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Description of Wal-Mart: Wal-Mart U.S. Segment Operates Retail Stores in All 50 States, With Supercenters in 48 States
Description of Wal-Mart: Wal-Mart U.S. Segment Operates Retail Stores in All 50 States, With Supercenters in 48 States
Description of Wal-Mart: Wal-Mart U.S. Segment Operates Retail Stores in All 50 States, With Supercenters in 48 States
The company was founded by Sam Walton back in the 1962, when it was only a rural
department store with a simple business model: to bring wider selection of products and
offer lower prices to urban consumers than to those who lived in more rural areas. Success
of Wal-Mart can be attributed to two factors; that is the creation and exploitation of density
economies and aggressive investment in information technology, both of which led to huge
cost advantages over competing companies. From the 1960s' until now it has grown to be
the largest and most emulated retailer in the world with over 11,000 operating retail units;
selling products and services under 63 banners in 28 countries, e-commerce websites in 11
countries and with over 2,3 million associates worldwide. The company operates in three
segments: Wal-Mart U.S., Wal-Mart International and Sam's club (Wal-Mart Inc., 2016a).
Wal-Mart U.S. segment operates retail stores in all 50 states, with supercenters in 48 states,
discount stores in 44 states and Neighborhood Markets and other small store formats in 26
states. Supercenters range in size with an average of approximately 55.000 sq. meters. Its
discount stores range in size with an average of approximately 32.000 sq. meters.
Neighborhood Markets and other small formats range in size with an average of
approximately 12.000 sq. meters. Of all the three segments, Wal-Mart U.S. is the largest and
has historically had the highest gross profit as a percentage of net sales. In addition, Wal-
Mart U.S. has historically contributed the greatest amount to the company’s net sales and
operating income. In the fiscal year 2016 this segment accounted for approximately 62,3 %
of its net sales, which is 3,6 % more than the previous year (Wal-Mart Inc., 2016a).
Net sales of Wal-Mart International in fiscal 2016 equal to 123,4 billion USD, which is a 2,4
% drop by previous year, where net sales amounted to 136,2 billion USD. This segment has
been the most rapid growing segment (see Figure 1), since it has grown primarily through
new stores and acquisitions. In recent years its net sales and operating income has grown
faster than the other segments. There was a slight drop of sales in fiscal
4
2014 due to fluctuations in currency exchange rates and no significant acquisitions (Wal-Mart
Inc., 2016a).
Sam’s Club segment covers only membership operations. Members include both business
owners and individual customers. As a membership club warehouse, facility sizes for Sam’s
Clubs have an average size of approximately 40.000 sq. meters. Sam’s Club also provides its
members with a range of merchandise and services online. It has a lower gross profit rate and
lower operating expenses as a percentage of net sales than the other two segments. In fiscal
2016 this segment accounted for approximately 11,9 % of its net sales (56,8 billion USD), with
0,1 % drop by fiscal 2015 (Wal-Mart Inc., 2016a).
350 25%
300
20%
250
15%
$ million
Source: Wal-Mart Inc., 2000 annual report, 2000, p. 1; Wal-Mart Inc., 2001 annual report, 2001, p. 1; Wal-Mart
Inc., 2002 annual report, 2002, p. 16; Wal-Mart Inc., 2003 annual report, 2003, p. 18; Wal-Mart Inc., 2004
annual report, 2004, p. 16; Wal-Mart Inc., 2005 annual report, 2005, p. 25; Wal-Mart Inc., 2006 annual report,
2006, p. 22; Wal-Mart Inc., 2007 annual report, 2007, p. 30; Wal-Mart Inc., 2008 annual report, 2008, p. 10;
Wal-Mart Inc., 2009 annual report, 2009, p. 14; Wal-Mart Inc., 2010 annual report, 2010, p. 9; Wal-Mart Inc.,
2011 annual report, 2011, p. 4; Wal-Mart Inc., 2012 annual report, 2012, p. 19; Wal-Mart Inc., 2013 annual
report, 2013, p. 14; Wal-Mart Inc., 2014 annual report, 2014, p. 18; Wal-Mart Inc., 2015 annual report, 2015, p.
18; Wal-Mart Inc., 2016 annual report, 2016, p. 18.
Wal-Mart's history can be described with superlatives - as a story of innovation, leadership and
success. It began with a single store, back in 1962, in Rogers, Arkansas. Since then the company
grew to be the world's largest and emulated retailer, some researchers even refer to it as the
industry trendsetter (Table 1). In 1979, annual sales of Wal-Mart corporation topped 1 billion
USD. By the end of fiscal 2002 Wal-Mart was already world's largest retailer, with 218 billion
USD in sales. In fiscal 2016 that number rose to 482 billion USD
5
in sales, with a sum of 11.528 stores worldwide and is still growing (Wal-Mart Inc.,
2016a).
Wal-Mart's operations range in scope and are comprised primarily of three retailing
subsidiaries: Wal-Mart stores division U.S., Sam's club and Wal-Mart international. Each of
their divisions is broken down into three types of shopping experiences for their
6
customers: discount stores ranging in size from 2.700 to over 61.000 sq. meters; neighborhood
markets comprised like the typical supermarkets and Sam's club's offering sales of bulk items
to its members. Wal-Mart's marketing has changed very little since its inception concentrating
on two main principles »Low prices save you money« and »Always low prices, always«. Shared
values at Wal-Mart seem to be expansion and overtaking any and all other competition, with
no regard to the costs and regardless of affect on public appearance and the public perspective
of the organization (Bedford, 2007).
Organizational chart. Wal-Mart operates under a multidivisional structure. They are divided
in 13 divisions, some represent traditional functional areas (finance, information technology
(hereinafter: IT), corporate affairs, legal department, etc.) and other represent geographic areas
of retail operations (Sam's Club, U.S., International division). This type of structure allows
Wal-Mart to have increased strategic and operational control and main focus on products and
markets.
Listed in Figure 2 are the executive board of directors. Doug McMillon has been the current
president and Chief Executive Officer (hereinafter: CEO) since February 2014. In earlier years
he was the president of Wal-Mart International. He leads a strong management team and under
his leadership, Wal-Mart is bringing together its stores, logistics network and digital commerce
capabilities in new ways to empower customers to shop at any given point, location- and time-
wise (Wal-Mart Inc., 2016a).
n CEO
Wal-Mart opened its first international store in Mexico City in 1991 through joint venture
with Cifra, the local retailer. In 1993 Wal-Mart created Wal-Mart International. Since their
first joint venture in Mexico, Wal-Mart International has grown rather erratically (Table 2).
In 90's Wal-Mart exported their big-box format, low-price model, a strategy, that was
expected to be as successful in foreign markets, as it was in the domestic market. Although
Wal-Mart has had quite a successful run throughout the years, it was not always an easy one.
For example, in China and the United Kingdom, Wal-Mart's efforts to offer customers lowest
prices backfired because of resistance from established retailers. In Germany the company
could not seem to fit its business model to local tastes and preferences, so they closed their
stores in 2006, with a loss of approximately 1 billion USD. They had plenty of issues in Japan
due to the buying habits of customers, for which the Wal-Mart model did not respond
accordingly. Its presence in Hong Kong ended after only two years, after rioting incidents in
Jakarta. Taking that aside, today, Wal-Mart International is a fast-growing part of Wal-Mart's
overall operations, with 6.107 stores and more than 800.000 associates around the world. The
company is ranked 20th on Forbes Global 2000 - World's biggest public companies, with
revenues amounting to 482,1 billion USD and market value 215,7 billion USD. They rank
first in sales, 17th in market value, 21st in profit and 22nd in world's most valuable brands
(Forbes, 2016).
Source: Wal-Mart Inc., 2001 annual report, 2001, p. 8; Wal-Mart Inc., 2003 annual report, 2003, p. 25; Wal-
Mart Inc., 2008 annual report, 2008, p. 40; Wal-Mart Inc., 2010 annual report, 2010, p. 7; Wal-Mart Inc., 2012
annual report, 2012, p. 19.
Wal-Mart International is responsible for the operation of retail stores, wholesale stores,
restaurants, drugstores and convenience stores operating under varying banners outside the
United States. The segment currently operates 54,64 % of all stores of which 2.360 are located
in Mexico, 709 in Central America, 621 in United Kingdom and 485 in Brazil. The
number of stores has multiplied six times since the year 2000, which is shown in Figure 3. The
company had opened 70 new stores in Mexico, 29 in United Kingdom and 21 in China. On the
other hand, Wal-Mart has decided to close down more than 80 stores in Japan, 58 in Brazil and
9 in Chile due to their poor performance. Number of units in other countries is growing at a
slow pace (Wal-Mart Inc., 2016a).
Overall, Wal-Mart is the most successful in Mexico, a near-by market. Since 1991, when they
entered this market, they have opened more than 2.360 discount stores, most known as Wal-
Mex. In 2006 the company was also approved by local finance ministry to open their own bank
and by the end of the year 2010 they opened nearly 250 branches. Wal-Mex's mission was to
lure newcomers with easy instructions and entry points (no commissions, minimum balances,
etc.). Wal-Mex's plans for future growth involve heavily targeting on people in the age group
16-24 years, which constitutes 55 % of Mexico's population (Wal-Mart Inc., 2016a).
7000
United Kingdom
6000 Mexico
Japan
5000
India
4000 Germany
China
3000
Chile
2000 Central America
Canada
1000
Brazil
0
Argentina
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Source: Wal-Mart Inc., 2000 annual report, 2000, p. 1; Wal-Mart Inc., 2001 annual report, 2001, p. 1; Wal-
Mart Inc., 2002 annual report, 2002, p. 16; Wal-Mart Inc., 2003 annual report, 2003, p. 18; Wal-Mart Inc., 2004
annual report, 2004, p. 16; Wal-Mart Inc., 2005 annual report, 2005, p. 25; Wal-Mart Inc., 2006 annual report,
2006, p. 22; Wal-Mart Inc., 2007 annual report, 2007, p. 30; Wal-Mart Inc., 2008 annual report, 2008, p. 10;
Wal-Mart Inc., 2009 annual report, 2009, p. 14; Wal-Mart Inc., 2010 annual report, 2010, p. 9; Wal-Mart Inc.,
2011 annual report, 2011, p. 4; Wal-Mart Inc., 2012 annual report, 2012, p. 19; Wal-Mart Inc., 2013 annual
report, 2013, p. 14; Wal-Mart Inc., 2014 annual report, 2014, p. 18; Wal-Mart Inc., 2015 annual report, 2015, p.
18; Wal-Mart Inc., 2016 annual report, 2016, p. 18.
Burt and Sparks (2006) see Wal-Mart's internationalization process having three phases.
The first phase of internationalization is expansion to neighborhood markets (Canada,
Mexico), which turned out to be successful; the second a world-market focus, where Mart's
moves were limited by regulatory issues and incompatibility of some facets of its business
model (Germany, Japan) and the last phase a strategic planning approach, where Wal-Mart
concentrated on key locations (China)
What Kind of Service Does Wal-Mart Provide?
Retail goods
Walmart offers retails goods in a variety of categories. Customers can buy electronic products such as
MP3 players, digital cameras, printers, laptops and computers. Walmart offers music downloads, movies,
books and jewelry. In addition to home furnishings, the retailer also offers baby products, sporting goods
and grocery items.
Photo Services
Walmart offers photo lab services inside stores and online. Customers can drop off their photographs for
developing via a store kiosk. They can also upload their digital photos via the corporate website. Pick up
photos at a store location or have them sent to a home address. The photo lab offers customers the option
to develop the prints in an hour.
Pharmacy
In 2006, Walmart began offering customers prescriptions for a mere $4. This practice was significant,
with many retailers following suit. The company estimates savings to customers total $3 billion since the
program's inception. Walmart offers monthly prescriptions for pickup in-store or mail order services for
long-term medications. The savings are due in large part to Walmart's catalog of over 300 generic
medications available for $4 in-store or $10 for a 90-day supply.
Financial Services
Walmart offers several financial services. These include credit cards, debit cards, bill payment, money
transfers, check cashing and check printing. Walmart offers a store credit card without an annual fee.
Obtain a debit card in-store or online. Walmart offers money transfer services through Moneygram,
starting at $4.75. Customers can also purchase money orders and gift cards, send bill payments, order
printed checks and cash checks for fees starting at $3.
Wireless Service
Walmart partnered with service provider T-mobile to offer wireless phone service. The Walmart Family
Talk Wireless service provides customers with a family plan for unlimited text and voice calls. The
service requires no traditional yearly contract and plans start at $45.
Money Services
Credit & Prepaid Debit Cards
Walmart Credit Card
Walmart MoneyCard
American Express Bluebird
Netspend Visa
Rapid Reload
Gift Cards
Walmart Gift Cards
Walmart eGift Cards
Visa/MasterCard/AMEX Gift Cards
Corporate Gift Card Program
Other Gift Cards
Product Services
Protection plans
Walmart Protection Plans
File a Claim
In-home Services
TV Wall Mounting
Furniture Assembly
Smart Home
Home Advisor
Other Product Services
Personalized Products
Photo Printing
Trade-In Programs
Business Services
Walmart for Business
Corporate Gift Card Program
Promotional Products
Business Credit Card
Community Credit Card
Health Services
Pharmacy
Wellness Center
Vision Center
Refill a Prescription
Flu & Immunizations
Clinic Services
Registry Services
Wedding
Baby
Event
Auto Service
Auto Care Center
Auto Buying
Tire Finder
Pet Services
Pet Medications
New Pet Parent Resources
Geographical Area
Walmart's operations are organized into four divisions: Walmart U.S., Walmart International, Sam's Club
and Global eCommerce. The company offers various retail formats throughout these divisions, including
supercenters, supermarkets, hypermarkets, warehouse clubs, cash-and-carry stores, home improvement,
specialty electronics, restaurants, apparel stores, drugstores, convenience stores, and digital retail.[98]
Walmart U.S.
Walmart U.S. is the company's largest division, accounting for US$298.38 billion, or 62.3 percent of total
sales, for fiscal 2016. It consists of three retail formats that have become commonplace in the United
States: Supercenters, Discount Stores, Neighborhood Markets, and other small formats. The discount
stores sell a variety of mostly non-grocery products, though emphasis has now shifted towards
supercenters, which include more groceries. As of January 31, 2018, there are a total of 4,761 Walmart
U.S. stores. In the United States, 90 percent of the population resides within 10 miles of a Walmart
store.[99]
Walmart Supercenter
Walmart Supercenters, branded simply as "Walmart", are hypermarkets with sizes varying from 69,000 to
260,000 square feet (6,400 to 24,200 square meters), but averaging about 178,000 square feet (16,500
square meters).These stock general merchandise and a full-service supermarket, including meat and
poultry, baked goods, delicatessen, frozen foods, dairy products, garden produce, and fresh seafood.
Many Walmart Supercenters also have a garden center, pet shop, pharmacy, Tire & Lube Express, optical
center, one-hour photo processing lab, portrait studio, and numerous alcove shops, such as cellular phone
stores, hair and nail salons, video rental stores, local bank branches (such as Woodforest National Bank
branches in newer locations), and fast food outlets.
Many Walmart Supercenters have featured McDonald's restaurants, but in 2007, Walmart announced it
would stop opening McDonald's restaurants at most of their newer stores, most likely due to nutrition.
Most locations that opened up after the announcement had Subway as their restaurants, and some
McDonald's inside the stores were replaced with Subways. In some Canadian locations, Tim Hortons
were opened. Recently, in several Supercenters, like the Tallahassee, FL location, Walmart added Burger
King to their locations.
Some locations also have fuel stations which sell gasoline distributed by Murphy USA (which spun off
from Murphy Oil in 2013), Sunoco, Inc. ("Optima"), the Tesoro Corporation ("Mirastar"), USA Gasoline,
and even now Walmart-branded gas stations.
The first Supercenter opened in Washington, Missouri, in 1988. A similar concept, Hypermart USA, had
opened a year earlier in Garland, Texas. All Hypermart USA stores were later closed or converted into
Supercenters.
As of January 31, 2018, there were 3,561 Walmart Supercenters in 49 of the 50 U.S. states, the District of
Columbia, and Puerto Rico.Hawaii is the only state to not have a Supercenter location. The largest
Supercenter in the United States, covering 260,000 square feet (24,000 square meters) on two floors, is
located in Crossgates Commons in Albany, New York.
A typical supercenter sells approximately 120,000 items, compared to the 35 million products sold in
Walmart's online store.
The "Supercenter" name has since been phased out, with these stores now simply referred to as
"Walmart", since the company introduced the new Walmart logo in 2008. However, the branding is still
used in Walmart's Canadian stores (spelled as "Supercentre" in Canadian English).
In 1990, Walmart opened its first Bud's Discount City location in Bentonville. Bud's operated as a
closeout store, much like Big Lots. Many locations were opened to fulfill leases in shopping centers as
Walmart stores left and moved into newly built Supercenters. All of the Bud's Discount City stores had
closed or converted into Walmart Discount Stores by 1997.[106]
As of January 31, 2018, there were 400 Walmart Discount Stores in 41 states and Puerto Rico.[1][2]
Idaho, Montana, Nebraska, North Dakota, South Carolina, South Dakota, Utah, District of Columbia,
West Virginia, and Wyoming are the only states and territories where a discount store does not operate.
Products at Walmart Neighborhood Market stores carry the same prices as those at Walmart's larger
supercenters. A Moody's analyst said the wider company's pricing structure gives the chain of grocery
stores a "competitive advantage" over competitors Whole Foods, Kroger and Trader Joe's.[111]
Neighborhood Market stores expanded slowly at first as a way to fill gaps between Walmart Supercenters
and Discount Stores in existing markets.[115] In its first 12 years, the company opened about 180
Walmart Neighborhood Markets.[115] By 2010, Walmart said it was ready to accelerate its expansion
plans for the grocery stores.[115] As of January 31, 2018, there were 701 Walmart Neighborhood
Markets,[1][2] each employing between 90 and 95 full-time and part-time workers.[116]
2015 photo of a Walmart Express branded as a Walmart Neighborhood Market in Alma, Georgia that
closed in 2016
2015 photo of a Walmart Express branded as a Walmart Neighborhood Market in Alma, Georgia that
closed in 2016
Walmart opened Supermercado de Walmart locations to appeal to Hispanic communities in the United
States.[117] The first one, a 39,000-square-foot (3,600-square-meter) store in the Spring Branch area of
Houston, opened on April 29, 2009.[118] The store was a conversion of an existing Walmart
Neighborhood Market.[119] In 2009, another Supermercado de Walmart opened in Phoenix,
Arizona.[120] Both locations closed in 2014.[121] In 2009, Walmart opened "Mas Club", a warehouse
retail operation patterned after Sam's Club. Its lone store closed in 2014.
Walmart Express was a chain of smaller discount stores with a range of services from groceries to check
cashing and gasoline service. The concept was focused on small towns deemed unable to support a larger
store, and large cities where space was at a premium. Walmart planned to build 15 to 20 Walmart Express
stores, focusing on Arkansas, North Carolina and Chicago, by the end of its fiscal year in January 2012.
As of September 2014, Walmart re-branded all of its Express format stores to Neighborhood Markets in
an effort to streamline its retail offer. It continued to open new Express stores under the Neighborhood
Market name. As of January 31, 2018, there were 99 small-format stores in the United States. These
include Amigo (17 locations), E-Commerce Acquisition / C-stores (59 locations), and other store formats
(23 locations). On January 15, 2016, Walmart announced that it will be closing 269 stores globally,
including all 102 U.S. Walmart Express stores, including those branded as Neighborhood Markets.[122]
Initiatives
In September 2006, Walmart announced a pilot program to sell generic drugs at $4 per prescription. The
program was launched at stores in the Tampa, Florida, area, and by January 2007 had been expanded to
all stores in Florida. While the average price of generics is $29 per prescription, compared to $102 for
name-brand drugs, Walmart maintains that it is not selling at a loss, or providing them as an act of
charity—instead, they are using the same mechanisms of mass distribution that it uses to bring lower
prices to other products.[123] Many of Walmart's low cost generics are imported from India, where they
are made by drug makers that include Ranbaxy and Cipla.
On February 6, 2007, the company launched a "beta" version of a movie download service, which sold
about 3,000 films and television episodes from all major studios and television networks. The service was
discontinued on December 21, 2007 due to low sales.
In 2008, Walmart started a pilot program in the small grocery store concept called Marketside in the
metropolitan Phoenix, Arizona, area. The four stores closed in 2011.
In 2015, Walmart began testing a free grocery pickup service, allowing customers to select products
online and choose their pickup time. At the store, a Walmart employee loads the groceries into the
customer's car. As of December 17, 2017, the service is available in 39 U.S. states.[128]
In May 2016, Walmart announced a change to ShippingPass, its three-day shipping service, and that it
will move from a three-day delivery to two-day delivery to remain competitive with Amazon.[129]
Walmart priced it at 49 dollars per year, compared to Amazon Prime's 99-dollar-per-year price.[130][131]
In June 2016, Walmart and Sam's Club announced that they would begin testing a last-mile grocery
delivery that used services including Uber, Lyft, and Deliv, to bring customers' orders to their homes.
Walmart customers would be able to shop using the company's online grocery service at
grocery.walmart.com, then request delivery at checkout for a small fee. The first tests were planned to go
live in Denver and Phoenix. Walmart announced on March 14, 2018 that it would expand online delivery
to 100 metropolitan regions in the United States, the equivalent of 40 percent of households, by the end of
the year of 2018.
Walmart's Winemakers Selection private label wine was introduced in June 2018. From domestic and
international sources, selected by an in-house expert with the help of a small number of trusted
distributors and importers, they are notably good for inexpensive wine. Available in about 1,000 stores,
the wines are identifiable by a large W in a banner on the label.
Chapter 2
What Is Globalization?
Globalization is a process of interaction and integration among the people, companies, and governments
of different nations, a process driven by international trade and investment and aided by information
technology. This process has effects on the environment, on culture, on political systems, on economic
development and prosperity, and on human physical well-being in societies around the world.
Globalization is not new, though. For thousands of years, people—and, later, corporations—have been
buying from and selling to each other in lands at great distances, such as through the famed Silk Road
across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries,
people and corporations have invested in enterprises in other countries. In fact, many of the features of the
current wave of globalization are similar to those prevailing before the outbreak of the First World War in
1914.
But policy and technological developments of the past few decades have spurred increases in cross-border
trade, investment, and migration so large that many observers believe the world has entered a
qualitatively new phase in its economic development. Since 1950, for example, the volume of world trade
has increased by 20 times, and from just 1997 to 1999 flows of foreign investment nearly doubled, from
$468 billion to $827 billion. Distinguishing this current wave of globalization from earlier ones, author
Thomas Friedman has said that today globalization is “farther, faster, cheaper, and deeper.”
This current wave of globalization has been driven by policies that have opened economies domestically
and internationally. In the years since the Second World War, and especially during the past two decades,
many governments have adopted free-market economic systems, vastly increasing their own productive
potential and creating myriad new opportunities for international trade and investment. Governments also
have negotiated dramatic reductions in barriers to commerce and have established international
agreements to promote trade in goods, services, and investment. Taking advantage of new opportunities
in foreign markets, corporations have built foreign factories and established production and marketing
arrangements with foreign partners. A defining feature of globalization, therefore, is an international
industrial and financial business structure.
Technology has been the other principal driver of globalization. Advances in information technology, in
particular, have dramatically transformed economic life. Information technologies have given all sorts of
individual economic actors—consumers, investors, businesses—valuable new tools for identifying and
pursuing economic opportunities, including faster and more informed analyses of economic trends around
the world, easy transfers of assets, and collaboration with far-flung partners.
Globalization is deeply controversial, however. Proponents of globalization argue that it allows poor
countries and their citizens to develop economically and raise their standards of living, while opponents
of globalization claim that the creation of an unfettered international free market has benefited
multinational corporations in the Western world at the expense of local enterprises, local cultures, and
common people. Resistance to globalization has therefore taken shape both at a popular and at a
governmental level as people and governments try to manage the flow of capital, labor, goods, and ideas
that constitute the current wave of globalization.
To find the right balance between benefits and costs associated with globalization, citizens of all nations
need to understand how globalization works and the policy choices facing them and their societies.
Globalization101.org tries to provide an accurate analysis of the issues and controversies regarding
globalization, without the slogans or ideological biases generally found in discussions of the topics. We
welcome you to our website.
Process Engineering
There is a significant difference between a company that is multinational, and a company that is truly
global. The difference is that a multinational company simply operates in multiple nations; a global
company has embarked upon the journey of systematically updating its policies, procedures, and systems
across multiple cultures. Some of the most significant challenges are often IT-related. Even given the
incredible advances in modern-day technology, global companies still suffer from program and platform
inconsistencies. Where technological practicality or the realities of budget do not permit complete
integration, that disconnect must be evaluated and corrected. At a minimum, all offices in the operation
must “know what they don’t know” regarding the business processes, IT systems, and the roll-out of
global policy and procedure, to assure maximum efficiency, risk reduction and cost optimization. Typical
examples include requests from finance in HQ in the United States requesting financial reports from
satellite offices around the world. The HQ platform might have the capability to generate the report with
the specific information and format requested in a blink of an eye (or at least the click of a mouse), but a
satellite office in Senegal might require a programmer or a wiz with an excel spreadsheet over the course
of a week to effectuate the same result. Knowing means that reasonable expectations for the deliverable
can be set.
Time Orientation
The concept of time orientation refers to the way in which a society values, executes and utilizes time. In
Western cultures, time is a commodity. If you’re not early, you’re late. Time is money. Time is divided
into the sixty minutes of a standard clock. In two-thirds of the world, time happens “when it’s supposed
to,” and is characterized as flexible and elastic. The most striking difference between China and Western
cultures in this regard is the long-term orientation of the Chinese culture. The culture has survived for
thousands of years, through flood and famine and having been invaded on all sides by multiple forces.
The longevity of the culture combined with Confucian philosophy yields a long-term orientation that
materializes in the business world in several ways. Short-term wastefulness in a supply chain, for
example, is despised because thrift is a significant virtue, but professional development training that will
lead to long-term corporate growth may see lavish expenditures. Business planning is not quarterly or
annual, but often is anticipated for the next decade, or even decades.
Leveraging the Power of Culture
While the U.S. has enjoyed decades of domestic economic prosperity, recent economic challenges remind
us that our future economic success revolves around succeeding in the global economy. It’s not about
who’s bigger, better, brighter, or faster; it’s about who is empowered to leverage the power of culture to
optimize an organization’s bottom line. Cross-cultural differences have time and time again been
identified as the most significant impediment to successful international ventures and projects. These
obstacles can be transformed into opportunities with a framework for tackling them head-on.
Valuable
Wal-Mart’s skills in developing and using POP data collection to control inventory
Rare Capabilities
Costly to Imitate
Brand Value
Non-Substitutable
If Wal-Mart continues to expand and sustain sales, there should be no fear of direct substitution in near
future
ii
Wal-mart has distribution centers located at different geographical locations in the US. Wal-Marts own
warehouses provides 85% of the inventory, as compared to 50-60% for its competitors. Wal-Mart is able
to provide replenishments within two days, whereas, its competitors in at least five days. Shipping costs
for Wal-Mart is roughly 3% compared to 5% for its competitors. The distribution centers ensured a steady
and consistent flow of products to support the supply function.
As Wal-Mart uses sophisticated barcode technology and hand-held computer systems, managing the
center becomes easier and more economical. It’s technological systems ensures that information
regarding the inventory level of all the products is accessible to every employee. The hand-held computer
enables the employee to keep track of the location of a particular product from a particular bin or shelf in
the center. The quantity of product required from the center is entered into the hand-held computer which
gets updated in the server. The hand-held computer also enables the packaging department to get accurate
information about products to be packed. It displays all information about the storage, packaging and
shipping of a particular product thus, saving time on unnecessary paperwork. This enables the company to
satisfy customer needs quickly and improve the level of efficiency of the distribution center management
operations.
Logistics Management
The main feature of Wal-Mart’s Logistics infrastructure is its transportation system. The distribution
center is serviced by more than 3500 trucks of its own. These dedicated trucks that Wal-Mart owns help
them in shipping goods from the distribution centers to the stores within two days and replenish the store
shelves twice a week. Wal-Mart believes that it needs drivers who are committed and dedicated to
customer service. The company hires only experienced drivers who have driven more than 3,00,000
accident free miles, with no major traffic violation.
To make its distribution process more efficient, Wal-Mart also made use of a logistics technique known
as ‘cross-docking’. In this system, the finished goods were directly picked up from the manufacturing
plant of a supplier, sorted out and then directly supplied to the customers. The system reduced the
handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.
In Cross docking , requisitions received for different goods from a store were converted into purchase or
procurement orders. These purchase orders are then forwarded to the manufacturers who convey their
ability or inability to supply the goods within a particular period of time. In cases where the manufacturer
agrees to supply the required goods within the specified time, the goods are directly forwarded to a place
called staging area. The goods are packed here according to the orders received from different stores and
directly sent to different customers. Traditionally, decisions about merchandising, pricing and promotions
had been highly centralised and were generally taken at the corporate level. The cross-docking system,
however, changed this practice. The system shifted focus from “supply chain” to “demand chain”
(Byrnes), which meant that instead of the retailer ‘pushing’ products into the system; customers could
‘pull’ products, when and where they need it.
Inventory Management
Wal-Mart has invested heavily in IT and communication systems to effectively track sales and
merchandise inventories in stores across the country. With rapid expansion of Wal-Mart stores across US,
it was essential to have a good communication system. Hence, Wal-Mart set up its own satellite
communication system in 1983. Its benefits are as Sam Walton rightly said that he can go to any
technician and talk on the phone to any store that might have a problem with system and gauge how a
particular day is going. On the screen, he could see total of the day’s bank credit sales adding up as they
occur. If something important is to be conveyed to the stores and distribution centers, he or any Wal-Mart
executive can walk to the TV studio and get on the satellite transmission and get it right there.
Wal-Mart is able to reduce unproductive inventory by allowing stores to manage their own stocks,
reducing pack sizes across many product categories, and timely price markdowns. Instead of cutting
inventory across the board, Wal-Mart made full use of IT capabilities to make more inventories available
in case of items that customers wanted the most, while reducing the overall inventory levels. Wal-Mart
has also networked all its suppliers through computers. Employees at Wal-Mart have hand-held
computers which are linked to the in-store terminals through a radio frequency network. These help them
track the inventory in stores, deliveries and backup merchandise in stock at the distribution centers. The
order management and store replenishment of goods were entirely executed with the help of computers
through the Point-of-Sales (POS) system. Through this system it is possible to monitor and track the sales
and merchandise stock levels on the store shelves. Wal-Mart also made use of the sophisticated algorithm
system which enabled them to forecast exact quantities of each item to be delivered, based on inventories
in each store. Wal-Mart also uses a centralized inventory data system using which the personnel at stores
can find out the level of inventories and the location of each product at any given time.
In 1991, Wal-Mart has invested approximately $4 billion to build a retail link system. More than 10,000
Wal-Mart retail suppliers used the retail link system to monitor the sales of their goods at stores and
replenish inventories. The details of daily transactions, which approximately amounted to more than 10
million per day, were processed through this integrated system and are furnished to every Wal-Mart store
by 4AM the next day. Wal-Mart tied up with Atlas Commerce for upgrading the system through the
Internet enabled technologies. Wal-Mart owns the largest and most sophisticated computer system in the
private sector.
By making effective use of computers in all it’s company operations, Wal-Mart is successful in providing
uninterrupted service to its customers, suppliers, stockholders and trade partners.
Wal-Mart strongly believed and constantly emphasized on strengthening its relationship with its
customers, suppliers and employees. The company made efforts to capitalize every cost saving
opportunity. The savings on cost were always passed on the the customers, thereby adding value at every
stage and process. Wal-Mart enjoyed the benefits of low transportation costs since it had its own
transportation system which assisted Wal-Mart in delivering goods to different stores within 48 hours.
The company enjoyed good bargaining power as it purchased huge quantities. Low pricing ensured that
the sales volume were high and consistent. The benefits of an efficient supply chain management system
included reduction in lead time, faster inventory turnover, accurate forecasting of inventory levels,
increased warehouse space, reduction in safety stock and better working capital utilization. It also helped
reduce the dependency on the distribution center management personnel resulting in minimization of
training costs and errors. The stock-out of goods and the subsequent loss arising out of it was completely
eliminated. Wal-Mart’s Supply chain management practiced resulted in increased efficiency in operations
and better customer service. Cross docking also helped Wal-Mart to reduce inventory storage costs. It
also helped to cut down the labor and other handling costs in loading and unloading of goods.
Primary Activities:
Inbound logistics:
Walmart’s suppliers are thousands of businesses spread globally. To keep its costs lower than the
competitors, Walmart has to depend on it suppliers. Since Walmart buys in bulk from its suppliers, it has
no difficulty managing prices. Based on its financial clout and size, Walmart is able to press the suppliers
for lower prices. Apart from it Walmart has also focused on efficient supply chain management and
inventory management to manage its supply chain costs. It has made use of technology and apps to
manage supply of material and inventory which also helps keeping costs low. The suppliers are
responsible for providing materials in real time as per requirement. Apart from it Walmart has also
applied a code of conduct for the suppliers. It has focused on managing long term relationships for
efficient sourcing and for keeping prices low. It offers its suppliers the potential for high volume
purchases in the long term for the lowest prices. This strategic partnership with the vendors has helped it
better manage its supply chain.
Operations:
Walmart operates in the retail sector and this sector has seen a lot of growth during the recent three years.
Today, Walmart operates across 28 countries and under 63 banners. It has more than 11500 retail units
operational worldwide. Sam’s club is a retail membership-based warehouse club that 662 retail units
operational in United States. In US alone, Walmart has 4,692 retail units operational. The number of
Walmart Super centers is 3,534 and that of discount stores is 412. There are 48 small format Walmart
retail stores and 698 neighborhood markets in US. Today, more than 1.5 million associates are employed
across more than 5,000 retail stores of Walmart in US.
Outbound logistics:
At the core of Walmart’s inventory management technique is a supply chain practice called cross
docking. The products received from the suppliers are cross docked at the distribution centres and then
forwarded to the stores. This keeps the inventory and transportation costs low and cuts down on the time
needed for transportation and thus eliminates inefficiencies. In this way, the Walmart stores are
immediately replenished without having to wait for long periods. This has reduced the costs for Walmart
and the benefits can be passed on to the customers. Its more than 150 distribution centres are the hub of
activity for its business. These distribution centres serve the stores, clubs and deliver to the customers
directly.
Marketing and sales:
Walmart’s slogan is “Save money. Live better”. Its pricing strategy is one of the key elements of its
marketing strategy. The everyday low prices strategy has helped it build a reputation of the best price
retailer. However, apart from it Walmart also spends billions on marketing. It advertises and promotes its
brand and deals through several advertising channels including traditional and digital channels. From
promotional videos to social media, Walmart uses them all for the promotion of its brands. Apart from it,
customer service is also a key part of its strategy that helps create a positive brand image and better
reputation.
Support Activities:
Technology:
Walmart has made extensive use of technology for better supply chain management and sales as well as
customer service. From smarter apps for inventory management to ecommerce websites it has used
technology to gain efficiency. A number of technological tools are used to keep the managers updated and
the stores well supplied. Technology has become indispensable for efficiency in the retail business.
Human Resource Management:
In the past, Walmart has faced severe criticism for its poor Human resource practices. However, things
have changed in the recent years. It had faced most criticism over its wage policy. Now, it has improved
the minimum wages to more than $13 and is investing $2.7 billion in wages, education and training. Last
year, it also promoted more than 200,000 people to jobs with higher responsibility and better pay.
Procurement:
One of the key focus areas at Walmart is procurement. It has managed strategic relationships with its
suppliers to keep costs of material lower. These suppliers provide standard products and services as
mentioned in the suppliers’ code.
Firm Infrastructure:
The infrastructure of any organization plays a key role in the success of that firm. Walmart has built a
very large infrastructure that includes its management, supply chain, human resources, its distribution and
fulfilment centers and more. Apart from excellent management of its technological and financial
resources now it is focusing on managing its employees better to be more successful. It has kept
increasing its investment in technology and people during the recent years considering their importance
for the faster growth and success of the brand.