Wal-mart is not just an ordinary success story, it is also a phenomenon. There are many stories about entrepreneurial success of one man’s vision and daring that allowed him to start from scratch and went on to build an enterprise that created an impact in his community. However, few can rival the amazing success of Wal-Mart. Sam Walton, the founder, incorporated his business as Wal-Mart Stores in Bentonville, Arkansas in the United States and decades later it is no longer a domestic operation but a global retailing juggernaut that generates close to $400 billion in fiscal year 2009 alone ( Thompson, Strickland, & Gamble, p. 374).
The success of this company can be explained through their visionary founder Sam Walton’s passion to serve others as well as his business credo: Everyday Low Prices. Nevertheless, competition is still vigorous according to experts (Yoffie, 2005). It is up to the heirs of Sam Walton and the corporate leaders managing Wal-Mart to usher in the company into the 21st century and ensure that it will still become sustainable in spite of the many challenges it is facing today.
Foremost in the mind of all businessmen is the need to sustain their operations. It does not matter sometimes if the business is losing money; as long as it can be sustained for a few more years there is always the chance that the organisation can recoup their losses. In the case of Wal-Mart, however, the goal is not simply to survive in the midst of a recession but to sustain its amazing run of multiplying their revenue streams and increasing their profitability many times over. Based on the case study prepared by David Yoffie for Harvard Business School, the company has to manage more than $300 billion in sales. This is no ordinary problem but a rare challenge that is enviable to many business people.
Even a mere overview of Wal-Mart’s operations will give the impression that this company’s future is secure. This assertion is based on three things:
- Wal-Mart’s commitment to sell goods at rockbottom prices;
- Wal-Mart’s commitment to innovation e.g. technology deployment and changing store formats; and
- Wal-Mart’s commitment to expand to international markets.
In a sluggish economy there is a need for belt tightening and the first thing that people will do is to find cheap alternatives to products that they use everyday. This is where Wal-Mart offers something that is hard to beat: they offer competitive prices, if not the lowest prices for the goods that consumers really wanted without the need to alter their lifestyle and sacrifice on quality. This will ensure that customers of Wal-Mart will continually flock to their superstores and other discount outlets.
Another feature of their operation that is hard to emulate is the company’s relentlessness and daring when it comes to deploying new technology. It is normal for businesspeople to be wary of new technology. This is because it is very difficult to understand and use new technology and more importantly it is very expensive to implement it. But Wal-Mart’s tradition of challenging industry standards when it comes to using high-tech equipment and advanced software to improve their efficiency is almost unrivaled in the retail industry.
Finally, Wal-Mart’s sustainability is further assured as a result of their foray into international markets. By doing so, Wal-Mart is making sure that the company is not placing all its eggs in one basket so to speak. But more than that, there are economic growth centers outside the United States and by operating in countries like Mexico, Argentina, Canada, Brazil, United Kingdom, Germany, South Korea, China, Japan, and many others, Wal-mart is not spreading itself too thin but strategically positioning the organisation to benefit from the positive impact of globalization.
Limits to Growth
It will not always go Wal-mart’s way, especially in a highly competitive world of retail marketing. Furthermore, the increasing publicity given to the company’ success makes it a target for competitors and critics. For instance, the company has been criticised for giving low pay and creating a system wherein they can employ part-time workers and temporary help (Yoffie, 2005). This is obviously done to cut cost in terms of benefits packages such as health-care coverage (Yoffie, 2005).
Wal-Mart may get away with it but in the long run this can catch up with them and there is a possibility that Wal-Mart will not be able to sustain the growth of their human capital. After all, it is best to groom future managers and executives from within the company as workers rise through the ranks. However, workers may find it difficult to stay long-term if they feel that the company is not going to give them what they need.
Disgruntled workers and other critics can team up to pressure the Federal government to increase the accountability of Wal-Mart when it comes to their handling of human capital. It has to be pointed out that Wal-Mart does not have a union of workers even though it is the largest trucker, the number three largest when it comes to pharmacy and of course one of the largest grocers in the United States (Yoffie, 2005) In the near future laws will be passed that can force Wal-mart to drastically alter their employment policies and this can significantly eat into their profit margins.
The more serious threat that can limit their growth comes from competitors who are willing and able to challenge Wal-Mart in its own game, which is, to offer everyday low prices to consumers. They utilise a more focused approach, instead of copying store format of Wal-mart they concentrate on one area of customer needs. For example, Best Buy and Circuit City are trying to be number one when it comes to consumer electronics.
It is a well-known fact that one can easily master one area as opposed to offering a diversity of products andservices. It is easy to monitor and fine tune strategies so that it can be effective in addressing consumer needs. In other words companies like these can seriously challenge Wal-mart in certain product lines and although they cannot stop the juggernaut they can slowly but surely eat into their share of the market. Furthermore, rivals Kmart and Sears planned a merger that will combine their resources and market share and therefore pose a serious threat to Wal-Mart.
Wal-Mart’s Global Reach
In the foreseeable future everyone will say that Wal-Mart will continue its dominance when it comes to the retail industry. They continually overachieve and will never rest on their laurels. The major proof for that is their tenacity and willingness to do everything they can to succeed overseas. There is no need to study international marketing in-depth to understand how Wal-Mart can leverage their capability to operate in key cities in Europe, Asia, and the Americas. The sheer size of their operation can give them the ability to negotiate harder with suppliers so that they will lower their prices even further.
Wal-Mart’s significant global reach will increase the number of partners who are more than willing to do business with the company. This will immediately give them two positive implications. First, shareholders will find reap tremendous rewards as the company’s value skyrockets. And secondly, their presence in various cities and countries in the globe will give them the capability as an outsourcer of goods and innovative products that they can in turn introduce to their customers in the United States and vice versa. Their attempt to go into e-commerce will significantly improve as they move into a more global operation.
It must also be pointed out that globalization does not come without problems. The sheer scope of logistics required for an operation of this magnitude will never be easy. The question for Wal-Mart is again sustainability. It has proven that it can be profitable every fiscal year since its inception but it a whole new ballgame when it comes to managing a global operation. Yet again Wal-Mart has demonstrated its commitment to innovation to solve problems and surely they will figure how to move goods from one continent to the next and also manage human capital along the way.
Sam Walton built a profitable business on good foundations. This is the reason why Wal-Mart continues to astound shareholders and even critics in its ability to surpass expectations. It is their openness to technology, the use of innovative strategies and their commitment to serve others that drive the company its leaders to reach for greater heights. On the issue of sustainability it can be said without a doubt that Wal-Mart will still be around in the foreseeable future. When it comes to possible limitations in their growth Wal-Mart continues to find ways to counter criticisms and challenges from competitors to secure their position as leader in the retail industry. And finally, Wal-Mart’s venture into the global market has proven to be profitable one – not just in terms of millions of dollars in earnings but billions.
Thompson, A. Jr., A. Strickland III, & J. Gamble. Crafting and Executing Strategy: The Quest for Competitive Advantage, Concepts and Cases. New York: McGrawhill, 2008.
Wal-Mart Corporate. “Saving People Money So They Can Live Better.” Web.
Yoffie, David. Wal-Mart, 2005. Harvard Business School.