Sam Walton and Wal-Mart
Written by Richard San Juan for Gaebler Ventures
The phrase "everyday low prices" has become synonymous with Wal-Mart as generations of Americans have shopped and still continue to shop at this retail giant. Sam Walton founded the company in 1962 as a discount store in Bentonville, Arkansas. Now, with almost $345 billion in net sales, 6,700 stores worldwide, and 1.8 million employees later, that discount store has now transformed itself to the headquarters of the second-largest company in the world.
The original store format of Wal-Mart was that of a discount center. Diversification seemed to be a central theme when Wal-Mart introduced the concept of "supercenters."
These "supercenters" now also carried grocery products and began offering various other specialty shops within. Among those that can be presently found are photocenters, vision centers, hair salons, banks, and even employment agencies. In addition to these "supercenters," Wal-Mart also operated several Sam's Clubs, which were basically members-only warehouses where customers can get discounts on large amounts of product.
As these "supercenters" and Sam's Clubs proved to be very profitable, Wal-Mart wanted to expand into another part of the domestic market: the urban market. The Neighborhood Market format basically resembled a Wal-Mart Lite in that it occupied much less space and offered less drug and grocery products.
While Wal-Mart was busy devising domestic business strategies, they were also concerned with expanding the Wal-Mart brand abroad. Wal-Mart's foray into the often turbulent international markets was sometimes successful and sometimes met with stiff resistance.
By far the most success Wal-Mart enjoyed was in their business expansion into the Americas utilizing a strategy that combined acquisition, partnership, and unilateral projects. The company's attempts to establish the Wal-Mart brand in both Europe and the Pacific Rim was not as successful, and sometimes even had dismal results.
Perhaps Wal-Mart's initial failure to adapt their business to local culture and instead forcing the Wal-Mart culture aggressively played a role. Nevertheless, Wal-Mart has learned from its experience and now its international operations account for nearly one-fourth of the company's global revenues.
This global development helped Wal-Mart secured being the most admired company. However, one price that is paid for being in the limelight is that the company's operations and daily activities are heavily scrutinized.
Labor relations began to be a source of trouble for Wal-Mart as allegations of negative business practices ran rampant. Child-labor and worker-safety compliance were often the topics of discussion internationally. Wal-Mart's reliance on part-time workers, along with a publicized class-action suit by female employees, contributed greatly to Wal-Mart's brand image decline.
In an effort to stem the negative press, Wal-Mart initiated a large-scale public relations campaign. Among the initiatives included the establishment of the "Candidate Wal-Mart," which accentuated the availability of low-cost drugs as well as the financial contributions to Hurricane Katrina relief.
To demonstrate that Wal-Mart values its employees, the company supported a group called Working Families for Wal-Mart. Al Gore's film entitled An Inconvenient Truth was also used to illustrate that Wal-Mart did indeed care for the environment.
In summary, this article was written to give an overview of how a single discount store in Middle America transformed itself into a worldwide brand. Moreover, despite its resounding success domestically, Wal-Mart had mixed results with its development overseas.
This, along with its public relations troubles have led to Wal-Mart's decision to scale back on its growth rate. However, as with any successful entrepreneur, Sam Walton was able to lead Wal-Mart's leadership to overcome these troubles. Just recently, a potential lucrative deal in India could open up a huge consumer market to the Wal-Mart brand.
Today, the competitors of Wal-Mart have evolved by targeting particular demographic groups. As the competitors have evolved, so should Wal-Mart. It has already taken steps to install wood flooring and widening aisles in an attempt to lure Target's customers while maintaining its "everyday low prices." Furthermore, there are plans for creating six different store models--each will be used to focus on attracting a specific group.
The lesson that aspiring entrepreneurs should take is that as time goes, business strategies continue to evolve. Entrepreneurs and small business owners should be ready to adapt to the changing environments in the marketplace to be successful just like Wal-Mart was able to.
Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.
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