Sam Walton opened his first Wal-Mart store in Rogers, Ark. in 1962. Over the next 45 years, Walmart expanded to include many different formats in the United States and globally. Walmart now operates stores in the United States, Mexico, Puerto Rico, Canada, Argentina, Brazil, China, the United Kingdom, Japan, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua (Reuters, n.d.). More than 75 percent of their international stores operate under a different name than Wal-Mart and all of their stores are united in their effort to reflect the local needs and wants of our customers, and to deliver everyday low prices.
Walmart has three main formats of operations that include Walmart Supercenters, Sam’s Clubs, and operations also located in Mexico and Central American that operate as part of the Wal-Mart family. In 1988, the Walmart Supercenter concept was established to meet the growing demand for one-stop family shopping. The Supercenters combine a full grocery store with our classic general merchandise mix under one roof.
Most Supercenters are open 24 hours a day. Additionally, the Supercenters are home to many specialty shops owned by outside vendors, such as banks, restaurants, portrait studios, hair and nail salons, health clinics and employment agencies. On average, the Supercenters cover 187,000 square feet, employ 350 or more Associates and offer 142,000 different items. There are more than 2,256 Supercenters across the United States today, and an additional 825 Supercenter and hypermarket formats around the world.
Sam’s Club is a membership-based format that offers customers a selection of general merchandise and large-volume items at value prices. Since 1983, Sam’s Clubs have been helping small businesses and families gain access to name-brand products at affordable prices. The goal is to help members save money and time by offering those small business members the
advantages of efficiency. Today there are more than 579 Sam’s Club locations across the United States and 128 warehouse club formats around the world – each averaging 132,000 square feet, carrying more than 5,500 different products and employing 160 to 175 Associates. As Walmart expands to new markets, they are continuing to develop formats that meet the specific needs and preferences of the people in those markets. Mi Bodega Aurrera and Mi Bodega Aurrera Express in Mexico, Pali and Despensa Familiar in Central America and Todo Dia in Brazil are a few of the unique Walmart formats in worldwide operations.
Typically, these are “soft-discount” stores with less than 20,000 square feet and a limited assortment of goods. The smaller format is particularly successful in developing countries where individuals are accustomed to an “informal” retail sector. The stores provide customers with access to products they need – both from their local region and from around the world – at prices they can afford.
This paper will provide information regarding the critical success factors and corporate strategies utilized by Walmart, as well as defining who are their stakeholders and how risks and challenges are met.
Critical Success Factors and Corporate Strategies Serviced A successful supply chain management strategy can lead to lower product costs and highly competitive pricing for the consumer. Over the past ten years, Walmart has become the world’s largest and arguably most powerful retailer with the highest sales per square foot, inventory turnover, and operating profit of any discount retailer. Walmart owes its transition from regional retailer to global powerhouse largely to changes in and effective management of its supply chain.
Walmart began with the goal to provide customers with the goods they wanted when and where they wanted them. Walmart then focused on developing cost structures that allowed it to
offer low everyday pricing. The key to achieving this goal was to make the way the company replenishes inventory the centerpiece of its strategy, which relied on a logistics technique known as cross docking. Using cross docking, products are routed from suppliers to Walmart’s warehouses, where they are then shipped to stores without sitting for long periods of time in inventory.
This strategy reduced Walmart’s costs significantly and they passed those savings on to their customers with highly competitive pricing. Walmart then concentrated on developing a more highly structured and advanced supply chain management strategy to exploit and enhance this competitive advantage. Walmart has been able to assume market leadership position primarily due to its efficient integration of suppliers, manufacturing, warehousing, and distribution to stores. Its supply chain strategy has four key components: vendor partnerships, cross docking and distribution management, technology, and integration.
Walmart’s supply chain begins with strategic sourcing to find products at the best price from suppliers who are in a position to ensure they can meet demand. Walmart establishes strategic partnerships with most of their vendors, offering them the potential for long-term and high volume purchases in exchange for the lowest possible prices. Suppliers then ship product to Walmart’s distribution centers where the product is cross docked and then delivered to Walmart stores. Cross docking, distribution management, and transportation management keep inventory and transportation costs down, reducing transportation time and eliminating inefficiencies.
Technology also plays a key role in Walmart’s supply chain, serving as the foundation of their supply chain. Walmart has the largest information technology infrastructure of any private company in the world. Its state-of-the-art technology and network design allow Walmart to accurately forecast demand, track and predict inventory levels, create highly efficient transportation routes, and manage customer relationships and service response logistics.
Since opening in 1962, Walmart’s major external stakeholders are their customers, suppliers, and competitors. Stakeholders are the people, groups, and companies that are directly affected by an organization’s performance. Understanding the needs of our customers is central to Walmart’s business practices. Walmart claims that in order to “be successful as a business, we need to understand our greater impact on the world. We need to understand both the unintended consequences of our business, and the ways that we can innovate to improve the lives of our customers and the world around us” (“Our Stakeholders”, n.d.).
One of the ways Walmart is working to engage stakeholders is to run a more sustainable business is through Sustainable Value Networks (SVNs). SVNs provide a forum for Associates, suppliers, NGOs, thought leaders and academic experts to collaboratively explore challenges and develop solutions that benefit the business and our local and global communities. Today Walmart SVNs focus primarily on environmental impact.
Risks and Challenges
Acknowledging the challenging retail environment, Walmart CEO Mike Duke said: “We’re in a tough and unpredictable global economy. The competition is also tough…raising the stakes even further on serving customers and delivering on performance. All of this is to say that near-term execution is critical for us” (“Walmart Corporate”, 2013). Duke started with the priority of growing company sales at Walmart U.S. His plan involved aggressive investments in price through lots of rollbacks and better in-stock. Walmart recently assessed its risks and challenges and made important strategic decisions on current operations.
These actions, combined with capital discipline and e-commerce investments are set up to deliver a solid framework for future growth and improved returns.
By highlighting the long-term areas where the company is making progress, Walmart is establishing investments in leverage initiatives globally. For example, the U.S. logistics team is reducing shipping costs and increasing transportation efficiency, a single process initiative is generating significant savings in labor productivity in China, and the company has migrated all but one market in Latin America to its Costa Rican Shared Services Center.
Also, the company is “much more streamlined in how we make real estate decisions and invest capital” (“Walmart Corporate”, 2013). New store are performing stronger and there is progress in bringing down the cost to build, expand and remodel stores. The biggest challenge Walmart has is winning the intersection between physical and digital retail around the world. As the previously mentioned, Walmart has made major investments in compliance over the past year. Its focus has been on better processes and procedures, increased training for associates and strengthening organizational leadership. For Walmart, progress with compliance is a long-term goal and compliance is an essential part of their growth strategy.
Walmart’s overall view on global business is to make substantial progress in areas that are the foundation for long-term growth and shareholder returns. Summary and Analysis Wal-Mart Stores help people around the world save money and live better – anytime and anywhere – in retail stores, online, and through their mobile devices. Each week, more than 245 million customers and members visit our more than 11,000 stores under 69 banners in 27 countries and e-commerce websites in 10 countries. With fiscal year 2013 sales of approximately $466 billion, Walmart employs more than 2.2 million associates worldwide.
Walmart continues to be a leader in sustainability, corporate philanthropy and employment opportunity.
Our Stakeholders. (n.d.). Wal-Mart. Retrieved May 14, 2014, from http://www.walmartstores.com/sites/sustainabilityreport/2007/companyStakeholders.html Reuters. (n.d.). Wal-Mart Stores Inc (WMT.N) Company Profile | Reuters.com. Reuters. Retrieved May 14, 2014, from http://www.reuters.com/finance/stocks/companyProfile?
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