Wal-Mart

History/Background of Wal-Mart Wal-Mart was founded by Sam Walton, with the first discount store opening in Rogers, Arkansas, in 1962. Within five years, the company expanded to 24 stores across Arkansas and reached $12.6 million in sales. In 1969, the company was incorporated as Wal-Mart Stores, Inc. Walton was extremely successful in running the stores. The company grew to 276 stores in 11 states by the end of the 1970s, far exceeding expectations Wal-Mart became the nation’s No.1 retailer in 1990, entering into Mexico, Canada, China, Germany, UK etc, and the first international store opened in Mexico City in 1991. In 2005, the growth of the company has reached the peak of its industry in US. Wal-Mart Stores Inc was the world’s largest retailer, with $288 billion in sales. The company held an 8.9% retail store market share in the United States, which means that of every $100 that Americans spent in retail stores, $8.9 was spent in Wal-Mart. Wal-Mart, was also the largest private-sector employer which employed more than 1.6 million associates worldwide. The information technology that powered Wal-Mart’s supply chain and logistics was the most powerful, next only to the computer capability of the Pentagon. Wal-Mart had the largest privately owned satellite communication network in the U.S. and broadcasted more television than any network TV. So how could Wal-Mart be so successful' We will now look at their good strategies. Corporate Strategy Purpose In terms of Corporate Strategy. Wal-Mart has the tenet: “In everything they do, they’re driven by a common mission, which is, Saving people money so they can live better.” Patterns in resource allocation Wal-Mart stores are related diversified as Wal-Mart's operations are organized into three divisions: Wal-Mart Stores U.S., Sam's Club, and Wal-Mart International. It consists of three retail formats that have become commonplace in the United States: Discount Stores, Supercenters, and Neighborhood Markets. The retail department stores sell a variety of mostly non-grocery products. Wal-Mart's investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, while it was forced to pull out of Germany and South Korea when ventures there were unsuccessful. Wal-Mart has obtained a 38% controlling share in the Japanese retail chain Seiyu in order to capture a slice of the world’s second largest market estimated at $1.3 trillion. Asda, which retains the name it had before acquisition by Wal-Mart, accounted for 42.7% of sales of Wal-Mart's international division in 2006. Though Wal-Mart may have been the top customer for consumer product manufacturers, it deliberately ensured it didn’t become too dependent on any one supplier. Business Strategy Position Cost leadership Wal-Mart’s winning strategy in the U.S was based on selling branded products at low cost. They guarantee “everyday low prices” to attract more customers rather than relied on advertised “sales”. That’s the reason why there were 138 million customers visited Wal-Mart store each week in the whole world. 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. Wal-Mart had implemented a satellite network system that enable the communication between stores, distribution centers and suppliers, it consolidated orders for goods, and then made the inventory costs reduced. Differentiation The competitive advantage comparing to Wal-Mart’s competitors is they apply many updated technologies. For example, Wal-Mart had persuaded its suppliers to have latest supply chain technologies which could increase its efficiency and productivity. As the largest trucking companies in the United States, the company has private-owned trailer trucks and truck drivers, unlike the outsourced trucking competitors. Focus Rather than most competitors such as Kmart, which focused on large towns with populations greater than 50,000, Wal-Mart has build large discount stores in small rural towns in its early years. Mission By 2005, Wal-Mart held an 8.9% retail store market share in the United States and become the market leader of supermarket industry. However, the company is keen to retain the leadership position and need significant cash outlays to maintain their competitive strength in such rapidly growing market. Management control systems As we all know that management control is the process by which managers influence other members of the organization to implement the organization’s strategies. For Wal-Mart, I have identified several management controls that conform to the goals of the company. Wal-Mart has provided financial and volunteer support to more than 100,000 charitable and community-focused organizations, and by using their locations to provide opportunities for their customers and associates to give back. For example, stepping up efforts to help end hunger in America and responding Haiti Earthquake etc. For its outstanding achievement in employee and community relations, Wal-Mart has been placed in the top spot on “Most Admired Companies” list in Fortune magazine. The company’s management control system was directed toward the efficient management of store operations, which in turn conferred a cost advantage companywide. The company collected, analyzed, and transmitted electronically data/items from 5,300 individual stores, on real-time basis. The information enabled the company to acknowledge the performance from individual stores or departments, and to make appropriate adjustments, so that to improve operations in “problem” stores. Further, the company was able to reduce pilferage-related losses. Comparing to the industry standard, Wal-Mart has issued a policy of sharing 50 percent of savings from decreased pilferage. In return for employees’ loyalty and dedication, Wal-Mart has implemented a profit sharing scheme since 1971, to encourage the employees’ better performing. For encouraging managers to be accountable and creative, Wal-Mart has introduced “Best Yesterday” ledgers that required store managers to fill out. The ledgers tracked daily sales performance against prior years’. For Wal-Mart’s management control systems, lots of experiments have been executed in some stores and succeed. In the area of customer services, one example was the “people greeter”, an associate who welcomed people as they entered the store. These greeters not only show their passion, but also monitor the customer’s behavior at the same time. It’s just like the airhostesses who standing at the gate of the airplane and greeting you, actually they want to double check your boarding pass. The 10 Foot Rule states that if a Wal-Mart Associate gets within 10 feet of a customer they are supposed to greet that customer and offer friendly assistance. There are several other policies and programs for its associates, such as incentive bonuses, discount stock purchase plan, promotion and open-door policy etc. Social Influence Wal-Mart's business model is based on selling a wide variety of general merchandise at “always low prices.” Such “low prices” is not only referring to the monetary terms, but also lower the negative impacts on the whole society. As the market leader of Supermarket Industry, Wal-Mart takes the sustainability issues very seriously. Environment At Wal-Mart, they are now using the sun and wind to help power their stores. Their drivers’ routes are shorter, which means less petrol and greenhouse gases. The way they are performing makes a big difference for the environment and also saved their money, which would then pass along to the public. Wal-Mart has conducted Global Shopping Bag Commitment through three strategy of reduce, reuse and recycle. -- Reduce: Decrease the amount of plastic going into our bags and also ensure bags are being loaded properly, reducing the number of plastic bags needed per trip to the store -- Reuse: Increase reusable bag use among our customers by making them accessible and affordable and educating customers on the benefits of reusable bags -- Recycle: Increase number of plastic bags being recycled. Customers Each week, about 100 million customers, nearly one-third of the U.S. population, visit Wal-mart's U.S. stores. Wal-Mart’s advertising slogan “Always low prices” used from 1962 until 2006 is the most important reason for attracting people shopping there. Employees Wal-Mart has the goal to attract, hire, keep and develop the best people. Every effort is made to provide a workplace where all associates feel respected and valued. As the company is rapidly developing, it has expanded to lots of subsidiaries worldwide. Thus, they provided global job opportunities to associates. They have also continued to refine existing programs and implement new career development options to ensure associates maximize opportunities that contribute to their continued success, which empowers associates to achieve the extraordinary. Communities As mentioned before, Wal-Mart has a long history for supporting charities and communities. In that case, the company builds good relations with communities, which improve their reputation, and also bring the good effects to the public. Economic Wal-Mart has a positive impact on small business. Although Wal-Mart’s low prices policy caused some existing businesses to close, it also created new opportunities for other small business. For the concern of jobs, the opportunities created by Wal-Mart have also stimulated the economy and saved many working families. Shareholder/Stakeholder theory Both the shareholder and stakeholder theories are normative theories of corporate social responsibility, dictating what a corporation's role ought to be. Shareholder theory asserts that shareholders advance capital to a company's managers, who are supposed to maximize shareholders’ values. On the other hand, stakeholder theory asserts that managers have a duty to both the corporation's shareholders and any individuals who contribute to a company's wealth creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers. In determining the public affairs strategy of Wal-Mart, there are many groups and individuals who have a stake in what Wal-Mart does. However, the two stakeholders I will focus on are one external stakeholder (customers) and one internal stakeholder (employees).   Through the years Wal-Mart has had to restructure their business but they have done so efficiently, always changing and always growing but always making the consumer feel as if they are first. Their unique way of treating employees helps to make this company stand out. The company is encouraging employees to be accountable to their own activities and provide incentive plans to make them creative. Their mission of “Saving people money so they can live better” was built on the principle of their founder, Sam Walton, who believed that associates should treat customers the way management should treat associates. Wal-Mart's goal to always supply their customers with great retail products at affordable prices along with a smile as well as always being of assistance is another reason they are able to stay ahead of their competition. Some of Wal-Mart's sustainable sources of competitive advantage lie largely in their goal to providing their customers with the "Everyday Low Prices" that they have grown to expect.   Wal-Mart tried their best to balance profit maximization with the long-term ability of the corporation to benefit the shareholders. Meanwhile, they also considered the society as whole, conducted activities that would not be harmful for the stakeholders such as employees and customers. Assure the stakeholders’ obtaining of legitimate interests and ethical obligation while they making decisions. Wal-mart has policies that offer benefits to them as well. Therefore we can learn from the success of this mega-corporation that stakeholder theory is the theory that others should follow. Conclusion In conclusion, Wal-Mart is the number one retailer in the United States and is at the top of the Fortune 500 listing. In order for Wal-Mart to stay at the top of their game and follow the company strategy and achieve their key policy goals, they are going to have deal better with their stakeholders and make sure they guard their reputation well.