1. Picking Wal-Mart’s POCKETS © Michael Bergdahl International Speaker, Author & Wal- Mart Competition Authority Baltimore, Maryland November 6, 2007 American Logistics Association Presents:

2. 1962

3. World’s Largest Company World’s Richest Man Picking Wal-Mart’s POCKETS

4. “Bird-Dawg”

5. X X Bentonville, Arkansas Wal-Mart Headquarters

6. Wal-Mart Big #’s 7100 Stores & 120 DC’s 7100 Stores & 120 DC’s 1.9 million Employees 1.9 million Employees 176 million Customers 176 million Customers Fact: 31 regional grocers have failed since Wal-Mart entered the grocery business.

7. Wal-Mart Big #’s $39,000,000 Sales $39,000,000 Sales $20,000 Profit $20,000 Profit Home Depot + Kroger + Target + Sears + Costco + K-Mart Home Depot + Kroger + Target + Sears + Costco + K-Mart Fact: Wal-Mart’s net profit is only 3.2% of total sales. Every Hour! Every Minute!

8. Picking Wal-Mart’s P.O.C.K.E.T.S. Price Operations Culture Key Item Promotion/Product Expenses Talent Service POCKETS = NICHE

9. “Why is Wal-Mart’s Every Day Low Price Strategy such a powerful competitive advantage?” Price Price Strategy Question:

10. Sam Walton’s Discounting Principle A. Buy in large quantity for 80¢ B. Price it at $1.00 rather than $1.20. C. Make ½ the profit per item D. He sold 3 times as much generating a greater profit overall Price

11. Wal-Mart’s Guaranteed Low Prices Accomplished via Shopping Cart Comparisons Price

12. Picking Wal-Mart’s POCKETS Price Leverage economies of scale - buying Special Buy Merchandise Opportunities Leverage customer loyalty programs

13. Operations Strategy Question: “What makes Wal-Mart’s Store Operations so unique?” Operations

14. “Commoditization” Wal-Mart is a supply chain driven company, not merchandise driven. Wal-Mart is a supply chain driven company, not merchandise driven. Cross docking distribution centers No Warehouses Largest privately owned IT systems in the world 7000 privately owned truck fleet – largest in the USA Operations

15. Hurricane Katrina “Wal-Mart’s trucks were the first to arrive in New Orleans.” Operations Fact: US Feds studied Wal-Mart’s Logistics after Katrina

16. Picking Wal-Mart’s POCKETS Operations - Focus on the basics - Continuous improvement - Share Best Practices with Suppliers

17. Culture Strategy Question: “How does Wal-Mart focus its leaders and employees as it continues to grow? Culture

18. The Teachings of Sam Walton Golden Rule Values Storyteller – Company Folklore Innovator & Imitator Embraced change like a friend Culture

19. Sam Walton’s 10 Rules for Success 1 - Controlling Expenses 1 - Serving Customers 1 - Taking Risks 1 - Your Personal Commitment 6 - Treatment of People Culture

20. Picking Wal-Mart’s POCKETS Culture - Treat employees like business partners - Solicit ideas from employees - use them - Take care of your people...

21. “What is the secret to Sam Walton’s strategy for selecting products and services for Wal-Mart’s stores?” Key Item Promotion / Products Strategy Question: Key Item Promotion / Products

22. “Sam Walton gathered product ideas by visiting his stores, talking to his customers and employees & visiting his competitor’s stores!” Outside / In Approach Key Item Promotion / Products

23. Saturday Morning Meetings Everyone at Wal-Mart is a Merchant Key Item Promotion / Products

24. Picking Wal-Mart’s POCKETS Key Item Promotion / Products - Form Vendor Partnerships - Use an outside / in approach - Innovation versus Imitation

25. Expenses “How important is expense control to Wal-Mart’s overall retailing strategy?” Expenses

26. Managing Costs “Wal-Mart’s success in creating EDLP is driven equally by buying products at low prices & continuously reducing costs.” Expenses Savings in cost are passed on to customers by lowering prices

27. Expense Control at Wal-Mart -Centralized Temperature Control -Office Supplies / Paper Costs -Executive Travel Expenses

28. Wal-Mart’s People Greeters Theft control specialists Expenses

29. Picking Wal-Mart’s POCKETS - As volume rises – expenses go down - Lead by your own example - Culturally integrate cost control Expenses

30. Talent “How did Sam Walton get his employees to execute his aggressive tactics?” Talent

31. H.E.A.T.K.T.E. HE ATKT E High Expectations Are The Key To Everything “Average People – Above Average Performance” Talent

32. Talent Pool - Bentonville - hired off the farms - 75% of managers promoted internally - Demoted non-performers Talent

33. Picking Wal-Mart’s POCKETS - Hire for attitude and teach skills - E.D.I.D.D. - Get people involved in goal setting Talent

34. Service “What is the importance placed on customers and customer service at Wal-Mart?” Service

35. Sam Walton’s Legendary Service Standards - The customer is the boss - “99.9% of Customers are honest” - 2 rules of Customer Service Service

36. The Wal-Mart Cheer Service Who is Number One?

37. Picking Wal-Mart’s POCKETS - One agenda – The Customer - Stand behind your products / services - Empowerment – give people authority Service

38. Lions or Gazelles? Wal-Mart Competition Blog: www.michaelbergdahl.net Picking Wal-Mart’s POCKETS