Sam Walton Management - Case Study Example

Sam Wilton Lecturer: Sam Walton was an ordinary man who managed to accomplish the extraordinary before his death through vision, hard work, and passion. Sam was a unique individual and one of the successful entrepreneurs in history since his enterprise continues to grow with almost 7000 stores across the globe employing about 2 million employees making Wal-Mart a global force. Interestingly, Walton’s aim was for Wal-Mart to be the best and never the biggest company. Walton acknowledged that by keeping the costs low and prices lowest, his enterprise would be a success for his retailing model. Walton’s leadership was the basis for the company in becoming one of the acknowledged in the world and among the most successful and leading food retailer in US. The company altered food retailing in ways that compelled other players to react to the company’s unwavering focus of being the low-price leader. Sam Walton was a thinker who developed a variety store into the world’s leading company whose sway continues to resound at Wal-Mart and other spheres where business occurs. Introduction On 29 March 1918, Sam Walton was born as the first born in his family. Three years later, Walton’s parents Tom and Nancy gave birth to his brother James Walton who later became Walton’s lifelong friend and eventually his business partner. Sam’s family moved to Missouri when he was five allowing him to go to high school in Columbia, Missouri where he starred in the football team (Shores, 2014). Sam Walton grew up in various small towns in the south at the time when the great depression influenced various businesses. It was during this period of the great depression that Sam understood the significance of money and difficult task in his early age. During the great depression, Sam’s family had financial challenges forcing Walton and his brother to work in order to help the family. Sam had the job of milking cows before going to school, while his mother bottled the milk when Sam was in school. Later on, when Sam came home from school in the afternoon, he delivered the milk to customers at a price of ten cents per gallon. Besides selling milk, Sam had other ways of making money for the family because when he was eight years he began selling magazine subscriptions. Moreover, Sam like other country boys raised rabbits and pigeons in order to sell. Apart from commitment to various jobs that helped him bolster the family income, Walton found time to attend school (Krieg, 2013). Walton was bright and hardworking enough to gain a place in the University of Missouri Columbia where he studied a degree in business graduating in 1940 (Sam Walton: on a wing and a prayer, 2003). Sam Walton through the experiences he went through and his passion, hard work, as well as vision for developing an enterprise that takes into account the needs of customers, he was able to establish Wal-Mart as an outstanding retail before his death. Humble beginnings Sam Walton single-handedly built Wal-Mart to one of the biggest retailers in the world transforming the way Americans shopped and in the process making himself one of the richest men. Sam showed his entrepreneurial prowess at a tender age when he sold milk from his family farm, hawking magazine subscriptions and selling newspapers earning him the title “Hustler” while in college. Walton started his lifelong career in retail business in 1940 as a sales trainee in J.C Penney store within Des Moines, Iowa where he learned management techniques that he would later apply in his enterprise like fostering a sense of inclusion by referring to his employees as associates. After serving the US army, Walton was released 1945 and at that time, he had a wife and a child to support, which propelled him to work on his own (Sam Walton: on a wing and a prayer, 2003). After gathering his $5000 and $20,000 he received on loan from father-in-law, Sam Walton set out to acquire a variety store within Newport, Arkansas and managed to purchase Ben Franklin. Through hard work coupled by a policy of pricing products below the prices of other retailers, Walton soon managed to triple his business making him the owner of the leading Ben Franklin store within the six-state region (“Sam Walton”, 2008). Walton’s property owner was aware of the success of the store and decided to acquire the business for his son by simply refusing to renew the lease because Sam did not intend to sell the enterprise; however, Walton was forced to sell out the enterprise. Developing the discount idea Walton did not give up from the experience of being forced to sell out the enterprise he had set up in Newport but rather he went and searched the rural towns within Arkansas for a new location to put his business and eventually found it in a small community in Bentonville. One of Walton’s greatest strengths was his ability and willingness to embrace innovation like the self-service stores and even the concept of discounted stores in the early 1960s (Sam Walton: on a wing and a prayer, 2003). He set up the shop in 1950 within the town square but on this occasion, he insisted on a 99-year lease for his enterprise. Although there were other variety stores in Bentonville, none offered consistently low prices provided by Walton; therefore, the new enterprise quickly achieved the same success as his previous venture. This prompted Walton to search for other opportunities in the 1950s, which enabled Walton to acquire several variety stores using loaned money and profits resulting from his stores. Hence, by 1960, Walton owned 15 stores; however, he was not getting the kind of profits he expected because he expected to make more money considering the kind of effort he put. The challenge propelled him to adopt a new strategy for discounting dramatically through price cutting process in the hope of undercutting competition while compensating the difference in price through high volume sales. Although the idea was not entirely new at the time, discount stores were within cities and only discounted specialty items. Walton’s idea was to develop huge stores that discounted everything within the premises and placing them in small towns (“Sam Walton”, 2008). At the onset, Walton approached the company responsible for franchising Ben and Franklin stores with his idea; however, the directors of the company refused to back him because he insisted that they would have to decrease their wholesale margin by half to accommodate the low price he wanted to charge. Walton never gave up on his idea so he decided to mortgage his home enabling him to open his first Wal-Mart in 1962 in Arkansas a short distance from Bentonville. Walton steadily built a network of mass-merchandise discount stores and through his desire to embrace innovation, he pioneered self-service concept. Walton’s desire to embrace innovation ensured that Wal-Mart was one of the first retailers to adopt network technology through satellite to link its stores (Sam Walton: on a wing and a prayer, 2003). To Walton, the essence of discounting entailed cutting the price to a point where it boosted sales enabling the firm to earn more compared to the selling the items at a higher price (Sam Walton in his own words, 1992). At the time, Walton was not alone in the venture of retail discounting because the same year saw the launch of Kmart and Woolco all of which could easily have crushed Wal-Mart. However, Walton was way off the established path to draw attention from the prevailing retail giants. Initially, it was tough for Walton to stock a full range of goods since suppliers were reluctant to be linked with mass merchandising, which necessitated Walton to experiment with various layouts and mixes of stock in order to create a discount store (Sam Walton: on a wing and a prayer, 2003). Despite the challenge of established brands refusing to supply his enterprise and severe shortage of capable managers coupled with stiff competition from the small town shops, Walton managed to build his enterprise outlet-by-outlet, county-by-county and state by state (Brown, 2008). Thrilled by the big-city discounting enterprise that ventured into the small-town in America, rural customers flocked Wal-Mart making the sales of the enterprise to soar. The early success provided the necessary funding required for development and by 1970, 18 Wal-Marts were evident all over Arkansas and Missouri (“Sam Walton”, 2008). The Formula Works By 1969, Walton funded the expansion using profits and through borrowing of funds; however, in 1970 he decided to make the enterprise public. The initial offering produced around $5 million with 61% of the ownership of the stock being retained by his family; nevertheless, the amount generated enabled the company to pay off its debt and to move ahead with Walton’s ambitious expansion plans. The first year after Wal-Mart became a publicly traded company, the enterprise added 6 more stores followed by 13 in the following two years and later on followed by 14 and then 26. Hence, at the end of the 1980, Walton owned 276 stores and soon opened stores at a rate of 100 within a year. Moreover, Walton in 1983 launched his wholesale clubs targeting small-business owners and other individuals who wanted to buy merchandise in bulk (“Sam Walton”, 2008). As Wal-Mart blossomed, Walton spent a lot of time ensuring that his employees were happy and well informed. By 1987, Wal-Mart was the third largest retailer in the US trailing only Sears and Kmart; besides, with his retail success, Walton in 1988 announced he was handing the duties of CEO to David Glass but he would remain the chair of the company. Walton was found to have a destructive strain of bone cancer 2 years later; however, this pronouncement never dampened his competitive spirit. In 1990, Walton forecasted that the enterprise revenue would quintuple to $125 billion within the decade and in the next two years, the retail giant soared past Kmart and Sears to be the largest retailer in the country. President G.W. Bush in March 1992 offered Sam the Medal of Freedom because of Walton’s industrial spirit and appreciation of employees as well as the community. Several days later, Walton went to Arkansas Hospital where he passed way on April 5 1992 only 6 days after celebrating his birthday (“Sam Walton”, 2008). Walton died as one of the greatest retailers in his generation and as one of the richest men in the world because he managed to build an empire of more than 1000 stores at that time. Sam Walton as the founder of Wal-Mart was the most successful merchant of his time even though he created the enterprise with an idea that every other retailer mocked. Walton not only built one of the largest companies in the world but also he created a retailing and business revolution that changed the way people shop. Walton was a magnetic leader because he inspired workers to work harder since it was his unique trait felt by his associates whenever he was in their presence. Walton was a servant leader because he acknowledged that the best ideas came from individuals who worked in the stores and who were constantly in touch with customers (Loveless, 2012). Walton was willing to learn from everyone and prepared to implement ideas regardless of whether the ideas were fanciful. Unlike other discounting retail stores that emerged in the 1960s, Wal-Mart never succumbed to cruise control or even display anything other than the desire to be the best (Brown, 2008). Since the turn of the century when Penny and Woolworth opened the new era in retailing, no one individual changed the way commerce is done in the manner Walton changed. The founder of Wal-Mart stores triumphed in the dedication to offering customers what they needed at low prices and a bit of service administered by employees who cared since they shared the ideals of the enterprise as well as its profits. Today Wal-Mart is the largest retailer across the globe with annual sales of over $351 billion, with over 6000 retail establishments and subsidiary operations in Brazil, Argentina, Puerto Rico, Great Britain, and Japan. The enterprise employs more than 1.9 million employees making the company a mega institution that is acknowledged all over the world. Wal-Mart success is attributed to the ruthless cost cutting, bargaining power, outstanding store-opening strategies, and efficient logistics, goods handling and merchandise-replenishment procedures. Moreover, Walton ensured that his associates were enthusiastic and that managers of his enterprise were dedicated to utilizing the available assets (Brown, 2008). Walton was a marketer with exemplary skill given that he never got off to a very good start; for instance, he propelled the “Buy American” campaign in mid 1980s, which proved to be a PR triumph at the time (Brown, 2008). Moreover, Walton Turned his status as America’s richest man to be a promotional advantage because his economical lifestyle served as an admirable counterpoint to the rampant consumerism propelled by greed. Walton’s most brilliant marketing achievements were reserved for his associates he led to believe that customers were number one in the firm’s operations (Brown, 2008). The first decade of Wal-Mart’s operations gained most of its strengths from Walton’s ability to challenge the conventional wisdom. The time Wal-Mart began it was acknowledged that discounted stores had to be in large towns or cities; however, Walton chose to open the early discounted stores in the same communities where he previously operated variety stores. Through his ventures in the small towns, Walton learnt a big lesson that there is much more business in small town America. The enterprise was forced to develop its own distribution system and communication network that eventually proved so efficient that they gave Wal-Mart cost advantage over the larger rivals (Waltons Vision of Retailing Shaped by Life Experience, 2012). The guiding principles In Walton’s whole career in retail, he stuck by a single guiding principle that considered successful retailing to offer customers what they need. Considering the needs of a customer from the customer’s perspective, it becomes clear that a customer needs much from wide assortment of high-quality merchandise coupled with the lowest feasible prices. To sustain this, Walton was aware that customers needed guaranteed satisfaction in whatever they bought through knowledgeable service and provision of free parking, all which culminated in a pleasant shopping experience. Communication is one of the essential factors to the success of the enterprise because it would have meant nothing for Walton to figure out a better way of discounting if he did not share it with everyone in the company (Vance & Scott, 1994). As the company grew, Walton adopted a strategy for pushing the responsibility and authority down toward the front lines like the department managers who were stocking the stores and who remained in touch with the customers. Moreover, Walton encouraged associates to push up their ideas through the system especially those that worked well in their stores by sharing the ideas with the other associates (Sam Walton in his own words, 1992). Besides, Walton was a stickler for high standards because he was known to close down stores immediately once he felt that the stores failed to meet his high standards (Sam Walton: on a wing and a prayer, 2003). Competition drove Walton to love retailing; nevertheless, he had some rules that worked for him. Some of his rules include commitment to the business than anyone else, which propelled him to overcome every shortcoming because of his sheer passion in his work. Sharing profits with his associates was another rule that enabled him to treat them as partners because he believed that they would in turn treat him as a partner, which would propel them to perform beyond their expectations. Another rule that helped Walton to develop the successful enterprise was motivating his partners since he believed that money and ownership are not enough. Walton valued communicating everything with partners because the more they knew the more they were capable of understanding and the more they would be willing to care. Listening to everyone in the organization was another rule for Walton since listening to individuals especially those who talk to customers offer information on what is going on (Bergdahl & Walton, 2013). Exceeding customer expectations was another rule Walton relied on because he believed that once he achieved this the customer would come back again and gain since the enterprise would offer what they need and a bit more. One of the key rules that enabled Sam Walton to develop the enterprise was going against the conventional wisdom, which remained an essential rule in Walton’s career in retailing (Sam Walton in his own words 1992). Conclusion Sam Walton managed to build his retail empire through his focus on rural areas and decades later, competition realized that Wal-Mart was the market leader. Although Walton did not discover the concept of discounting, he took the concept to a new dimension in creating something that never existed in the past within the American retailing industry. The lesson he learnt during the great depression stuck with him throughout his life because he learn how much work one had to do in order to get a dollar. Upon graduating from the university with a degree in business, Walton embraced his first fulltime job as a management trainee at J. C. Penney. Later on he was drafted in the army but in 1945, he resumed his career in retail; however, instead of returning to be an employee Walton wanted to become the boss. Through some of his money and $20,000, he borrowed from his uncle; he managed to purchase Ben Franklin, which was a variety store in Newport. When the property owner noticed the success the enterprise he declined to extend the lease once it expired forcing Walton to sell out the store. Walton moved and opened a new store, which was still under Ben and Franklin chain and through discounting the new store generated enough money enabling him to open one more within a period of two years and by early 1960 he had 15 Ben and Franklin stores. Walton by now was ready to work on his own and in 1962; he opened his first Wal-Mart store that offered a wide variety of goods at discounted prices. Walton chose small towns as a strategy coupled with the fact that it was cheaper to build in small town areas. As Wal-Mart developed, Walton’s passion helped him locate new sites for more stores. References “Sam Walton” (2008). Entrepreneur. Retrieved 22 April 22, 2014 from http://www.entrepreneur.com/article/197560sv Bergdahl, M., & Walton, R. (2013). The 10 rules of sam walton: Success secrets for remarkable results. Hoboken, N.J: Wiley. Brown, S. (2008). SAM WALTON (1918-92). In , Fail Better! (pp. 36-40). Marshall Cavendish Limited. Krieg, K. (2013). Sam Walton: Founder of the Walmart empire. Loveless, R. (2012). Culture Sam Walton Built Crucial to Walmart Success. Mmr, 29(11), 55. Sam Walton in his own words. (1992). Fortune, 125(13), 98-106. Sam Walton: on a wing and a prayer. (2003). Business Strategy Review, 14(4), 81-82. doi:10.1111/j..2003.00290.x Shores, E. L. (2014). Sam Walton. Vance, S. S., & Scott, R. V. (1994). Wal-Mart: A history of Sam Waltons retail phenomenon. New York [u.a.: Twayne Publishers [u.a.. Waltons Vision of Retailing Shaped by Life Experience. (2012). MMR, 29(11), 49. Read More