Wal-Mart on Becoming the World's Largest Company - Essay Example

Wal-Mart’s Winning Strategy Sam Walton’s philosophy was to make sure he always had a wide variety of goods available to the at low prices. When he started his first retail business, he would visit other stores to compare prices and see how they displayed their products. He also had a philosophy of keeping his stores open later than most of his competitors. Because he purchased bulk goods from the lowest-cost suppliers, he was able to pass those savings on to the customer; a strategy that greatly increased sales.

When Walton expanded with more stores, he offered his store managers a limited partnership if they would invest in the store that they managed. This was another great idea because store managers were more motivated to succeed and improve their individual stores. Another philosophy Walton had was locating his stores in small towns as opposed to large cities. This allowed him to avoid competition from larger retailers. He also created clusters of stores within a specific region and had giant warehouses built in the middle of these clusters in order to supply the stores in that region (“Wal-Mart,” 2009).

These various strategies and management philosophies that Walton employed made Wal-Mart a tremendous success. Wal-Mart continued to expand in the 80s. Walton introduced “Sam’s Club” stores in 1983, which allowed customers to buy consumer goods at bulk-quantity prices. In 1987, Wal-Mart purchased a state of the art networking system that instantly communicated inventory and sales information across their network of stores. This greatly increased efficiency and gave Wal-Mart another edge over its competitors.

A year later, Wal-Mart introduced their first “Supercenter” which combined their retail store with a supermarket. They continued to grow in the 90s as they went international in 1995 and introduced the first “Neighborhood Market” stores, which specialize in groceries, in 1998 (“Wal-Mart,” 2009). Much of Wal-Mart’s continued success in the 80s and 90s was due to the continued implementation of Walton’s management philosophies as well as their ability to generate new ideas, gain competitive advantages, and expand into new markets after he stepped down as CEO.

Late 2000 and 2001 sales were poor for the retailing industry as a whole. The events of September 11, 2001 further increased the decline of retail sales. Also, beginning in the early 2000s, Wal-Mart has been challenged by more and more competitors in the retail industry as stores like Target and e-commerce retail giant Amazon.com are able offer similarly low prices to customers. Globalization is also an important factor that Wal-Mart is adapting to. Management’s strategy changed as they realized they needed to enter into new global markets in order for their profits to continue to grow.

After a down year in 2001, Wal-Mart has continued to grow since. The growth is due mainly to continuing their strategic plan of horizontal growth, which means that they research target markets and then enter into those markets that give them the best chance for success. Additionally, the plan consists of changing store formats to fit customers needs (Wheelin & Hunger, 2003). In 2005, Wal-Mart introduced a “going-green” incentive as more and more people realized the benefits of switching to organic foods.

Also, in 2009 they announced that they would remodel and change the format of nearly 70% of their store to better fit customers needs (“Financial Report,” 2010). These strategies have also proven to be successful. One of the reasons for Wal-Mart’s continued success after 2001 was their ability to aggressively seek out new markets. When entering a new market, their goal is not merely to be profitable but to be #1 in that market. They also continued to invest heavily in research to find out what customers want and then tailor stores to fit the customer’s need.

Also, Walmart.com has been growing and is staying competitive with Amazon.com. Some popular features of the web site include “Site-to-store” and home delivery options. Strong inventory management also continues to be a tremendous competitive advantage for Wal-Mart. To conclude, much of the company culture that Sam Walton implemented is still alive and well in the company today. Because of efficient management, innovative ideas, and the existing corporate culture, it is a safe bet that Wal-Mart will continue to be a success for a long time to come.

References Financial Report: Wal-Mart 2010. (2010). Walmart.com. Retrieved from http://walmartstores.com/sites/annualreport/2010/walmart_us.aspx Wal-Mart. (2009). New World Encyclopedia. Retrieved from http://www.newworldencyclopedia.org/entry/Wal-Mart?oldid=896549 Wheelin, T.L., & Hunger, J.D. Wal-Mart Stores, Inc.: On Becoming the World’s Largest Company. New Jersey: 2003.