History Sam Walton founded Walmart in 1962. He was a businessman who started working in retail in 1940 at a J.C. Penney store in Des Moines, Iowa. In 1945, he ran a retail store in Newport, Arkansas, part of a chain of variety stores named Ben Franklin. Instead of renewing his lease, however, he decided to open a new Ben Franklin franchise in Bentonville, Arkansas and called it “Walton’s Five and Dime.” He succeeded by selling at a discount. Walmart’s purpose best exemplifies what the company still stands for today: “Saving People Money So They Can Live Better” (Walmartstores.com)
Within five years, the company had grown to 24 stores throughout Arkansas, reaching sales of $12.6 million. The company officially incorporated on October 31, 1969 as Wal-Mart Stores, Inc. In 1970, it opened its first distribution center and home office in Bentonville, Arkansas. By this time, it had 1,500 associates working out of 38 stores. Its sales were $44.2 million. In this same year, it began to trade its stock as a publicly held company and was soon listed on the New York Stock Exchange. By 1971, it had stores in five states:
Arkansas, Kansas, Louisiana, Missouri, and Oklahoma. It expanded into Texas in 1973, and Kentucky and Mississippi by 1974, and Texas in 1975. By this time, it had 125 stores and 7,500 associates, with sales of $340.3 million.
By its 25th anniversary in 1987 it had 200,000 associates working out of 1,198 stores. Sales were $15.9 billion. It also completed a satellite network that linked all operating units with its Bentonville home office via two-way voice and data transmission and one-way video communication. It helped its home office to track inventory and sales and communicate instantly with its stores.
In 1988, Sam Walton turned over the CEO role to David Glass. However, he remained the Chairman of the Board. In this same year, the company opened its first Walmart Supercenter in Washington, Missouri. In 1995 it entered South America, beginning with Argentina and Brazil. It entered Europe in 1999 by buying Asda for $10 billion.
In 1998, the company introduced the “Neighborhood Market” with three stores in Arkansas. In 2000, H. Lee Scott became Walmart’s President and CEO. Sales increased to $165 billion. By 2002 it had been listed at America’s largest corporation on Fortune 500 list, with profits of $6.7 billion. By 2005, it had sales of $312.4 billion, 6,200 facilities worldwide and 1.6 million associates. Recent Operating Results
According to the press release dated February 18, 2010 (Bentonville, Ark), Wal-Mart Stores, Inc. reported financial results for year ended January 31, 2010. Net sales for the fourth quarter were $112.8 billion, which was a 4.6 percent increase from fourth quarter of the previous year. Diluted earnings per share were $1.23—up from $0.96 from the previous year. Adjusted earnings were $4.5 billion ($1.17 per share). (“Walmart Reports”, 2010).
As of March 29, 2011 4:00 p.m. ET:
WMT52.26 0.07 (0.13%)
Dow12,279.01 81.13 (0.67%)
S&P 5001,319.44 9.25 (0.71%)
Economic, Social & Political Forces According to its Edgaronline.com, Wal-Mart reports that current economic conditions could adversely affect the company’s financial performance. “In the United States, higher interest rates, higher fuel and other energy costs, weakness in the housing market, inflation, higher levels of unemployment, unavailability of consumer credit, higher consumer debt levels, higher tax rates and other changes in tax laws, overall economic slowdown and other economic factors could adversely affect consumer demand for the products and services we sell through our Wal-Mart Stores segment and Sam’s Club segment, change the mix of products we sell to one with a lower average gross margin and result in slower inventory turnover and greater markdowns on inventory (Edgaronline.com).”
“The company is in the beginning stages of a massive store and strategy remodeling effort, which it has dubbed Project Impact (Gregory, 2009, p. 1).” Project Impact will result in cleaner, less cluttered stores that meant to improve the shopping experience with friendlier customer service. (Gregory, 2009) It’s ultimate goal—to crush the remaining competition.
Although it is of little surprise, Wal-Mart continues to take hits from critics that question the negative impacts in local communities. Strategies, like its Project Impact further cement those concerns. “Under Project Impact, Walmart will make major plays in winnable categories. The pharmacy, for example, has been pulled into the middle of the store, and its $4-prescriptions program has generated healthy buzz. With Circuit City out of business, the electronics section has been beefed up. Walmart is also expanding its presence in crafts. Sales at Michael's Stores, the country's largest specialty arts-and-crafts retailers, have sagged, and Walmart sees an opportunity. (Gregory, 2009)” SWOT Analysis
Strengths•Largest retailer & employer in U.S. •A large number of products offered in one place •Sales prices throughout the year, not just special holidays/occasions •Different divisions (i.e. SAM’s Club attract wide range of customers Weaknesses•Stores are concentrated in America & Europe with little presence in other countries •Mostly part time employees are paid low wages and few incentives •Most local companies oppose Walmart because of adverse effects on their business Opportunities•Opportunity to spread in China, Europe and emerging economies (i.e. India) •Up-to-date strategies for super centers
•Opportunity to capitalize on increased internet sales & decreasing dollar value •Opportunity to increase sales by changing market perception Threats•Rising concerns about negative impact on local communities. •“The constant price strategy is not very accurate for the products with increased manufacturing costs.” •“Emerging competitors with innovations that are not adopted by Walmart.” (Kasi, 2011)
Factors to Plan for In general, the factors that Wal-Mart needs to predict, plan for, and adjust for are the same as those listed previously under “threats”. The company needs to change the negative perceptions that keep people from fully embracing their local Wal-Mart stores. They need to show how the retail giant can actually help improve their lives. They need to develop a pricing strategy that will better account for products with increasing manufacturing costs, to help increase its profits. They need to embrace new innovations and changing technologies.
References Gregory, S. (2009). Walmart’s latest move to crush the competition. Telsey Advisory Group. Retrieved March 29, 2011 from, http://www.telseygroup.com/files/news/Time-090909.pdf Kasi (2011). Wal-Mart Swot Analysis. Marketing Mixx. Retrieved March 29, 2011 from, http://marketingmixx.com/swot/156-wal-mart-swot-analysis.html (2011). Retrieved from http://www.walmartstores.com