Walmart Company is one of the most influential in the world of retail trade. For more than 15 years, it has been recognized the largest chain of hypermarkets in the United States. In addition, Walmart`s positions are strong in other countries as well. Walmart company since its foundation pursues a strategy of low prices. This specific strategy allows the company to offer products for selling at cheaper prices than other competitors sell.
The history of the creation of one of the largest retail chains in the world is associated with the name of Sam Walton. In the mid-1950s the owner of several stores, Mr. Walton faced the fact of the increased competition from two new forms of retailing: supermarkets and discount stores. Adapting to new market conditions, Walton decided to follow a path different from the leaders` in low prices commerce, such as Kmart. For the target market, Walton chose small towns with populations of less than 25,000 people. The strategy was that by offering products at prices not higher than in retail networks of large cities, the company would be able to attract consumers due to the proximity factor. Indeed, instead of 4-5 hours spent to reach the nearest cheap Kmart, the buyer could with the same economic benefit purchase goods close to his home.
In 1962, the first discount store Walmart appeared in Rogers, Arkansas. It was the first store from which the history of Walmart with its famous corporate culture began. Corporate culture, where every employee is involved in managing the company and is a generator of new ideas. Wal-Mart, which became the first company to open a discount store in a small locality, immediately received a number of advantages.
The management of Walmart placed a bet on innovation in three areas. The first innovation was the aggressive strategy of “conquering” the small towns that led to the emergence of 276 stores in 11 states in the U.S. by 1979. Therefore, the goal of economies of scale was achieved. The next innovation was a system of ordering and delivering goods. Several distribution centers were created that united the whole delivery system of goods on a geographical approach. Orders for goods to stores related to one geographic region took place centrally, then the goods were delivered to a specific distribution center, where the next phase of sorting and loading of goods for delivery to a particular outlet was conducted.
One more area of innovation was intra-system communications. Electronic system of scanning of results of trade was introduced in every store to effectively manage assets. Information on every outlet was accumulating in distribution centers, where the statements of sales were consolidated, and the decision on delivery of the next consignment of goods to a particular store in the region was taken.
Wal-Mart has not economized on information systems, what contributed to the implementation of the strategy of low prices. It was one of the first selling companies that established electronic connection with major suppliers. The latter received the opportunity of completing and delivering the orders directly to the Walmart stores. Other retailers might have used the same system, as well, but they considered it to be disadvantageous. “The technology that went into what Wal-Mart did was not brand new and not especially at the technological frontiers, but when it was combined with the firm’s managerial and organizational innovations, the impact was huge” (Schrage, 2002).
In 1994, the Walmart Company opened 122 stores in Canada; in 1995, it entered the market in Argentina and Brazil. Huge scale and efficient logistics system allowed the company to save a lot. Reduction in expenditures significantly reduced the prices on goods. To add to this the unique corporate culture where innovation was not only welcomed among employees, but also was mostly introduced from them, as well as the latest inventory management system and strong marketing, will explain why the competitive positions of Walmart were and remain to be unshrinking.
In autumn 2007, management of Walmart conducted a little update: first, the old slogan, having served 19 years, was replaced to a new one – “Save money. Live better”, till now the company appeals to its customers with this motto. The following year, the network was officially renamed to Walmart Stores, Inc, and the logo was changed at the same time that remains up to this day.
The main reason for the constant criticism of Walmart is that the huge scale of this company represents a serious threat for smaller businesses. As analysts remark, after with an opening of a new Walmart store in any town, local traders are forced to either reduce the number of its personnel, or to go out of business.
Walmart is often criticized for the fact that its management discourages trade union activity among its employees. The United Food and Commercial Workers Union representative Ernest Duran stated “Any time there's any mention of a union within a store they send in about 20 to 30 suits from their main office” urging Walmart workers not to join a union (Davies, 2005).
Despite all the criticism, Walmart is the reality of our days, and other competitors of the Walmart Corporation shall be aware of its strong positions. The larger Walmart becomes, the fiercer is the criticism against it. Besides criticizing success of Walmart, other companies, in my opinion, shall concentrate on interaction with their customers and on keeping up with the times, just as Walmart does.
Davies, Matthew. When size matters at Wal-Mart (February 15, 2005). BBC News. Retrieved from http://news.bbc.co.uk/2/hi/business/4253981.stm
Fortune Global 500. (2014). CNN Money. Retrieved from http://money.cnn.com/magazines/fortune/global500
Schrage, Michael. Wal-Mart Trumps Moore's Law (March 1, 2002). MIT Technology review. Retrieved from http://www.technologyreview.com/article/401379/wal-mart-trumps-moores-law/
Walmart. History. (n.d.). Walmart. Retrieved from http://corporate.walmart.com/our-story/history/
Walmart. Our Business. (n.d.). Walmart. Retrieved from corporate.walmart.com/our-story/our-business/