Wal-Mart and Radioshack Management - Case Study Example

Walmart The brand Wal-Mart was established in 1962 by proprietor Sam Walton. What many people do not realize is that before Wal-Mart, Sam Walton owned and operated a number of variety stores in the 1950’s. Increased competition forced him to think of something else that would beat competition. He thus came up with the idea of discount retailing after traversing America and observing the opportunity that lay in discount retailing. His observations were seemingly very accurate as a result of years of experience in the retail industry. Initially, Walton operated a franchise of Ben Franklin in the 1940’s. His dream was to own a store and in 1950 he set up his first store in Bentonville Arkansas. He discovered that discount pricing was the best way to beat competition which worked perfectly for him. As such, by 1962, he had expanded his stores to fifteen and coined the name Walmart. By 1968, the company had 24 branches in Arkansas and opened new ones outside Arkansas. New stores were opened in many other states driven by increased sales and success of the already operating stores. By 1975, the chain had a total of 125 operational stores grossing over $340 million in sales. The company attained a number of associates and even acquired some competing stores such as Mohr Value, Kuhn’s Big K., and Hutcheson Shoe Company, in order to boost market presence. Given that most of the stores acquired were specialized, Wal-Mart followed the cue and split into several markets such as pharmacy, jewelry, automobile service centers among other new developments. In 1970, the firm went public and in 1972, it was listed in the New York Stock Exchange. The 90’s decade was the most robust for Wal-Mart in terms of growth in sales, market presence and expansion. It is in this decade that the store chain expanded into Mexico, China, Europe, Canada and Brazil. Entry into these new markets was made either by franchise or strategic partnerships with established players in those markets. This is in line with a number of authors on market entry methods. In this context, Wal-Mart scores highly in making some f the best market entry moves. However, the firm was forced to rename some of its stores in the foreign markets in order to gain the local appeal. These came to be known as the Wal-Mart subsidiaries. Some of them are Sam's Clubs and Todo Dias supermarkets in Brazil, Bodegas discount stores, Suburbias specialty department stores, Superamas supermarkets, and Vips restaurants. In others like the The Seiyu, Ltd in Japan, Walmart only holds shares. The store chain was ranked first by Fortune 500 list in the 2001/02 financial year in terms of market presence and influence with revenues surpassing $219.8 billion. Operations outside the US account for 18.5% of total revenues implying that the US still remains to be the largest market for the firm. The firm’s growth has been spurred by its expansion strategy and diversification and also due to a strategic management that has seen the firm lower its costs of operations. In fact in the late 80’s the firm reported 12 straight years of 35% annual profit growth thereby establishing its strength in the market. This has also been supported by public interest in the firm where its stock price has been performing considerably well. Currently, the Walton family has 38 percent interest in the company. Nevertheless, optimism towards Wal-Mart has encountered serious test pitting the store chain against manufacturers and the public. Some major cases have involved dictating sales terms with manufacturers, mistreating employees and sourcing cheap items from China and by-passing the local manufacturing market. As one of Wal-Mart’s strategic management tactics, the firm regularly by-passes vendors and distributors of major goods that they stock and deal directly with manufacturers as a cost cutting measure. The firm is expected to be the third level in the supply chain as the one dealing with vendors with consumers. However, the firm has bypassed the vendors and distributors. This has received both criticism and commendation. Chandaran recognizes that ingenuity of Wal-Mart in supply chain management and quotes Vernon who says “supply chain management is moving the right items to the right customer at the right time by the most efficient means. No one does that better than Wal-Mart” (2). Wal-Mart seems to have laid more emphasis on obtaining supplies at the lowest possible prices in the market in order to be able to pass the low cost benefits to the right consumers through a lower price than that offered by competitors. Due to market domination and its strong brand name, Wal-Mart has considerable bargaining power as a buyer. Small manufacturers have been the biggest losers towards Wal-Mart’s policy of negotiating for low prices for goods bought in bulk. However, the company has defended itself on the basis that the costs benefits are always passed on the customers. This has been seen as a point of unfair competition by other competing firms in and out of the US. Wal-Mart offers lower than market prices thereby forcing small operators and new market entrants out of business. The result has been domination of the market by the firm and increased bargaining power. Another element worth notice in the firm’s manner of handling supply issues is bypassing the inconveniences that might arise as a result of having middle men. Chandaron (4) once again cites a former Wal-Mart employee who says that the firm avoids logistic inconveniencies from suppliers and manufacturers by using their (Walmart) trucks to fetch items from manufacturers’ warehouses instead of waiting for the deliveries to be made. The company thus developed its own distribution centers across the US. These warehouses supplied 85% of the inventory something most competitors could not afford. This also eliminated the time lag between ordering and actual supply with replenishing of stock being done one in just two days while competitors could manage the same at a minimum of five days. As the firm grows and technological innovations came along, Wal-Mart has been quick in adopting them. The web or the internet, as one of man’s hall mark of technology innovations, has revolutionalized business and retailing. Wal-Mart has adopted technology in one of the most exquisite ways. The firm has established online shopping for its customers on particular products and facilitated delivery through www.walmart.com. The firm is also in the process of allowing smart phone users to access the same website and go on with shopping. While Wal-Mart has made considerable steps in achieving online retailing, EBay and Amazon are lead the market in online retailing. However, many observers argue that the large stores owned by Wal-Mart are the greatest hindrance to the firm’s adoption of online retailing that will compete with the market leaders this is because the established online retailers such as eBay and Amazon capitalize on the absence of additional costs of running stores to lower their prices. Wal-Mart on the other hand relies on the physical presence of their large stores that attract shopper to their physical location. Changing this into online retailing may not be the best option for consumers who prefer the psychological satisfaction they achieve in walking down the aisles of Wal-Mart stores and picking things other than the proposed click of a mouse. Wal-Mart’s management realizes the complication of such a situation and hence the firm is investing in online and in-store shopping. Davis (2010) says that this strategy of combining online with in store retailing will also help Wal-Mart access the urban market which it has not been able to access fully due to political opposition. Nevertheless, Chartpoppers (2009) has a different story to report about Wal-Mart’s online retailing venture saying that “with 22 percent growth so far this year -- the world's largest retailer is coming closer to dominating the Web the way it does cities and towns across the U.S. That would mean eventually dethroning online retail leader Amazon.com, whose sales hit $19.17 billion in the 2008 calendar year.” While the report may highlight the battler between walmart.com and other established online retailers such as Amazon and eBay, the high growth in sales fugues mark another monumental point for the firm in terms of consolidating its market position and generating revenue. On the other hand, as a firm so adept in cutting costs and eliminating middle men, online retailing will eliminate the cost of maintaining and running stores. This implies that the firm is even better positioned to lower its prices further and compete at another level. Radioshack Radioshack is a US-based retail chain store for electronic goods operating in a number of countries in North America, Africa, Latin America and Europe. The firm was formerly known as Tandy Corporation until mid 2000 when the name Radioshack was adopted. The chain store aspires to be the leading store for consumer electronic products according to the firm’s mission statement which centers on demystifying technology for the mass market. The company was established in 1960 by Charles Tandy who used to run Tandy Leather craft. While the earlier business dealt in leather, Tandy’s passion for retailing saw him buy a bankrupt Radioshack chain store in Boston. He abandoned the name Radioshack for Tandy Corporation. In two years time, he had turned the fortunes of the company around and back into profit making ways. The success of the firm lay in strategic management that centered on eliminating unnecessary inventory from a high of 20 000 items to only 2 500 of the best selling items. This therefore configured the direction for the firm into consolidating first moving items only. Tandy also paired the firm’s profit margin with turnover thereby brining into the industry the issue of gross profits which he consistently maintained at over 50%. He also invested heavily on marketing and advertising. The firm was persistent in making huge bold advertisements in the newspapers with frequent ‘stock clearance sales.’ Tandy is also credited with claiming to ‘institutionalize entrepreneurship’ by incorporating his employees in the sales program. He did this by giving his employee bonuses based on the percentage profits the company made. This increased encouraged hard work and commitment from the employees who often earned five to ten times their salaries out of bonuses. As time progressed, Tandy abandoned his family leather business and concentrated on electronics retailing. With technology advancement creating more and more product for stocking, Tandy Corporation enjoyed every minute of its growth. The company’s growth is thus attributed to the timing when technology and especially the invention of computers for the mass-market in the 1970’s and 80’s. However, doubt was cast over the firm’s ability to continue with such impressive growth after the death of Charles Tandy. The predecessor, Phillip North was highly doubted as he admitted of not having any knowledge or interest in technology. With the assistance of John Roach, North managed to maintain the company’s labor force together and uphold the spirit of vigorous marketing. After North retired, Roach took over and as experienced hand in computers, he managed to strategically position the firm in the market as the computer bag was making its effect felt. In fact between September 1, 1977 and June 1, 1979, Radioshack sold 100 000 computers which served the company well in establishing its presence in the computer market. Lateral and vertical integration were other options for Radioshack in its growth program. In 1988, Radioschack acquired Grid Systems Corporation, an innovator in the emerging laptop market. Again the company entered into marketing agreements with Victor Microcomputer and Micronic to handle the company’s operation in Europe. By spreading into new markets, the company then was spreading technology and creating a niche market by dictating the term sin technology growth through manufacturing of computers and other electronic gadgets. As such, by remaining innovative in this industry, RadioShack Corporation has been able to create new markets for its products. Since the 80’s Radioshack relied heavily n its subsidiaries to manufacture most of the gadget that the store stocked. However, as many computer companies came into the market, there was need t stock software and gadgets compatible with other systems such as those from IBM and Apple. As such, Radioshack was forced to liaise with these companies and stock more a wider variety of goods. Again, competition was rife and the innovative side of Radioshack came into play as the firm opted to trade beyond the confines of its stores by selling computers to colleges, campuses, schools and other institutions. Radioshack also entered into an agreement with Wal-Mart Stores to sell its 100SX computer line. This point to Radioshack’s two positions as a business to business outfit and business-to-consumer outfit. However, the 1990’s saw the firm give more attention to the retailing section due to increased demand fro more simplified gadgets by consumers. This entailed doubling the number of stores to 380 by 1991. To capitalize on the retail market, Radioshack established subsidiaries Computer City that stocked computers and softwares from a number of makers all under one roof. This was followed again by the opening of Edge in Electronics stores that stocked premium consumer electronics that targeted the premium shopper. Still targeting the retail market, Radioshack opened the Incredible Universe, a mini-mall for consumer electronics which was remotely comparable to the Disney theme park. However, this expansion strategy did not work out well for the firm as it was soon forced to close down over 400 outlets in 2006 as a result of a losing making streak that hit 62%. On a positive note, the store chain has moved swiftly into the smart phone market. Currently, the Radioshack stocks Apple’s iPhone and the T-Mobile's myTouch 3G, the Samsung T239, the Samsung Comeback, the Samsung Gravity 2, BlackBerry Curve 8900 and the Samsung Behold among other models (Radioshack, 2010). Some of these products are developed with collaboration of Radioshack and the suppliers. To inspire innovation among the suppliers, Radioshack offers awards to the most innovative suppliers. Given that Radioshack is involved technologically savvy goods, it would be expected that the firms would be well served in handling such changes in the business world. And sure enough the firm has not disappointed. It has embraced technology on two fronts. First it has been stocking technologically advance gadgets such as computers and laptops. By acquiring Grid systems, Radioshack was able to explore and develop products that suited the market very well. On the other front, the firm has applied technology in its operations with the web being the most significant. The firm now allows online shopping at http://www.radioshack.com. Online retailing for the firm has gone a long way in eliminating some costs for the firms. Again, it allows quick and easy view of products stocked by the chain store. For instance, the firm is able to displays more products on its website with prices listed than it would do in conventional stores. Again, the popularity of the web in day to day life gives the firm an excellent opportunity to carry on its vigorous advertising spirit at a lower cost. All in all, the two companies have managed to incorporate innovation in their in management style and aligning their operations with developments in the respective industries. However, Wal-Mart seems better positioned to make more impact through innovation and the web as a result of the firm’s position in the market and its financial prowess. On the other hand, Radioshack’s experience in technology and association with leading technology innovators in the market is faced with a much more solid opportunity than Wal-Mart. The two firms also compete on some levels given that Wal-Mart stocks some relatively simpler electronics same way as Radioshack. References Chartpoppers (2009). Retrieved online on 21st 2010 from http://www.emailwire.com/release/31380-Wal-Mart-aims-aiming-to-control-online-retailing-Chartpopperscom-releases-a-Investment-Overview-on-Wal-Mart-Stores-Inc.html Chandran, P. (2003). Wal-Mart’s supply chain management practices, Retrieved online on 21st 2010 from http://mohanchandran.files.wordpress.com/2008/01/wal-mart.pdf Davis, (2010). Wal-Mart talks big: The world’s largest retailer challenges Amazon for online retail leadership. It has a long way to go. Retrieved online on 21st 2010 from http://www.internetretailer.com/article.asp?id=32973 Fishman, A. (2006). The Wal-Mart effect: how the world's most powerful company really works-- and how it's transforming the American economy. New York: Penguin Group Radioshack. Retrieved online on 21st 2010 from http://www.radioshack.com/home/index.jsp RadioShack Corporation. Retrieved online on 21st 2010 from http://www.fundinguniverse.com/company-histories/RadioShack-Corporation-Company-History.html RadioShack Stores Nationwide Now Offering T-Mobile's myTouch 3G. Retrieved online on 21st 2010 from http://ir.radioshackcorporation.com/releasedetail.cfm?ReleaseID=403938 Wal-Mart Stores, Inc. Retrieved online on 21st 2010 from http://www.fundinguniverse.com/company-histories/WalMart-Stores-Inc-Company-History.html Wal-Mart's Marketplace attempts to conquer online retail world. Retrieved online on 21st 2010 from, http://www.ecommerce-ournal.com/news/18035_wal_marts_marketplace_attempts_to_conquer_online_retail_world Read More