Fundamentals of Business Administration and Management in Wal-Mart - Case Study Example

Fundamentals of Business Administration and Management The need for starting Wal-Mart as a business organization was mainly to offer low and affordable products at the retailer’s prices. There was also a need to create employment opportunities to the citizens of the United States and its immigrants. The management team who pioneered Wal-Mart stores had seen the need to avail products to all people regardless of the social economic status. Besides the owner wanted to progress in business and he viewed subsidized prices as the best bet for market penetration and dominance. (Basker, 2004) With its mission being to give ordinary folk the chance to buy the same thing as the rich, Wal-Mart is really working towards accomplishing its mission. Most of its products have price tags that are accommodating to the entire community. Upon accepting a job offer at JC Penney stores Sam Walton met a regional retailer by the name off Butler Brothers. The retailer owned various stores by the name of Ben Franklin. He inspired Walton to witness by offering him one of his many stores in Newport. He later opened another store at Bentonwille where he managed to acquire increased sales volume by selling his products at considerably lower prices compared to his competitors. It was in the year 1962 that Walton managed to open the first Wal– mart discount city in Rogers within Arkansas State. Five years later his business had achieved successful growth since he had opened twenty-four retail stores in the same state and recorded higher sales targets. By 1968 Walton ventured beyond Arkansas by opening branches at Sikeston in Missouri state and Claremore in Oklahoma State. (Basker, 2004) Later in the year 1969 the outlet store was incorporated as Wal-mart stores when it opened its home office in Bentonville to be its center for distribution services. By then the company had opened 38 stores with a record of 1500 workers and over 44.2 million dollars sales revenue. This qualified the firm in joining the New York stock exchange where it began trading its stock as a publicly held company in the year 1972. (Basker, 2004) By the year 1975 the company had employed 7,500 people in its 125 stores and was achieving sales revenue of more than 340 million dollars. At this time, it had explored more than eight states i.e. Texas, Mississippi, Kentucky, Tennessee, Oklahoma among others. The company had been achieving rapid growth in most of its stores thus employing more people as well as constructing new branches. In the international arena Wal-Mart has stores in Japan by the name of the Seiyu Co. LTD Mexico as Walmax and the UK under the name ASDA. In Brazil, Canada, Puerto Rico and Argentine the company has wholly owned operations. How ever, the company was liquidated its stores in Germany and South Korea. (Abigail, 2006) At the moment, Wal-Mart has more than 4000 stores in the United States, however its growth is believed to be declining for having created less job vacancies in the last two years compared to the other 3and years. This has impacted negatively to the US economy since Wal mart stores carvings depends on the economic growth of various nationals. At the moment Wal mart outlets are supplied. With Chinese juice from Huiyuan juice, a juice company in China. This is to be supplied to the more than 4000 outlets across the US a thing that is expected to bring positive growth to the Wal-Mart stores. The move is taken as an expansion strategy to ensure that the company’s goals do not wither. (Abigail, 2006) Wal-Mart is under pressure mounted by the union campaigners who include, Wal-mart watch, change to win and a group of seven unions i.e. UFCW, SEIU, Wakeup Wal-Mart. Com among others. The campaigns is aimed it compelling Wal – mart to implement changes relating to improving employees remunerations among other benefits. This has really costed the company some of the real estate sites its key locations thereby impacting negatively on the company’s sales volume. Consequently the campaigns have interfered with the management programs since the company has not been focusing on its retail strategy. The company’s profitability has also been affected since its chief executive spends most of his time on efforts aimed to improving the company’s local and international image. (Abigail, 2006) This has led to Wal-Mart spending million of dollars in its attempts to advertise the company’s products. To fight these external attacks from campaigners Wal-Mart is employing a huge budget estimated at over 570 million dollars. Directed towards the brand image marketing. This in itself is straining its annual budget a likely reason as to why considerable growth has not been achieved in the recent past. According to Abigail (2006), these campaigns are geared against Wal mart development for instance, those people at Marina opposed the developers ‘deal’ with Wal mart after the purchase of K mart building in coastal Marina which was earlier closed down. Area residents thought that the property was for building a number of shop aimed at tourist attraction and not for the retail outlet. Its own director of public affairs Eric Brewer appears to oppose some of the expansion moves arguing that this civil lead to traffic problems. At the moment Wal mart is constructing a supercentre adjacent to Redmond where the residents are not much opposed to the more. However, most of the Wal mart opponents are not just against development but are doing so in order to press the company to offer wages to its retail employees that are above average and also to ensure that Wal mart workers are unionized. Member from the city council in concord are also turning down projects for building Wal-Mart and other retail stores in the established industrial area. (Abigail, 2006) This is because constructing more stores in these regions will bring traffic menace together with associated environmental problems. However, Wal-Mart is still pressing for this project to be granted. Union founded campaigns are turning to be very expensive for the Wal-Mart stores. The political campaigns are barring the outlet from reaching some markets thus hindering market expansion, which later inflates its cost. The management team is currently emphasizing on a good public image rather than focusing on business activities. Attempts by Wal-Mart to explore India’s massive market are fiercely fought by the India’s small retailers. Storeowners at New Delhi and other towns in India are against any move by Wal-Mart of opening outlets in their regions. Plans are underway to open a joint venture between India’s bbbbbb and Wal-Mart where Bharti is expected to be the stores sole owner while Wal-Mart will take over the supply management chain. The company has since hacked its earlier plan, which was aimed at opening its own industrial bank at Utalii for internal transactions regarding debit cards. This ended fear to the financial service companies who were not ready to face competition from Wal-Mart. (Wysocki, Bernard and Ann, 2003) The company’s target market includes both the low-income earners and the rich. The firm is targeting the entire United States the reason as to why it has more than 3,000 stores in US alone. It is also targeting other parts of the world especially those with dense population for example Delhi in India. It normally sells it products at low prices making it affordable to all people under it retailing subsidiaries i.e. Sam’s club, Wal-Mart International and Wal-Mart stores division in US. Their products are fast moving consumer goods which include groceries, photo developing, health and beauty products, pharmaceuticals, gasoline, fresh sea food, baked goods etc implying that they target every member of the society since all these products are consumed by everybody. . (Wysocki, Bernard and Ann, 2003) To protect its revenue Wal-Mart is using strategies of digitally enabled services. This has helped the company in reducing its cost thus managing to face its competitors adequately. The management team is emphasizing on the use of offering quality services to its customers since this will portray a good image for the company, which will act as sole revenue generator and as an opportunity of gaining expected profits. . (Wysocki, Bernard and Ann, 2003) The company is working on strategies that are aimed on maximizing its economies of scale through expansion across the globe. They are coming up with new business models, which they are spreading in every corner of the world where they have branches. This in itself is helping them to realize even more sales volumes making its competitors to join hands in opposing their further expansion. These business models are based on the current technological advancement, c consumer habits i.e. change of lifestyle, population distribution among others. . (Wysocki, Bernard and Ann, 2003) The managerial staffs at Wal-Mart, are actively involved in the research that is based on information and communication technology, this is ensuring that techniques on information communication and technology are applied to ensure that the changing customer’s trends in demand are accommodated. The stores are applying e-commerce where customers are shopping electronically. Through its online services customers can now order products from their homes where delivery is made right to their doorsteps. These products are the company’s main revenue generator where advertising fees are also obtained. Wal-Mart has set environmental friendly goals which include wastes avoidance, trading with products that are not a threat to the environment and using renewable energy in its operations. The company intends to increase efficiency in fuel usage particularly to its track fleet an idea that is aimed at cutting the company’s costs thereby adding to its profits. (Schaefer, 2007) Wal-Mart has been creating competition among the organic food suppliers. This created competition has resulted to the suppliers lowering the prices of organic food thereby making it possible for Wal-Mart to manage to buy more for its outlets. At the same time this enables them to sell the organic foods at very cheap prices, which are slightly above non-organic food items by about ten percent. This will assure the firm of more customers, increased profits and developed image. Seafood certified by the Marine Stewardship Council is bringing more benefits to the company as well as to the entire community. This is because the fish caught are chemical free and therefore fit for human consumption while on the other hand fishing conserves the environment due to its environmental friendly fishing equipments a great advantage to the surrounding community. (Schaefer, 2007) The company is intending to introduce a new health care package to its employees, which is expected to have lower premiums. At the same time Wal-Mart is initiating a campaign aimed at pressing congress to increase their set minimum wage whose overall results will be increased sales volumes for the company translating to increased profits. The company is also replacing their current PVC packaging with more sustainable materials that are easily recycable thereby helping reducing solid wastes. (Schaefer, 2007) For its market potential Wal-Mart is opening stores that are meant to serve highly populated markets, they offer product mix to the customers with their entrance being dual thus making it possible for them to offer efficient and quality services. They are offering food and general merchandised at low prices making them develop the idea of urban phenotype. This has created opportunities for expansion in urban areas. (Schaefer, 2007) The few limiting factors facing Wal-Mart include the fact that not everyone will have access to Wal-Mart stores, the changing trends in technological advancement that requires new knowledge and skills to keep in pace with modern technology, competition from Amazon, Tesco among other outlets is limiting growth since the company is spending a lot of money a massive advertising and marketing to curb the competition. The firm is facing regulatory difficulties what is turning out to be very expensive for Wal-Mart since it is spending more money on litigation proceeding thought hiring lawyers. The low prices that are offered by the company means that there will be less profits to be realized hence few resources (finance) to be pumped to the marketing efforts. The limited resources are hindering faster growth and development in the corporation. Wal-Mart has not fully managed to offer those companies outside US some direct entry to the wider American market. This has been so due to the increased costs in networks and connections establishment as a result the expected business growth has not been met. However, Wal-Mart is a big outlet with centralized management operations such that it can manage to hook suppliers, for example, those based in China. It currently has wider establishments that can enable it gunner overseas sourcing in a short duration of time as compared to the earlier days. With reduced costs connections and networks Wal-Mart can realize considerable growth. Wal-Mart is also venturing in the sale of organic food items such as organic milk. This appears to be a very good gesture as far as development is concerned. (Dicker, 2006) Much resource is diverted to activities aimed at understanding consumers buying patterns, combined with their taste and preferences. With its many branches the company creates a huge demand for the organic foods in its own stores. Organic food has not been readily available to its many branches thus hindering growth in the organic food sector. To counter the above limiting factor the organization is widening its organic product line with high hopes that it will make it possible for it’s customer to have organic foods as per they demands. This will result into achieved growth in the organic food industry. (Dicker, 2006) However, the firm is working hard to counter the above limiting factors through training its employees to cope with the latest technological advancement concentrating on building the firms image through its customers oriented strategies, extensive marketing strategies aimed at increasing sales and a marketing style that seeks diet response thus obtaining immediate feedback from the customers and other stake holders. (Dicker, 2006) The company has applied effective marketing strategies. In its bid to cut down costs and offer efficient products delivery and other products the firm is employing operational excellence strategy. This has seen it reduce both fixed and variable costs through energy conservation measures, good ties with the suppliers and proper inventory management. The company is improving consumers efficiency thus has greatly helped in reducing its overall operational costs and strengthening the strategy of operational excellence. The company is targeting its marketing professional through proper segmentation and treating each segment as per its customer demands and needs. This strategy is commonly referred to as customer intimacy strategy. Wal-Mart has got three different store formats segmented in the basis of specific target markets this is done by the store managers through organized promotions on the target regions. Training programs have been very essential in facilitating the strategy in assisting customers through the acquired knowledge. Wal-Mart is making continued inventions and innovations though not much success has been realized in product leadership strategy. (Schaefer, 2007) The company is not focusing on the expansion of super center stores after realizing that super center is more profitable compared to the other two formats. This will be achieved through development of new sites, upgrading the existing ones and market expansion. Plans to construct more super center stores are underway These Supercenters will contain everything that is contained in the Wal-Mart Discount Stores format. This will include a full-line supermarket with baked goods, frozen foods, garden products, poultry and dairy products. The supercentres also harbor optical shops, pharmacy, photo studios, fast food kiosks, a bank branch, cell phone shops, salons and a pet shop. (Schaefer, 2007) The company is very keen on establishing a good image at the various new branches that it opens year after the other. This is itself is seen as an important measure in quick market establishment in the new territories for the existing stores efforts are made to ensure that the company’s image is well maintained. They are maintaining high quality products at affordable prices to ensure that they do not loose customers to their many competitors who are offering stiff competition. (Schaefer, 2007) Extensive research on the consumer demands and changing lifestyle is conducted on regular basis to ensure that their services are upto the customers expectations and demands. The company is relating well with its suppliers and as well invites more suppliers to apply for tender so as to ensure continuous supply of goods and services in their many branches. This will increase reliability hence developing customer confidence and loyalty. Good relations with the suppliers, employees and customers are basic for the company’s efforts that are aimed at strengthening the firm’s image. This has been yielding fruits since the company’s image has gained continued strength in its stronghold. The company is achieving its positioned strategy through designing a marketing plan to guide it on its marketing operations. The structured plan has been helping Wal-Mart in establishing what it has to offer based on the market needs and demand. This has been made possible through the evaluation of the company’s strengths, weaknesses, and opportunities and threat an approach referred to as SWOT analysis. Though the assessment the firm has been able to maximize on the available opportunities employ more resources on strengths, take action to revert the weaknesses and fiercely face the prevailing threats. It is also helping them in establishing their global position, showing the customers the value of their products as well as designing methods on how customers should better perceive their products in their market targets. (Ortiz, 2006) Wal-Mart has devised some product strategies aimed at marketing its products using a brand name of the core products. It ensures that it has all the product mix that may be required by the customers through continued supply for the sophisticated products the company is offering free training to its customers on how to operate them. It also offers after sale services to the clients, which include free repair and maintenance service, provision of manuals, contains useful information regarding the use of products particularly the newly launched accessories. Customer service is perfected to ensure that the clients are not complaining. Since the company believes that observing better services to its clients can put it miles ahead of their competitors. (Ortiz, 2006) Prices offered are very compatible with the positioned market targets and are low prices as compared to many of its competitors. However, gross margins is observed to ensure that the company is not operating at a loss a thing that helps it in achieving it’s many set goals. The pricing strategy is customer oriented since the firm’s price tag are designed according to the various geographical segmentation making sure that prices are very affordable to every person in the various spectrums of social economic status. Although there are some small scale retailers who are offering even much lower prices Wal-Mart still emerges to be the market leader as far as pricing is concerned. (Stone, 1997) The company is applying various distribution channels among the most advanced being online distribution center located at Bentonville in Arkansa estate. (Stone, 1997) More promotional activities are carried out through advertising its products organizing trade shows and seminars, placing articles on the local dailies in various countries where they have branches merchandising its products, sales promotion activities i.e. offering discounts, after sale services among others, widened publicity, through them email address and its website by the name www.walmart.com On issues relating to business development Wal-Mart has started its own training institutions where students are trained on proper management skills. Education here is forward for free to its workers with an aim of sharpening their managerial and technical skills. The company is liaising with government and trade organizations on matters relating development. (Stone, 1997) It is also using the avenues provided by the many advertisers either in magazines and other publications or else TV and Radio advertising. This has also assisted in the company in attaining the intended publicity. They are also gathering information relating to the marketing system where surveys are conducted through questionnaire method or even directly interviewing the customers to get the first hand feedback on their products. Qualified personnel who ensure that the participant details are not disclosed making them anonymous for their own confidentiality and security carry this out. (Reyes, 2006) For the questionnaires customers are required to fill particular forms containing questions directed at achieving customer’s needs. The market information form is later forwarded to the top management team who often going through them decides on the correct way forwarded for the company. Numerous market researches are also conducted aimed at achieving and maintaining the company’s image. Media appraisal is also conducted to monitor the company’s development trends with customers being requested to fill customers request from to and in efforts of business development. (Reyes, 2006) Equipment and facilities at Wal-Mart Company are of high quality to ensure that business operations are not interfered with. There includes those equipments in their services production and also equipments in the shelves that are meant for sale. There is wide use of information technology with most of its electronics equipments being technologically compliant. Current Wal-Mart has more than 6,500 stores with a great percentage being concentrated in the United States. Last year (2006) the company realized a net income of over 12.1 billion dollars out of sales volume in excess of 344 billion dollars. Being the nation-respected company Wal-Mart employs more than 1.8 million people in the United States alone. (Reyes, 2006) The company is coordinating all business aspects with new business initiatives being started year after the other. The company is developing detailed projects so as to tackle any business problems. The company is employing highly qualified people with knowledge and skills that will that will always keep the company ahead of others. These people are required to man key projects so as to produce positive results. According to Freking (2006), Wal-Mart is offering some health benefits to its employees and their immediate family members. These include dismemberment insurance, dental health, life, long term disabilities, and accidental details among others. They also receive financial security through saving and investing programs provided by the company. The profit sharing projects assists the employees in saving for their retirement needs with the stock through payroll deduction method. That has been very helpful to the workers since when one retires he is always having some good amount of money that he can either invest or consume in his old age The Company is also financing its workers education plus that of their families. (Freking, 2006) Associates are also given opportunities to grow and advance their careers through the provided career benefit program. These occur in form of mentoring, in-store training, and classroom training among other forms that helps in availing necessary knowledge and skills to the employees. Employees have drawn much benefit from the program and as for now most of them possess the required skills and knowledge making them resourceful for the firm’s development projects a thing that is witnessed in the expansion strategies that the firm is banking on. (Freking, 2006) Reference: Basker, E. (2004): Job Creation or Destruction? Labour-Market Effects of Wal-Mart Expansion. Missouri: University of Missouri, USA Stone, K. (1997): Impact of the Wal-Mart Phenomenon on Rural Communities. Iowa: Iowa State University Ortiz, J. (2006):"Can Kroger slow Wal-Mart?" Desert Morning News. October 26, 2005. Retrieved on July 25, 2006. http/www.walmartfacts.com Abigail, G. (2006): Wal-Mart Reaches Out, Gets SlappedLos Angeles Times August 25, 2006 Wall Street Journal article Managing Wal-Mart: How U.S.-Store Chief Hopes to Fix Wal-Mart Reyes, S. (2006): "Study: Wal-Mart Private Brands Are Catching On." Brand week. August 21, 2006. Wysocki, Bernard J. and Ann Z. (2003): "Wal-Mart Cost-Cutting Finds a Big Target in Health Benefits", Wall Street Journal, 2003-09-30, p. 1. Freking, K. (2006):"Wal-Mart to Offer More Health Coverage." ABC News. April 17, 2006. Retrieved on August 7, 2006. Dicker, J. (2006): "Union Blues at Wal-Mart." The Nation. June 20, 2002. Retrieved on July 26, 2006. Bianco, A. (2006): "No Union Please, We're Wal-Mart." Business Week. February 13, 2006. Retrieved on July 26, 2006. Schaefer, L. (2007):"World's Biggest Retailer Wal-Mart Closes Up Shop in Germany." Retrieved on February 11, 2007. Read More