Introduction
Wal-Mart is a highly successful brick-and-mortar business, both in the U.S. and globally. It has been leading the Fortune 500 list and the Global Powers of Retailing rating consistently for numerous years. The success of the company is based on its business practices and approaches that favor the customers and promote efficiency and cooperation. However, the same principles that led the company to grow to its current size, especially its approaches to managing employees and the environment, maybe hindering its further growth and expansion.
Expansion Strategies
Wal-Mart has chosen to expand into other countries because it had saturated the local market and required further growth to avoid stagnation. A halt in the growth would spell the end of the company due to its economic model, which demanded a constant increase in profits to satisfy the stakeholders. The chain chose to direct its growth toward neighboring countries, such as Mexico and Canada, as well as Eastern markets in China and Japan. Wal-Mart has attempted to enter other markets, particularly Europe and Russia, but its efforts have been mostly unsuccessful, and the countries mentioned above remain its primary areas of operations.
The company has conducted its expansions through partnerships and acquisitions. The unfamiliarity of the areas which the company was entering, as well as the reliance of the general stores favored by Wal-Mart on individual consumers, made the idea of directly investing into the construction of new stores unattractive. Acquisitions circumvented the issue by allowing Wal-Mart to use the expertise of its new employees to adapt to the needs of the market quickly.
However, at times there were no companies that could be easily acquired, and in those cases, Wal-Mart chose to engage in partnerships with existing companies on equal terms. The chain’s ability to leverage its contracts with various large American manufacturers, such as Coca-Cola, to obtain preferential pricing treatments, is a significant bargaining factor that makes its offers of cooperation appealing to local retailers.
Adaptation and Market Research
Even when choosing to partner with local companies, Wal-Mart needed to adjust to the realities of the local market when introducing its traditional and innovative products. As such, the company needed to conduct research and identify potential ideas as well as their value before implementing its strategy. Wal-Mart has experienced failures with certain ideas that were not as popular with the population as the company’s executives expected, such as extension ladders and large soy sauce bottles in China. However, the company has overcome the hurdles by implementing more varied and rigorous research methods as well as consulting its partners to a greater degree.
After seeing the initial failure of some of the company’s new products in China, its executives began exploring the existing conditions by walking on city streets and inspecting stores and locations that were popular with the local population. The resulting ideas turned the opening of the next Chinese Wal-Mart store into a resounding success, and the company has adopted direct perception research methods to a greater degree. Nevertheless, the chain regularly conducts formal research, as it is useful for obtaining general ideas and suggestions for improvements and new products, which can be elaborated on later.
Logistics and Supply Chain Management
Wal-Mart has expanded into distant countries and grown into a massive network of stores, restaurants, and wholesale centers. Such an undertaking requires a highly organized supply chain that can supply the chain’s locations with necessary products on short notice. According to “Walmart’s Successful Supply Chain Management,” the company achieves that goal with a high degree of success by simplifying the transportation process. The company does not store transported goods in temporary locations, but loads them into outbound transport directly from incoming traffic, a practice known as cross-docking. The company has achieved the degree of organization necessary to consistently execute these maneuvers through substantial investment in information and inventory management technology.
The company’s other significant logistical factor is the emphasis that it places on partnerships and cooperation. Wal-Mart works directly with various manufacturers to reduce shipping times and costs. “Walmart’s Successful Supply Chain Management” notes that the company also introduced the concept of Vendor-Managed Inventory, which contributed to a reduction of its distribution costs to a degree where the chain was able to spend half as much on transport and storage as its competitors.
The cooperation ensures that delays, errors, and oversights are avoided. It is easier and faster for a company to notice that a Wal-Mart location is running out of its product, adjust output, and send a shipment than it is for the store manager to realize the same fact, calculate the necessary shipment size, and send a request to the manufacturer.
Ethical Concerns
Wal-Mart’s business model is predicated on achieving continuously increasing profits, which is what motivated the company to attempt globalization. In an extremely long-term scenario, this is not a sustainable model, as the resources and markets are ultimately finite, and the company would eventually stagnate and become unable to fulfill its goals. However, such a scenario is highly unlikely to occur in reality, and if it did, the company’s leadership would have a significant amount of time to attempt to formulate and implement a new business strategy. However, the emphasis placed on profit raises various other concerns, such as the potential use of unethical or unlawful practices to bolster financial gain. Wal-Mart is well known for being guilty of such approaches.
Large companies, such as Wal-Mart, wield a significant amount of power over the lives of their employees. An ethical, though less profitable, course of action would be to attempt to elevate their conditions and lifestyles. However, Kullberg and Braekkan claim that Wal-Mart pays its worker’s unfair wages and provides poor working conditions, both in the United States and abroad (2).
They add that Wal-Mart uses the same approaches as smaller brands, which have to choose between selling their products to the chain with a low-profit margin and not being featured in the stores of the world’s largest retailer. At the same time, the company’s executives receive substantial salaries, which could be used to significantly improve the wages and conditions of the company’s workers or establish a fairer relationship with its suppliers.
Corporate Social Responsibility Practices
Corporate social responsibility has become a highly relevant topic to modern companies. Privately-owned companies provide the majority of workplaces in a capitalist economy and carry out most of the production with the associated issues, such as the creation of waste and pollution. This fact has led to the formulation of the idea that companies are members of the communities they operate in and should behave responsibly and contribute to the improvement of the overall situation.
Behaviors such as charity work, the betterment of working conditions, the adoption of more environmentally friendly production methods, and others can contribute significantly to a company’s popularity and lasting success. However, Wal-Mart is currently refusing to adopt the practice, relying on its brand strength for continued sales.
Besides the poor working conditions mentioned above and the generally unethical behavior of the company, Wal-Mart engages in environmentally unfriendly practices. According to Danciu, “Wal Mart that [sic] has been accused of discrimination, human rights violation, environmental crimes and more” (5). Danciu goes on to state that Wal-Mart has been identified as one of the most socially irresponsible companies in the United States alongside enterprises such as Monsanto and Exxon Mobile (6).
The company’s practices increase its immediate profits due to the money saved on wages and environmental protection programs, but the resulting poor reputation adversely influences the brand’s sustainability as well as its ability to expand into new markets, which may not be interested in admitting a competitor that hurts smaller manufacturers, its employees, and the environment.
Conclusion
Wal-Mart is among the world’s largest retailers due to its low prices and high presence in the markets it has chosen to target. The company’s success is based on its choices of expansion markets and strategies as well as its focus on direct perception in research, which allows ideas with high potentials to surface. Furthermore, Wal-Mart has established a highly efficient supply chain, which enables it to stock all of its numerous locations without delays or significant shortages.
However, the company’s focus on obtaining and maximizing profits has led it to adopt socially irresponsible practices, such as unethical treatment of its employees and strong-arming smaller manufacturers into setting low prices for their goods. These approaches damage the company’s reputation and therefore its sustainability, which may hinder its further growth.
Works Cited
Danciu, Victor. “The Controversy of Corporate Social Responsibility: What Is Best For Business.” Romanian Economic Journal, vol. 18, no. 58, 2015, pp. 3-26.
Kullberg, Lauren, and Kristian Braekkan. “The Ethical Dilemma of Globalization.” Journal of Economics, vol. 6, no. 2, 2018, pp. 1-4.
“Walmart’s Successful Supply Chain Management”. TradeGecko. Web.