Wal Mart Analysis

Wal-Mart and the United States and Global Economy

Azusa Pacific University

Table of Contents

History of Sam Walton 3

Background of Wal-Mart 5

Management Philosophy 9

Use of Information Technology as a Competitive Weapon 10

Purchasing Power 12

Supply Chain and Inventory Management 14

Supply Chain and Distribution 14

Inventory Management 18

Expanded Operation in Groceries 21

Labor Unions and Wal-Mart 22

Role of the Largest Company and Employer on Planet Earth 23

Strengths, Weaknesses, Opportunities, and Threats Analysis (SWOT) 24

STRENGTHS 25

Wal-Mart's broad inventory and customer base 25

The ability to customize to and meet any customer segment 25

Partnerships 26

Wal-Mart management and Corporate Culture 27

WEAKNESSES 28

OPPORTUNITES 29

Other potential growth opportunities 30

THREATS 30

References 32

Sources of Images 33

History of Sam Walton

Sam Walton was born on March 29, 1918 in Kingfish, Oklahoma. While growing up in Missouri, he was an active student of retailing. His first job was working for his father's store while he was attending school (Galiano, 2005). Later, Sam attended the University of Missouri and majored in Economics. During his senior year of college Sam was elected Senior Class President (Kennon, 2005).

After college, Sam started his career in the retailing business by running several Ben Franklin five-and-dime franchise stores in Arkansas. He learned some of his first lessons about buying, pricing, and passing good deals on to customers from Harry Weiner, a manufacturer's agent from New York. Sam learned "by cutting your price, you can boost sales to a point where you can earn far more at the cheaper retail than you would have by selling them at the higher price" (Wal-Mart Stores, 2005).

Sam was convinced that this new discount retailing concept was the wave of the future. If a local barber named Herb Gibson could operate a chain of profitable discount stores outside the same towns where Sam ran his variety stores, Sam knew he could do even better (Huey, 1998). By this time, Sam owned 15 variety stores and was a rich merchant. He was in fact so rich, that he and his wife, Helen, fronted 95 percent of the money needed to open the first Wal-Mart store in Rogers, Arkansas in 1962 (Wal-Mart Stores, 2005).

Surprised by the initial success, Sam later opened up a small chain of Wal-Mart stores across several states. Prior to opening a store, he would fly over small towns and study the lay of the land. He would then buy farmland at major intersections and order another Wal-Mart store to be built (Huey, 1998).

In 1970, Sam was one of the leading pioneers of offering a profit sharing plan for his employees. Employees at Wal-Mart were offered stock options and store discounts. Sam believed that "individuals don't win, teams do" and that happy employees meant happy customers and more sales. By making an employee's success dependent on the company's success, the employee would care more about the company (Galiano, 2005).

Sam was never bothered by the fact that many small-town merchants were driven out of business. He believed that any merchant could compete if they were willing to make major changes and to adapt to the new retailing philosophies. Sam saw where the future of retailing was going, so he chose to eat rather than be eaten (Huey, 1998). Wal-Mart soon passed the sales revenue of their competitors K Mart, Target, and Sears. "The secret of successful retailing is to give your customers what they want. And really...you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction; friendly, knowledgeable service; convenient hours; ...a pleasant shopping experience" (Wal-Mart Stores, 2005).

By 1992, Sam's vision of discount retailing turned him into one of the world's richest and most respected businessmen. However, he lived most of his life largely unnoticed by the public or press. He was known to prefer pickup trucks over limos and the company of his family and dogs over that of investment bankers (Huey, 1998). Sam died on April 5, 1992, leaving his approximated $100 billion fortune to his four children and his wife. Just before he died, President George Bush presented Sam Walton with the Medal of Freedom, the nation's highest civilian award (Wal-Mart Stores, 2005).

People often asked Sam what his secret was for Wal-Mart's success. He answered that question by explaining ten simple rules he followed for building a better business (Walton, 1992):

* Commit to your business and your goals. Believe in it more than anyone else.

* Share your rewards and your profits with your associates. Treat them as partners.

* Energize and motivate your colleagues. Money and ownership alone are not enough.

* Communicate all you know to your partners.

* Value your associates and appreciate everything they do for the business.

* Celebrate your success and don't get bogged down in your failures.

* Listen to everyone and figure out ways to keep associates talking.

* Deliver more than you promise and exceed your customer's expectations.

* Work smarter than others. Control your expenses better than your competition.

* Blaze your own path. Swim upstream. Ignore conventional wisdom.