they entered the store. These greeters not only provided a personal service, their presence served to reduce pilferage. The ’10-foot attitude’ was another custom service approach Walton encouraged. When the founder visited his stores, he asked associates to make a pledge, telling them, “I want you to promise that whenever you come within 10 feet of the customer, you will look him in the eye, greet him, and ask him if you can help him”.

In return for employee’s loyalty and dedication, Walton began offering profit sharing in 1971. “Every associate that had been with us for at least one year, and who worked at least 1000 hours a year, was eligible for it,” he explained. “Using a formula based on profit growth, we contribute a percentage of every eligible associate’s wages to his or her plan, which the associate can take when they leave the company, either in cash or in Wal-mart’s stocks. In Fiscal 2005, Wal-Mart’s annual company contribution totaled $ 756 million. Wal-Mart also instituted several other policies and programs for its associates: incentive bonuses, a discount stock purchase plan, promotion from within, pay raises based on performance and not on seniority, and an open door policy.

Sam Walton, the founder of Wal-Mart, believed in being frugal. He drove an old beat up truck and flew economy class, despite being a billionaire. He instilled frugality as part of Wal-Mart’s DNA.

DISCUSSION QUESTIONS

01. What is Wal-Mart’s strategy? What is the basis on which Wal-Mart builds its competitive advantage/

02. How do Wal-Mart’s controls systems help execute the firm’s strategy?