INTRODUCTION

Wal-Mart is one of the most extraordinary success stories in business history. Started in 1962 by
Sam Walton, Wal-Mart has grown to become the worlds largest corporation. In the financial year
ending January 31, 2004, the discount retailer whose mantra is every day low prices had sales
of nearly $256 billion, five thousand stores in ten countries (almost three thousand are in the
United States), and 1.3 million employees. Some 8 percent of all retail sales in the United States
are made at a Wal-Mart store. Wal-Mart is not only large but also very profitable. In 2003, the
company earned a return on invested capital of 14.7 percent, significantly better than rivals
Costco and Target, which earned 9.4 percent and 10 percent, respectively (another major rival,
Kmart, emerged from bankruptcy protection in 2004). As shown in the accompanying figure,
Wal-Mart has been consistently more profitable than its rivals for years. Wal-Marts superior
profitability reflects a competitive advantage that is based on the successful implementation of a
number of strategies. In 1962 Wal-Mart was one of the first companies to apply the self-service
supermarket business model developed by grocery chains to general merchandise (two of its
rivals, Kmart and Target, were established in the same year). Unlike its rivals, who focused on
urban and suburban locations, Sam Waltons Wal-Mart concentrated on small southern towns that
were ignored by its rivals. Wal-Mart grew quickly by pricing lower than local mom-and-pop
retailers, often putting them out of business. By the time Kmart and Target realized that small
towns could support a large discount general merchandise store, Wal Mart had preempted them.
These towns, which were large enough to support one discount retailer, but not two, provided a
secure profit base for Wal-Mart. However, there is far more to the Wal-Mart story than location
strategy. The company was also an innovator in information systems, logistics, and human
resource practices. Taken together, these strategies resulted in higher productivity and lower
costs than rivals, which enabled the company to earn a high profit while charging low prices.
Wal-Mart led the way among American retailers in developing and implementing sophisticated
product tracking systems using bar-code technology and checkout scanners. This information
technology enabled Wal-Mart to track what was selling and adjust its inventory accordingly so
that the products found in a store matched local demand. By avoiding overstocking, Wal-Mart

did not have to hold periodic sales to shift unsold inventory. Over time, it linked this information
system to a nationwide network of distribution centers where inventory was stored and then
shipped to stores within a 300-mile radius on a daily basis. The combination of distribution
centers and information centers enabled Wal-Mart to reduce the amount of inventory it held in
stores and devote more of that valuable space to selling and reducing the amount of capital it had
tied up in inventory. With regard to human resources, the tone was set by Sam Walton, who
believed that employees should be respected and rewarded for helping to improve the
profitability of the company. Underpinning this belief, Walton referred to employees as
associates. He established a profit sharing scheme for all employees, and after the company
went public in 1970, he initiated a program that allowed employees to purchase Wal-Mart stock
at a discount to its market value. Wal-Mart was rewarded for this approach by high employee
productivity, which translated into lower operating costs and higher profitability.

As Wal-Mart grew larger, the sheer size and purchasing power of the company enabled it to drive
down the prices that it paid suppliers and to pass on those savings to customers in the form of
lower prices, which enabled Wal-Mart to gain more market share and hence demand even lower
prices. To take the sting out of the persistent demands for lower prices, Wal-Mart shared its sales
information with suppliers on a daily basis, enabling them to gain efficiencies by configuring
their own production schedules to sales at Wal-Mart. Already by the 1990s, Wal-Mart was the
largest general seller of general merchandise in America. To sustain its growth, Wal-Mart started
to diversify into the grocery business, opening 200,000-square-foot supercenter stores that sold
groceries and general merchandise under the same roof. Wal-Mart also diversified into the
warehouse club business with the establishment of Sams Club. With its entry into Mexico in
1991, the company began expanding internationally. By pursuing these expansion strategies,
Wal-Mart aims to increases sales to over $400 billion by 2010, up from $40 billion today,
thereby solidifying its scale-based advantage. Despite all of its success, Wal-Mart has
experienced problems. In some parts of America, such as California and the Northeast, there has
been a backlash against Wal-Mart, particularly by small town residents who see Wal-Mart as a
threat to local retailers. Increasingly, Wal-Mart has found it difficult to get planning permission
to open up new stores in these towns. In addition, despite the long-held belief that employees
should be treated well, Wal-Mart has been the target of lawsuits from employees who claim that
they were pushed to work long hours without overtime pay, and from female employees claiming
that the culture of Wal-Mart discriminates against them. While some observers believe that these
complaints have little merit, others argue that they are signs that the company has become too
large and may be encountering limits to profitable growth.

Wall Mart Company Strategies

This section will examine Wal-Mart's company strategy in several sections. Three elements of
successful strategy formulation and a fourth element, which exemplifies the implementation
process of company strategy, will be looked at. Followed by this, an analysis of key factors
contributing to this strategy will be detailed. These include looking at Wal-Mart's competitive
strategy.

Strategic Goals
a. Dominate the Retail Market Everywhere
A key strategy of Wal-Mart is to dominate the retail market. Company founder Sam Walton put
in place a retail philosophy the company still follows. Wal-Mart is primarily a discount retailer
because they sell their products at the lowest possible prices. By selling at the "lowest price."
Walton outlines that the essence of successful discount retailing to cut the price on an item as
much as possible, lowering the markup, and earn profit on the increased volume of sales. (Wal
Mart pricing philosophy document, www.walmart.com).
Another subset of this strategy is the competitiveness of every unit. Each store is encouraged to
ferociously compete against all other stores in its customer base until the Wal-Mart store gains
dominance over its local competitors (Quinn, 2, 115). Wal-Mart is currently ranked as the
world's number one retailer and the number one company in the world in terms of sales (over
$200 billion) on the Fortune 500 list (www.walmart.com) (www.fortune.com) The key strategy
is to dominate a market. Using its size and volume buying power, the company effectively
implements its strategy.

b. Growth by expansion in the US and Internationally.

A strategic goal of Wal-Mart is to expand. It has done so successfully. Looking at the facts and
figures clearly shows the corporations dominance and power. Currently the corporation employs
over 1.3 million employees, one million in the US alone. The company owns over 4000 stores
worldwide. Over 1,200 units (stores) are in operation internationally. Domestically, Wal-Mart
is the largest US retailer, employing around 1 million people. It has over 3,000 stores and outlets,
and 77 distribution centers. The company serves more than 100 million customers weekly in all
50 states, Puerto Rico, and several nations around the world. (www.walmart.com, Fact Sheet Wal-Mart at a Glance, 2002).
Internationally, the retailer operates in Mexico, Canada, Argentina, Brazil, China, Korea,
Germany, and the United Kingdom. Its expansion strategy internationally has been aggressive
and powerful. The latest expansion strategy is for the company to gain entry into a nation by
corporate takeover of a national retailer. Once the company is bought,
Wal-Mart converts the stores into Wal-Mart stores. Three countries, all with no previous WalMart stores, became part of the corporation's international presence when domestic retail chains
were overtaken. In 1994, Wal-Mart bought 122 Woolco stores in Canada; today there are 196
units in Canada. In 1998 Wal-Mart bought the Wertkauf store with 21 units, now there are 94
Wal-Mart's in Germany. In 1999, Wal-Mart acquired the ASDA chain with 229 units in the UK.
Today, the UK has 252 Wal-Mart stores. (www.walmart.com, Fact Sheet on International
Operations, 2002)
This particular strategy, of corporate takeover, puts the company at an advantage when it enters
into a new market. In one stroke, a large competitor is eliminated, and at once, Wal-Mart has
real estate and employees, and a massive presence in its targeted location. This is an effective
use of the company's size and wealth, as few if any competitors are able to do this effectively.
The company builds up brand familiarity, while retaining the old familiar outlets. Gradually, as
the local Wal-Mart stores begin to make money, and local management assess their competition
environment, the company begins to redesign the acquired stores to look like "Wal-Mart's, it then
begins to build new and larger stores in that new market. Wal-Mart is now the largest retailer in
Canada and the UK.

c. Create Positive Brand and Name Recognition

The company aims to create positive impression of customer satisfaction with the Wal-Mart
brand. Their goal is to have the customer associate the retailer with the reputation of offering the
best prices. The company accomplishes this through television advertising campaigns and
newspaper adverts. Characteristic of Wal-Mart advertising is the use of actual Wal-Mart stores
and employees in its commercials. Key themes, such as "Low Prices Always" are featured. The
company engages in partnerships and co-branding. For example, many Wal-Mart stores have a
McDonalds restaurant inside them. Due to the size of the retailer, certain exclusive promotions
are made with Hollywood movie companies and music companies, for exclusive in Wal-Mart
promotions and distribution (www.walmart.com, 2001 Annual Report, and Quinn 115).

d. Branching out into New Sectors of Retailing

A successful company strategy has been to branch out into new sectors of retailing. Wal-Mart
has recently become a major pharmacy, automotive repair shop, and is now moving into grocery
sales. This is an example of success - it exemplifies Sam Walton's vision of being the best
retailer around. After a store expands physically and geographically, it must then expand in
terms of what they sell; branching out and competing with other businesses.
The traditional retail business of Wal-Mart has been selling discount and cheap house wares and
plastic goods, clothing, sporting goods, and toys. Other departments include but are not limited
to stationary and office supplies, hardware, home improvement, paint supplies, arts and crafts,
cosmetics and toiletries, shoes, books and magazines, greeting cards, and confectionery. WalMart has also encroached into home electronics, automotive supplies, pharmaceuticals, jewelry
sales, photo finishing, travel planning, and home gardening. More recently Wal-Mart has begun
to move into the grocery store business with its new "Neighborhood Markets." Everywhere the
store has a department, it competes with those businesses, which specialize in that sector, often

putting smaller competitors out of business. Wal-Mart can be judged by the fear it puts into its
potential competitors and by the uproar caused by them protesting a Wal-Mart incursion, as is the
case with grocers (www.walmart.com, 2000, 2001 Annual Reports, Quinn 89-138)
Competitive strategy
The company's competitive strategy is to dominate every sector where it does business. It
measures success in terms of sales and dominance over competitors. Its strategy is to sell goods
at low process, outsell competitors, and to expand. Generally, Wal-Mart does everything it can
to win over competitors (www.walmart.com, Quinn, 115).
A typical Wal-Mart model is to build more stores, make existing stores bigger, and to expand into
other sectors of retail. Every step of the way, it strives to make money and dominate its
competitors, to the point of putting some of them out of business.
The corporate mission can be stated as follows:
As Wal-Mart continues to grow into new areas and new mediums, our success will
always be attributed to our culture. Whether you walk into a Wal-Mart store in your
hometown or one across the country while you're on vacation, you can always be assured
you're getting low prices and that genuine customer service you've come to expect from
us. You'll feel at home in any department of any store...that's our culture.

Marketing and Service Strategies

Wal-Mart built differentiated business departments to serve different market segments. They
included supermarket (1,294 stores in 2001), one-stop shopping store with entertainment
facilities, so-called Sams Club member warehouse, (528 stores), discount store targeted family
(2,348) and small scale stores selling foods and related stuff (19). Wal-Mart has discounted stores
in Canada and Mexico. As for Asia operations, she mainly uses supermarkets supplemented by
warehouses. The major factor of Wal-Marts success is built on lowest price everyday practice
that significantly reduces searching cost. Further, Wal-Mart high quality at low price offerings
has won herself the reputation of high value-added company and loyalty of customers. Therefore,
Wal-Mart could reduce expenses on advertisements and promotions and also increase turnovers
of products. Wal-Mart always believes that customers always come first. All employees follow
three management philosophies; respect everyone, serve customer, and search for perfection to
entirely implement Wal-Mart humane service. They fully carry out the practices of 8 teeth smile,
ten-foot rule, and sundown rule; provide 95% products as a minimum for 95% of time. All these
practices have become the benchmark of the retailing industry.

Physical Distribution and Digitalization Strategies

Wal-Mart has spent more than half billion dollars in information technology facilities to connect
their worldwide stores with headquarters. Meanwhile, they request suppliers to adopt electronic
data interchange system. With this system in place, Wal-Mart can transfer information swiftly
and has saved three fourth stock-holding costs. Further, headquarters can finish stock-taking of
each item for more than 4,000 stores in the globe within an hour. At present, each store sends
information to his suppliers via internet and have products replenished in on-average two days
versus five days of their rivals (Huey & Walton, 1992). Wal-Mart also cooperates with IBM to
set a brand new on-line shopping site named Walmart.com. This site provides full range products

from low to high price items. As for physical distribution, Wal-Mart allies with local retailers for
customers to take what they have purchased at the website.

Shape humane culture

That most retailers prefer on-going promotions to attract new customers and retain old ones is
totally different from everyday low price and no price promotion practices of Wal-Mart. An open
and tolerating culture of Wal-Mart could endure over time because managements treat employees
as their partners. They show respect each other and share both profit and knowledge that lead to
the creation of a harmony organizational climate. Therefore, companies ought to develop
themselves not as a workplace but a learning institution to further the practices of knowledge
management. By establishing knowledge management system, knowledge could be repeatedly
utilized to generate economies of scale and reserved within a firm easily accessed internally.

Conclusion
Wal-Marts core competitive advantage is that delivers the lowest possible price and its business
strategy is aligned with this advantage, based on cost leadership (Johnson, Scholes, and
Whittington, 2010). Its wholesaler Business Models supports this strategy, all elements focused
on using the leastamount possible of resources, always looking into how to improve performance
and effectiveness. As has been exposed previously, Wal-Mart Business Model is an example
followed by its competitors. Taking into account its financial results, Wal-Marts Business Model
is a very successful one. However, Wal-Mart effects are not always positive. On the other hand,
Wal-Mart success is based on applying this business model to every activity that undertakes. And
experience has proven that this is not always the best approach, for example, when it comes to
compete in different markets, such as Germany. The sustainability of Wal-Marts Business
Model will depend on its ability to adapt within the changing environment, continuously
satisfying customers needs and capturing the biggest value. While doing so Wal-Mart will have
to revise its activities and match them with the image of a social corporate responsible business
that is developing.