Wal-Mart Strategic Audit: Origins, Objectives and Strategies

Current Performance

Current Situation

Currently, Wal-Mart Stores, Inc. displays the signs of recovery from the crisis caused to the bulk of business companies worldwide by the economic recession and financial downturn. Although much lower than the figures for 2005 and 2006, as presented in the case study, for instance net sales $285 and $312 billion (Wheelen and Hunger, 2007, p. 19-3), the financials for the third quarter of 2009 illustrate growth, compared to the third quarter of 2008. Net sales increased from $97.619 billion in 2008 to $98.667 billion in 2009, while the income saw the increase to the level of $3.246 billion in 2009 from $3.033 billion in 2008 (Wal-Mart Stores, 2009).

Mission

The origins of Wal-Mart Stores’ mission can be traced from the views that the founder of this retail trading company, Sam Walton, had on business, the role of the company and its customers in it. According to Mr. Walton, “the reason for our success is out people and the way that they’re treated and the way they feel about their company” (Wheelen and Hunger, 2007, p. 19-10), so currently Wal-Mart Stores follows this idea and sticks to the point that “the customer is the boss” (Wal-Mart Stores, 2009). Finally, the current mission of Wal-Mart Stores is “Saving people money so they can live better” (Wal-Mart Stores, 2009).

Objectives and Strategies

The objectives pursued by Wal-Mart Stores are also derived from Sam Walton’s ideas and the corporate mission discussed above. There are domestic and international strategic objectives and strategies implemented for their fulfillment. The list of the company’s strategic objectives and the corresponding strategies will allow better understanding the essence of Wal-Mart Stores business conduct:

Policies

Wal-Mart Stores, Inc. also implements a set of the following six policies that allows the company to succeed in retail trade and display income growth even under the conditions of economic recession:

1. Customer centric business conduct (“customer is the boss”).
2. Human resource management that deeply involves employees into the corporate governance (employees are called associates and encouraged to decision-making).
3. Employee career development policy (management is recruited from former entry-level associates).
4. 10-Foot Rule/Policy (every customer is greeted and offered help by a Wal-Mart associate when approach 10 steps of closer).
5. Open Door Policy (readiness to help an associate and/or customer at any time).
6. The Sundown Rule (priority of urgent work over other tasks).

Strategic Managers

Board of Directors

According to the Wal-Mart Stores official web site (2009), the Board of Directors at Wal-Mart consists of 16 persons and is subdivided into four committees:

Audit committee includes

• Christopher J. Williams – Board of Directors and Audit Committee Chairman, Executive Committee member; former Chairman and CEO of Williams Capital Management, LLC. Experience in Wal-Mart – 5 years.
• Aida M. Alvarez – Audit Committee member; former Administrator of the U.S. Small Business Administration and a member of President Clinton’s Cabinet from 1997 to 2001. Experience in Wal-Mart – 8 years.
• James I. Cash – Audit Committee member; former Professor of Business Administration at Harvard Business School. Experience in Wal-Mart – 6 years.
• Arne M. Sorenson – Audit Committee member; also the Executive Vice President and Chief Financial Officer of Marriott International, Inc. Experience in Wal-Mart – 11 years.

Strategic Planning and Fiannce

• James W. Breyer – Strategic Planning and Finance Committee Chairman; also Partner of Accel Partners. Experience in Wal-Mart – 8 years.
• M. Michele Burns – Strategic Planning and Finance Committee member; also the Chairman and Chief Executive Officer of Mercer LLC. Experience in Wal-Mart – 6 years.
• Roger C. Corbett – Strategic Planning and Finance Committee member; former Chief Executive Officer and Group Managing Director of Woolworths Limited. Experience in Wal-Mart – 3 years.
• David D. Glass – Strategic Planning and Finance Committee member; former Chairman of the Executive Committee of the Board of Directors of Wal-Mart Stores, Inc., the former President and Chief Executive Officer of Wal-Mart Stores, Inc. Experience in Wal-Mart – 21 years.
• Gregory B. Penner – Strategic Planning and Finance Committee member; a General Partner at Madrone Capital Partners. Experience in Wal-Mart – 2 years.
• Jim C. Walton – Strategic Planning and Finance Committee member; the Chairman of the Board of Directors and Chief Executive Officer of Arvest Bank Group, Inc. Experience in Wal-Mart – 4 years.

Compensation, Nomination, and Governance

• Lind S. Wolf – Compensation, Nomination, and Governance Committee Chairman; former Chairman of the Board of Directors and Chief Executive Officer of Leo Burnett Worldwide, Inc. Experience in Wal-Mart – 4 years.
• Douglas N. Daft – Compensation, Nomination, and Governance Committee member; former Chairman of the Board of Directors and Chief Executive Officer of The Coca-Cola Company. Experience in Wal-Mart – 5 years.
• Allen I. Questrom – Compensation, Nomination, and Governance Committee member; former Chairmanbof the Board of Directors and Chief Executive Officer of J.C. Penney Company, Inc. Experience in Wal-Mart – 3 years.

Executive and Equity Compensation

• H. Lee Scott – Executive and Equity Compensation Committee Chairman; former President and Chief Executive Officer of Wal-Mart Stores, Inc. Experience in Wal-Mart – 9 years.
• Michael T. Duke – Executive and Equity Compensation Committee member; also President and Chief Executive Officer of Wal-Mart Stores, Inc. Experience in Wal-Mart – 14 years.
• S. Robson Walton – Executive and Equity Compensation Committee member; also Chairman of the Board of Directors of Wal-Mart Stores, Inc. Experience in Wal-Mart – 17 years.

Top Management

The list of the top managers at Wal-Mart includes both persons involved in the Board of Directors and those that do not participate there (Wal-Mart Stores, 2009):

1. Vice Chairman – Eduardo Castro-Wright (responsible for the Walmart U.S. Division, 7 years in Wal-Mart);
2. Executive Vice President – M. Susan Chambers (people division; 7 years in Wal-Mart);
3. Executive Vice President – Brian C. Cornell (President and Chief Executive Officer of Sam’s Club Division; 3 years in Wal-Mart);
4. Executive Vice President – Leslie A. Dach (Corporate Affairs and Government Relations; 7 years in Wal-Mart);
5. President and Chief Executive Officer – Michael T. Duke (Executive and Equity Compensation Committee; 14 years in Wal-Mart);
6. Executive Vice President – Rollin L. Ford (Chief Information Officer; 26 years in Wal-Mart);
7. Executive Vice President – Thomas D. Hyde (Legal, Ethics and Corporate Secretary; 8 years in Wal-Mart);
8. Executive Vice President – C. Douglas McMillon (President and Chief Executive Officer of International Division; 10 years in Wal-Mart);
9. Executive Vice President and Chief Financial Officer – Thomas M. Shoewe (Finance and Compensation; 10 years in Wal-Mart);
10. Chairman of the Executive Committee of the Board of Directors – H. Lee Scott (Executive and Equity Compensation Committee Chairman; 9 years in Wal-Mart);
11. Chairman of the Board of Directors – S. Robson Walton (Executive and Equity Compensation Committee member; 17 years in Wal-Mart);
12. Senior Vice President and Controller – Steven P. Whaley (Supervision and performance control; 8 years in Wal-Mart).

The company adopts the partnership strategic management style as both the board and the top executive management are involved in the strategic management and decision making.

The External Environment

Societal Environment

Economic Forces

Currently, the major economic force regulating the performance of Wal-Mart alongside with other business companies is the economic recession. The growing rates of unemployment, declining levels of income, and difficulties in finding a job reduce the demand for costly products and services (Wal-Mart Stores, 2009). Wal-Mart might implement a more flexible discount system and introduce more varieties of cheap goods and services to maintain its customer base and save at least a part of its sales (Opportunity (O)).

Technological Forces

Two basic technological forces influencing the world of business include the need to update the technological basis for the company and educate the employees in regard to handling the new equipment, IT solutions, and computerized software packages (ICRM, 2003; Wheelen and Hunger, 2007, pp. 42, 64). Therefore, Wal-Mart strategic objective of technological modernization can actually allow the company to recover from the financial crisis faster than other business entities admitting no importance of the technological force (O).

Political and Legal Forces

Political stability and freedoms, legal climate and conformity of the company’s activities to the local and international legislations are the main political and legal forces (Kimura, 2006). For Wal-Mart, the political and legal forces are especially important as currently it is the greatest retailer in the world and it operates in a number of international markets. However, presence of such politically related people in the Board of Directors as Aida M. Alvarez, etc. benefits Wal-Mart (O, Strength (S))

Socio-Cultural Forces

The socio-cultural forces are important for Wal-Mart due to the same above mentioned reasons of international expansion. The major socio-cultural forces for Wal-Mart include the cultural differences between the basic US market and the markets of the Latin America, Europe, and especially Asia (Wal-Mart Stores, 2009). As well, the ability to satisfy the needs of various social groups of its customers is a socio-cultural force influencing the performance of Wal-Mart and being simultaneously its opportunity (O) and threat (T).

Task Environment

Communities

According to the corporate web site of Wal-Mart Stores, Inc. and the case study presented by Wheelen and Hunger (2007, pp. 19-28 – 19-29), Wal-Mart has always tried to be corporate citizen and give back to the communities it develops in. Accordingly, the task of giving back to communities is the strength of the company as well as its further development opportunity, but can also become a threat if Wal-Mart fails to continue its community supporting initiatives like Wal-Mart Foundation for Support of Volunteerism, Holiday Gift Giving, and Grants for US Teachers’ Support (Wal-Mart Stores, 2009) (S and O, T).

Competitors

An important task for Wal-Mart is to preserve and possibly improve its market and competitive position (Wal-Mart Stores, 2009). Although Wal-Mart is the largest retail trader in the world, the competition it faces at the domestic and international markets is strong. The major domestic competitors are Target (TGT), Kmart, Best Buy, BJ, and COST. The strongest international competitors include companies like Tesco (United Kingdom), Carrefour (France), and Metro (Germany), whose activities and interests are similar to Wal-Mart’s ones (S, T).

Creditors

The work with creditors is another integral part of the task environment for Wal-Mart Stores, Inc. The point here is that Wal-Mart has the experience of being a creditor as well as the payment collector from its creditors. For example, Wal-Mart acquired the right to buy out the Hinsdale, N.H., Greyhound Park that owed over $500,000 to the company (Kimura, 2006; Wal-Mart Stores, 2009). At the same time, former Wal-Mart property was also sold for debt. Therefore, handling creditors’ matters is an essential task for Wal-Mart (T, W).

Customers

Competitors and their satisfaction by all the services and goods that Wal-Mart trade with is the major task of the company as the mission and the basic ideas by Sam Walton. The idea of customer as a boss and the concepts of 10-Foot and Open Door reflect the vitality of handling any customer inquiries by Wal-Mart associates (Wal-Mart Stores, 2009). Therefore, handling customers’ needs is the basic task in the task environment for Wal-Mart (S, O).

Labor Unions

Currently, the Wal-Mart analysts (2009) notice the strong anti-Wal-Mart campaign in the society that is carried out by labor unions. The allegedly main focuses of the campaign include undermining the Wal-Mart’s market position and acquiring new union members as potential dues-payers (Wal-Mart Stores, 2009). Therefore, the struggle with the labor unions and the task of explaining to the community the positive character of Wal-Mart activities is also vital for the company’s development (T).

Governments

The cooperation of the Wal-Mart with the government of the United States and other countries is a controversial point. On the one hand, Wal-Mart employs over 1.3 million people in the USA alone and thus contributes to the tax fund. On the other hand, labor unions’ campaigns argue that Wal-Mart works with sweatshops in the countries of Asia and Africa and by this undermines the image and the financial basis of the US international trade (Kimura, 2006). Therefore, handling the proper cooperation with the governments is a major task for Wal-Mart for the future (T, O).

Special-interest groups

The task of dealing with the attacks of numerous special interest groups is also significant for Wal-Mart as far as the United Food and Commercial Workers Unions, National Organization for Women, etc. claim that Wal-Mart violates the wage rights, women right, and civil freedoms in the course of employment and treatment of its associates (ICRM, 2003; Kimura, 2006; Wal-Mart Stores, 2009). Therefore, the situation with the special interest groups, as well as labor unions, presents a considerable threat for Wal-Mart (T).

Shareholders

One of the most important aspects of the task environment for Wal-Mart is also the coordination of work and influence between the key shareholders of the company. Naturally, the major shareholders (owning about 41%) are the Walton family members, i. e. S. Robson Walton and Jim C. Walton. The Board of Directors’ members together own less than 1% of the shares, which misbalances the allocation of power in the company. Accordingly, the more equal distribution of shares, especially outstanding ones, might be an opportunity for Wal-Mart, while the current situation is more like a threat (T).

Suppliers

Wal-Mart has recently been involved in the controversy with its suppliers as the dominant market position of the company allegedly allowed it to dictate its conditions of sales to the suppliers (Kimura, 2006). This was expressed in the claims of Wal-Mart’s suppliers that Wal-Mart threatened them to finding new suppliers is the sales were not made to them directly and at the necessary prices. Avoiding such accusations in future should be one of the major opportunities for Wal-Mart to improve its image and strengthen in the struggle with labor unions (O).

Trade Associations

The controversy with the trade associations can also characterize the task environment of Wal-Mart as the accusations of exporting the labor, underpayment, and overworking were numerous towards Wal-Mart, especially from trade associations who claimed that Wal-Mart destroys the small business in the United States and the rest of the countries it operates in (Wal-Mart Stores, 2009). So, another task for Wal-Mart is to settle the trade associations’ debate and demonstrate employee-friendly policies (T, O).

The Internal Environment

Finance

Finance is the basis of any business company (Wheelen and Hunger, 2007, p. 194), and Wal-Mart is not an exception. The internal financial environment of the company is characterized by the sharp decrease in sales and income rates observed between 2006 and 2008 ($312 billion in 2006 and $97.619 billion in 2008 in net sales and $11.221 and $3.033 billion respectively in net income), followed by the considerable growth in the third quarter of 2009 (to $98.667 billion in net sales and $3.246 billion in net income) (Wal-Mart Stores, 2009) (S, O).

Manufacturing/Service

Wal-Mart does not deal with manufacturing, while the services constitute the most important part of its business as far as every Wal-Mart associates keeps to the idea that the customer is the boss (Wal-Mart Stores, 2009). Accordingly, the quality of services plays an important role in the internal environment of the Wal-Mart Stores, Inc. and is the basis on which the company’s vision is established (S).

Marketing

Understanding the importance of marketing in the mix of the internal environment, Wal-Mart in the context of the recent economic recession implemented innovative marketing and advertising techniques that included the promotion of the flexible discount offers, expansion of the product lines offered by the Wal-Mart facilities, and the creation of the more attractive advertisements (Wheelen and Hunger, 2007, p. 19-9) (O).

Research and Development

In the conditions of the modern highly competitive and quickly developing market, Wal-Mart understands that research and development initiatives are vital and the company invests considerable funds into them (Wal-Mart Stores, 2009). Especially notable are the developmental programs for adjusting the Wal-Mart traditionally American trading culture to the demands of Latin American and Asian markets in respect of cultural awareness (Wal-Mart Stores, 2009) (W, O).

Human Resource Management

Human resource management has been traditionally regarded as the basic strength of Wal-Mart Stores, Inc. The referral to the employees as associates, the participant style of strategic management, and the involvement of associates to the decision making process are still the basic values that Wal-Mart claims to pursue irrespective of controversies with the labor unions, special interest groups, and trade associations (Wal-Mart Stores, 2009) (S).

Management of Information Systems

For the same reasons, i. e. understanding of the fast pace of the technological modernization in the market, Wal-Mart invests heavily into the process of the management of information systems (Kimura, 2006; Wal-Mart Stores, 2009). Examples include opening and modernization of the corporate web site, the introduction of the e-commerce option for both customers and employees, and the international online advertising opportunities (S).

Strategic Factors and Strategies

Based on the whole complexity of the above presented discussion, the strategic factors that affect the development and proper function of Wal-Mart Stores, Inc. include the company’s mission and vision, the organizational culture and structure, the participant style of strategic management, and understanding of the needs to invest heavily in the projects associated with the marketing, advertising, and information technology management ideas.

Again, the above discussion allows assuming that the currently implemented strategies in Wal-Mart Stores, Inc. are completely proper and considerably effective. The alternative strategies that might be of help in the context of the current economic recession include:

• Cost-effective store management (reducing unnecessary losses and implementing more efficient salary schemes for associates);
• Wider publicity of Wal-Mart financial and employee-related processes.

Revision of Mission, Objectives and Policies

The mission of Wal-Mart Stores, Inc. is completely reasonable and effective as it allows building the customer loyalty and customer satisfaction by the levels and quality of services obtained in Wal-Mart stores. The objectives of the Wal-Mart Stores, Inc. are properly developed but lack specificity, measures of success and specific timelines of their achievement. Therefore, certain improvements associated with the objectives quantification and the improvements of the used strategies are necessary.

Evaluation and Control

The process of making the above discussed improvements requires the proper means of evaluation and control to be implemented. These means need to be clearly structured and comprehensible. People charged with evaluating and controlling the improvements should be aware of their functions and of responsibility they bear for the careless attitude towards their duties.

References

ICRM. (2003). The Good and Bad of Wal-Mart’s Culture, from International Center for Management Research. Web.

Kimura, K. (2006). The Costs of Wal-Mart. Web.

Wheelen, T. and Hunger, D. (2007). Strategic Management and Business Policy. Prentice Hall 11th Edition.

Wal-Mart Stores. (2009). Corporate Web Site.