Wal-Mart: A Progressive Success Story

WAL-MART- A PROGRESSIVE SUCCESS STORY

Introduction

Wal-Mart is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue and is founded by Sam Walton in 1962. It is the largest private employer in the world and the fourth largest utility or commercial employer. Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U.S. It also owns and operates the North American Company, Sam's Club. Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. It sells in three months what number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. Wal-Marts operations are organized into three divisions: Wal-Mart Stores U.S., Sam's Club, and WalMart International.[40] The company does business in nine different retail formats: supercenters, food and drugs, general merchandise stores, bodegas (small markets), cash and carry stores, membership warehouse clubs, apparel stores, soft discount stores and restaurants. Wal-Marts price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Wal-Mart are enormous a total of $263 billion in 2004, or $2,329 per household. Wal-Mart and the Walton family have generally worked against the progressive issues that would benefit its employees, including funding campaigns advocating the repeal of the estate tax. Recently, Wal-Mart came around to endorse a higher minimum wage, but this limited step is outweighed by its consistent funding for attempts to roll back progressive priorities that would benefit its workers. As a result of Wal-Mart's ever growing size and variety of services they offer, their public affairs department is becoming more and more important. Its public affairs strategy enables the company to move into other sectors of the marketplace and expand into foreign countries. The public affairs strategy also involves gaining access to politicians who can help Wal-Mart achieve its goals.

Wal-Mart: A Progressive Success Story

Problems Faced by Wal-Mart

However, Wal-Mart might well be both Americas most admired and most hated company. Wal-Mart definitely increases the overall GDP of the United States, but its monopoly also detestation. Employees low payment, sex discrimination, restriction in suppliers, and small business destroyer are the example reasons that make Wal-Mart be an evil in retailer business. But it seems that Wal-Mart does not recognize this, it still using the same way of doing business in the global market. Along with this misstep in oversea operation, it was later destroyed and brought big problems to Wal-Mart itself. Furthermore, Wal-Mart did not give much significant to International division when compare to its competitors. WalMarts growth was achieved primarily in its US home market and only 8.9 percent of its 1999 sales came from international markets.

External Problems
Late Entry : Even though Wal-Mart already expanded into nine countries and has planned for more, it is still much behind its competitors. Many European retailers such as Carrefour and Ahold have a couple of decades more international experience than Wal-Mart. Carrefour, a giant Frances retailer, is one of Wal-Mart main competitor in Global retailers. While Carrefour had already entered in 31 countries, Wal-Mart had only nine. The advantage of first come first serve is obviously in this case. Better locations were already reserved by Carrefour. New comer like Wal-Mart has to bring other strategies to persuade the customer to go shopping at its store. Overlook Competitors: Wal-Mart should realize that it is new in globalization, in contrast, it strongly believes in its strength which is size and prices. Large scale of stores was brought to judge its intensity. Although, Wal-Mart accustomed to enjoy its power in the United States, but this extraordinary rule cannot fit all. At the time of Wal-Mart entry, the competitors were already powerfully investing in store automation. Molin (2004) reported that misreading of the competitors and the cultures lead Wal-Mart made numerous bad decisions in international business. Destroy Small Businesses: When Wal-Mart is the world's largest retailer, it is obsessive about numbers. It is number one, after all, and it wants everyone to know. In global business world, only larger size cannot imply that Wal-Mart is better and successful. In fact, Wal-Mart also came under criticism for its impact on small retail businesses. Independent small shops have to went out of business after this giant chain stores come into play. Some research said that after Wal-Mart has been in town for eight to ten years, that town is just a ghost town. This phenomenon is not happening only in the United States, but it also has the same consequence in everywhere that this giant chain store comes into play. In some countries, Wal-Mart has banned from local communities because it obliterates local business. In short run Wal-Mart is like a custodian but when look cautiously, it is a killer. Joint Venture and Nationalism: There are both advantages and disadvantages in Joint Venture or acquisition of local businesses. These arrangements helped Wal-Mart understand a 2

Wal-Mart: A Progressive Success Story new market and avoid problems with local distributors. Partnerships are also the best sources of information on local sales trends and retailers performance data. Moreover, these strategies facilitate market presence and allow quicker market penetration. However, the acquisition of local chain retailers in some countries can make people feel that they will occupy by the foreigner. This also effect in purchasing banned from local customers. Especially, in the country that people are nationalism such as Germany. The acquisition of Wertkauf and Interspar mislead the establishment in Germany that soon after caused huge number of problems to Wal-Mart. Culture Different: The biggest barrier that Wal-Mart is facing when trying to grow in Global market is the opposition at the local level. The company is seldom accepted from community groups when it opposes plans to build new stores. It is not only the protection for local business itself but also the differentiation in culture. The retail giant had some problems with consumers and has had to make some adjustments. Some research says that Wal-Mart is behind the locals in their knowledge of taste. House Brand and Price Differentiate: Everyday Low Price, an ideal strategy of WalMart, is now facing a looming challenge. Although Wal-Mart always claims that its sells cheaper, the prices are not so different. If the customers want to buy a small amount of goods, they prefer a convenience store that closer and easier. Furthermore, most of cheaper products are from Wal-Marts manufacturing goods. The appearances are same but different in qualities. Suppliers: Relationships with suppliers were a major problem for Wal-Mart in International Market. First of all, the company tired to apply the same standards it used in The United States with local suppliers. But the relationship among retailers and manufacturers was quite different from the USA. In America, Wal-Mart is the biggest retailer. All suppliers have to follow its rules and conditions. The prices and standards are set from Wal-Mart only. This is why Wal-Mart can buy and sell cheaper. However, Wal-Mart was banned from the manufacturers in some countries, when it attempted to sell many products at price below cost. And this reaction was sometimes extreme. Some local suppliers neither refused to give special discount nor to sell products to Wal-Mart. Also, some producers rejected delivery system; they refused to send goods to Wal-Mart distribution center. Even a discount in exchange was ignored. This, combined with irregularity of delivery by suppliers and problems with inventory control, lead shot in products on the shelf. Furthermore, Wal-Mart has been known not only for setting the tone with its venders for buying and selling, but often for only dealing directly with vender by passing sales representatives. A research says that more than 100,000 independent manufacturers representatives initiated a public information campaign to fight Wal-Marts effort to remove them from the selling process, claiming that the company eliminated manufacturers right to choose how it sells its products. Despite a decade of effort, Wal-Mart still has not create a strong supply chain in the international marketplace.

Government Regulations: In the business world, dealing with government rules and regulations is unavoidable. When Wal-Mart is in the United Stated, it is so powerful but in elsewhere, it is just a foreigner. This problem became clear when Wal-Mart entered into China. 3

Wal-Mart: A Progressive Success Story China has population above one million and has cities up to 170 cities. But despite some early successes, Wal-Mart was plagued by problems that defy quick solutions. The examples of these problems are supply chain, strong local and foreign competition, and lots of governments red tape. Everyone knows that rules and regulations of Communist countries are very strict and limited. The Communist government has boxed foreign retailers into selected countries to limit competition. Moreover, some selected products are controlled and nominated by local suppliers only. For instance, liquor and tobacco must be bought locally, and Chineses favorite vegetables have to be bought nearby too (Groeber, 2002).

Internal Problems
Unique culture and concepts: One of the reasons that failed Wal-Mart internationally is when it attempt to transport the companys unique culture and retailing concept to each new country. Gilman (2004) asserts that in Wal-Mart overseas expansion, it has been trying hard to launch the supercentre concept. But not every concept matches all over the places, or even in Brazil. Most of Brazilians are living in very small places and have tiny storages, definitely, they have no room for the bulky merchandises. Without a doubt, this supercenter concept does not fit in this country. In spite of adjust or create new concept, Wal-Mart pays no attention to the culture different, and still enlarge its own culture from one to another countries. As a result, the giant distributor failed in making profit. The popularity in larges sales volume does not make any meaningful impact on sales. Its good to introduce global standards but you also need to adapt to local practice, said in Zellner, Schmidt, et al. (2001). Wal-Mart seems not to consider in this theory. It insists that any problems do not reflect the culture of the company as a whole. Together with its hypermarket expansion, Wal-Mart also introduces its private labels, for example, Sams choice and Great Value. These brands were initially used for more than a thousand items of products selling in its supercenter stores. Wal-Mart indicates a desire to stamps its brand on every store. Not every new cross- border retailer can be a retail giant outer its home. The mistake of exporting its culture wholesale, rather than adapting to local market, leads Wal-Mart failed in Germany market Our biggest mistake was putting our name up before we had the service and low price. People were disappointed (as cited in Wal around the world, 2001). Most of WalMart overseas problems were avoidable.

Human Resource Management: Wal-Mart employment problems are easily seen from the headlines: Illegal immigrants mopping its floors, Sex discrimination, Low wages lead worker strike, etc. One of the biggest problems is likely to come from unions and community groups. Even though no one can force to have union in Wal-Mart, these problems still hurt the company itself. The unions complain that Wal-Mart stores take advantages from the stuffs. Only on their income, they were not being able to pay for health insurance and other benefits. Wal-Mart workers generally gave the company high performances, but they never get proper pay and benefits. In fact, they got a very low pay one. Moreover, employees did not get pay from overtime working

Wal-Mart: A Progressive Success Story Due to rapid growth of Wal-Mart, the biggest problem is its lack of human capital. Wal-Mart was argued that it cannot claim to be an international company when the managers in the foreign countries do not even speak the language of that country. The company solved this circumstance by decentralize management authority from headquarter to International operation. Individual country leaders were given more freedom to run the business, especially in the areas of operations and merchandising (Zellner, Schnidt, et al, 2001). However, Wal-Mart cannot maintain employees quality as in the United States. Local employees, including managers, lack of experiences in the company culture; they are slowly adjusted.

Last but not least, sexual discrimination is another eternal controversy topic of Wal-Mart. Women employees are often overlooked or ignored when it came time to promote. Available data showed that, the percentage of women employed by Wal-Mart decreased from 76 per cent to 64 per cent since 1996 (Rock, 2001). Some of women stuffs about being told that they were unsuited to management because the working hours are too long, and they should be home with their children. Besides when employees were promoted to higher-level jobs, there was an expectation that they would be moved to other stores, districts or regions, as much as business need required (Rock, 2001). As a result, women employees are the first abandon choice since they are inflexible.

Wal-Mart: A Progressive Success Story

SWOT ANALYSIS
Strengths Established name brand that is identified with reasonable to cheap pricing and bargain pricing. Wal-mart is a store that most individuals when they are on a low budget and still want to buy what they set out to buy - visit. Wide network of stores and therefore it is accessible to all types of individuals whether they are of wealthy means or not. The organization is able to buy in bulk and gain huge bulk discounts that are not available to other organizations and is able to pass on the discounts and pricing benefits to the customers thus further solidifying its reputation as a bargain store The organization deals in all types of goods from clothes to electrical items, from jeweller to garden equipment and therefore caters to a wide range of individuals and needs. A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.

Weaknesses

Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors. The organization has also earned much negative publicity for its strong arming tactics and squeezing suppliers of profit margins by threatening to take its business elsewhere. The company is global, but has a presence in relatively few countries Worldwide. The organization has been challenged in court over its strong-arm tactics of trying to suppress the unionization of its American workforce.

Opportunities

The current economic crisis has decreased the disposable income of many individuals and thus has caused many individuals and households to lower their expectations and to shop for bargains, thus Wal-mart stands to gain in such a situation. The inflation in the economy is on the decline and the economy is on the brink of deflation thus it may mean that Wal-mart is able to provide its customers with increased bargains. Many retail organizations are going out of business due to the reduction in disposable incomes. This can help Wal-mart by increasing its customer base due to the bargains that it can provide its customers.
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Wal-Mart: A Progressive Success Story

Due to the cheap rate that the organization is able to buy its products from suppliers, it is able to provide customers with even bigger bargains to encourage them to shop at Walmart. New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large super centers, to local and mall-based sites.

Threats

The big name retailers such as M&S are giving having huge sales such as 50% off sales; this is difficult for Wal-mart to compete with, as its profit margins are not that great on each unit. The reduction in disposable income of customers and the looming recession and fears of job losses have caused individuals to curtail their shopping and this is a huge threat to Wal-mart, which relies on consumer spending. Being number one means that you are the target of competition, locally and globally. Being a global retailer means that you are exposed to political problems in the countries that you operate in. The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost has fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat.

Wal-Mart: A Progressive Success Story

CHARACTERSTICS General Characteristics

Wal-Mart has indisputably made a tremendous contribution to productivity. From its sophisticated inventory systems to its pricing innovations. But Wal-Mart, like other retailers and employ\ers of less-skilled workers, does not pay enough for a family to live the dignified life Americans have come to expect and demand. Wal-Mart and the Walton family have generally worked against the progressive issues that would benefit its employees, including funding campaigns advocating the repeal of the estate. Wal-Mart has come around to endorsing a higher minimum wage, but this limited step is outweighed by its consistent funding for attempts to roll back progressive priorities that would benefit its workers tax.. Some of the largest price differentials are for groceries, with Wal-Marts prices substantially below the prices at unionized chains like Kroger and Safeway. The expansion of Wal-Mart over the 1985-2004 period can be associated with a cumulative decline of 9.1% in food-at-home prices, a 4.2% decline in commodities (goods) prices, and a 3.1% decline in overall consumer prices. The Global Insight results found that the entry of a Wal-Mart leads to a 1.5 to 3 percent reduction in selected retail prices in the short run and a 7 to 13 percent reduction in prices in the long run.

Wages

Wal-Mart experiences similarly high application ratios at other jobs. These anecdotes strongly suggest that jobs at Wal-Mart are better than the opportunities these workers would have in the absence of Wal-Mart, either other jobs or unemployment. A range of studies have found that prices at Wal-Mart are anywhere from 8 to 39 percent less than its major competitors. Wal-Mart itself reports mean hourly wages of $9.68. These are somewhat below the 2004 national average of $10.29 for general merchandise and $12.58 for retail as a whole. Wal-Mart does, however, pay significantly lower wages than those earned by one group of employees: unionized grocery workers in major cities.

Health Benefits

Wal-Mart is relatively unusual in that it offers health insurance both to full- and part-time employees. By comparison, only 60 percent of firmseconomywide offer health benefits and only 17 percent of firms offer health benefits to part-time workers.

Wal-Mart: A Progressive Success Story

Substantially more Wal-Mart employees are eligible for health insurance than in the retail sector as a whole and even slightly more than the nationwide total. Wal-Mart employees, however, are less likely to take up their health insurance. As a result, 48 percent of Wal-Marts workers have health insurance, compared to 46 percent in the retail industry as a whole . 5 percent of Wal-Mart employees are on Medicaid, which is similar to the percentage for other large retailers and is comparable to the national average of 4 percent. Wal-Mart like every other business is interested in paying the lowest possible total compensation (wages and benefits) consistent with recruiting, motivating and retaining qualified workforce. As a corporation, it does not fundamentally care whether this cost is in the form of wages or benefits.

Impact of Wal-Mart on the Local Labor Market

Even if Wal-Mart pays as much as comparable employees, it could still have a deleterious impact on labor markets as a whole. When Wal-Mart enters a new county, it could kill jobs or lower wages, leaving everyone worse off. The aggregate evidence and at least some anecdotal evidence at the local level suggest that the entrance of Wal-Mart into new markets squeezes profit margins. A company like Wal-Mart will only lead to more or less jobs nationally to the degree that it changes the level of unemployment consistent with stable inflation. The overall fiscal impact of Wal-Mart is overwhelmingly positive. In its last fiscal year it set aside $5 There is relatively little scope to pressure Wal-Mart and almost no scope to pressure other smaller and less visible companies into paying higher compensation.6 billion for corporate tax payments. Even if the campaign resulted in, say, some expansion of health benefits to placate one of Wal-Marts most visible public relations problems, the result could well be lower wages.

Wal-Mart: A Progressive Success Story

SUMMARY
Wal-Mart Stores Inc. is the largest retail company in the United States and has been ranked number one on the Fortune 500 Index by Fortune Magazine. Wal-Mart has four parts to their corporate strategy. 1. Dominance in the Retail Market 2. Expansion in the U.S. and International Markets 3. Creation of Positive Brand and Company Recognition 4. Branch Out into New Sectors of Retail Wal-Marts public affairs strategy must work to make implementation of these policy goals happen. Its public affairs strategy enables the company to move into other sectors of the marketplace and expand into foreign countries. The public affairs strategy also involves gaining access to politicians who can help Wal-Mart achieve its goals. Wal-Mart has a very active Political Action Committee that gives almost a quarter million dollars annually. While Wal-Marts public affairs strategy works well with its corporate strategy. W e feel that there are a few recommendations which could make the company work better. Recently, WalMart has been criticized for their opposition to allowing their employees to be unionized. WalMart needs to clarify their reasons for their opposition to unionization. The public affairs strategy must also address the negative feelings harbored by some groups who feel that Wal-Mart is encroaching into far too many other sectors retail than it should. These concerns must be addressed if Wal-Mart is to enjoy continued success in creating positive name recognition.There is little dispute that Wal-Marts price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Wal-Mart are enormous a total of $263 billion in 2004, or $2,329 per household But Wal-Mart, like other retailers and employers of less-skilled workers, does not payenough for a family to live the dignified life Americans have come to expect and demand. The right response to Wal-Mart is not to scale back these programs but to expand them in order to fulfill the goal of making work pay.If Wal-Mart were committed to the welfare of its more than 1.3 million associates, as itcalls its workers, then it would push to expand these public programs. Instead, Wal-Mart and theWalton family have generally worked against the progressive issues that would benefit itsemployees, including funding campaigns advocating the repeal of the estate tax. A range of studies have found that prices at Wal-Mart are anywhere from 8 to 39 percentless than its major competitors. Some of the largest price differentials are for groceries, with WalMarts prices substantially below the prices at unionized chains like Kroger and Safeway.Global Insight was hired by Wal-Mart to quantify the national benefits of Wal-Martslow prices. It estimated that the expansion of Wal-Mart over the 1985-2004 period can beassociated with a cumulative decline of 9.1% in food-at-home prices, a 4.2% decline incommodities (goods)
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Wal-Mart: A Progressive Success Story

prices, and a 3.1% decline in overall consumer prices. The entry of a Wal-Mart leads to a 1.5 to 3 percent reduction in selected retail prices in the short run and a 7 to 13 percent reduction in prices in the long run. In the spring of 2004, a new Wal-Mart opened up in Glendale, Arizona. The storereceived 8,000 applications for 525 jobs with wages starting as low as $6.75 per hour.10 AHarvard applicant has a higher chance of being accepted than a person applying for a job at those Wal-Mart. Wal-Mart experiences similarly high application ratios at other jobs. Theseanecdotes strongly suggest that jobs at Wal-Mart are better than the opportunities these workerswould have in the absence of Wal-Mart, either other jobs or unemployment.The mere fact that more than 1.3 million Americans work at Wal-Mart demonstrates thatits compensation is at least as good as the alternatives, which could mean similar jobs in theretail sector, jobs in other sectors or unemployment.Nevertheless, the available data is consistent with the premise that Wal-Mart pays wagesthat are comparable to the retail sector.Wal-Mart itself reports mean hourly wages of $9.68. These are somewhat below the2004 national average of $10.29 for general merchandise and $12.58 for retail as a whole.Wal-Mart itself reports mean hourly wages of $9.68. These are somewhat below the2004 national average of $10.29 for general merchandise and $12.58 for retail as a whole.Even if Wal-Mart pays as much as comparable employees, it could still have adeleterious impact on labor markets as a whole. When Wal-Mart enters a new county, it could kill jobs or lower wages, leaving everyone worse off.The overall fiscal impact of Wal-Mart is overwhelmingly positive. In its last fiscal year itset aside $5.6 billion for corporate tax payments. In addition, its employees pay taxes on theirtens of billions of dollars of earnings. Together with indirect effects, like driving up real estatevalues, their total tax bill is much larger than the claimed $1.5 billion in federal subsidies for itslow-income employees.The image of Wal-Mart as all powerful is at least six years out of date. Although still arapidly growing mega-corporation, Wal-Mart is losing customers, especially for higher-marginproducts, to the likes of Target Corp.

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