Wal-Mart Stores, Inc: Strategies for Dominance in the New Millennium

1. Investigate and Analyze the Company’s History and Growth

When Sam Walton first entered the retailing business he had no idea that he would become a huge success in this business.  He initially worked in JC Penney store in Iowa in 1940 where he stayed for 18 months.  He later on opened his first store, the Five and Dime where he achieved better sales than his competitors.  In 1962 he opened the first Wal-Mart store where he had one simple vision – to keep prices as low as possible.

He knew that by keeping the prices low, though his profit would not be as large as his competitor’s but he also knew that he could compensate this by higher volume of sales.  This policy propelled him to success.  Soon he was opening new stores in other states and earning millions of dollars.  Within five years from the time he first opened his Wal-Mart store his company expanded to 24 stores across the state of Arkansas and reached $12.6 Million in sales.  In 1968, he eventually opened other stores outside the state of Arkansas.

At present, Wal-Mart is the biggest corporation surpassing its competitors.  (Jim Hightower, 2002) It has more than a hundred retail stores all over the world making the Waltons some of the richest people in the world.  S. Robson Walton is ranked by London’s “Rich List 2001” as the wealthiest human on the planet having more than $65 billion surpassing Bill Gates.  (Jim Hightower, 2002)

1. Identify the Strengths and Weaknesses Within the Company

   One of the strengths of Wal-Mart is its use of technology.  Wal-Mart is the first to use the Universal Bar Code system.  The bar code contains details about the product which tells the retailers information such as how many of the said products have been sold and how many are still remaining.  This system helped improve the way inventories are done in stores.

With the bar code system, the inventory system is now more accurate and retail store owners no longer need to hire employees to conduct inventory.   With this system, Wal-Mart can immediately know the remaining supplies of a particular product so that it could immediately order from its suppliers.  It is also keeping up with the changes brought about by the Internet Technology.  The company has its own website which gives the consumers information about the company.

Wal-Mart adopted the corporate culture of frugality.  The Waltons were very careful about spending their money and they lived a very simple lifestyle.  They also demanded frugality from their employees.  Frugality is so imbedded in its culture that even the company’s headquarters is located in Arkansas which is very old and looks dull.  The executives of the company do not ride in fancy limousines and nor do they reside in expensive hotels.  Instead, the executives shared budget-hotel rooms with their colleagues. (Caroline Wilbert, n.d.)

Unfortunately, the company wants its employees to practice the same frugality that its owners are practicing.  The corporate culture of frugality in manifested in the HR policies it has chosen to adapt to its employees.  Here lies the weakness of Wal-Mart.   This policy is perceived to be prejudicial not only to the employees of Wal-Mart but to the whole retail industry in general.  Statistics shows that a substantial number of Wal-Mart employees or associates earn far below the poverty line.

  In an article entitled “Is Wal-Mart Too Powerful?” published in the October 2003 issue of the Business Week, it states that in 2001, sales associates, the most common job in Wal-Mart, earned on average $8.23 an hour for annual wages of $13,861. The 2001 poverty line for a family of three was $14,630.   (“The Real Facts About Walmart” 2007)  Further, in a study conducted by Dr. Richard Drogin entitled “Statistical Analysis of Gender Patters in Wal-Mart’s Workforce”, it states that a 2003 wage analysis reported that cashiers, the second most common job, earn approximately $7.92 per hour and work 29 hours a week. This brings in annual wages of only $11,948. (“The Real Facts About Wal-Mart” 2007)

III. External Environment Information

            At present, there are no other retailers that pose serious threat to the dominance of Wal-Mart.  The policy of Everyday Low Prices is still considered music to the ears of every American consumer.  However, I believe that its most serious threat is itself.  If the company does not change its HR policies the company might find itself flooded with suits and claims from its employees whom it has deprived of the proper benefits and wages accorded to them by law.

1. Determine if the company is in a strong competitive position and decide if it can continue at its current pace successfully

            Wal-Mart is still in a strong competitive position and I believe that it will remain competitive for a few more years.  However, unless drastic changes are made in its Human Resource policies, it will lose its dominance in the global market in the coming years.

1. Identify Corporate Level Strategy/Business Level Strategy

The business strategy employed by Wal-Mart is to keep its prices low.  The profits for every customer may be a small amount but this can be compensated by the volume of sales its produces from its customers.  To keep prices low, Wal-Mart must continuously maintain a good inventory system that will monitor the supply of its products.  This is he reason why it has adopted the bar code system.  Also, to keep prices low it must abandon its “Buy American” campaign.

Thus, the company has been looking for other suppliers from Asian countries which manufacture products for a lesser price.  Research shows that in 1995, Wal-Mart said that 6 percent of its total merchandise was imported. A decade later, experts estimated that Wal-Mart imported about 60 percent of its merchandise. (Caroline Wilbert, n.d. ) Today, Wal-Mart is considered the largest importer of Chinese-made products in the world, buying $10 billion worth of merchandise from several thousand Chinese factories. (Jim Hightower, 2002) To keep its prices low, the standard of living of its employees must also be sacrificed.

1. Evaluate organizational change, levels of hierarchy, employee rewards, conflicts, and other issues that are important to the company.
   The most important issue in the case of Wal-Mart is the people aspect. Wal-Mart fondly calls their employees ‘Associates.’ The treatment however is similar to that of slaves.  They pay low wages.  They compel their employees to work for extra hours without overtime pay.  They do not provide adequate health care insurance and other non-monetary benefits to their employees.  They have hiring policies that grossly violate the existing federal and state laws against discrimination.
2. Despite the existing laws against these practices, it is surprising that they are able to do all these things to their employees.  This is because Wal-Mart has adopted an aggressive policy against unions.  Wal-Mart monitors the activities of unions in all its stores.  Research shows that in North America, Wal-Mart has thwarted efforts to create union through aggressive anti-union tactics such as managerial surveillance and pre-emptive closures of stores or departments who choose to unionize. (“Wal-Mart”) Specifically, in April 2005, Wal-Mart immediately closed its store in Quebec its employees received a union certification.  (“The Real Facts About Wal-Mart” 2007)
3. The incident which happened in Quebec is just one of the incidents of union busting being employed by the company in an effort to prevent its companies from being unionized.  Research shows that in the last few years, over 100 unfair labor practices have been filed against Wal-Mart throughout the country, with 43 charges filed in 2002 alone.  For companies like Wal-Mart, it is important for them to prevent at all costs any unionization attempts by its employees.  If a company begins to be unionized, the employees, through the assistance of the union, will seek for better wages, better benefits and better working condition.

VII. Recommendations

It seems that Wal-Mart is both the most admired company in the United States but it is also the most hated.  It is most admired by the consumers because of the cheap price of goods it offers.  It is the most hated because it drives its competitors out of business, pays low wages to its employees and reduces the quality of goods in the market.

I believe, however, that it is possible for Wal-Mart to improve the wages and benefits it gives to its millions of employees and at the same time maintain the prices of their products low.

The philosophy is clear and definite – Wal-Mart can maintain the low prices of its products without hurting and sacrificing its employees.  In one of the studies conducted by the Economic Policy Institute which was cited in the article entitled “US: Wal-Mart Could Hike Pay and Keep Prices Low: Study,” researchers have concluded that if only Wal-Mart would reduce its profit margin to about 2.9%, where it stood in 1997, from the 3.6% margin it recorded last year that would free up about $2.3 billion to pay workers without raising prices.” (Emily Kaiser 2006)

If only a small portion of these earnings will only be equitably distributed to its employees, then the employees will receive higher wages, better benefits, better working conditions.  Consequently they will experience an improvement in their living condition.  The amount of money it spends in an effort to defend the company against suits for discrimination, lack of benefits or low wages could be utilized more if devoted for the purpose of improving the standard of living of the employees.

 

 

 

Bibliography

 

Hightower, Jim.  How Wal-Mart is Remaking the World.  April 26, 2002.  Retrieved January 4 , 2007 from: http://www.alternet.org/story/12962/

Kaiser, Emily.  US: Wal-Mart Could Hike Pay and Keep Prices Low: Study CorpWatch.  June 2006.  Retrieved January 4, 2007 from:  http://www.corpwatch.org/article.php?id=13735

The Real Facts About Wal-Mart.  Retrieved January 4, 2007 from: http://www.gaypasg.org/GayPASG/AboutGayPASG/Wal-Mart%20RealFacts%200608.htm

 “Wal-Mart.”  Retrieved January 4, 2007 from: http://en.wikipedia.org/wiki/Wal-Mart

Wilbert, Caroline.  How Wal-Mart Works.  Retrieved January 4, 2007 http://money.howstuffworks.com/wal-mart.htm