Sears, Roebuck and Co. vs. Wal-Mart Stores, Inc
1. How do the retailing strategies of Sears and Wal-Mart differ?
Walmart’s strategy is more of a cost leadership strategy and Sears has more of a product differentiation strategy. This fact can be derived from their income statements , as is observed that Sears in 1997 spent 23% ( percentage of its sales) on Selling and administrative costs yet Walmart spent only 16% ( as a percentage of it’s sales ) on the same income statement line.
o Sears – differentiates by
• Located in shopping malls
• Selling Specialties: home furnishings, hardware, auto parts
• New strategy to target middle class women
• Proprietary credit card – to provide flexibility of payment
o Walmart – Focuses on
▪ Low price strategy
▪ Large product mix
▪ Lowering Operating expenses
2. Wal-Mart’s average return on equity for the 1997 fiscal year was 19.7% [$3,525/($18,503+17,143)/2] while Sears’ average return on equity over roughly the same period was 22.0% [$1,188/($5,862+$4,945)/2]. Don Edwards was puzzled by these numbers because of Wal-Mart’s reputation as a premier retailer and Sears’ financial difficulties not long ago. What is driving the performance of these two companies during fiscal 1997?
• Both Sears and Wal-Mart appear to be performing well in 1997 but due to different reasons. Wal-Mart appears to be experiencing organic growth ( growth from within the organizations from normal operations ). Wal-Mart keeps emphasizing on offering a wide variety of products at the lowest possible cost to increase revenue and gain market share. Sears on the other hand is growing by diversifying into other types of business like financing and real estate with mixed results. Wal-Mart...