1. Introduction:
Wal-Mart Stores Inc is the largest Business Company in the world which has achieved leadership in the industry of retailing because of its efficiency in the supply chain management practices. Wal-Mart has set earnings and record sales for the fiscal year of 2008 (net sales of $374.5 billion), which was an increase of 8.6 percent over the previous year. Wal-Mart’s mission is saving its customers money in order to live better and thus it has created an impact on over 176 million customers in over 13 nations worldwide (Bianco, Zellner, 2003, p.100).
Wal-Mart, as a global business company has positioned itself to be an unbeatable price leader which provides its customers with a variety of affordable goods or products which range from beauty, health, jeweler, apparel, food items, and electronics among others. The company has propelled itself to retail stardom because of its strategic and expansion acquisitions and its emphasis on return on investment coupled with its ability in move goods from the production point to the marketing in an effective manners.
Wal-Mart's Background:
Wal-Mart as a company was founded in 1962 by Sam Walton the time he opened his first discount store that is located in the Rogers, Arkansas. On October 31, 1969, the Company was officially incorporated to be Wal-Mart Stores Inc. Currently, Wal-Mart Stores operates various Super centers, Neighborhood markets, discount stores, Sam’s club warehouses in 4100 plus facilities located in the United States and it also has more than 3100 additional facilities which are located in the United Kingdom, China, Brazil, Argentina, Canada, El Salvador, Costa Rica, Puerto Rico, Mexico, Japan, Honduras, Nicaragua and Guatemala. Wal-Mart employs 1.4 million associates in the United States and more than 2 million associates worldwide making it the largest private employer in the Mexico, Canada and the United States. Wal-Mart has also established its operations in India.
Wal-Mart’s success in the U.S is attributed to the founder’s aggressiveness in buying products in quantity for less and then eventually passing the savings on to its customers. The company then expands to other market places. Sam Walton, the founder of Wal-Mart developed a way of selling products cheaply, changing the economy and changed the way in which shoppers shopped (Lohr, S, 2003, p. 41). It was because of these initiatives that Wal-Mart was able to outgrow other retailers through keeping the prices of their products lower while increasing its customer base. It is through Walton’s achievements that Wal-Mart has been able to expand worldwide. He died in the year 1992 when he was 72 years of age after having received a Medal of Freedom from the president of the United States of America George W. Bush. Walton’s innovations have continued to be realized through the executives who have been constantly changing the landscape retailing abroad. This was done in the same way in which it was changed domestically through the utilization of various retail forms. These formats include; super-centers and discount stores.
Current or potential performance Issues for Wal-Mart.
Wal-Mart Executives have adopted various strategies in order to correct some of the economic, political and cultural issues that are experienced by the company (Bianco, Zellner, 2003, p.101). Hillary Clinton, being the first woman to serve on Wal-Mart’s Board and gave the company legal experience, political strength and aid in Wal-Mart’s worldwide communication strategies. Currently, Wal-Mart as a company understands that in order to enter into a new market, it has to study various laws and languages. It is through the availability of the company’s strong managers and leaders like Hillary Clinton that Wal-Mart has been able to achieve its tremendous goals. In order to accommodate the consumers’ needs to further extend, the company has adapted to unfamiliar environments through hiring local managers to manage its numerous outlets. Wal-Mart’s appeal towards its customers has been bettered through its adaptation of better communication with its consumers also due to its scale and size which enable its executives a lot of tremendous buying power (Biddle, 2004, p. 787). For instance, Wal-Mart accounts for 20 percent purchase of Pampers brand, which are produced, by Procter and Gamble making its bottom line grow.
Wal-Mart, being the biggest retailer in the whole globe is spreading its power all over the world in various countries including nine of them from Europe, South America and Asia. However, its attempt of penetrating in the nations it enters has made them encounter several problems. Nationalism of various countries became a problem through the joint ventures and acquisitions which Wal-Mart entered in with local businessmen. Furthermore, Wal-Mart became an evil in the employees’ perspective because of its low wages, sex discrimination and unions (Lohr, S, 2003, p. 45).
The Wal-Mart Culture (2004) proposes the two keys and three basic beliefs which differentiates Wal-Mart from the rest of its rivals. Expansion of Wal-Mart has not been that easy since it has been faced with both internal and external problems. Critics have commented that the Company has less consideration for International Markets as compared to its competitors. One of the external factors that come into play for Wal-Mart is government regulations through restrictions which have eventually led to monopoly markets in some nations where Wal-Mart operates. The entry of global companies into the local markets has led to the entry of local companies into the global markets. This has then resulted into an increase in the competition in the global market. This later leads to an increase in the quality of goods produced by Wal-Mart and this also leads to a lowering the price of the commodities and a widened range of available products. Diversity has been created from the globalization of the invention in the world.
Wal-Mart’s use of Information Technology has enabled it to ascertain the products which its customers buy most also enabled it to tell the manufacturers of the products it sells what to produce and where to ship the finished products. The operation of its three segments, which includes the, Supercenters, the Neighborhood Markets and the Discount Stores located in the United States, helps the company easily merchandise its operations and serve its clients well. With a net income of around $8 billion, Wal-Mart sales stood at $ 247 billion according to an income Statement released in 2004 (Groeber, J, 2004). Due to this, Wal-Mart became the subject of several journal articles and newspaper features which praised its success and dominance in business. Even, though, around 75 percent of its stores that are located in the United States, Wal-Mart have over time continued to expand internationally.
3. Wal-Mart’s Organizational Culture:
Wal-Mart’s success is built on its strong culture which is closely attributed to the founder, Sam Walton’s personal life story, his personal values and core beliefs for Wal-Mart, and the company’s history. According to public information on Wal-Mart, it was depicted its customer focused culture raised from Wal-Mart’s authentic customer service coupled with its pursuit of low prices. Striving for excellence, service to customers or respect to individuals the three basic beliefs on which Wal-Mart was built on.
Apart from the three basic beliefs, two key rules supported them. The Ten foot rule, for example, which offered the customer a greeting whenever they were within ten feet of the customer and the Sundown Rule, which ensured that the requests received on the same day were attended to the same day. This aggressive hospitality is initiated by the founder Walton made Wal-Mart different from its competitors. Thus, it has always strived to be the most friendly business organization committed to offering better services than what customers expected and in most circumstances exceeded their expectations. Good concepts for Wal-Mart were also realized through its endeavors in offering its customers a variety of brand name goods at cheap discounts, which eventually also became a strategy for every day low prices.
4. Wal-Mart’s International Penetration:
Wal-Marts growth as a company is attributed to its aggressive strategies for international expansion. This was achieved through the establishment of the International Division which was specifically set up to oversee some growing opportunities. The establishment of the International Division became one of the highest rated departments in Wal-Mart. This is clearly reflected in Wal-Mart’s financial report in 2003 in which it was said that the division’s sales had reached more than $40 billion. Wal-Mart as a company has expanded its stores throughout the world in a range of thirteen years, and it applies various strategies during its expansion (Bianco, Zellner, 2003, p.123).
5. Wal-Mart’s problems in expansion to International markets:
The standardization of Wal-Marts supermarkets and other stores has enhanced its branding and expansion within the USA and in the international markets. A strong retailing proposition helped Wal-Mart to expand its market more easily. The low costs were realized through the company’s purchasing power, economies of scale, effective information systems, and close vender relations and through an efficient supply chain. Because of Wal-Mart’s leading inventory turnover and its competitive gross margins, Wal-Mart can easily play with the strategy of lowering prices. This concept is capable of working both on the regional and global levels with the main goal of improving quality, lowering prices, lowering costs and increasing the company’s volume.
Wal-Mart has in most circumstances used expansion shortcuts through the acquisition of local retailer countries based in various locations and through joint ventures. Wal-Mart, however, might be a company that is most admired and highly hated. This is because as much as Wal-Mart has increased the overall Gross Domestic Product (GDP) for the United States, its evil in the retailing business is reflected in its sex discrimination, employees’ low payments small business destroyer, and because of its restriction in suppliers. Unfortunately, it appears as if Wal-Mart does not even recognize these evils and thus it has continued to use the same old ways of doing business in the international market. As a result of this, Wal-Mart’s growth was only achieved in the United States in its home market unlike the 8.9 percent of sales which came from International Markets in the year 1999. These figures are considerably less compared to Wal-Mart’s competitors who have around 30% in international markets.
6. External problems that Wal-Mart face in the industry:
One of the external problems faced by Wal-Mart is a late entry into markets. This is because even though it had already expanded in to nine countries and it has planned for more expansion, it is still much behind most of its competitors (Biddle, 2004, p. 753). One of Wal-Mart’s chief competitors in global retailing is the giant French Retailer known as Carrefour which has entered in 31 countries. This is a lot more compared to Wal-Mart which has only entered 9 countries. Wal-Mart’s is, therefore, not well placed because the rule or advantage of first come, first served. Carrefour had better places reserved for it Wal-Mart unlike which entered the market when it was late and then had to develop strategies to convince clients to shop with them when they entered their country.
Another external problem faced by Wal-Mart is overlooking its potential competitors. It is terribly unfortunate that Wal-Mart has not even realized that it is new in globalization, but instead it has banked its hopes on the notion that its strength can be found in their prices and size. The extraordinary rule of enjoying its power in the United States cannot fit all market places. By the time Wal-Mart was entering new markets, its competitors were busy investing in store automation and thus became more and more powerful. According to Moline, (2004:5-100), Wal-Mart’s misreading of the cultures and its competitors resulted in its ruinous decisions, in the area of international or global business.
Because Wal-Mart is known to be the largest retailer in the world, this notion has created its obsessive about numbers. It wants it to be number one and for it to be known by each, and every one of its competitors. Its impact on small retail business was extremely criticized because it led to the collapse of various small shops because of its giant chain stores (Groeber, J, 2004, p. 89). Thus, destruction of small businesses is also one of the external problems that face Wal-Mart. Some nations have even gone further to ban Wal-mart from operating in their countries because it obligates the businesses of the local community (Biddle, 2004, p. 763). As much as Wal-Mart might seem to be a custodian, the reality is that they are, in fact, a killer.
7. Wal-Mart’s internal analysis:
Unique culture and concepts are vital for any business entity that wants to succeed in any new business environment or market. Wal-Mart’s overseas expansion strategies were hampered because it attempted to transport its unique retailing culture and concepts to each of the new countries that it moved into the company. Wal-Mart’s failure to realize that not every concept will match all places has resulted in its competitors’ success because they have adapted to the needs of the new environments. For instance, it is difficult for the concept of super centers to fit in Brazilian markets since most of the citizens live in small places and thus have tiny places to store things. Though it is gratifying to introduce global standards in new market environments, it is also vital to adapt to local practices of new market environments. This is a theory that Wal-Mart has failed do not only appreciate but also continued to insist that problems cannot be reflected in its company as whole.
Wal-Mart is truly the world’s largest company and largest retailer in the world based on its assets, revenues, ignoring its profits or income and market capital. Though Wal-Mart has tremendously and successfully run its business in the United States and enforced its expansion strategies in the international markets, these achievements cannot guarantee Wal-Mart automatic success in the entire world. The reason why Wal-Mart is not currently doing well in the Global market is attributed to both internal and external problems that are facing the company (Biddle, 2004, p. 763).
Wal-Mart’s numerous attempts aimed at sustaining its growth some few years back have been met with several setbacks and enormous challenges resulting in leveling off its growth, being plagued with public relations problems which are self inflicted, and having flat stocks. While Wal-Mart’s chief competitors like for instance Costco and Target are prospering, Wal-Mart’s fortunes have continued to flounder. Unlike in the year 2005 when Wal-Mart’s CFO Tom Schoewe had boasted that there was enough room to accommodate 4000 Supercenters in the United States, the Company conceded in late 2006 that it was unable to grow like the way it used to be. In a recently published Wal-Mart Watch poll, it was indicated that the reputation of Wal-mart in recent years has drastically fallen (Groeber, J, 2004, p. 78).
In general, overall problems that are currently faced by Wal-Mart include the differentiation of price and house brands, nationalism and joint venture, overlooking its competitors, late entry, government regulations, destroying of small business among others. Besides the external problems, Wal-Mart is also faced with internal problems, which include among, others unique concepts, culture, and human resource problems. These problems have become so critical and thus made it difficult for Wal-Mart to compete with its competitors in its endeavors of expanding into new markets.
In order to find workable solutions to overcome problems facing Wal-Mart, it is essential for the Company to analyze the various internal and external problems facing it as this will significantly enhance its ability in the creation of opportunities for the company to become globally competitive and glow in the international market in the future. Wal-Mart’s success in new markets will also be substantially increased if it will become flexible in venturing into new markets, which have a, different pattern, environment, and culture. In order to succeed and restore Wal-Mart’s lost glory, the company must re-examine and re-evaluate its business model in order to address any challenges which may arise and adequately sustain it. In order to continue with its growth, Wal-Mart must also comply with its own standards of governance in order to restore Wal-Mart’s reputation as an attractive global employer. Wal-Mart should make attempts enter San Francisco, Boston, San Diego and New York City which account for 5.6 % of the Unites States retail sales and 6.5% of U.S retail sales.
The resistance to change that is exhibited by cities like Los Angeles, San Diego and New York’s refusal to let Wal-Mart, which is the world’s largest retailer to operate in its urban centers, should be countered through negotiations. Wal-Mart should also convince the labor unions, activists and the city leaders who are opposed to Wal-Mart’s operation in these areas by creating job opportunities, donating money to several political campaigns and increase its charitable donations.
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