COMPANY HISTORY Sam Walton is the founder of Wal-Mart, in 1962. In 1945, Walton acquired a franchise of Ben Franklin in Newport, Arkansas. Walton increased annual sales from $80000 to $225000 by 1948. landlord declined to renew the lease on favourable terms, by the end of 1950. On may 9, 1950, Walton purchased a store from Luther E. Harrison in Bentonville, Arkansas. By 1962, the number of stores had increased to eleven. At this time Walton opened the first discount store in Rogers, Arkansas, now the stores came to be called Wal-Mart. By 1967, the company grew to 24 stores across the state of Arkansas.
By 1968, the company opened its first stores outside of Arkansas, andby 1974, there were 78 stores.By the company’s 25th anniversary in 1987, there were 1,198 stores, withsales of $15.9 billion.Wal-mart became an international company in the year 1991 by enteringMexico with a joint venture.An inter-store computer network was also developed during this period. Company completed its satellite network, a $24 million investment. At the time, this was the largest private satellite network, and allowedthe corporate office to track inventory, sales, and send instantcommunication to their stores. By 1988 they had equipped 90% of their stores with barcode readers.
WAL-MART FORMATSWal-Mart operates its business under three main business segments:I. Wal-Mart stores divisionII. Sam’s clubIII.Wal-Mart international
WAL-MART STORES DIVISION Stores range in size from 100000sq feet to 224000sq feet. Wal-Mart stores operate on an ‘Every Day Low Price” philosophy. The Wal-Mart stores offer pleasant and convenient shopping in 36 departments. It includes family apparel, health and beauty aids, house hold needs toys, electronics, snack bar etc., Further this Wal-Mart stores divides into:: Wal-Mart super centers: It provides a one stop family shopping convenience, the store combines full line groceries and general merchandise. Wal-Mart Neighborhood markets: It includes full line groceries and a limited selection of general merchandise.
SAM’S CLUB Sam’s club is America’s largest membership warehouse club. Focusing on serving small business owners, with a 46 million members in its 530 clubs. It follows a simple philosophy of serving specific business segments, including convenience stores and retail stores offices etc., Sam’s club is a vital partner to many small business in America.
WAL-MART INTERNATIONAL Wal-Mart International’s segment consisted of retail operations in 12 countries. Management teams in each country are focused on achieving specific sales objectives. Across the international segment, company is leveraging best practices, lessons from multiple-store formats, and global procurement process. Wal-Mart strongly performing its activity including UK, China, Brazil, Mexico, Argentina etc.,
WAL-MART CULTURE Three guiding principles which are followed by Wal-Mart since 1962, these are also fundamental to the success of Wal-Mart:: Respect the individual Service to our customers Strive for Excellence
THE 10-FOOT RULE1. Commit to your business.2. Share your profits with all your associates, and treat them as partners.3. Motivate your partners.4. Communicate everything you possibly can to your partners.5. Appreciate everything your associates do for the business.6. Celebrate your successes.7. Listen to everyone in your company.8. Exceed your customers expectations.9. Control your expenses better than your competition.10. Swim upstream.
GLOBAL STRATEGY Nearly 30years after opening the doors of first Wal-Mart store in Rogers, it became an international company. In the year 1991, Wal-Mart entered into Mexico with a joint venture with cifra, S.A. de C.V., Entering Canada also a success for Wal-Mart, which it entered in 1994. Wal-Mart holds a 37 per cent market in general merchandise, apparel and furniture. Wal-Mart began operations in Brazil in 1995 with 2 supercenters and 3 Sams clubs, and currently it is third largest retail company in brazil. In 1999, entered Britain market and now it is second largest supermarket in Britain. Wal-Mart came to China in 1996, over 95% of the merchandise in the stores in china is sourced locally.
Wal-Mart established partnerships with nearly 20000 suppliers in china.Wal-Mart directly exports about US$9 billion from china every year.Challenges to Wal-Mart in international markets ::One of the challenges that Wal-Mart has faced in the international markets hasbeen in Germany.Wal-Mart entered in Germany with 2 acquisitions the werkauf stores in 1997andinterspar in1998.In June 2006, Wal-Mart decided to pull out of the country.Reason attributed to this failure was a lack of understanding of the local market,and mainly underestimating the local retailers.Indonesia is also a country where it faced a stumbling block as the company didnot understand the local market. Company also had a lot of disagreements withlocal partners about ownership and direct competition.
WAL-MART IN INDIA Wal-Mart marked its entry into India in 2007, by signing two agreements with Bharthi Enterprises. Firstly is a franchisee arrangement between the two companies. Bharthi will handle the front end, while Wal-Mart will take care of the back end supply chain management and logistics . Second is a 50:50 joint venture agreement for the wholesale cash –and-carry business. cash and carry business operation is a B2B proposition that will service small retailers, farmers, craftmens etc., Wal-Mart plans for India include sourcing from small-scale manufacturers, but also using these manufacturers to export products to other region through the Wal- Mart route. The firm also intend to help small manufacturers with technical support to upgrade the quality of produced goods.
LOGISTICS OF WAL-MART Ability to move product from place to place quickly and efficiently- key driver in success. Started in a rented garage in 1960 It has world class supply chain to support its stores. Has nine disaster distribution centers strategically located in the US. Global procurement employs technical experts to focus on particular category purchase. Wal-Mart logistics includes 88000 associates 112 distribution centers 51 transportation offices.
MERCHANDISE Has 3 goals in merchandise categories: Offer price leadership on top quality brands Ensure clarity of product offerings Invest in growth categories. Every day low pricing- pricing philosophy Innovation in merchandising led to unique brands and new products for customers.
Rank Company Headquarters World wide 2011 Change retail sales stores (10’VS09) ($000) Bentonville, 1 Wal-Mart $421,886,000 4,358 1.3% Ark. 2 Kroger Cincinnati $78,326,000 3,609 -0.4% 3 Target Minneapolis $65,815,000 1,750 0.6% 4 Walgreen Deerfield, Ill. $63,038,000 7,456 8.1% The Home 5 Atlanta $68,000,000 1,966 0.0% Depot
DISCUSSION QUESTIONS Q1 Give the phenomenal rise of Wal-Mart, analyze the elements of its strategy that have enabled it to reach the status that it has today.
Q2a. Given Wal-Mart tie up with Bharthi, analyze the kind of strategy that it is likely to adopt for the Indian market place.b. Analyze the kind of challenges it is likely to face in the Indian marketplace