Walmart: Management, Competencies And Business Model

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Walmart: Management, Competencies And Business Model

Walmart is where we find anything and everything within considering our budget. A place for a middle to lower class person to manage their household. A place for brand and utilities. One could opt for luxuries like organic food and also get everyday necessities like a clearance section for groceries. The ability to reach every crowd has made Walmart rank 1 in top fortune 500 companies with a revenue of $500 billion .

What is it offering that none other companies could survive with such competition? How is it able to afford quality within the price range? The company that we know today went through many ups and down to stand out. There are huge retail chains like Costco, target, Kingsooper, wholefoods, Safeway, and many more to compete with Walmart, yet it remains unbeatable.

According to the history on Walmart’s website, Walmart’s started with Sam Walton in 1962 . Sam Walton was born in Oklahoma in 1918. He served in the military for 4 years and then moved to Newport Arkansas. His wife wanted a small town living which gave opportunity for him to explore a different lifestyle. After working in small business and understanding the market, Sam opened the first Walmart on July 2nd, 1962 in the southern state, Arkansas of the United States of America. The main idea behind the establishment of the company was low prices and great service. Many Competitors only used high branded products in their store, however, Walmart focused on all brands at a lower price. People did not mind traveling long distances to get high-quality products at less price. The market did not expect the company to reach such heights, yet, Sam Walton’s vision not only did great in financial terms but exceeded everyone’s expectation in respect of growth .

After his success in America, Walmart expanded and branched out in Mexico, Canada, Germany, UK, and China. By 1997 it reached around $100 million in just sales. Within the first 20 years, Walmart opened its first superstore Sam’s Club. Walmart not only provided amazing products throughout the world but eventually hired many employees. By 1999 Walmart was the largest private employer in the US .

Sam had three goals when he started his company: Every individual is important; customer service should be great, and one should strive for excellence . He worked towards reducing the prices of each item. He believed in buying in bulk which reduces the price in total and sells the item for cheap. Through this method, the company earned less on each item but earned more when sold in bulk. For his service in retail, he received the presidential medal of freedom by George bush in 1992. His acceptance speech “lower the cost of living so that everyone can save money and have a better life’ became the purpose of the company till today. He died the same year after receiving the award, but Walmart is still growing because of his dreams and values.

OPPORTUNITY

Today we can find Walmart within every few miles in every state in the United States. In the mountains where there is no shopping mart or grocery store, Walmart has been delivering goods and services which includes groceries, clothing, furniture, beauty products, gifts, electronics and automobile parts to name a few. In a few states, one could also buy guns in the store. Walmart has always tried to advertise its branded as a place for family to shop. They also refused to sell any movies or games that were not children friendly or erotic.

Walton leveraged the opportunity when he first started his business in Bentonville, Arkansas. He explored the rural and suburbs regions rather than aiming at big urban centers. Kmart, Sears was one of the major retail centers at that time. He went in a direction no one dared to and provided branded products at cheaper costs. The strategy that Walmart still earns from is the “lowest price’.

In terms of opportunity, Walmart might not be the one to take on new opportunities but when someone else succeeds at a strategy, then opt it immediately. After Sam Walton died, management took loans to expand their store worldwide. Through this company owned a huge amount of debt which could only be paid if their strategy worked. Management kept the business alive based on Sam’s vision and the idea of the lowest price and today it’s the highest revenue earning company. In 2007, Walmart changed its slogan from ‘always low prices always” to ‘save money live better’ . In 2016, Walmart introduced Walmart pay for its customers to pay their bills through smartphones. 2017, it entered the business of video streaming. It also tried to improve the technology used in cash registers to increase the speed and reduce the time for transactions .

There is no other window that sells branded items for a lesser cost. Walmart has a strategy that targets areas where no other marts are open, and every store has almost everything for a lesser price than provided by other stores. Throughout our couse EMEN 5400 Product Development and design, we have learned that a company needs to understand the customer’s requirements to sell the product or gain trust .

Walmart’s business model comprises 3 areas: Walmart US which is 64% of the sales, Walmart international for example ventures with other companies in the world like Flipkart in India which accounts for a total of 24% of the sales and Sam’s Club which is 12% of the sales . Today Walmart has 270 million customers in both instore and ecommerce. This is because of the infrastructure of the store and online websites. Many of the Walmart stores are opened 24×7. Walmart tries to incorporate new strategies every day to meet customer demands .

There were many strategies that companies follow but below are the one that I believe created an impact on their sales and account for their success.

EDLP – Everyday low price. Few stores give discounts on the items a few days in a month to increase their sales, however, Walmart provides them every day.
Rollback – Few products whose demand is less is sold for less price than marked in the product. These products can be found on the clearance sections specifically dedicated to selling last and few items.
Online delivery – In this digital world, it’s hard to succeed by not making a presence online. Online shopping and delivery system remove the need for the customer to rush early morning to get the necessary groceries. If the product is not available in one branch of the store, one could get delivery from the other store. People now want to spend less time in activities that could be completed with a click of a button and free delivery is an added bonus. People are moving towards it. Walmart introduced online shopping in 2007 . Online shoppers might not be as many as instore shoppers, yet they contribute a significant amount in revenue as seen below. Below are the statistics based on the 2019 survey conducted by U.S Census Bureau data.

WALMART BUSINESS MODEL

To understand the business model, firstly we need to understand the strategy Walmart is following to grow its company world-wide, secondly, we need to understand the failure it faced while trying to implement a new strategy and finally the measures it takes to overcome those failures. Walmart has been leading in its famous EDLP (Everyday Low Price) strategy. Below are Walmart’s pillar’s is presently working on

1. Lowest Price

Walmart buys products worth billions from its suppliers which gives the edge on bargaining. Additionally, they use cross-docking to reduce the price. In Cross-docking, shipments arriving from the suppliers are directly unloaded in trailers at the Walmart distribution centers . There are 42 distribution Walmart centers with a total of 50million square feet of the area .

2. One-stop shopping experience

Walmart has always been a family shopping store and they refuse to sell any products which are not children friendly. The store aims to provide everything so that one doesn’t go to another store for any product. The store is arranged in a format that when the shopper enters the store, he/she is lured into looking at other sections. Traditional shoppers like us look at the products for examining the prices and end up buying things off our list. Many of the Walmart stores are open 24×7. Although there are few customers at night, yet Walmart doesn’t miss a chance if there is the potential of customers shopping at night.

3. Competitive

Walmart has its stores in all 50 states. 2.2 million people are working in Walmart today. 1.5 Million in U.S and 700,000 internationally . Sam started his journey with “Five and Dime” stores and dreamt of discounted stores. He did not find anyone to back him on his journey, so he traveled to remote places. He believed that by lowering the mark up on each product one could earn more through volume. He first started his work with Ben Franklin where he used his strategy and grew the sales by 350% in just 3 years . He successfully opened around 14 five and dime stores under the Ben Franklin franchise. He suggested his strategy to the butler brothers of the ben franklin franchise, but they declined the proposal. So, Sam left the company and opened his first Walmart.

Walmart’s business model first step was acquiring companies. They made their first acquisition of 16 Mohr Value in Michigan and Illinois, in 1974. Now, Walmart is trying to compete with all the e-commerce sites like Amazon. In 2016 Walmart acquired Jet.com an online shopping site. Walmart believes in acquiring the stores and setting them up that are in the secluded areas rather than setting up a whole new facility. This ultimately saves them time and cost of the new set up.

Many stores are in the cities where there are just a few grocery stores in 22 miles radius. In a few months, Walmart beats the prices of local stores. As a result, all the stores run out of business . Walmart remains the sole provider of all necessities and commodities. The establishment brings joy to the local community because it provides jobs, savings and opportunities. Each store earns a lot through this method.

So, the question is why Walmart is closing so many of its stores?

Walmart, a supercenter that has transformed the way one goes shopping suddenly started closing stores in 2016. The company closed 154 stores in the United States and 115 stores internationally. These not only affected the localities where Walmart made its presence but also around 16,000 employees were either laid off or restructured .

The major reason is Amazon. It’s all interconnected. Amazon is the company that is challenging the core of Walmart which is the lowest price. As we have learned in EMEN 5090 Marketing and technology Ventures, one needs to adapt to continuous market change and needs to prosper in difficult times . Walmart started an online business in 2007 and grew ever since. To expand its e-commerce Walmart bought Jet.com and an online shopping site. Now, Walmart is trying to analyze the products requirement in-store and online. It wants the customer to get the same services as Amazon. However, to deliver such services one needs huge inventory and sellers. Walmart now faces the issue where either their inventory is overfilled or underfilled. The items they aren’t able to sell are stocked up in the clearance section.

Walmart is trying new ways to get customers in their stores. In 2011, Walmart opened Express stores in urban markets but eventually closed all the stores in 2014. Walmart tries to lure the customers, but when they fail, they quickly move to the next one rather than trying to decrease the impact of closure like unemployment or reduce the dependency of the localities.

Now they are shifting their focus to online delivery and pickup. Walmart has just exhausted all the store locations. Now they are looking to close stores where there is less potential, and stores are not generating revenues as expected.

CORE COMPETENCIES

Core competencies of a business/venture are the characteristics or vision of that company that stands out in the market. For any business to succeed in the longer run, one has to understand the vision it wants to create for its business. Sam Walton’s vision was to expand the company worldwide and beat the competition. Today, Doug McMillon is the CEO of the Company and his vision is to beat the online retail industry like amazon. Walmart’s main core competencies are the Lowest price which they achieve by reducing their expenses, buying the products in bulk and carrying operations through distribution centers. Walmart employees stay at a cheap hotel and every employee is being treated the same way no matter the rank.

MANAGEMENT & CULTURE

Walmart dominates when it comes to Management. In the past, Walmart was believed to be the place for any employee to work because of the benefits and training programs. However, recently the ugly truth comes out as one dig deeper into its history with employees and services at the store. Walmart’s main purpose is to keep the stakeholders happy and suppliers in control. When Walmart enters a location, it not only puts all the shop owners out of business but also dominate the suppliers by paying the minimalistic cost. In terms of employees, Walmart never entertains labor unions or complaints of the employees against management. When the situation goes out of hand, the company does everything possible to win the case. Walmart is represented by the best law firms in the country and many of the lawyers are in the house. One can also assume that’s it’s almost impossible to win a case against Walmart. When the situation worsens Walmart has an amazing public relations firm to get Walmart out of any negative publicity.

Walmart has a huge history of discrimination against employees based on gender, race, orientation, and age. Many cases were filed by female employees claiming they were paid less compared to the men for the same job. There are many cases where employees have sued the company for discriminating based on orientation. Apart from the discrimination, Walmart was sued for not paying employees for their break time. According to the Walmart labor handbook, employees should be paid for their break which depends on the length of their shift. Ultimately, the court favored the employees and nearly 187,000 employees were paid a total of $188 million dollars. Walmart does not like losing, so it filled the case in the supreme court which rules against it and employees were then paid $224 million.

The management problem is just not with its employees, the problem has also been with its customers. There is no proper training given to an employee who Walmart treats as associates. There is a guessing game that goes on when an associate faces a problem with the customer. In such a situation, you could be at Walmart all day trying to find a manager to solve the problem. The main reason Walmart is unable to manage its employees and customers is because of the old book methods it follows . With the changing time, one needs to understand the requirement of customer service, equality, and respect in business. Respect for individual users to be one of the core business strategies of Walmart. Today there is no scope for inconvenience to the customer. A company could easily lose customers by causing problems and it wouldn’t matter if they apologize. In our course, EMEN 5830 Engineering Communications, we learned that a project or company could only move smoothly if effective communication is present. This communication could be between management and its employees or employees with customers . If one lacks the ability to communicate it could result in misunderstanding which could in worst case scenario also leads to lawsuits. The policies that are working today might not work tomorrow. Walmart is able to lure customers because of their past reputation and still unbeatable prices. However today, one could easily manage to disrespect someone and then hiring lawyers to defend.

CONCLUSION

In conclusion, Walmart is at the top in fortune 500 companies, but amazon is catching up at 5th rank. Walmart is trying to incorporate all the ecommerce strategies to expand their stores worldwide and explore new markets every year. They also try to expand the services and products they deliver. There are approximately 35 million merchandises sold on the online store whereas a typical supermarket would have 120,000 products depending upon the area and market.

With this growth comes controversies. Walmart is now America’s biggest employer. With this comes responsibility of treating their employees with respect. In EMEN 5030 Introduction to Project Management, we have learned that a company needs to consider their employees in their path to success . Today we might not know the exact change in the management but due to bad past and press, Walmart has to work hard to improve their reputation if they want to grow. Many individuals and unions have complained against Walmart. Business owners have also claimed that Walmart forced them out of business and eventually left the locality, creating a havoc in the town. These issues came to notice when public became more concern regarding their issues and unions encouraged people who were suppressed of their rights and privileges. In an CNBN interview with Doug McMillan, he emphasized that employees are being trained more and paid more than minimum wage. Company is also sponsoring education to the who would like to continue their education with their work . As a result, Walmart has to be more concerned regarding their laws and ways to maintain their reputation.

In terms of community, competition is cutthroat now. If Walmart will not occupy the community, other’s will also not miss a chance. Walmart in reality helps the community to save some money in their daily expenses. However, the problem arises when the local stores run out of business because they are not able to compete with the prices. In such situation Walmart is at the top of the retail chain. Community starts to get dependent on it for jobs and commodities. Then at one point the store saturates and the revenue decreases. When this happens, Walmart closes its branch and move to a new location. Employees are given the option to move to the new branch, but can every employee live in this unstable situation. Few stores don’t even survive for more than 1 year. People live in communities and there are old people as well who lived in that community for their entire life but sustain on Walmart’s monthly paycheck. Severance won’t help them in their longer run, but jobs would. When Walmart’s enters a community and all the other run out of business, there is nothing Walmart could do to stop that because that’s competition and business, but the issue lies when they leave them hanging with no support.

After all these controversies regarding labor and product quality, Walmart still stands at the Top in retail business. Sam Walton could never have imagined the length his business he once started has reached.

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