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Walmart Stores Incorporated Business Analysis essay example
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Walmart Stores Incorporated Business Analysis

Walmart Stores Incorporated is an international publicly traded general merchandise store from Rogers, Arkansas U.S.A. Walmart stores has made over $485 million USD during the 2017 fiscal year. Walmart operates over 11,200 stores under 55 banners in 27 countries and e-commerce websites in 10 countries. Walmart employs approximately 2.2 million associates around the world — 1.5 million stateside. Walmart owns and operates retail stores that offer a variety of food options, household and personal products, paper items, electronics, auto accessories, hardware, horticulture and accessories, sporting goods, seasonal merchandise, apparel, pharmacy and optical services, and check cashing services. Walmart’s strategy since 1945 has been to provide low prices everyday (“Our Business” para 2).

History

Walmart was founded in 1962 by Mr. Sam Walton, who graduated from the University of Missouri with a degree in economics. He worked at J.C. Penny for two years under their management trainee program prior to joining the Army. When Mr. Walton completed his term of service, he opened a Ben Franklin variety store in Newport, Arkansas. Sam and his brother J.L. Walton went on the open nine franchises by the late 1950’s (‘Walmart Stores, Inc.’ para 3).

Early in the 1960’s, Sam Walton used his experience in mass merchandising and came up with a proposal to slash prices significantly and operate the stores at a high volume, however, the other Ben Franklin franchise owners would not agree. In 1962, the Walton brothers decided to open their first Walmart discount store in Rogers, Arkansas (‘Walmart Stores, Inc.’ para 4), yet continuing to run the Ben Franklin Franchise stores. The Walton brothers continued to expand Walmart throughout Oklahoma, Missouri, Arkansas and Kansas by the end of the 1960’s (‘Walmart Stores, Inc.’ para 6).

Walmart’s first formal warehouse operation was opened in 1970, which implemented their warehouse distribution strategy. Walmart built their own warehouses to have the ability to purchase in volume. These warehouses were in close proximity to the various stores they distributed to. By implementing the distribution strategy, Walmart was able to cut cost due to inventory replenished quickly (‘Walmart Stores, Inc.’ para 7).

In the early 70’s Walmart went public and was listed on the New York Stock Exchange. By 1976, Ben Franklin stores were phased out and all expansion efforts were placed into the Walmart stores. Walmart had 276 stores throughout 11 states and sales reached $1.25 billion by 1979. These stores added pharmacies, jewelry divisions, and auto service centers in some. “Walmart became the fastest company to reach the $1 billion mark” (‘Walmart Stores, Inc.’ para 9), and continued to grow into the 80’s when they opened three Sam’s Wholesale Clubs. Sam’s Club was designed for an urban market, giving the ever expanding, Sam Walton, access to customers he did not have before. Walmart studied the membership club market carefully before entering.

Walmart was able to combine the two chains without having to compete with each other. As Walmart continued to serve small towns, Sam’s Club was able to cater to urban areas with multi-unit packaging where items could be sold in bulk. Sam’s Club also catered to small restaurants and food service businesses. Sam’s Club helped Walmart exceed in sales and profits and by 1993, Walmart posted profits of $2.33 billion on revenues of $67.34 billion and the company workforce exceeded to half a million people (“Walmart Store, Inc).

In 1991, Walmart entered into a joint venture with Cifra, S.A. de C.V., Mexico’s largest retailer which was marked as its first foreign expansion. Walmart used an aggressive international expansion as a vehicle of company growth since the company was beginning to reach the limits of growth within the domestic market. In 1994, Walmart purchased 122 Woolco stores in Canada, and over the next few years entered Brazil, Argentina, U.K, and China through joint ventures (‘Walmart Stores, Inc.’ para 19).

Today, Walmart reports 2.2 million associates were employed around the world and about 75% of their store management teams started as hourly associates, and are currently earning between $50,000 and $170,000 a year. Walmart is also investing $2.7 billion over two years in higher wages, education and training (“Company Facts. Walmart Corporate” para 1).

Mission Statement

For any company, goals are needed to understand the purpose of their organization. Mission statements help stakeholders, as well as employees, understand the importance of the organization and the purpose of the company. Walmart’s mission statement is “to save people money so they can live better” (Ferguson para 3). The mission statement is focused on the values of the consumer. Walmart wants to ensure that customers are receiving low everyday prices for any items customers need. Walmart’s mission statement is resembled through the slogan that is advertised, “Save Money. Live Better”. This slogan is a sole connection through the mission statement of Walmart. Walmart wants to ensure great customer service and low prices for the consumers.

Business

Walmart’s mission statement is needed to define the business and how the company is seen to the competitors. Walmart wants to their customers are receiving everyday low prices to follow the mission statement. Putting the customer first will continue to drive sales and increase growth for the company. “Walmart fulfills the “save people money” component of the mission statement through its low selling prices. For example, consumers save money by spending less in buying goods from the company’s stores, compared to buying the same or similar goods from midscale and high-end stores” (Ferguson para 4). This business model is used as a competitive advantage for Walmart.

Major Goals

Having goals within a company helps contribute to the company’s mission statement. Walmart states “Another Walmart.com goal – providing easy access to more of Walmart – is evident in the more than 1,000,000 products available online and in the innovative businesses that Walmart.com continues to develop, such as Music Downloads and 1-Hour Photos, which gives customers the convenience of ordering products online and picking them up at a local Walmart” (“Walmart.com’s History and Mission”para 1). Being available across the nation leads Walmart to become more of a convenient avenue for their customers. They strive for a one stop shop retailer for their customers will contribute to the company’s success of having more customers. Convenience gives customers a reason to continue to shop at Walmart.

Another goal Walmart has is to be able to provide low prices for customers. “The company is focused on being a low-priced retailer — ‘our first obligation is to save the customers’ money’ — but she said within that strategy, her team constantly works with suppliers to identify products that could be made in the United States” (Toloken para 6). To reduce pricing, Walmart focuses on having production within the United States. This helps lowers the cost because there is no international trade. It also eliminate the fear of tariffs and import tax which will help drive Walmart’s goal.

Corporate Philosophy

Corporate philosophies are used to help with a company’s culture and beliefs. Walmart’s vision is to ensure customers are happy and that Walmart is providing convenient services. “The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good-quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience” (“Walmart.com’s History and Mission” para 1). Walmart uses the customer’s wants as a direction to determine the corporate philosophy.

The company also focuses on the foundation of the business which is the employees. “Walmart adversely affects employment and wages. Retail workers in a community with a Walmart earned 3.5% less because Walmart’s low prices force other businesses to lower prices, and hence their wages, according to the Neumark study. The same study also found that Walmart’s presence reduces retail employment by 2% to 4%” (Cervantes para 3). Corporate philosophy not only affects the customers but their employees. Since Walmart focuses on low prices for the customers has affect the employees at the company as well. In order to keep prices low expenses must be kept low as well, which includes employment costs. The company philosophy can contribute to the culture of the organization as workers average wage is less than those in other companies.

Strategic Evolution

In the evolution of retail, Walmart is investing in being the leader of the evolution. Basic financial planning in order to seek better operational control by trying to meet budgets. Walmart’s forecast planning strives to have more growth by trying to predict the future beyond next year. In the strategic planning process, Walmart will look to increase the responsiveness to the markets and competition. With this competitive advantage Walmart can project a successful future by managing all resources. Walmart should have a consideration of strategy implementation and evaluation and control, in addition to the emphasis on the strategic planning.

Intended Strategy

When Walmart entered the retail industry, the business model implemented was to offer lower prices plus great service. Walmart’s strategy to help improve lives without the trouble of paying higher prices for essentials is the intended strategy. Walmart’s, “everyday low price” concept, helped to grow the business and became a public trading company in 1970. Walmart continued to grow by developing other businesses that were aligned with the mission they set for themselves. The birth of Sam’s Club and Walmart Supercenters were introduced with the same concept. Sam Walton believed in sharing his mission with his associates and made them partners. Walton felt that this contributed to the overall growth of Walmart, nationally as well as internationally (‘Our History’).

Emergent Strategies

Business is ever evolving, and in order to stay profitable you have to evolve with it. Walmart evolution expanded internationally to Mexico in 1991, Canada in 1994, China in 1996, and the UK in 1998, growing every 2 years. Walmart was aware of the convenience online shopping was to customers, and in 2000 introduced online shopping. Online shopping is currently 75% of Walmart’s sales with the flexibility of customers picking up their orders from stores. Walmart continued to grow and expand even becoming more socially responsible. They however never changed from the intended strategy for people to live better lives, Walmart became dedicated to hire honorably discharged veterans, and raise $2 billion to help end hunger in the United States.

With businesses importing more to keep cost low for customers, Walmart made a pledge to source $250 billion in products by 2023. The initiative is expected to create 1 million new U.S. jobs with 250,000 in direct manufacturing and 750,000 in support and services. Walmart wants to invest more into their associates by providing more training and increasing opportunities to build a career (“Our History”).

Stakeholders

A company’s stakeholders are individuals or groups with an interest, right, or say in the company’s stake, in what it does, and in how well it performs. There are internal and external stakeholders. Walmart’s internal stakeholders include its stockholders, executives, employees, and board of directors. Walmart’s external stakeholders include customers, suppliers, creditors, governments, unions, and local communities where it operates. Walmart operates “approximately 11,600 stores under 59 banners in 28 countries and e-commerce Websites in 11 countries.” (“Walmart Stores Inc…”para 1)

Walmart’s Internal Stakeholders

Stockholders- are individuals or companies that own Walmart stock. Stockholders, buy shares in hopes that the stock price increase and it pays out dividends. “The Waltons have retained control of the retailer that Sam Walton founded in 1962 through its expansion into a global giant with nearly 12,000 stores from Chicago to Chile to China” (Nassauer para 6). Sam Walton’s, inheritors have current control of the company with more than 50% of Walmart shares.

Top executives -receive a salary but are also compensated with stock option depending of the company’s wealth. Some of Walmart’s top executives include,

  • Greg Foran – President, Chief Executive Officer
  • Michael Dastugue – Executive Vice President, Chief Financial Officer
  • Tony Rogers – Chief Marketing Officer, Senior Vice President
  • Clay Johnson – Chief Information Officer, Executive Vice President

Employees – Walmart employs 2,300,000 associates. This year Walmart increased the starting wage for their U.S. associates to $11 per hour. It also extended the maternity and parental leave for all its associates. Walmart’s employees also have stock options. Walmart offers employee training through its Academy. “Since the program launched in early 2016, the curriculum has expanded training to cover more than 65 positions, including customer service manager, online grocery pickup and assistant store manager” (“Walmart Academy Pays…”para 4). The Academy is leading to better employee and customer satisfaction.

Board of directors- are elected by the shareholders and their role is to oversee the company’s mission, vision and determine company policies in the best interest of the shareholders. Walmart’s current board of directors are.

  • James I. Cash, Jr., Ph.D.
  • Timothy P. Flynn
  • Sarah Friar
  • Carla A. Harris
  • Morgan Stanley.
  • Thomas W. Horton
  • Marissa A. Mayer
  • C. Douglas McMillon
  • Steven S Reinemund
  • Kevin Y. Systrom
  • S. Robson Walton
  • Steuart L. Walton

Walmart’s External Stakeholders

Customers – In 2012 Walmart was the leading mass merchandiser with 66.70% of the market share. Last year Walmart served 270 million customers per week.

Suppliers – Walmart has a network of more than 3,000 diverse suppliers. “Walmart announced it is launching a Supplier Inclusion Showcase on Walmart.com to spotlight products from Walmart’s ever-growing diverse suppliers’ community which includes companies operated by minorities, women, veterans, members of the lesbian, gay, bisexual and transgender (LGBT) community, and people with disabilities” (“Walmart Increases…”para 1).

Government- officials have no direct stake in Walmart’s operations. However, some local jurisdictions prohibit Walmart’s establishments from its city limits. “For six years, Wal-Mart has clashed with union and community leaders on expanding in Chicago” (Martin 2).

Unions – Walmart is not unionized, but it has seen its share of employee protesters who would like to be in the union. “Walmart spokesman Dan Fogleman said the OUR Walmart group represents one of many attempts by employees over the years to unionize the company” (Pipkin, para 4).

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Local communities – Walmart gives back to communities in more than one form,

  • Walmart created local jobs by doubling its sales of local produce in the U.S. between 2009 and 2015.
  • Walmart has increased its U.S. fleet efficiency by eliminating nearly 650,000 metric tons of greenhouse gases in 2015, helping the environment.
  • Walmart Foundation awards scholarships to its associates and dependents for higher education. (“Walmart Academy Pays…”para 4)
  • Walmart encourages their associates to volunteer their hours for Walmart sponsored community events. “In FY17, 73,000 full- and part-time associates volunteered more than 1.2 million hours for various non-profits in their local communities. Associates may apply for a Volunteerism Always Pays (VAP) grant on behalf of their volunteer hours at eligible organizations” (Our Volunteers, para 1)

Company’s Organization and Structure

The organizational structure that Walmart follows is classified as a divisional organizational structure. This increases the flexibility the organization by giving each group of managers a specific market and geographic structure to smooth out the workflow. Walmart also has an organizational structure that can be classified as a decentralized organization. Based on this, the employees are empowered to make decisions at the store level making it more flexible. Walmart operates worldwide including Canada, Mexico and United Kingdom. Walmart has adopted a tall structure due to the levels in its hierarchy.

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