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Wal-Mart's Business Strategy

Buy custom Wal-Mart's Business Strategy essay

Wal-Mart Stores is an international retailer corporation that deals with large discount stores and warehouse stores. It is ranked as the 18th largest company in the world by Forbes. It is the largest private employer. It employs over 2 million workers worldwide. The main controllers of the corporation are the Walton family.  This would be expected because the founder of the company was Sam Walton. It was founded in the year 1962. It got incorporated in 1969 and entered the stock exchange in 1972. The headquarters of this company is situated in Bentonville, Arkansas. The company owns 8500 stores which are situated in 15 different countries. These stores are under 55 names. The U.S has the highest number of the stores at 3800.

Historical Background

Wal-Mart stores were founded by Sam Walton. Sam Walton was a businessman who hailed from Arkansas. Sam Walton ventured into retail business at a young age when he started working. This was in the year 1940. He worked at J.C Penny stores for eighteen months. In the year 1945, Sam Walton met the Butlers who were retailers. The Butler brothers were the proprietors of Ben Franklin stores. This group offered him a store in the town of Newport, in the state Arkansas. Walton did magnificently well in the store. He succeeded a great deal. His success was beyond expectations. Despite his success, when time rolled for a new lease renewal, Sam Walton did not agree with the set terms. He was not able to find another store in the same place. Sam Walton consequently opted to open a new store in the town of Bentonville and called it a new name. Here Walton made even greater sales (Fishman, 2006). He did this by doing marking up that was lower than what other retailers had his competitors.

Walton came up with the company’s pioneer store in July, 1962. This store was situated in Walnut Avenue in town of Rogers. This building is currently serving as a store of hardware and an old mall. Five years down the line, Wal-Mart had grown to own 24 stores across the state of Arkansas. It achieved a sale twelve million dollars within five years. The company opened its pioneer store away from Arkansas around 1968. These were in Missouri and Oklahoma.

Wal-Mart was officially incorporated in 1969. The head office was commissioned in 1970. It owned 38 stores which were fully operational with 1500 employees. At this time it made sales of great worth. In October 1970, it was listed in the stock market.

In the 1980s, this company maintained the speed in its growth scale and by 1987, it had accumulated 1198 stores. This is the year that it launched its satellite network which was to allow subsequent communication with the head office in Bentonville and keeping and tracing of inventory. Walton stepped down from the portfolio of the company C.E.O in 1988 and the position was taken over by David Glass. Walton continued being the chairman of the board. In this year, the first Wal-Mart supercenter was opened in the city of Washington. In the year 1998, the company brought up the concept of neighborhood market. In 2005, it is estimated that the company was in control of about 20 per cent of the total grocery sales and consumable products.

In the year 2005, Wal-Mart made sales of $312.4 billion. It had 6200 facilities all over the world of which 3800 were in the U.S (Hill, 2009).

In 2005, Wal-Mart declared that it was going to take part in provision of solution to environmental issues that affected its areas of operation. It pledged that it was going to take up measures that would increase energy efficiency. It also undertook to help in reducing emission of greenhouse gases into the environment by 20% within a time span of seven years. It was also going to cut on energy use by 30 per cent and cut off on production of solid waste by 25 per cent.

Wal-Mart took a positive direction in selling of organic milk and buying organic cotton. It also reduced packaging and energy use.

Wal-Mart also spent a lot of time with outside consultants trying to find out the environmental impacts associated with the company. This was to aid it in identifying the possible adjustments it needed to effect to carry out its environment friendly operations. For example the company realized that by reducing packaging, it was going to save a great deal of money as well as having positive effect on the environment.

Finance and Governance

By the end of January 2011, Wal-Mart realized a net income totaling to $15.4 billion. Wal-Mart is the 18th largest cooperation in the world. This is in accordance with Forbes global list. It is the largest public co-operation when the ranking is done according to revenue.

The governing body of Wal-Mart is composed of a board of directors of 15 members. The members of the board are selected by the shareholders every year. The chairman of the board is Robinson Walton who is the eldest son of Sam Walton. The C.E.O of the company is known as T. Duke. Lee Scott, who is the former C.E.O, is the chairman of the executive committee.

Sam Walton passed on in the year 1992. After his death, Don Soderquist took over to continue this noble culture.  

Competitors

Competition to Wal-Mart in North America is quite wide with department stores like Shopko and Target among others taking the lead. It also experiences competition from Canada’s Superstores, Zellers and Hart. Commercial Mexicana of Mexico is one other company that poses competition in Wal-Mart’s field.

When Wal-Mart ventured into the grocery business in 1990s it had to pull neck to neck with several chains of supermarkets in the U.S and Canada. A number of small retailers especially dollar stores successfully identified means of competing against Wal-Mart especially in dealing with home consumables.

Wal-Mart also had to face a great competition in foreign countries. For instance, in Germany, it was able to capture around 2 per cent of German’s food market. It became a secondary player in this market after Addi with a 19 per cent. However, in the year 2006, Wal-Mart announced its withdrawal from the German market. It sold its stores to Metro. Wal-Mart continues to prosper in the U.K though. Its Asda branch is the largest after Tesco. In 2006, Wal-Mart withdrew from South Korea around eight years after it entered the Korean market. It sold its stores to Shinshegae. In china, Wal-Mart prospects succeeded by dealing in things that are liked by the Chinese citizens (Dalic, 2004).

Impact on Economy

A professor of economics once wrote that if Wal-Mart enters into a small town to start business, many retail shops would be at a great risk of losing their business within a very short time. He said that the concept of discount retailing is more preferred in small towns than in big towns. The impact created by Wal-Mart would be so great. Study shows that when Wal-Mart opens in an area, the sales of existing stores drop by 40%. The effect of this impact is related to the distance of Wal-Mart from these shops and that is why the effect would be felt more in small towns than in big towns. It is normally quite a sweaty task to try and pull down or compete with Wal-Mart.

A study by Von Misses Institute showed that the low prices offered by Wal-Mart have a positive effect on small scale stores because they make them think of better opportunities. It argues that by these shops closing down, better ideas are prompted in the minds of the small traders. The study also showed that the low prices in Wal-Mart save the working citizens a great deal of expenditure per year. This law price of foodstuffs boosts the welfare of Americans by $50 billion every year (Soderquist, 2005).

Wal-Mart also acts as a job creator to thousands of citizens in the world. U.S alone, Wal-Mart employed 210000 workers. Studies show that when Wal-Mart displaces another retail shop, the rates of employment increase remarkably. The Wal-Mart chain of retail shops also act as source of revenue income to countries of operation. It makes large sales hence big chunks are pumped into the government as revenue.

Conclusion

Wal-Mart is indeed a big and reputable company. It got its foundation from the hard works and managerial skills of an enthusiastic young man called Sam Walton. Sam Walton’s success in this field was by far amazing. Sam Walton managed to take control of the retail market at a very fast speed and within a short time his stores were travelling all over the world. Sam Walton’s dream managed to secure jobs for many as well as providing a ground for pocket friendly shopping among the Citizens. Wherever Wal-Mart malls are commissioned, buyers tend to get attracted so fast such that the pre existing stores are eventually denied the trade. The low priced goods have helped Wal-Mart to sell way above its competitors.

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