NOTE: Free essay sample provided on this page should be used for references or sample purposes only. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. To get a completely brand-new, plagiarism-free essay, please use our essay writing service.
One click instant price quote
Wal-Mart Wal-Marts history of success is very impressive. In 1960 s Samuel Moor Walton opened a first discount retailing store in Arkansas. It took thirty years to become the world known giant in retailing industry with 5, 289 stores and billion sales. The Boston Consulting Group reported that The world has never known a company with such ambition, capability and momentum (Thompson C- 412). In 2005 over 50 % of Americans made shopping in Wal-Mart stores at least one per month and more than 1 / 3 shopped Wal-Mart shops on a weekly basis.
Despite of Wal-Marts successful business, there are several main issues that can be unimpressive. According to critics opinion, low cost strategy resulted in insufficient medical benefits and substandard wages for more than 1. 3 million employees. However, Wal-Marts management disproves the criticism. Secondly, Wal-Marts sourcing too much of its merchandise from Chinese suppliers (Thompson, C- 410) costed jobs for the U. S. workforce and contributed to decline of manufacturing sector.
Nowadays it is quite difficult to define what accounted to the companys success: the great strategy, the superb strategy implementation and execution or a great leadership. Evidently, all components made their contribution to the companys unbelievable success but Waltons leadership was the cornerstone of the companys success. Walton started the business as a seat-of-the-pants merchant. He undertook all efforts to expand the business and to attract the most talented people with retailing experience. Waltons born merchant instincts helped him to learn from competitors failures and successes and allowed him combining all effective ideas to make a successful retailing business.
Wal-Mart operated 38 stores and had sales of $ 44. 5 million in 1970. Nine years later the company became the first enterprise to reach billion in sales in such short period of time. Great Waltons leadership, ability to motivate people, hands-on management style, Waltons talent for discount retailing contributed to development of effective corporate culture and set of values that kept Wal-Mart on a path of continuous innovation and rapid expansion (Thompson, C 414). Waltons style of leadership was so great that his name was associated with Wal-Mart.
He was known as a genuine American folk hero and the entrepreneur of the century (Thompson, C 414). Walton had a reputation of being concerned for employees, community-spirited, and a devoted family man who epitomized the American dream and demonstrated the virtues of hard work (Thompson, C 414). In 1992 Waltons aim was to reach $ 125 billion in sales by 2000. However, his successor David D.
Glass was so successful that managed to reach the aim by approximately two years. Glass made a successful move into Supercenters and grocery retailing. Superb business strategy, corporate vision and values, continuous implementation of innovations, and rapid expansion policy accounted for Wal-Mart success over the past 20 years. Wal-Mart implements cost leadership strategy based on desire to be the overall low-cost provider in the industry.
By implementing this strategy, the company wanted to attract customers loyal to their competitors like general stores, apparel shops, pharmacies, hardware stores, sporting good stores, supermarkets, shoe stores and convenience stores operated by local competitors. Due to aggressive low-cost policy a number of Wal-Mart competitors were unable to retain their positions and had to leave the market. This effect created by Wal-Mart strategy was known as the Wal-Mart effect. In order to be able implementing low-cost strategy, the company undertook all efforts to reduce its expenditures. Wal-Marts labor costs were 20 % less than their competitors. The main components of Wal-Marts strategy are low everyday prices, low operating costs, multiple store formats, wide selection of products, customer-friendly environment, strong emphasis on customer satisfaction, a big percentage of name-brand merchandise, innovative merchandising, geographic expansion, and entering new foreign markets by numerous acquisitions.
In order to successfully implement and execute business strategy, Wal-Mart management places high emphasis on consistent collaboration with suppliers to get the lowest possible prices. As far as Wal-Mart is the biggest customer, its scale of operation allows bargaining hard with suppliers to get the lowest prices. The company chooses suppliers, who are dominant in their category to provide the strong brand-name recognition, who have full product lines, who are able to grow with Wal-Mart, who are able to develop products and services exclusively for Wal-Mart and can bring the company new and enhanced selection of products to retail services. Wal-Mart also supports practice of working with smaller suppliers, who can deliver products to a specific Wal-Marts store to a certain geographic location.
Small suppliers products are usually placed in a Store of the Community section containing local products from local suppliers. The company selects some suppliers as category managers and develops initiatives urging vendors and suppliers to share the ideas about his to make its stores more fun insofar as their products were concerned (Thompson, C 421). The management strives for capturing win-win cost saving throughout supply chain (Thompson, C 420), keeping the companys internal operations lean and efficient. Wal-Mart adheres to a set of specially developed supplier standards and established an internal group to check whether suppliers conform to the business practices and ethical standards. The set of standards consistently undergoes changes. For example, in February 2003 the company directly controlled the foreign factory audits, factory certification teams located in Bentonville, Singapore, China, India, United Arab Emirates, and Honduras (Thompson, C 422).
Wal-Marts management places high emphasis on the smallest details in store layouts and merchandising and makes efficient use of state-of-the-art technology. What concerns distribution center operations, during the period of 1980 - 1990 the company implemented a number of efficiency-increasing actions. Wal-Mart automated many of the labor-extensive tasks in distribution centers by using state-of-the-art technology and created a cost-effective system of bar-coding machines, conveyors, handheld computers to enhance productivity in sorting incoming shipments from manufacturers into store-specific quantities and route them to waiting trucks to be sent to stores to replenish sold merchandise (Thompson, C 422). Wal-Marts management used the newest retailing technologies and the most effective leadership practices in supply chain activities to obtain operating advantages. The company also enhanced its truck fleet operations and developed initiatives to enhance store construction and maintenance to get more mileage out of Wal-Marts capital expenditures for store fixtures, store renovations and new store constructions.
In order to retain positions of a low-cost retailer, the companys corporate offices and distribution centers were furnished simply and built economically. What concerns the use of cutting-edge technologies Wal-Mart used the newest techniques, equipment and programs to enhance productivity, improve effectiveness, and drive costs down. It developed a computer-assisted merchandising system, installed the largest private satellite communication network to be used in the office, to contact vendors and to introduce a credit card authorization procedure (1989). In 2003 the company started using EPC (electronic product code) technology based on RFID (radio frequency identification) systems. Wal-Mart is synonymous to Satisfaction Guaranteed customer service. The company uses a practice of aggressive hospitality, with a specially trained greeter at store entrance, and clerks and check-out employees trained to be helpful and to exhibit a friendly, folksy attitude.
Wal-Marts management focused attention on five themes: to think like a customer, to sell the customers what they want to buy, to provide a genuine value to the client, to make sure that the client had a pleasant experience and to exceed the clients expectations (Thompson, C 425). The chief elements and characteristics of corporate culture are based on Waltons leadership style and business philosophy. Wal-Mart develops culture rooted in perfect customer service, hark work, constant perfection, improvement, and low prices. There are four core values: treating employees as partners, to look to the future rather than immediate gains, to understand that the road to success is hard and consists of successes and failures, where each failing should be examined a part of learning process, and, finally, involving associates at all levels in the total decision-making process (Thompson, C 426). Wal-Mart had a cheer that was a core-part of corporate culture and was used during the corporate gatherings and meetings to make a whistle while you work atmosphere. It injected fun and enthusiasm, cheered everyone up and was conductive to get sessions started on a positive emotional note.
Wal-Mart culture is based on three basic beliefs: every person deserves to be treated with dignity and respect, customer service is the top priority, and excellence is always in demand. Wal-Marts employees had an objective to do their best to surpass the customers expectations, to practice Waltons 10 rules for building a business, and to obey to the Sundown rule (to answer requests by sundown on the day they are received (Thompson, C 428). As far as Wal-Marts headquarter complex is located in Bentonville, Wal-Mart corporate culture seems to be much stronger there than out in the stores. Wal-Marts financials clearly illustrate the companys success as the worlds large retailer.
For the period of 1993 - 2005 the companys sales increased by a factor of 5 ($ 55. 5 billion in 1993 compared to $ 285. 2 billion in sales for the fiscal year ending January 31, 2005). The quantity of stores increased by a factor of 287 (9 stores in 1963 v. 2. 148 stores in 1993 and 5. 289 in 2005. Profits increased by a factor of 5 ($ 2. 0 billion in 1993 compared to $ 10. 3 billion in 2005). In 2005 the company spent more than $ 200 billion on merchandise. Being one of the most successful retailers in the U. S. , the company faced many embarassing issues.
In 2005 Wal-Mart was accused on handling a merchandise classified as a hazardous waste. The company faced accusations of low health care costs, unlawful attitude to workers, low wages, possible money laundering, the issue concerning toy weapons, the discrimination lawsuit, environmental issues, to mention a few. Wal-Mart management hider a public relations company to get the story out and respond within hours to any new blast of criticism (Thompson, C 434). Despite of such unpopularity, the company still has a good potential for future growth.
The company developed a plan of aggressive geographic expansion and plans to reach the revenue of $ 500 billion by 2007 - 2008. What concerns American, the company will increase its store count and add new product categories. In order to overcome criticism and negative attitude to the company, Wal-Mart should continue its policy of favorable publicity. What concerns Wal-Marts expansion plans, the management should pay attention to threat of anti-trust suits that can become an obstacle on the way to Wal-Marts plans to achieve $ 500 billion revenue. In order to minimize negative consequences, Wal-Mart management should enlist the customer support and continue developing new customer loyalty programs and initiatives. Finally, the company should continue to develop, implement and execute technologies that allows creating value for the customers while minimizing Wal-Mart footprint on the enviroment.
Wal-Mart should commit to protecting the environment and continue using renewable sources of energy, reduce percentage of solid waste and sell products that sustain our resources and environment. Bibliography Thompson, A. A. Case 25.
Wal-Mart Stores, Inc. : Combating Critics and Sustaining Growth. In Part 2: Cases in Crafting and Executing Strategy. The University of Alabama.
Free research essays on topics related to: low cost strategy, wal mart stores, wal marts, companys success, rapid expansion
Research essay sample on Wal Mart Stores Low Cost Strategy
