In 1962, a man named Sam Walton, with an innovative vision, opened his first store in Rogers, Arkansas, based on the idea of bringing big-city discounting to his corner of the rural American South. No one could have predicted the enormous success this small-town merchant would have.
Through his savvy, and sometimes unconventional business practices, he and his team led the company forward for thirty years making it one of the biggest giant in discount retailing. Yes, you guessed it right, the company is none other than the retailing giant - Walmart. Today, even after eighteen years of his death, the company is still growing steadily relying on the traditional goals and philosophies that Sam's legacy left, while simultaneously keeping ahead of the ever-changing technology and methods of today's competitive, fast-paced business environment.Even though the company has faced, and still facing significant amount of controversy over several different issues but these have done nothing more than scrape the exterior of this gigantic operation. With various initiatives and campaigns being devised, the future looks brighter than ever for this company.
If you are related to business sector, once in lifetime you must have wondered 'Why is Wal-Mart so successful? Is it the Good-Strategy or the Strategy execution?' The answer can be found in companies core philosophies and competencies.
The Walmart Philosophy - Walmart is successful not only because it makes sound strategic management decisions, but also for its adept implementation of those strategic decisions. Regarded by many as the entrepreneur of the century, Sam had a reputation for caring about his customers, his employees, and the community. In order to maintain its market position, Walmart executives have inherited the management guidelines Walton developed.
Walton believed in three guiding principles: 1. Customer values and services; 2. Partnership with its associates; 3. Community involvement (Story of Walmart-1995).
The Customer - A word that can be always seen in almost all of Walmart's literature. One of the Sam's deepest belief was that the consumer is always right, and his company is still driven by this philosophy. According to Walmart Annual Report, 1994 , when questioned about Walmart's success, Walton quoted 'It has to do with our desire to exceed our customers' expectations every hour of the day'.
The Associates - One of the Walton's greatest accomplishment was his ability to empower, enrich, and train his employees (Longo, 1994). Associates regularly make suggestion for cost cutting through their "Yes We Can Sam" program. The technology, unlike normal speculations, is not used as means of replacing existing employees, but to provide them with a means to succeed in retail market (Thompson & Strickland, 1995).
The Community - For nearly 40 years, Walmart and Walmart Foundation have been committed to strengthening local communities around the world. Walmart is involved in many community outreach program and has launched several national efforts through industrial development grants.
The key features of Walmart's Approach to implementing the Strategy put together by Sam Walton - The key feature of Walmart's approach to implementing the strategy emphasizes building solid working relationships with both suppliers and employees, being aware of and taking notice of most intricate details in store layouts and merchandising techniques, capitalizing on every cost saving opportunity, and creating a high performance spirit. The strategy is to provide the customers access to good quality goods, to male these goods available when and where customers want them, to develop a cost strategy that enables competitive pricing, and to build and maintain a reputation for absolute trustworthiness.
Walmart operate according to their "Everyday Low Price" strategy. Walmart has emerged as the industry leader because of its cost containing strategies. It continues to improve upon its key business processes, managing them centrally and investing them heavily for the long term payback. Walton was a visionary leader and was known for his ability to quickly learn from his competitors' successes and failures. In fact, founder of Kmart once claimed that Walton "not only copied our concepts, he strengthened them. Sam just took the ball and ran with it"(Thompson & Strickland, 1995, p. 859).
Walmart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Walmart to achieve economies of scale which reduces its cost of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Cross docking gives the individual managers more control at the store level. To those unaware of cross-docking, it is nothing but a logistic procedure where goods are distributed directly to customers or retailers with little or no storage between.
A company owned transportation system also assists Walmart in shipping goods from warehouse to store in less than 48 hours. This allows Walmart to replenish the shelves 4 times faster than it competitors. Walmart owns the largest and most sophisticated computer system in the private sector. It uses a MPP(massively parallel processor) computer system to track stock and movement which keeps it abreast of fast changes in the market(Daugherty, 1993). Information related to sales and inventory is disseminated via its advanced satellite communications system.
Environment concerns are important to Walmart. A prototype store was opened in Lawrence, Kansas, which was designed to be environmentally friendly. The store contains environmental and recycling centers. All offices, including the corporate headquarters, are connected via computers to headquarters. Through these programs, Walmart shows its concern for the community.
Just how successful is Walmart? - In 2018 fiscal year, the company's global sales amassed approximately 495.76 billion U.S. dollars. The figures have grown considerably over the last few years, increasing about 3 percent in 2018 compared to prior fiscal year. As of 2018 fiscal year, the company operated more than 11,000 stores globally and the figure is more likely to increase as the company continues to expand in emerging markets.
Walmart is predominantly broken down into three division: Sam's club, Walmart International and Walmart U.S.. with latter generating the majority of the companies earnings. In 2018, the U.S. segment of Walmart alone generated over 310 billion U.S. dollars, which correlates to about 60%. Walmart International and Sam's club generated over 100 billion and 50 billion U.S. dollars respectively.
As of fiscal year 2018, Walmart's operating income worldwide amounted to 20.44 billion U.S. dollars. The gross profit margin worldwide stands around 24.7%. Walmart's estimated ad spend in the United States amounted to 2.28 billion U.S. dollars.
In the age of eCommerce, with more and more customers becoming tech savvy and move their shopping online, Walmart expanded into eCommerce too. While, competitors like Amazon has been dominant, but Walmart has drastically beefed up it's online offerings to compete. As of first quarter of year 2018, digital sales jumped 33% with expectation for 40% increase for the full year.
Challenges Ahead - Even with the brightest operating scenario involves some bad news for the business, though. Walmart has spend lots of cash to build out its online sales infrastructure, even as it allocates more capital toward improving its in-store shopping experience. Thanks to these rising expenses, operating income worsened to 16 billion U.S. Dollars or 4.4% of sales from 16.5 billion U.S. dollars, or 4.7% of sales, over first three quarters of fiscal 2018. Walmart's free cash flow is down significantly, too, at 10 billion U.S. dollars compared to 12 billion U.S. dollars. In short, while the company is enjoying fast growth, it's paying a price for that success.
Besides online growth, expanding strategy for developing markets such as India will play a huge role in determining company's future outlook too.
Conclusion - The ever changing market presents continuing challenges to retailers. Customers are being offered a wide choice of shopping experiences, both online and offline, but no one can capture them all. Therefore, its incumbent upon management to define their target market and direct their energies toward solving that specific market's problems. Technology, demographics, consumer attitudes, and advent of a global economy are all conspiring to rewrite the rules for success. Success in the next-decade will depend upon the level of understanding retailers have about ever-changing technology, expectations and needs of customer. If Walmart remains technology driven, increasing it's online footprint alongside maintaining its in-store reach and customer-driven culture, it should remain a retail industry leader well into its next-century.
Through his savvy, and sometimes unconventional business practices, he and his team led the company forward for thirty years making it one of the biggest giant in discount retailing. Yes, you guessed it right, the company is none other than the retailing giant - Walmart. Today, even after eighteen years of his death, the company is still growing steadily relying on the traditional goals and philosophies that Sam's legacy left, while simultaneously keeping ahead of the ever-changing technology and methods of today's competitive, fast-paced business environment.Even though the company has faced, and still facing significant amount of controversy over several different issues but these have done nothing more than scrape the exterior of this gigantic operation. With various initiatives and campaigns being devised, the future looks brighter than ever for this company.
If you are related to business sector, once in lifetime you must have wondered 'Why is Wal-Mart so successful? Is it the Good-Strategy or the Strategy execution?' The answer can be found in companies core philosophies and competencies.
The Walmart Philosophy - Walmart is successful not only because it makes sound strategic management decisions, but also for its adept implementation of those strategic decisions. Regarded by many as the entrepreneur of the century, Sam had a reputation for caring about his customers, his employees, and the community. In order to maintain its market position, Walmart executives have inherited the management guidelines Walton developed.
Walton believed in three guiding principles: 1. Customer values and services; 2. Partnership with its associates; 3. Community involvement (Story of Walmart-1995).
The Customer - A word that can be always seen in almost all of Walmart's literature. One of the Sam's deepest belief was that the consumer is always right, and his company is still driven by this philosophy. According to Walmart Annual Report, 1994 , when questioned about Walmart's success, Walton quoted 'It has to do with our desire to exceed our customers' expectations every hour of the day'.
The Associates - One of the Walton's greatest accomplishment was his ability to empower, enrich, and train his employees (Longo, 1994). Associates regularly make suggestion for cost cutting through their "Yes We Can Sam" program. The technology, unlike normal speculations, is not used as means of replacing existing employees, but to provide them with a means to succeed in retail market (Thompson & Strickland, 1995).
The Community - For nearly 40 years, Walmart and Walmart Foundation have been committed to strengthening local communities around the world. Walmart is involved in many community outreach program and has launched several national efforts through industrial development grants.
The key features of Walmart's Approach to implementing the Strategy put together by Sam Walton - The key feature of Walmart's approach to implementing the strategy emphasizes building solid working relationships with both suppliers and employees, being aware of and taking notice of most intricate details in store layouts and merchandising techniques, capitalizing on every cost saving opportunity, and creating a high performance spirit. The strategy is to provide the customers access to good quality goods, to male these goods available when and where customers want them, to develop a cost strategy that enables competitive pricing, and to build and maintain a reputation for absolute trustworthiness.
Walmart operate according to their "Everyday Low Price" strategy. Walmart has emerged as the industry leader because of its cost containing strategies. It continues to improve upon its key business processes, managing them centrally and investing them heavily for the long term payback. Walton was a visionary leader and was known for his ability to quickly learn from his competitors' successes and failures. In fact, founder of Kmart once claimed that Walton "not only copied our concepts, he strengthened them. Sam just took the ball and ran with it"(Thompson & Strickland, 1995, p. 859).
Walmart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Walmart to achieve economies of scale which reduces its cost of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Cross docking gives the individual managers more control at the store level. To those unaware of cross-docking, it is nothing but a logistic procedure where goods are distributed directly to customers or retailers with little or no storage between.
A company owned transportation system also assists Walmart in shipping goods from warehouse to store in less than 48 hours. This allows Walmart to replenish the shelves 4 times faster than it competitors. Walmart owns the largest and most sophisticated computer system in the private sector. It uses a MPP(massively parallel processor) computer system to track stock and movement which keeps it abreast of fast changes in the market(Daugherty, 1993). Information related to sales and inventory is disseminated via its advanced satellite communications system.
Environment concerns are important to Walmart. A prototype store was opened in Lawrence, Kansas, which was designed to be environmentally friendly. The store contains environmental and recycling centers. All offices, including the corporate headquarters, are connected via computers to headquarters. Through these programs, Walmart shows its concern for the community.
Just how successful is Walmart? - In 2018 fiscal year, the company's global sales amassed approximately 495.76 billion U.S. dollars. The figures have grown considerably over the last few years, increasing about 3 percent in 2018 compared to prior fiscal year. As of 2018 fiscal year, the company operated more than 11,000 stores globally and the figure is more likely to increase as the company continues to expand in emerging markets.
Walmart is predominantly broken down into three division: Sam's club, Walmart International and Walmart U.S.. with latter generating the majority of the companies earnings. In 2018, the U.S. segment of Walmart alone generated over 310 billion U.S. dollars, which correlates to about 60%. Walmart International and Sam's club generated over 100 billion and 50 billion U.S. dollars respectively.
As of fiscal year 2018, Walmart's operating income worldwide amounted to 20.44 billion U.S. dollars. The gross profit margin worldwide stands around 24.7%. Walmart's estimated ad spend in the United States amounted to 2.28 billion U.S. dollars.
In the age of eCommerce, with more and more customers becoming tech savvy and move their shopping online, Walmart expanded into eCommerce too. While, competitors like Amazon has been dominant, but Walmart has drastically beefed up it's online offerings to compete. As of first quarter of year 2018, digital sales jumped 33% with expectation for 40% increase for the full year.
Challenges Ahead - Even with the brightest operating scenario involves some bad news for the business, though. Walmart has spend lots of cash to build out its online sales infrastructure, even as it allocates more capital toward improving its in-store shopping experience. Thanks to these rising expenses, operating income worsened to 16 billion U.S. Dollars or 4.4% of sales from 16.5 billion U.S. dollars, or 4.7% of sales, over first three quarters of fiscal 2018. Walmart's free cash flow is down significantly, too, at 10 billion U.S. dollars compared to 12 billion U.S. dollars. In short, while the company is enjoying fast growth, it's paying a price for that success.
Besides online growth, expanding strategy for developing markets such as India will play a huge role in determining company's future outlook too.
Conclusion - The ever changing market presents continuing challenges to retailers. Customers are being offered a wide choice of shopping experiences, both online and offline, but no one can capture them all. Therefore, its incumbent upon management to define their target market and direct their energies toward solving that specific market's problems. Technology, demographics, consumer attitudes, and advent of a global economy are all conspiring to rewrite the rules for success. Success in the next-decade will depend upon the level of understanding retailers have about ever-changing technology, expectations and needs of customer. If Walmart remains technology driven, increasing it's online footprint alongside maintaining its in-store reach and customer-driven culture, it should remain a retail industry leader well into its next-century.
With Love
Manjul Raj😃
Great blog....waiting for more
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