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WAL-MART History, Philosophy, Business Strategy, Community Partnership and Present Structure and Future Outlook.
History
Wal-Mart is the brainchild of Sam Walton, born in Kingfisher, Oklahoma in the year 118. He was educated at the University of Missouri where he obtained a bachelor degree in economics in 140. Apart from being a good student through share dedication and hard work, Sam Walton was actively involved in extra curricular and community based activities. At different times he was the student president, president of Sunday school class, member of Rotary club, president of the local Chamber of Commerce, etc.
Sam Walton's first stint at retail business was at JC Penney Stores where he landed a job as manager trainee immediately after his graduation. He held the job until 14, when he enlisted in the USA Army for World War II. He put his entrepreneurial skills to test in 145, after his discharge from the military. He obtained the franchise of Butler Brothers to run a retail store at Newport. His store was a huge success with outstanding performance. His next store still under the franchise of the Butler Brothers was set up in Bentonville in Arkansas. This was the beginning of a bigger dream that would eventually see the birth of the world's largest retail chain in 16. By that year Sam and his brother Bud already had sixteen retail stores called Walton center, in Arkansas, Missouri and Kansas. These became Wal-Mart stores, as we know them today. The first Wal-Mart store was set up in Rogers, Arkansas. The chain experienced rapid growth and high profitability. By 180 it had over 00 stores. Today, both local and international, it has about 4,600 stores with annual sales in the region of $7 billion.
Philosophy
Sam Walton emphasized the pre-eminent position of customers in his business. His teaching is that every customer must receive courteous treatment in Wal-Mart stores. They are to be given "high value, low price and warm welcome". This is embodied among other things in the "10 foot attitude" which simply means that employees of the organization must endeavor to greet customers first, before the customer has the opportunity to greet them. Ancillary to this is Wal-Mart's practice of putting staff at the entrance doors of their stores to pleasantly welcome customers into the stores with friendly smiles. There is no doubt that this has positive psychological impact on the customers who naturally would want to do business in a friendly environment and interact with staff that demonstrate positive attitude.
Another limb of Wal-Mart's demonstrated customer commitment is seen in the emphasis on quality merchandise as well as brand name products at low prices. This no doubt has positive impact on customer loyalty. Sam Walton placed high premium in the ability of his staff, by their ethical treatment, to make customers come back over and over again. He therefore enjoined them to exceed the expectation of their customers at all times with the way they render quality services. Customer satisfaction and retention is the bedrock of Wal-Mart's business.
The pricing philosophy of Wal-Mart of passing on to customers the low price benefits from good deals with the manufacturer evidences a genuine commitment to customer's satisfaction. Sam Walton was once quoted as saying; "no matter what we pay for it, if we get a great deal, pass it along to the customers". Sam Walton succinctly put this philosophy is a concise statement he made while receiving the Medal of Freedom from President Bush in 1; "we will lower the cost of living for everyone, not just in America, but we'll give the world an opportunity to see what it's like to save and have a better lifestyle, a better life for all. We 're proud of what we have accomplished; we've just begun".
Business Strategy
Sam Walton underpinned his strategy for growth and profitability in Economies of scale and efficient use of available technology. Employing both he hoped to out-perform his competitors.
The aggressive growth strategy has seen Wal-Mart expand from twenty stores in 16 to over three hundred by 180. Today, the stores number over 4,600 both at home and globally. The staff strength currently stands at 1. million. Annual sales is a staggering $7 billion, with annual income of $7.7 billion.
Wal-Mart is a pioneer in discount merchandising. It established and maintained good business relationship with manufacturers of product, and given its size over time it has become increasingly able to negotiate good trade deals. This has enabled Wal-Mart eliminate costs and bottlenecks associated with middlemen and third party transactions. The cost cutting advantage of direct relation with manufacturers has also enabled Wal-Mart to meet its commitment of high value/low price to its customers. This relationship with manufacturers was and is fostered with professionalism and ethical treatment.
Sam Walton was quite mindful of the fact that productivity bears directly on profitability. He therefore fashioned policy that elicited and encouraged total commitment and high productivity from the employees whom he referred to as associates. Sam's 10 rules for success are intended to achieve this end. He set up equity participation scheme for willing store managers and encouraged that associates be included in profit sharing. This enabled employees to give their best and believe that they are also partners in the prosperity of the company.
Staff motivation and morale boosting in strongly emphasized in the "10 rules for success" Setting high targets, accompanied by handsome reward for achievement is part of the efficiency and growth plan of Wal-Mart. The company is also committed to treating its employees with significance. They are to be listened to and their intelligible contribution, especially as it affects cost saving and customer response is welcome.
Staff empowerment is also part of the success strategy. Management is encouraged to treat all staff as partners and communicate all relevant business information to them. This, it is viewed will enable them work smarter and raise productivity to new heights.
On the side of merchandise availability, Wal-Mart has employed up-to-date computer technology to ensure speedy replenishment of merchandise in its entire stores. As early as 166, Wal-Mart employed bright brain from IBM and created a centrally linked data based merchandise monitoring system that quickly highlights dwindling stock of any merchandise. This, in conjunction with the company's owned transportation system enabled quick restocking of products. Infact Wal-Mart restocks four times quicker than its competitors. Currently Wal-Mart has the second largest database software program after Pentagon. Wal-Mart has created automated reordering system that links computers between Procter & Gamble [P&G] and its stores and distribution stock. This link enables P&G to receive resupply orders identifying the products that are needed. P&G is then able to quickly send the needed stock to the respective Wal-Mart stores. This technology will obviously lower costs and restocking time for Wal-Mart.
Community Partnership
Wal-Mart has a policy goal of identifying with the communities within which its stores are located. It is an active partner in community upliftment. It participates in fund raising efforts by non-profit organization for Community Matching Grant Programs. Associates are given latitude in steering charity donations to the needs of their respective local communities. By this process Wal-Mart actively supports and identifies with vision and aspirations of the communities where it does business. Inspite of its scale it aims at becoming the "neighborhood store".
Further still, Wal-Mart contributes to the educational needs of the communities by its college scholarship awards to high school seniors. It also raises funds for local children's hospitals through the "Children's Miracle Network Telethon".
Wal-Mart's commitment to buying home made goods of comparable quality and usability to foreign made ones, translates into community empowerment, as it has the tendency to encourage local entrepreneurial skills in the manufacturing field. This will also boost domestic job creation.
Wal-Mart it also an environmentally conscious organization. Through its "Green Coordinator" each store makes effort to transact its business in environmentally friendly manner. Besides, it also encourages the use of recyclable materials, as well as educates local communities in environmental management techniques.
Present Structure and Future Outlook
While future prospects are not necessarily bleak, inherent weakness in Wal-Mart's business structure poses some risk factors.
Firstly, the single business strategy [retail trading] is akin to one putting all its eggs in one basket. It is true that such strategy accounted in part for the tremendous success of the organization, it is doubtful if it will endure for all times. If consumer demand falters, due to downturn in the economy, Wal-Mart will find it increasingly difficult to make profit at the level it had done in the past. That would raise the economic question of efficient deployment of capital. Diversification at this stage may be a strategic business response to cure the risk inherent single-business approach.
Secondly, Wal-Mart's business territory is no longer as secure as it once was. Specialty retailers such as Home depot, Circuit City and Spiegel are now able to match Wal-Mart's prices in products common to them. This means that the strategic advantage of low prices that Wal-Mart depends on is being gradually significantly diluted.
Thirdly, part of Wal-Mart's success strategy hinged on rapid expansion. But, due to economic factors, growth can not be pursued ad infinitum. At some point diminishing returns set in. Thus businesses expansion quest is governed by the need for optimal mix and utilization of both human and non-human resources. If Wal-Mart has not reached that point yet, it is not certain how far away it is from it.
Furthermore, it does appear that the geographical expansion of Wal-Mart at least in the USA is becoming increasingly limited. Rural communities are becoming increasingly resentful of Wal-Mart, as its entrance into any community tended to destroy the local retail businesses. Local communities are actively organizing against Wal-Mart opening stores in their neighborhoods.
In his address to Wal-Mart's shareholders, the CEO reported a revenue increase of 1.8 % for the year 00 with total annual sale of $18 billion. This is said to represent the company as the #1 in the world in terms of annual sales. The compound annual returns on shareholders investment for the last five years is stated at 17.%. However, the goal of the company is said to; "be the best, measured in terms of its customers, suppliers, employees, communities and of course the shareholders.
In terms of work place pleasantness, Wal-Mart was named # in a list of ten best companies to work in according to survey by Fortune Magazine. However, notwithstanding the enviable successes of Wal-Mart over the last forty years, the business terrain of the future calls for a different approach. A deeper understanding of customers changing needs, values and expectations, as well as smart application of technological advances will determine success or failure in the future.
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