Wal Mart Corporation Overview
Wal-Mart Corporation Overview
“Basic History Overview”
Wal-Mart’s history is one of innovation, leadership and success. It started with a single store in Rogers, Arkansas in 1962 and has grown to what is now the world’s largest - and arguably, the most emulated - retailer. Some researchers refer to Wal-Mart as the industry trendsetter. Today, this retailing pioneer has annual revenues of over $100 billion, 3,000 stores and more than 750,000 employees worldwide. Wal-Mart operates each store, from the products it stocks, to the front-end equipment that helps speed checkout, with the same philosophy: provide everyday low prices and superior customer service. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Wal-Mart to achieve economies of scale which reduce its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. This allows Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart’s ability to replenish theirs shelves four times faster than its competition is just another advantage they have over competition. Wal-Mart leverages its buying power through purchasing in bulks and distributing the goods on it’s own. Wal-Mart guarantees everyday low prices and considers them the one stop shop.
The case study starts off with quotes from Wal-Mart executives with their thoughts of how employees/consumers should feel about the arguably most innovative retailer. “Wal-Mart employees who do not think globally are working for the wrong company.” “Wal-Mart must think and act as if it’s a global company. Otherwise, it cannot grow enough in the United States to maintain its stock price. It needs to be in South America. It needs to be in Asia. It needs to be in Europe.”
Wal-Mart has taken their mind and cash over the last 20 years to become the world’s largest retailer. Wal-Mart had a base of 2,200 stores in the 80’s, closing out of the 90’s with a bang of 3,600 stores and $4.4 billion in net income. Spurred by NAFTA, Wal-Mart took advantage foreseeing potential growth in the foreign markets. Currently they have stories in the following countries: Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea, United Kingdom, and in 1998 a controversial Germany. Most analysts believed Wal-Mart would move into eastern European countries however Wal-Mart confounded the analysts when they purchased a 21-unit Werkauf chain in Germany. Why Germany they ask? The Germany countryside was littered with carcasses of other retailers, therefore Wal-Mart new that its non brand name items, service, and low prices would succeed. Analysts believed that Wal-Mart would not buy in Germany for many reasons: first, zoning laws, scarcity of land, and high real estate prices make it almost impossible to find affordable space for new supercenters. Second, the domination of other major retail stores. Next, due to German unions, the workers are very highly paid and unemployment being high. Last, Wal-Mart low price strategy could be hindered due to other manufacturers’ marketing strategies of selling brand name goods.
Of course, Wal-Mart has succeeded in Germany with a “smile” as always advertised. Wal-Mart pushes the limit of hours being opened despite the government regulated operating times. Wal-Mart has also renovated many German stores, restocking them with common shopping practices, wider aisles, and renaming the stores Wal-Mart. Most importantly in a land of pfenning pinchers, Wal-Mart has introduced EDLP (“Every Day Low Prices”). The new low prices have caused many competitors to lower their prices, in turn reducing income.
After the completion of the move to Germany, analysts now started predicting Wal-Mart’s next threat to retailers was going to happen. Wal-Mart landed in Europe, causing many retailers to merge in order to survive.
1. Describe Wal-Mart’s global strategy? What tactics has it used to become a major global retailer?
Wal-Mart’s success is mainly based on its concentration of a single-business strategy. This strategy has achieved enviable success over the last three decades without relying upon diversification to sustain its growth and competitive advantages. In a sense, Wal-Mart’s low prices, service, and smile are their leading marketing strategies. However, there is risk in this strategy, because concentration on a single-business strategy is similar to “putting all of a firm’s eggs in one industry basket”. On the business side, Wal-Mart is the country’s most sophisticated retailer in terms of using information systems. Their cross-docking inventory and transportation services able them to have the goods needed by the consumer at all times.
In order for Wal-Mart to become a major global retailer, they have closely examined and utilized tactics to profit from their many stores. One great tactic is starting free-trade-zone distribution centers, in turn, saving almost $500,000 annually. Another tactic includes their service from when you walk in the store to when you leave. Also, their bread and butter is again the technology they utilize. They can track how much of one item has been sold on any giving day, and if not a hot commodity at one store, they will ship it out to another where it is being sold much faster.
2. Can Wal-Mart sustain its competitive advantage in global retailing?
Domestically, Wal-Mart is growing through its Superstores. Traditionally, this business is a very low-margin space, but with Wal-Mart’s competitive advantages in distribution and leverage over suppliers, they can make it a big winner. International expansion has been robust and will continue to be an important part of Wal-Mart’s future growth opportunities. Certainly the Internet provides a growth avenue as well that will open a new faucet for them to potentially take over an upcoming market.
I really think that the growth opportunities for Wal-Mart are just beginning. Any company that can grow net income to $4.4 billion and yearly sales of $137 billion should make you do a double take. I personally feel that a trillion dollars in sales is not unreasonable.
3. Explain the importance of selling only brand-name merchandise to the Wal-Mart strategy.
The focus that Wal-Mart shares in all advertisements is service, low prices, and quality of goods. Wal-Mart is not a specialty shop focusing on one “good”, they are innovative offering a selection based on consumers overall needs. They do have some brand name merchandise however do not have a specific section set aside for Polo Shirts. Unlike Wal-Mart, brand name stores in most circumstances, only offer their product at a price that is normally above affordable. These retailers rely on their name to sell; Wal-Mart relies on their convenience and low prices.
4. Choosing markets to enter is of major importance in global expansion. If you were in charge of Wal-Mart, what European country would you enter next? Why? Would entering this country require adaptation of Wal-Mart’s marketing strategy and tactics? If so, how?
If I were in charge of Wal-Mart, I would choose to expand into Russia next. The Russian economic structure nine years ago is still struggling from the collapse of USSR. Russia has achieved some economic progress. Inflation is now under control and the ruble is now somewhat stabilized. The economic situation in Russia makes it a perfect target for a Wal-Mart. Wal-Mart’s inventory of heavily discount of brand-name merchandise would offer consumers in this market the quality they desire at prices they can afford. Even though there has been an economic decline, people still seed discounted prices as opposed to high-end goods. Wal-Mart sells reliable merchandise that consumer’s need. Russian consumers are looking for quality goods that they need to sustain life at a price they can afford. The fact remains that people need day-to-day items to get by such as milk, eggs, and meat – things people need, food and clothes for their families. Wal-Mart is the ideal place to purchase these goods; it is your one stop shopping headquarters.
I do not feel that entering Russia would require Wal-Mart to alter their marketing strategy and tactics. Wal-Mart runs its business based on “everyday low prices”, which is just what the Russian population needs.
5. If you were running Wal-Mart, what non-European country in the world would you enter next? Why? Would entering this country require adaptation of Wal-Mart’s marketing? If so, how?
I would choose Australia. Australia is a perfect market for Wal-Mart for much of the same reasons as Russia but from a different angle. Australia has had one of the most outstanding economies of the world in recent years—more competitive, flexible and vibrant than ever before. Although much smaller than those of the United States and Japan, Australia’s economy is larger than those of Sweden, Belgium and Switzerland. Australia is a high-growth, low-inflation, low-interest rate economy with a very competitive business sector, a flexible labor market and an efficient and democratic government.
One of Wal-Mart’s main competitors would be Franklin, which is currently struggling at this time. (I better get my Wal-Mart set up quick.) Many of the Australian retailers such as Aldi, Tesco, and Ahold, who previously relied on specials, would be forced to reduce their daily prices to compete with Wal-Mart’s everyday low price strategy. Low-Prices are the foundation of Wal-Mart’s ideas and strategy and could surely beat out Australia’s smaller end retailers. Another are in which Wal-Mart would prosper is with tourists,. Wal-Mart is well known and trusted , and in high tourism cities such as Sydney, travelers would be more likely to shop at a place they know and trust. Its inevitable that while on vacation for example, people forget to pack or run out of necessities such as toothpaste, shampoo, and deodorant, etc. Why not go to Wal-Mart and get all these things and pick up the few extra goodies you didn’t realize you needed.
I thinks Wal-Mart’s normal marketing strategies are traditional marketing strategies, ideal for the Australian culture. Australians expect the quality they need at the prices they can afford.