Wal-Mart Stores, Inc.: Management & Supply Chain

Founded in 1962 by American entrepreneur and retailer Sam Walton, and incorporated in 1969, Wal-Mart Stores, Inc. is not only the world’s leading public corporation by revenue, but also the world’s largest private employer and the undisputed market leader in grocery retailing (Wal-Mart, 2009; Weir, 2003). The success story and growth strategies of the corporation, headquartered in Bentonville, Arkansas, reads like a fairy tale from its humble beginnings in Rogers, Arkansas, to the business empire that today trades under the brand name ‘Wal-Mart’ in over 3,600 locations dispersed in 50 states across the U.S. The corporation has also established a presence in 15 international markets.

Despite the harsh economic environment occasioned by the recent financial meltdown, Wal-Mart managed to increase its total net sales for 2009 by 7.2% to $401,244, up from $374,307 recorded in 2008 (Wal-Mart, 2008). In 1972, Wal-Mart was listed on the New York Stock Exchange for purposes of public trading.

It is imperative to note that Wal-Mart operates under its own brand name in the U.S. and Puerto Rico. However, it operates as ‘Walmex’ and ‘Asda’ in Mexico and the United Kingdom respectively, and goes by the brand name ‘Seiyu’ in Japan and ‘Best Price’ in India (Parnell & John, 2008).

But while the corporation entered international limelight through acquisitions and buying majority stake in fully operational retail chains, its operations outside the U.S. have achieved mixed results of profit making in some locations such as the U.K and China, and loss-making in others such as Germany and South Korea (Parnell & john, 2008). It is also important to note that the corporation’s operations comprise three business segments, namely Wal-Mart U.S., Wal-Mart International, and Sam’s Club (Wal-Mart, 2009). The U.S. retail outlets include discount stores, super centers, and neighborhood markets.

Wal-Mart is primarily engaged in retail business. Its business model, according to Parnell & John (2008), revolves around selling a wide variety of quality general merchandise and groceries at prices that customers can afford. As rightly noted by Carlson (2007), “…Wal-Mart is in the business of selling everything customers need in their everyday lives” (para. 1)

The corporation is undoubtedly non-governmental and profit-oriented. Although its shares are publicly traded at the New York Stock Exchange, the corporation always strives to increase its profit margins by looping in more customers while sticking to its traditional approach of offering products at greatly discounted prices to enable its customers and members save money, thus live better. According to the 2009 financial disclosures, Wal-Mart U.S. accounted for 63.7% of total net sales, while Wal-Mart International and Sam’s Club netted 24.6% and 11.7% respectively (Wal-Mart, 2009). Overall, the corporation’s total net sales for the period grew by 7.2% to stand at $401,244, while return on assets (ROA) and return on shareholder’s equity grew by 8.4% and 21.2% respectively.

Wal-Mart is structured around a management approach that enables the corporation to effectively adjust to an ever-shifting global marketplace, not mentioning the fact that the management structure enables it to develop efficient business systems with the capacity to offer value to customers through the delivery of products at low prices (Russell, 2010).

The corporation is governed by a Board of Directors, consisting of fifteen members who are elected on an annual basis by the shareholders. Having being initially started and run as a family business, the mantle of leadership is still held by Robson Walton – the first son of the corporation’s founder and chief architect Sam Walton (Wal-Mart, 2009). Important managerial and strategic duties and responsibilities are delegated to a team of assiduous and conscientious professionals, led by the Chief Executive Officer (CEO) Michael T. Duke.

The business case for Wal-Mart is to always offer the lowest prices to customers. Additionally, the management aims to develop a store which offers convenience to customers by allowing them the opportunity to shop for every single item they need under one roof (Carlson, 2007). This management strategy of convenience with low prices has propelled the corporation to where it is today – a global market leader.

Wal-Mart’s fundamental business strategy, according to Parnell & John (2008), is Low Cost Leadership. This therefore means that’s its major source of strength comes from its ability to offer low-prices, and as such, its competitive advantage should be viewed and evaluated in this perspective (Carlson, 2007). Still, there is compelling evidence that Wal-Mart may be pursuing a vertical integration strategy, especially after the corporation started to develop and sell products under the brand name ‘Sam’s Choice.’

Wal-Mart’s supply chain structure have often been subjected to lengthy discussions in panels and conferences as professionals attempt to interrelate the various strategies and methodologies that enable such a huge entity to run a flawless supply and distribution chain. However, Wal-Mart’s success story in supply chain started way back in 1962 when its founder, Sam Walton, ensured that “…stores were located within one-day driving distance from the company’s distribution center to ensure instantaneous restocking” (Kennon, 2010, para. 6). To date, the corporation still maintains an efficient and faultless logistical network that permits deliveries to be shipped or transported everywhere around the world at moments notice (Russell, 2010).

In addition to the above, Wal-Mart’s strong supply chain structure coupled with its sheer size and presence in major international markets have allowed the corporation some form of leverage and flexibility in dealing with suppliers. Indeed, Wal-Mart’s relationship with suppliers is structured in a way that the corporation engages in business with suppliers that keeps their prices low, and it’s ever ready to search for new suppliers when current ones exceed the price quotations negotiated with Wal-Mart (Russell, 2010; Carlson, 2007).

The basic philosophy for Wal-Mart is that it is not in any way difficult to make adjustments aimed at ensuring an effective transition to a different supplier at no extra cost due to the corporation’s efficient supply chain. As noted by Carlson (2007), this supply chain strategy has greatly diminished supplier power, in the process enabling Wal-Mart to pursue its goals of providing high-quality products to customers at ‘all-time low prices’ and in line with its Cost Leadership Strategy. The corporation has also increasingly embraced technology as a driving force for its supply chain.

Wal-Mart has been selected for analysis since the corporation makes a strong case for effective management of structures and processes with the focus being laid on achieving a common good – that of enabling the customers to live better lives through providing them with a framework for buying high-quality products at greatly discounted prices.

References

Carlson, S. (2007). Wal-Mart case study. Web.

Kennon, J. (2010). Sam Walton (aka Samuel Moore Walton. About.Com). Web.

Parnell, J.A., & John, A.L. (2008). Competitive strategy and the Wal-Mart threat: Positioning for survival and success. SAM Advanced Management Journal, 73(2), 14r-24.

Russell, M. (2010). Logistics at Wal-Mart. EzineArticles. Web.

Wal-Mart 2009 Annual Report. (2009). Web.

Weir, T. (2003). Wal-Mart’s the 1. Progressive Grocer, 82(7), 35-36.