Wal-Mart’s Great Value Brand Makeover

Brand Strategy – Retailing- March, 2009

What is ‘Great Value’ brand?

In 1993, Wal-Mart launched the Great Value store brand. ‘Great Value’ is the largest grocery brand and the biggest brand that Wal-Mart has with thousands of products spanning 100 categories. Wal-Mart has more than 5,250 of its Great Value private-label products.

What did Wal-Mart do to its store brand?

Wal-Mart improved its private label offering – the Great Value line of products. Wal-Mart worked with both the suppliers and its customers for over a year to assess the quality of more than 5,250 of its Great Value private-label products against top national brands.

Features of Wal-Mart’s Brand Makeover:

  • Altered the formulas for 750 everyday items, mostly foods. E.g. The kids’ breakfast cereal was made crisper.
  • Product Innovation: Introduced new products which were designed using consumer feedback. Wal-Mart trained customers to do comparisons and give feedback on what they were looking for. E.g. New unusual flavors like mocha mud slide and cake batter introduced in the Great Value all-natural ice cream range. 80 new products under the Great Value line, such as thin-crust pizza, fat-free caramel swirl ice cream, and organic cage-free eggs.
  • New packaging design to provide a more consistent, consumer-friendly image. E.g. More prominent nutritional information with nearly all labels in both English and Spanish languages.

Why did Wal-Mart overhaul its oldest and biggest store brand?

Private Label Store Brands vs. National Brands

Consumers prefer buying private label store brands instead of national brands in times of economic uncertainty. Why? Simple, because they match the quality of national brands and that too at lower prices. Data tracker Nielsen reported that, in 2008, sales of private-label items increased 10% compared to a 2.6% increase for branded goods. An industry trade group, the Food Marketing Institute found that, in 2008, around 64% of buyers (59% in 2007) said they often or always preferred a store brand as compared to a national one. This is an indication that the initial hesitation shoppers had towards store brand products is disappearing and very quickly.

Advantages of Private-label brands/products

  • Typically cost less (5% to 20%) than name-brand products.
  • Higher profit margins for retailers owing to lower overhead costs and zero marketing expenses.

How private labels are faring at other retailers?

  • Kroger’s private-label collection set a new record when it touched 27% of overall sales in its most recent quarter.
  • Safeway’s ‘O Organics’ store brand is very successful. The retailer is now licensing it for use by other retailers.
Keywords: Wal-Mart, groceries, retailing, generic label, private label store brands, brand strategy, national brands

Is the Adidas Reebok merger working?

March 05, 2008 – Business Management Article

Adidas plus Reebok is equal to better competition with giant Nike

In 2006, Adidas (the German athletic apparel and the world’s second-biggest sports goods maker after Nike) acquired Reebok in a US$3.1 billion deal. The merger was aimed at helping Adidas increase its share in the U.S. market and better compete with market leader Nike Inc. and fourth ranked Puma AG. At the time experts felt that the merger made sense. But the key challenge was to unite Adidas’s German culture of control, engineering, and production and Reebok’s U.S. marketing- driven culture.

The Reebok acquisition was seen as a key factor in growing the Adidas brand in developing and fashion-oriented markets of Asia like China, Korea, and Malaysia. Moreover, Reebok already had marketing tie-ups in China (with Yao Ming) and Adidas did not have to cover all China segments. Read a blog post Adidas and Reebok Merger Case Study

Download full-text of management case study on adidas and Reebok merger (PDF file)

Adidas – Fourth Quarter 2007 performance

Adidas AG reported its fourth quarter results for 2007 (October-December, 2007). The results were helped by lower purchasing costs resulting from its acquisition of Reebok and improved sales.

Its net income rose to €21 million (US$31.9 million) from €13 million a year earlier. Sales increased to €2.4 billion (US$3.7 billion) compared with nearly €2.3 billion in 2006. In 2007, total yearly earnings were €551 million (US$837.9 million), up 14 percent from €483 million in 2006. Sales for the year rose marginally to €10.3 billion (US$15.6 billion) from €10 billion in 2006.

Adidas vs. Reebok unit performance

The Adidas brand had sales worth €7.1 billion (US$10.8 billion) while Reebok had sales worth €2.3 billion (US$3.5 billion). Last year, in 2006 the Adidas brand had sales worth €6.6 billion to Reebok’s €2.5 billion.

Year-end order backlog represents firm future revenues from contracts signed up to that date. Order backlog is a key indicator of future sales for retailers and Reebok’s lower order backlog remains the key question mark. Order backlog of brand Adidas was excellent up 17 percent which can be partly attributed to the Euro 2008 soccer championship and Beijing Olympics this year. However, Reebok’s order backlog was down 8 percent (down 20 percent in North America). Nike reported worldwide futures orders for athletic footwear and apparel (scheduled for delivery from December 2007 through April 2008) totaling $6.5 billion, 13 percent higher than such orders reported for the same period last year.

Meanwhile, Nike announced (Mar 3, 2008) that it has completed its acquisition of Umbro Plc. Nike’s Umbro takeover is an effort to consolidate its position in the football market where Adidas has performed well. Last year, Nike’s CEO Mark Parker outlined a brave plan to increase the company’s business to $23 billion in revenue by 2011. Will Nike do it or will the Adidas-Reebok merger spoil its plans, still remains to be seen.

Keywords: Adidas, Athletic Apparel and Sporting Goods, Mergers and Acquisitions, Nike, Reebok

Warren Buffett – Lunch with the Investment Leader

June 29, 2008 – Leadership and Entrepreneurship Article

Warren Edward Buffett, Chairman and Chief executive of Berkshire Hathaway Inc. and admired by many analysts for his shrewd business acumen is primarily known for his investing success. Over the years, Buffett developed his own tenets of buying a business or stock. Not only his investments, but companies acquired by Berkshire Hathaway also performed consistently over the years. Berkshire owns more than 60 subsidiaries including insurance, clothing, furniture, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola Co., Anheuser-Busch Cos. and Wells Fargo & Co. Also read Leadership case study on Warren Buffett (10 pages, PDF file).

He is known as the "Oracle of Omaha" and generally considered to be the world’s most successful investor with a net worth around U.S. Dollars 62 Billion. He has figured consistently among the top five in the Forbes magazine’s list of the 400 richest Americans (the elite Forbes 400). Buffett is also known for his philanthropy and in 2006, he announced his plan to give away the bulk of his nearly $49 billion fortune over time.

It may then not come as a surprise, that last year, $650,100 was the price for a lunch with the great leader in an auction on eBay. Buffett has been auctioning off lunches online for six years. He offers only one lunch a year. The auction benefits the Glide Foundation, which provides social services to the poor and homeless in San Francisco. It is anybody’s guess how high the bidding will go this year. Well to end the surprise, in the most expensive charity auction ever held on eBay, a Chinese investment fund manager (Zhao Danyang) won the chance to have lunch with billionaire Warren Buffett by bidding $2.1 million. The most expensive charity item ever sold on eBay earlier was a Harley Davidson motorcycle for $800,100. The motorcycle was autographed by celebrities that TV show host Jay Leno offered in 2005 for tsunami relief.

Warren Buffett, Leadership, Investment Leader, Oracle of Omaha

Daimler, Chrysler and the Failed Merger

March 10, 2008 – Business Management Article

Daimler 2007 Profit Rises

Mercedes-Benz maker, Daimler AG and the world’s second-largest maker of luxury vehicles reported profits in its fourth-quarter results for 2007. The good results this quarter have come after selling the Chrysler division in the U.S. and cutting jobs at Mercedes-Benz Cars. Without Chrysler, Daimler reported profits of 1.7 billion euros (£1.3 billion) for the fourth quarter and a net profit of 4 billion euros for the year (3.8 billion euros in 2006). Sales rose to 99.4 billion euros ($144.98 billion) from 99.2 billion euros, with 2.1 million automobiles sold globally. In May last year, after a decade of disappointing results, Daimler finally sold Chrysler to private equity firm Cerberus Capital for £3.74 billion.

With the North American car and truck market struggling this year from the impact of falling house prices in the wake of the sub-prime crisis, Daimler is banking on demand from China, India and Russia. Daimler, the Stuttgart-based company expects the North American truck market to recover in the second half of the year.

Daimler Chrysler Merger Failure

In 1926, the merger of two German automobile manufacturers Benz & Co. and Daimler Motor Company formed Stuttgart-based, German company Daimler-Benz. Its Mercedes cars were arguably the best example of German quality and engineering.

In 1998, Daimler-Benz and U.S. based Chrysler Corporation, two leading global car manufacturers, agreed to combine their businesses in what was perceived to be a ‘merger of equals’. Jurgen Schrempp, CEO of Daimler-Benz and Robert Eaton, Chairman and CEO of Chrysler Corporation met to discuss the possible merger.

The merged entity ranked third (after GM and Ford) in the world in terms of revenues, market capitalization and earnings, and fifth (after GM, Ford, Toyota and Volkswagen) in the number of units (passenger-cars and commercial vehicles combined) sold. In 1998, co-chairmen and co-CEOs, Schrempp and Eaton led the merged company to revenues of $155.3 billion and sold 4 million cars and trucks. But in 2000, it suffered third quarter losses of more than half a billion dollars, and projections of even higher losses in the fourth quarter and into 2001. In early 2001, the merged company announced that it would slash 26,000 jobs at its ailing Chrysler division.

Daimler, Chrysler and cultural differences

The Daimler Chrysler merger proved to be a costly mistake for both the companies. Daimler was driven to despair, and to a loss, by its merger with Chrysler. Last year, the merged group reported a loss of 12 million euros.

Analysts felt that though strategically, the merger made good business sense. But contrasting cultures and management styles hindered the realization of the synergies. Daimler-Benz attempted to run Chrysler USA operations in the same way as it would run its German operations. Daimler-Benz was characterized by methodical decision-making. On the other hand, the US based Chrysler encouraged creativity. While Chrysler represented American adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more traditional respect for hierarchy and centralized decision-making.

Related Automotive Updates:
Nissan and Chrysler joint relationship
Toyota overtakes Ford Sales

Automotive, Chrysler, Daimler, Mergers and Acquisitions

Is Dell’s Retail Strategy paying off?

January 17, 2008 – Business Management Article

Dell’s Turnaround Strategy working…

Ever since founder Michael Dell returned as CEO a year ago, Dell has forayed into retail, made more acquisitions and focussed on cutting costs. IDC reported that Dell is back to double-digit percentage growth in global PC shipments in the fourth quarter. Dell’s worldwide shipments shrank 8.4 percent last year.

Dell leaves behind HP as Largest PC Supplier in the U.S.

One of Dell’s Turnaround move was switching from a direct sales model to selling PCs through retailers like Best Buy and Wal-Mart. Dell’s new retail sales strategy is starting to pay off in the U.S. where Dell sold 15.2 percent more PCs than a year earlier. This figure is more than overall U.S. market growth of 8.8 percent and HP’s 9.8 percent. Dell shipped 5.5 million units in the U.S. Competitor HP’s (Hewlett-Packard)growth slowed. HP shipped 4.5 million units. But still Dell remained in the No. 2 market-share spot globally (Dell shipped 14.6 percent of the global PC market; a total of 11.3 million units). HP kept the No. 1 market share spot with 19 percent. HP remained the world’s largest PC dealer, topping Dell, Acer and Lenovo, according to figures from both firms. Taiwan’s Acer held 9.6 percent of the worldwide PC market and is aggressively expanding. Acer in October 2007, purchased Gateway Inc in the United States after which Acer’s PC shipments increased 60.3 percent. Apple Inc, held 5.7 percent of the U.S. market with its computers sales increasing by 30.9 percent in the fourth quarter. Lenovo made slower growth in the global market and is struggling to retain its core audience of business users.

Acer, Dell, Direct to consumer model, HP, Lenovo, PC Manufacturing

EBay’s Ethical Supply Chain

Business Ethics and Supply Chains

EBay and Ethical sourcing

In September 2008, EBay, the online auction giant, launched an ethically sourced online marketplace for selling products that have a positive impact on people and the planet. The project is a collaboration of eBay and World of Good. It includes a nonprofit development organization along with a corporate arm called World of Good Inc.

Socially responsible shopping – Tailored shopping impact

The online marketplace aims to give socially responsible shoppers a chance to buy great products that also help mankind and the planet. Customers can also customize their shopping impact (regardless of the social causes most important to them) by shopping for items with different attributes spanning 15 categories. Items are broadly classified as People PositiveTM and Eco PositiveTM.

Products for sale – Organic, made from recycled material and animal friendly

Sellers at the website (www.worldofgood.com) are verified by third parties known as trust providers. The goal is to meet a core set of ethical and environmental standards. Items for sale on the site include clothing, jewelry, coffee, tea, pottery, accessories and home decor items. These items are organic (e.g. organic clothing) and made from recycled materials. Beauty products sold on the site are ‘animal-friendly’ and some products are made by artisans from developing countries. Even food items are offered on the site.

Ethical consumer experiences with Unique GoodprintTM labeling system

A labeling system known as GoodprintTM gives each product on the site a unique nutritional label. This helps customers easily identify the positive social and environmental impact on each buy/purchase they make. They can assess if their purchase aids: economic empowerment, helps preservation of animal species, conserves energy, or is made of recycled, organic and/or sustainable materials.

Facilitating ongoing dialogue between buyers and sellers

The marketplace, an online community, not only helps bring together products, people, and organizations all in one place but also facilitates a dialogue (about ethical shopping) between them and Trust Providers via related blogs, articles, and forums.

EBay, founded in 1995, has more than 84 million active users worldwide. The items offered on WorldofGood.com are also made available on eBay.com.

Download related PDF files of management case studies on eBay:

eBay CEO Meg Whitman plans to retire

January 22, 2008 – Business Management Article

Margaret Whitman, the chief executive (CEO) of eBay, is planning to retire so as to breathe fresh life into the company and a much needed radical reinvention of eBay. In March, Ms. Whitman, 51, will have served in the position for 10 years.

Whitman, ranks 22nd on Forbes.com’s list of the world’s most powerful women. In October 2002, Fortune Magazine ranked Whitman, as the world’s third most powerful women in business, after Carly Fiorina and Oprah Winfrey. Under her leadership, eBay’s revenues and profits doubled every year.

Whitman, joined eBay as chief executive in 1998. Under her leadership and her strong belief in eBay’s business model and its customers, Revenues increased from $4 million to $1 billion by late 2002. Whitman led eBay towards success even when many dotcoms crashed.

“In the beginning, I was certainly not an entrepreneur who came up with the idea, but I think I was fairly entrepreneurial in trying to figure out how to bring that idea to life and build a backbone for the company that could take it to the next level,” Whitman commenting on her journey from a novice to a leader in the dotcom world.

Margaret C. Whitman was born in August 1956. She was popularly known as Meg Whitman and ‘darling of the Internet’. Whitman, a studious and clever student, and the youngest child of a Wall Street executive grew up in Long Island, New York. She graduated in Economics from Princeton University. She received an MBA from Harvard Business School in 1979. Whitman began her working career at Procter & Gamble from 1979 to 1981 and then worked for companies like Bain & Company and Walt Disney Company. Meg Whitman accepted the 2007 Lifetime Achievement Award for the community of buyers and sellers that make up eBay.

eBay, Leadership and Entrepreneurship, Margaret Whitman

Will controversy follow Exxon Mobil’s Record profits again?

February 02, 2008 – Business Ethics Article

Exxon Mobil and 2007: Record Profits

Oil companies like Chevron and Royal Dutch Shell reported strong profits in 2007. Chevron, the second-largest American oil company, reported profits of $18.7 billion (increase by 9 percent compared to last year). Royal Dutch Shell reported the best figure ever for a British company when its net income rose by 23 percent to $31 billion. Most oil companies, benefited from a near doubling of oil prices. In early January, the cost of crude oil passed the $100-a-barrel mark for the first time and has stayed above $90 for most of the time since then.

Exxon Mobil’s net income increased by 3 percent to $40.6 billion and sales figure was more than $404 billion. The fourth quarter of 2007 was the most profitable quarter ever in its history with net income increasing by 4 percent, to $11.7 billion. Revenue for the fourth quarter increased 30% to $116.6 billion. Exxon Mobil beat its own record for the highest profits ever recorded by any company to become the world’s most profitable publicly traded corporation.

But the main question is, Will Exxon Mobil face controversy again like it did last time in 2005, when it reported highest quarterly profits in the corporate history of the US. Already, the Foundation for Taxpayer and Consumer Rights, has called the profits unjustifiable and at the cost of an economy tipping into recession.

History of Exxon Mobil Corporation

In 1870, John D. Rockefeller (Rockefeller) along with his associates formed Standard Oil. In about 40 years time period, Rockefell went on to become the richest man in the world after he built Standard Oil into one of the largest integrated oil producing, refining, and marketing organizations in the world. However, US politicians and journalists accused Standard Oil of monopolistic practices and stifling competition. In 1911, after a US Supreme Court ruling Standard Oil Trust was dissolved into 34 separate companies.

Two of the thirty four companies formed by the dissolution, Jersey Standard and Socony went on to become Exxon and Mobil respectively.

In 1999, Mobil Corporation became a wholly-owned subsidiary of Exxon Corporation, and Exxon changed its name to Exxon Mobil Corporation.

Fourth Quarter 2005 – Record profits and Controversies

In 2005 (fourth Quarter), Exxon Mobil recorded profits of US$ 10.71 billion. This was the highest ever quarterly profits in the corporate history of the US. However, with rising oil prices there were problems. A few US policy makers and consumer activist groups accused Exxon Mobil of price gouging (pricing above the market when no alternative retailer is available) and corporate greed. In May 2006, the US House of Representatives passed a price gouging bill that would penalize any oil company found guilty of price gouging with penalties of up to US$ 150 million.

Even environmental activist groups were unhappy with the Exxon’s Valdez oil spill and oil drilling in the Arctic National Wildlife Refuge. In March 1989, Exxon Valdez, the oil tanker owned by Exxon, had caused major ecological and financial damage when it spilled 11 million gallons of crude oil in the Alaskan region.

Exxon Mobil maintained that though the rise in prices helped record profits, its ability to complete projects on time as well as keeping its costs in check was also a main contributing factor. The oil industry and American Petroleum Institute (API) too defended Exxon’s record profits. An advertisement in the media by API stated that the profitability of America’s oil and natural gas industry was far less than many other major industries, like banks, pharmaceuticals and real estate on an average in the past five years. And the US$ 10.7 billion fourth quarter profits of Exxon was a reasonable rate of return.

Read similar articles:
Mattel in 2007, the year of the product recall and the rebound
Starbucks for a Dollar, Storm in a coffee cup

Business Ethics, Chevron, Exxon Mobil, Oil Companies, Scams and Controversies

From a sluggish Caterpillar to an alert CAT

January 27, 2008 – Business Management Article

Chairman and chief executive of Caterpillar Inc, Jim Owens, expects to see record results again in 2008, in what he thinks will be a challenging year. But he hopes to see the world’s biggest maker of earth-moving equipment have all-time record results again fuelled by growth in markets outside the U.S.

Last quarter Caterpillar’s sales rose more than 10 percent inspite of a difficult domestic market. However, a very strong global footprint ensured record sales and profit for the whole year.

Caterpillar’s Turnaround Story

Until 1982, Caterpillar or ‘CAT’ (as most people refer it to) enjoyed a long-standing record of profitability and market leadership. However, with increased competition it was almost out of business. It then turned around its business from near-bankruptcy to profitability in a space of a few years. Jim Owens (now CEO), who started as a mid level manager at Caterpillar believed that it was a spectacular transformation of a kind of sluggish company into one that actually has entrepreneurial zeal. What made Caterpillar different was how it reshaped its DNA in a way that permanently changed the culture and capabilities of the enterprise. Caterpillar focused on its decision rights, organizational structure, motivating factors and metrics and measures – the four essentials of organizational DNA. CAT delivered 12 straight years of profit after that. It nearly tripled both its top and bottom lines since1993. In 2005, Forbes had listed Caterpillar as the best-managed industrial corporation in America. …

Caterpillar, Corporate Restructuring, Turnaround Strategies

GE’s Turnaround and Jack Welch’s straight talk

January 26, 2008 – Business Management Article

“Jacked Up: The Inside Story of How Jack Welch Talked GE into Becoming the World’s Greatest Company” is a 315-page book written by author Bill Lane. Bill Lane is none other than Jack Welch’s former speechwriter. In his book Bill recounts how John Francis Welch Jr. (Jack Welch) built upon the straight talk culture and insisted on it. He mentions how Welch was sometimes brutally direct and drove out muddy thinking. Perhaps his nickname “Neutron Jack” comes from this passion or like some felt sometimes rude boss.

GE from an old-economy manufacturer into a modern conglomerate

GE’s turnaround from from an old-economy manufacturer (US$13 billion in 1981) into a modern conglomerate (US$480 billion in 2000) is because of this straight talk culture Jack Welch insisted upon. Jack was quick to praise people whose ideas he liked and ready to pounce on those who did not meet his standards. During Welch’s tenure between 1981-2001, GE’s stock price increased 50 times and Jack Welch’s leadership is well illustrated in the fact that GE’s stock has shown little growth after his retirement (Jack Welch retired after spending 41 years with GE in September 06, 2001) and not to forget the 9/11 attacks.

GE Managers – No five-year strategic plans

Under Welch’s leadership, five-year strategic plans were done away with as he believed no one could could plan four or five years into the future. Bill mentions in his book that any such person who planned for four or five years was considered a ‘bullshitter’. Welch wanted GE managers to give simple and clear explanations of the
business challenges they were facing and their plan to overcome them.

Restructuring GE

Jack Welch joined GE in 1960 as a Junior Engineer. Jack Welch quickly rose to become the head of the plastics division in 1968. He became the GE’s youngest CEO in 1981. Jack Welch initiated a restructuring plan in his initial years as the chief executive. This restructuring plan included massive job cuts, positioning the various businesses as number one or number two in the respective segments, and selling off unprofitable ones. The 29 layers of hierarchy were dismantled. GE then transformed into an informal company…

General Electric Co (GE), Leadership and Entrepreneurship
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