Overview And History Of Walmart
In 1962, the first Wal-Mart Inc. discount store opened in Rogers, Ark. The founder of Wal-Mart is Sam Walton. The company was incorporated in Delaware in October 1969. Sam Walton was a man of vision, he along with his associates was passionate about helping people to have the same things that rich people have but with lower prices. The first three Sam’s Clubs were opened in 1984, the first supercenter opened in 1988 and the first Neighborhood Market was opened in 1999. Wal-Mart retail stores specialize in providing a broad assortment of quality merchandise and services at everyday low prices (Wal-Mart Stores, Inc. – Financial and Strategic Analysis Review, 2010).
The company operates in three business segments: Wal-Mart Stores, Sam’s Club and International. The Wal-Mart Stores segment includes Walmart.com, supercenters, discount stores and Neighborhood Markets in the United States. The International segment consists of operations outside of the United States. Wal-Mart operates 803 discount stores, 2,747 supercenters, 158 Neighborhood Markets and 596 Sam’s Clubs in the United States. Outside of the United States, the company operates 43 units in Argentina, 434 in Brazil, 317 in Canada, 252 in Chile, 170 in Costa Rica, 77 in El Salvador, 164 in Guatemala, 53 in Honduras, 371 in Japan, 1,469 in Mexico, 55 Nicaragua, 56 in Puerto Rico, 371 in the United Kingdom. Wal-Mart also operates 279 stores in China through a combination of joint ventures and minority-owned subsidiaries (Wal-Mart Stores, Inc. – Financial and Strategic Analysis Review, 2010).
According to the article “Wal-Mart Stores Inc” under “Financial Performance” states that, “Wal-Mart reported revenues of (U.S. Dollars) USD 408,214.00 million during the fiscal year ended January 2010, an increase of 0.95% over 2009. The operating profit of the company was USD 23,950.00 million during the fiscal year 2010, an increase of 5.05% over 2009. The net profit of the company was USD 14,335.00 million during the fiscal year 2010, an increase of 6.98% over 2009” (Wal-Mart Stores, Inc. – Financial and Strategic Analysis Review, 2010). Wal-Mart was named “Retailer of the Decade” by Discount Store News in 1989. Even with After Walton’s death in 1992, Wal-Mart’s sales continue to grow significantly.
Sam Walton envisioned a goal at Wal-mart to saving people money so they can live better. Today, with thousands of stores in a number of formats around the globe, this mission is embedded in their business; it lives in their culture; and it impacts every part of Wal-Mart, from customers and shareholders, to associates and communities. Wal-mart believes that by applying “Save money. Live better” mission to big global challenges like energy or the cost of prescription drugs, they can deliver both value and quality to customers, and ensure that neither comes at the expense of responsibility (www.walmartstores.com).
According to the article “Can We Do It” states Wal-marts three main goals which are: “To be supplied 100% by renewable energy; this calls for existing stores to be 20% more efficient in 2012, and new stores to be 30% more efficient in 2009. It’s looking to increase fleet efficiency by 25% in 2008, and 50% more efficient in 2015 compared with today. To create zero waste; the plan here calls for a 25% reduction in solid waste in 2008. All private brand packaging is being improved this year in terms of being right-sized, and made from reusable materials whenever possible. And to sell products that sustain our resources and environment; Wal-Mart is looking to have 20% of its supply base aligned to specifications here in 2008, with preference given to aligned suppliers” (Can We Do It, 2007).
Stakeholders are the groups that are affected by the Wal-Mart; the stakeholders could be anyone that is involved in the organization; including managers, community, suppliers, associates, employees, vendors and customers. Groups that are interested or affected by the work of organizations and believe to gain profit from its activity are basically the stakeholders.
The challenges Wal-Mart faces today are intense competition, price matching program by Target, legal issues, growth potential and foreign currency fluctuation. Make sure all paragraphs are a minimum of 100 words.
There is competition everywhere from schools to businesses. Every person wants to be on top. Wal-Mart is facing intense competition from a large number of local and international companies including Carrefour, Tesco, Target, Home Depot, Sears, Kohl’s, Kroger and Best Buy. Wal-Mart Stores competes with retailers that operate discount, department, drug, variety and specialty stores; supermarkets, super center-type stores; and hyper marts, as well as internet-based retailers and catalog businesses. Sam’s Club competes with wholesale clubs such as Costco and Metro, as well as discount retailers and wholesale grocers. Wal-Mart also competes with internet-based retailers such as amazon.com, target.com, and kohls.com. However, stiff competition could adversely affect the revenues and profitability of Wal-Mart. (DATAMONITOR: Wal-Mart Stores, Inc, 2009)
Target is Wal-Mart’s biggest competitor. Target planned to bring back the price matching program that was held down in 2002. Target has recently tested the price matching program in few of its store. As per the program, Target will match the competitor’s prices on identical items. Wal-Mart is currently offering a similar pricing program of matching the competitor’s advertised price on key value items under its save even more strategy. If Target successfully launches the program and expands the program across the US, it would reduce Wal-Mart’s existing market share (DATAMONITOR: Wal-Mart Stores, Inc, 2009).
Wal-Mart is currently running in 15 international countries where currency fluctuation can affect Wal-Mart’s performance. According to the article “DATAMONITOR: Wal-Mart Stores, Inc”, “During FY2009, the company’s international operations generated 24.6% of its total net sales. During FY2009, fluctuation in foreign currency exchange rates had a $2.3 billion unfavorable impact on the net sales of Wal-Mart’s international segment as compared to a favorable impact of $4.5 billion in FY2008. The unpredictability of the foreign exchange fluctuation would affect the company’s international planning process” (DATAMONITOR: Wal-Mart Stores, Inc, 2009). “Wal-Mart plans to add another 1,500 Supercenters to its base in the U.S. over the next five years, a 40% increase, or close to 300 million sq. ft. of new retail space.” Scot told Times Magazine that he is not trying to be flippant but plan to be everywhere they are not (Wal-Mart’s Challenges Mesh with Lee Scott’s Skills, 2003).
The opportunities from which Wal-Mart can benefit include; expanding brand portfolio, rising US healthcare spending, increasing online sales and increasing store network. In February 2008, Wal-Mart became the first nationwide US grocer to adopt Global Food Safety Initiative standards. Global Food Safety Initiative program requires Wal-Mart and Sam’s Club private label food products to audit and certify by the independently licensed auditors. The GFSI standard program would further strengthen consumer confidence over the quality of the company’s private label products, which in turn would ensure strong customer loyalty and increase in private label sales (DATAMONITOR: Wal-Mart Stores, Inc, 2009).
Online shopping is very popular in the US and has grown very rapidly. Although US retail sales have been decreased by the recession in the States, the online retail sales according to the “DATAMONITOR: Wal-Mart Stores Inc” has increase at 11% in 2009. The country is expected to see an online expenditure of $156 billion in 2009, higher than $141 billion recorded in the previous year. Wal-Mart has a strong presence in the online retailing format. The company markets more than 1,000,000 products through its flagship e-commerce websites walmart.com and samsclub.com. Further, Wal-Mart scored 77 points out of 100, in an annual consumer survey measuring e-commerce satisfaction by the US consumers. As per the survey the company is well ahead of some of its major competitors such as Khols.com (76 points), target.com (75 points) and best buy.com (74 points). This indicates Wal-Mart’s strong position in the online retail format. Wal-Mart is well poised to benefit from the expected increase in online sales. Moreover, online sales, while offering convenience to customers, also improve the company’s margins by cutting down operating costs (DATAMONITOR: Wal-Mart Stores, Inc, 2009).
Wal-Mart is based on the principals of individual respect; strive for excellence and excellent customer service. These beliefs are what help promote and build the illusion of integrity and ethical conduct that is the foundation of Wal-Mart. Wal-Mart has been successful, unsuccessful and both in the years passed. Wal-Mart makes good effort to control and improve work environment. Wal-Mart’s goal is to motivate, retain and develop their employees. Wal-Mart is very much aware that if employees are not motivated that they can’t provide the customer satisfaction in which they have a great passion for. Managers can better assist employees to work towards the goals of the organization when they know what motivates them to work (Wire Zone, 2010). Wal-Mart could better enhance individual motivation and performance beyond what it is currently doing by working as a leader instead of getting motivated by its employers.
Wal-Mart teams are consisted of six to seven members. Members are interdependent. They rely on each other’s skills. The benefits these teams bring to the organization are huge. They establish rules, roles and procedures. Teams may be empowered to various degrees. Among the areas over which they may have control are: Determining responsibilities within the team, Absenteeism and other member problems, Allocating vacation time, Scheduling, Recruiting and hiring new members, selecting their own leaders, setting performance standards for members, Appraising group performance, Budgeting and Training (Kalbaugh, G Edward, Sept 1998).
The strategies that Wal-Mart uses to support encourage, or reward teams are bonus, health insurance coverage, and stock option. In 2007, Wal-Mart gave bonuses to around 80% of their associates based on store performance. Wal-Mart uses effective communication skills to engage its employees and get feedback on regular basis. The key is to balance the organization with greater individual responsibility, trust and internal support, and control (Zone- Wire, 2010). According to the article “Using Leadership Skills to Improve Company Performance” states that, “The transfer of knowledge and skills, from leader to individuals, should be constantly encouraged as it provides a good way of educating and developing potential leaders.”
The organizational culture at Wal-mart has been shaped by the founder Sam Walton. According to the article “Sam Walton made us a Promise” Walton says in his autobiography, Made in America, “If you’re good to people, and fair with them, and demanding of them, they will eventually decide that you’re on their side. (Mark Gimein, 2002).
The organizational culture at Wal-Mart is devised a set of simple rules; three basic beliefs, ten foot rule, open rule, the sundown rule, grass roots process, servant leadership, teamwork, and Wal-mart cheer to guide the organization’s culture. Walton was passionate about keeping the costs of the business as low as possible. There are three basic corporate beliefs; respect to individual, service to customers and strive for excellence covering employee motivation, customer satisfaction and competitiveness (Culture, walmart.com).
Wal-Mart leaders ensured discipline and uniformity in the organization that was growing at such a rapid pace and had been operating for over many years now and such unity of purpose and a spirit of oneness was created and maintained across the organization that lead to resistance to change in the organization. Wal-Mart employees are trained well before they step into the organization. This training makes the employees well fit for the organization and they know what is expected from them. Employees are taught the rules, mission and goals which they have to fulfill.
In spite of the fact that Wal-Mart is doing great as an organization, there is still room for improvement. Wal-mart faces some weaknesses which need to be overcome by the organization. Wal-Mart is facing self-cannibalization in the process of opening new stores in the US. According to Wal-Mart’s internal estimates, “the impact on comparable store sales because of new-store-openings was approximately -1.1% in FY2009 and -1.5% in FY2008. Although the comparable store sales of the company increased by 3.5% and 1.6% in FY2009 and 2008 respectively, the new store openings in existing areas impacted the overall performance of the company adversely. If self-cannibalization trends continue further, the new stores may reduce sales from the existing outlets; this in turn would impact Wal-Mart’s business performance in the long run” (DATAMONITOR: Wal-Mart Stores, Inc, 2009).
Wal-Mart is involved in a number of legal issues. One of which is gender discrimination. Women are discriminated at the time of promotion, pay, training and job assignments. Wal-Mart is presently involved in a class action suit, Dukes vs. Wal-Mart Stores. The complaint is from the former and current female employees in Wal-Mart’s US retail and warehouse club store operations. The claimants sought $11.5 billion for injunctive relief, front pay, back pay, punitive damages and attorney’s fees. The suit is one of the biggest gender discrimination cases in the US.
Wal-Mart is should also focus on wages. Many employees are not getting paid for the work done. Such proceedings may adversely affect the company’s brand image. Moreover, any unfavorable outcome from the investigations could affect the company’s result of operation and profitability (DATAMONITOR: Wal-Mart Stores, Inc, 2009).
Wal-Mart was involved in several product recalls lately. In April 2009, Wal-Mart recalled the EB brand fitness ball because of reports on these fitness balls bursting unexpectedly; the event caused a fracture to a user and resulted in multiple bruises to another. The company also recalled Philips Senseo One cup coffeemaker, Joyfair Rashelle shoe, Stanley works stud sensor, Evenflo majestic high chair, and Conair clothes iron among others for possible health and hazardous reasons. Though the product defects are outside the company’s control, frequent product recalls indicate lax quality control measures by Wal-Mart. Moreover, continuous product recalls would lead to adverse publicity and loss of confidence among customers and would discourage consumers from buying the company’s products (DATAMONITOR: Wal-Mart Stores, Inc, 2009).
Every organization faces ups’ and down, the ones that survive can enhance their management by correcting their mistakes in future. Wal-Mart has come a long way with many obstacles overcome by the management and employees. Wal-Mart has the key to balance the organization with greater individual responsibility, trust and internal support, and control. Organizations have to get involved with their employees to know what motivates them and provide feedback, training and coaching. According to the article “What does Wal-Mart know that others do not?” by Barbara Young states that, “Sam Walton, company co-founder, may easily go down as the best businessman the world ever produced. His concept of bringing low prices to the masses not only proved to have staying power, but the company he co-founded is changing the way Big Business is run” (Barbara Young, August 2008).