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DESCRIPTION OF WAL-MART

The company was founded by Sam Walton back in the 1962, when it was only a rural
department store with a simple business model: to bring wider selection of products and
offer lower prices to urban consumers than to those who lived in more rural areas. Success
of Wal-Mart can be attributed to two factors; that is the creation and exploitation of density
economies and aggressive investment in information technology, both of which led to huge
cost advantages over competing companies. From the 1960s' until now it has grown to be
the largest and most emulated retailer in the world with over 11,000 operating retail units;
selling products and services under 63 banners in 28 countries, e-commerce websites in 11
countries and with over 2,3 million associates worldwide. The company operates in three
segments: Wal-Mart U.S., Wal-Mart International and Sam's club (Wal-Mart Inc., 2016a).

Wal-Mart U.S. segment operates retail stores in all 50 states, with supercenters in 48 states,
discount stores in 44 states and Neighborhood Markets and other small store formats in 26
states. Supercenters range in size with an average of approximately 55.000 sq. meters. Its
discount stores range in size with an average of approximately 32.000 sq. meters.
Neighborhood Markets and other small formats range in size with an average of
approximately 12.000 sq. meters. Of all the three segments, Wal-Mart U.S. is the largest and
has historically had the highest gross profit as a percentage of net sales. In addition, Wal-
Mart U.S. has historically contributed the greatest amount to the company’s net sales and
operating income. In the fiscal year 2016 this segment accounted for approximately 62,3 %
of its net sales, which is 3,6 % more than the previous year (Wal-Mart Inc., 2016a).

Wal-Mart International segment consists of its wholly owned subsidiaries operating in


Argentina, Brazil, Canada, China, Japan, and the United Kingdom; its majority owned
subsidiaries operating in Africa, Central America, Chile, China and Mexico; its joint
ventures in China and India; and its other controlled subsidiaries in China. Wal-Mart
International operates retail, wholesale and other types of units, including restaurants and
some banks. The overall gross profit rate for Wal-Mart International is lower than that of
Wal-Mart U.S. because of its merchandise mix. In fiscal 2016 this segment generated
approximately 25,8 % of its net sales (Wal-Mart Inc., 2016a).

Net sales of Wal-Mart International in fiscal 2016 equal to 123,4 billion USD, which is a 2,4
% drop by previous year, where net sales amounted to 136,2 billion USD. This segment has
been the most rapid growing segment (see Figure 1), since it has grown primarily through
new stores and acquisitions. In recent years its net sales and operating income has grown
faster than the other segments. There was a slight drop of sales in fiscal
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2014 due to fluctuations in currency exchange rates and no significant acquisitions (Wal-Mart
Inc., 2016a).

Sam’s Club segment covers only membership operations. Members include both business
owners and individual customers. As a membership club warehouse, facility sizes for Sam’s
Clubs have an average size of approximately 40.000 sq. meters. Sam’s Club also provides its
members with a range of merchandise and services online. It has a lower gross profit rate and
lower operating expenses as a percentage of net sales than the other two segments. In fiscal
2016 this segment accounted for approximately 11,9 % of its net sales (56,8 billion USD), with
0,1 % drop by fiscal 2015 (Wal-Mart Inc., 2016a).

Figure 1. Wal-Mart's net sales by segment (in million USD)

350 25%
300
20%
250
15%
$ million

200 Wal-Mart U.S.


10%
150 Wal-Mart Int.
5%
100 Sam's club
0% Total company
50
increase
0 -5%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

Source: Wal-Mart Inc., 2000 annual report, 2000, p. 1; Wal-Mart Inc., 2001 annual report, 2001, p. 1; Wal-Mart
Inc., 2002 annual report, 2002, p. 16; Wal-Mart Inc., 2003 annual report, 2003, p. 18; Wal-Mart Inc., 2004
annual report, 2004, p. 16; Wal-Mart Inc., 2005 annual report, 2005, p. 25; Wal-Mart Inc., 2006 annual report,
2006, p. 22; Wal-Mart Inc., 2007 annual report, 2007, p. 30; Wal-Mart Inc., 2008 annual report, 2008, p. 10;
Wal-Mart Inc., 2009 annual report, 2009, p. 14; Wal-Mart Inc., 2010 annual report, 2010, p. 9; Wal-Mart Inc.,
2011 annual report, 2011, p. 4; Wal-Mart Inc., 2012 annual report, 2012, p. 19; Wal-Mart Inc., 2013 annual
report, 2013, p. 14; Wal-Mart Inc., 2014 annual report, 2014, p. 18; Wal-Mart Inc., 2015 annual report, 2015, p.
18; Wal-Mart Inc., 2016 annual report, 2016, p. 18.

1.1 General history

Wal-Mart's history can be described with superlatives - as a story of innovation, leadership and
success. It began with a single store, back in 1962, in Rogers, Arkansas. Since then the company
grew to be the world's largest and emulated retailer, some researchers even refer to it as the
industry trendsetter (Table 1). In 1979, annual sales of Wal-Mart corporation topped 1 billion
USD. By the end of fiscal 2002 Wal-Mart was already world's largest retailer, with 218 billion
USD in sales. In fiscal 2016 that number rose to 482 billion USD
5
in sales, with a sum of 11.528 stores worldwide and is still growing (Wal-Mart Inc.,
2016a).

Table 1. Wal-Mart's history timeline

1960s - Retail revolution


• Sam Walton's strategy was built on an unshakeable foundation: The lowest prices anytime, anywhere.
• 1962 - First store opened in Rogers, Arkansas.
• 1967 - Walton family owned 24 stores ($12,7 million in sales).
• 1969 - Official incorporation as Wal-Mart Stores, Inc.

1970s - Wal-Mart goes national


• 1970 - Wal-Mart became a publicly traded company. First stock sold at a price $16,50.
• 1971 - The first distribution center opened in Bentonville, Arkansas.
• 1972 - Wal-Mart listed on the New York Stock exchange. With 51 stores, they recorded sales of $78 million.
• 1979 - Establishment of Walmart Foundation.

1980s - Decade of firsts


• 1980 - Wal-Mart reached $1 billion in annual sales, with 276 opened stores and 21,000 employed associates.
• 1983 - First Sam's Club opened in Midwest city, Oklahoma.
• 1987 - Wal-Mart installed the largest private satellite communication system in the U.S., linking the company's
operations through voice, data and video communication.
• 1988 - The first Wal-Mart Supercenter opened in Washington.

1990s - America's top retailer


• 1991 - Wal-Mart went global through a joint venture with Cifra, a Mexican retail company, opening first Sam's
club in Mexico city.
• 1992 - Wal-Mart had opened 1,928 stores and clubs and employeed over 371,000 associates.
• 1994 - Wal-Mart expanded into Canada with the purchase of 122 Woolco stores.
• 1996 - Wal-Mart opened its first store in China.
• 1999 - Wal-Mart entered the United Kingdom with the acquisition of ASDA.

2000s - New Millenium


• Goal: to offer customers a seamless shopping experience, whether they are online, in a store or on a mobile
device.
• 2000 - Walmart.com was founded, allowing U.S. customers to shop online.
• 2002 - Wal-Mart topped the Fortune 500 ranking of America's largest companies. Wal-mart entered the
Japanese market through its investment in Seiyu.
• 2009 - Wal-Mart entered Chile with the acquisition of a majority stake in D&S S.A.
• 2010 - Bharti Walmart, a joint venture, opened its first store in India.
• 2011 - With the acqusition of MassMart in South Africa, Wal-Mart surpassed 10,000 retail units around the
world.
• 2014 - Wal-Mart records more than 2,2 million associates worldwide and serves more than 200 million
customers each week at more than 11,000 operational units.
• 2015 - 100% acqusition of Yihaodian, e-commerce business in China.

Source: Wal-Mart's history timeline, 2017.

1.2 General overview of Wal-Mart

Wal-Mart's operations range in scope and are comprised primarily of three retailing
subsidiaries: Wal-Mart stores division U.S., Sam's club and Wal-Mart international. Each of
their divisions is broken down into three types of shopping experiences for their
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customers: discount stores ranging in size from 2.700 to over 61.000 sq. meters; neighborhood
markets comprised like the typical supermarkets and Sam's club's offering sales of bulk items
to its members. Wal-Mart's marketing has changed very little since its inception concentrating
on two main principles »Low prices save you money« and »Always low prices, always«. Shared
values at Wal-Mart seem to be expansion and overtaking any and all other competition, with
no regard to the costs and regardless of affect on public appearance and the public perspective
of the organization (Bedford, 2007).

Organizational chart. Wal-Mart operates under a multidivisional structure. They are divided
in 13 divisions, some represent traditional functional areas (finance, information technology
(hereinafter: IT), corporate affairs, legal department, etc.) and other represent geographic areas
of retail operations (Sam's Club, U.S., International division). This type of structure allows
Wal-Mart to have increased strategic and operational control and main focus on products and
markets.

Listed in Figure 2 are the executive board of directors. Doug McMillon has been the current
president and Chief Executive Officer (hereinafter: CEO) since February 2014. In earlier years
he was the president of Wal-Mart International. He leads a strong management team and under
his leadership, Wal-Mart is bringing together its stores, logistics network and digital commerce
capabilities in new ways to empower customers to shop at any given point, location- and time-
wise (Wal-Mart Inc., 2016a).

Figure 2. Wal-Mart's organizational chart

EVP and Chief financial officer


Treasurer
Claire Babineaux-Fontenot

EVP and Chief administrative


officer
Rollin L. Ford EVP, Chief merchandising
officer, Wal-Mart U.S.
EVP, Chief marketing officer, Charles Redfield
Wal-Mart U.S.
McMillo

n CEO

Stephen Quinn EVP, Logistics and Supply


Chain, Wal-Mart U.S.
Chris Sultemeier

EVP, Chief Financial Officer,


President and CEO, Sam's Club Sam's Club
Rosalind G. Brewer
Michael Dastugue

President and CEO, Wal-Mart EVP, Strategy and International


International Development, Walmart Int.
David Cheesewright Scott Price

EVP, Corporate affairs and


EVP, Chief information officer government relations
Karenann Terrell Dan Bartlett

EVP, People division


M. Susan Chamber

Source: Wal-Mart's executive management, 2014


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1.3 Wal-Mart's internationalization

Wal-Mart opened its first international store in Mexico City in 1991 through joint venture
with Cifra, the local retailer. In 1993 Wal-Mart created Wal-Mart International. Since their
first joint venture in Mexico, Wal-Mart International has grown rather erratically (Table 2).
In 90's Wal-Mart exported their big-box format, low-price model, a strategy, that was
expected to be as successful in foreign markets, as it was in the domestic market. Although
Wal-Mart has had quite a successful run throughout the years, it was not always an easy one.
For example, in China and the United Kingdom, Wal-Mart's efforts to offer customers lowest
prices backfired because of resistance from established retailers. In Germany the company
could not seem to fit its business model to local tastes and preferences, so they closed their
stores in 2006, with a loss of approximately 1 billion USD. They had plenty of issues in Japan
due to the buying habits of customers, for which the Wal-Mart model did not respond
accordingly. Its presence in Hong Kong ended after only two years, after rioting incidents in
Jakarta. Taking that aside, today, Wal-Mart International is a fast-growing part of Wal-Mart's
overall operations, with 6.107 stores and more than 800.000 associates around the world. The
company is ranked 20th on Forbes Global 2000 - World's biggest public companies, with
revenues amounting to 482,1 billion USD and market value 215,7 billion USD. They rank
first in sales, 17th in market value, 21st in profit and 22nd in world's most valuable brands
(Forbes, 2016).

Table 2. Wal-Mart's internationalization

Year Country Mode of entry


1991 Mexico Joint venture - Cifra
1994 Brazil Joint venture - Lojas Americanas
1994 Canada Acquisition - Woolco
1995 Argentina Wholly owned subsidiary
1996 China New opening, joint venture, acquisition
1998 South Korea Acquisition
1999 United Kingdom Acquisition - ASDA
2002 Japan Acquisition - Seiyu
2002 Germany Acquisition - Wertkauf, Spar
2007 India Joint venture - Bharti Enterprises
2009 Chile Acquisition - D&S S.A.
2011 Southern African countries Acquisition - Massmart Holding Limited

Source: Wal-Mart Inc., 2001 annual report, 2001, p. 8; Wal-Mart Inc., 2003 annual report, 2003, p. 25; Wal-
Mart Inc., 2008 annual report, 2008, p. 40; Wal-Mart Inc., 2010 annual report, 2010, p. 7; Wal-Mart Inc., 2012
annual report, 2012, p. 19.

Wal-Mart International is responsible for the operation of retail stores, wholesale stores,
restaurants, drugstores and convenience stores operating under varying banners outside the
United States. The segment currently operates 54,64 % of all stores of which 2.360 are located
in Mexico, 709 in Central America, 621 in United Kingdom and 485 in Brazil. The
number of stores has multiplied six times since the year 2000, which is shown in Figure 3. The
company had opened 70 new stores in Mexico, 29 in United Kingdom and 21 in China. On the
other hand, Wal-Mart has decided to close down more than 80 stores in Japan, 58 in Brazil and
9 in Chile due to their poor performance. Number of units in other countries is growing at a
slow pace (Wal-Mart Inc., 2016a).

Overall, Wal-Mart is the most successful in Mexico, a near-by market. Since 1991, when they
entered this market, they have opened more than 2.360 discount stores, most known as Wal-
Mex. In 2006 the company was also approved by local finance ministry to open their own bank
and by the end of the year 2010 they opened nearly 250 branches. Wal-Mex's mission was to
lure newcomers with easy instructions and entry points (no commissions, minimum balances,
etc.). Wal-Mex's plans for future growth involve heavily targeting on people in the age group
16-24 years, which constitutes 55 % of Mexico's population (Wal-Mart Inc., 2016a).

Figure 3. Number of Wal-Mart stores worldwide in years 2000-2016

7000
United Kingdom

6000 Mexico

Japan
5000
India

4000 Germany

China
3000
Chile
2000 Central America

Canada
1000
Brazil
0
Argentina
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Source: Wal-Mart Inc., 2000 annual report, 2000, p. 1; Wal-Mart Inc., 2001 annual report, 2001, p. 1; Wal-
Mart Inc., 2002 annual report, 2002, p. 16; Wal-Mart Inc., 2003 annual report, 2003, p. 18; Wal-Mart Inc., 2004
annual report, 2004, p. 16; Wal-Mart Inc., 2005 annual report, 2005, p. 25; Wal-Mart Inc., 2006 annual report,
2006, p. 22; Wal-Mart Inc., 2007 annual report, 2007, p. 30; Wal-Mart Inc., 2008 annual report, 2008, p. 10;
Wal-Mart Inc., 2009 annual report, 2009, p. 14; Wal-Mart Inc., 2010 annual report, 2010, p. 9; Wal-Mart Inc.,
2011 annual report, 2011, p. 4; Wal-Mart Inc., 2012 annual report, 2012, p. 19; Wal-Mart Inc., 2013 annual
report, 2013, p. 14; Wal-Mart Inc., 2014 annual report, 2014, p. 18; Wal-Mart Inc., 2015 annual report, 2015, p.
18; Wal-Mart Inc., 2016 annual report, 2016, p. 18.

Burt and Sparks (2006) see Wal-Mart's internationalization process having three phases.
The first phase of internationalization is expansion to neighborhood markets (Canada,

Mexico), which turned out to be successful; the second a world-market focus, where Mart's
moves were limited by regulatory issues and incompatibility of some facets of its business
model (Germany, Japan) and the last phase a strategic planning approach, where Wal-Mart
concentrated on key locations (China)
What Kind of Service Does Wal-Mart Provide?
Retail goods
Walmart offers retails goods in a variety of categories. Customers can buy electronic products such as
MP3 players, digital cameras, printers, laptops and computers. Walmart offers music downloads, movies,
books and jewelry. In addition to home furnishings, the retailer also offers baby products, sporting goods
and grocery items.

Photo Services
Walmart offers photo lab services inside stores and online. Customers can drop off their photographs for
developing via a store kiosk. They can also upload their digital photos via the corporate website. Pick up
photos at a store location or have them sent to a home address. The photo lab offers customers the option
to develop the prints in an hour.

Pharmacy
In 2006, Walmart began offering customers prescriptions for a mere $4. This practice was significant,
with many retailers following suit. The company estimates savings to customers total $3 billion since the
program's inception. Walmart offers monthly prescriptions for pickup in-store or mail order services for
long-term medications. The savings are due in large part to Walmart's catalog of over 300 generic
medications available for $4 in-store or $10 for a 90-day supply.

Financial Services
Walmart offers several financial services. These include credit cards, debit cards, bill payment, money
transfers, check cashing and check printing. Walmart offers a store credit card without an annual fee.
Obtain a debit card in-store or online. Walmart offers money transfer services through Moneygram,
starting at $4.75. Customers can also purchase money orders and gift cards, send bill payments, order
printed checks and cash checks for fees starting at $3.

Wireless Service
Walmart partnered with service provider T-mobile to offer wireless phone service. The Walmart Family
Talk Wireless service provides customers with a family plan for unlimited text and voice calls. The
service requires no traditional yearly contract and plans start at $45.

Money Services
 Credit & Prepaid Debit Cards
 Walmart Credit Card
 Walmart MoneyCard
 American Express Bluebird
 Netspend Visa
 Rapid Reload

 Send & Receive Money


 Money Transfers
 Bill Pay & Money Orders
 Check Cashing

 Gift Cards
 Walmart Gift Cards
 Walmart eGift Cards
 Visa/MasterCard/AMEX Gift Cards
 Corporate Gift Card Program
 Other Gift Cards

 Other Money Services


 Walmart Pay
 Mobile Express Money Services
 Check Printing
 Tax Prep Services
 Coinstar

Product Services
 Protection plans
 Walmart Protection Plans
 File a Claim

 In-home Services
 TV Wall Mounting
 Furniture Assembly
 Smart Home
 Home Advisor
 Other Product Services
 Personalized Products
 Photo Printing
 Trade-In Programs

Business Services
 Walmart for Business
 Corporate Gift Card Program
 Promotional Products
 Business Credit Card
 Community Credit Card

Health Services
 Pharmacy
 Wellness Center
 Vision Center
 Refill a Prescription
 Flu & Immunizations
 Clinic Services

Registry Services
 Wedding
 Baby
 Event

Auto Service
 Auto Care Center
 Auto Buying
 Tire Finder

Pet Services
 Pet Medications
 New Pet Parent Resources
Geographical Area
Walmart's operations are organized into four divisions: Walmart U.S., Walmart International, Sam's Club
and Global eCommerce. The company offers various retail formats throughout these divisions, including
supercenters, supermarkets, hypermarkets, warehouse clubs, cash-and-carry stores, home improvement,
specialty electronics, restaurants, apparel stores, drugstores, convenience stores, and digital retail.[98]

Walmart U.S.

Walmart U.S. is the company's largest division, accounting for US$298.38 billion, or 62.3 percent of total
sales, for fiscal 2016. It consists of three retail formats that have become commonplace in the United
States: Supercenters, Discount Stores, Neighborhood Markets, and other small formats. The discount
stores sell a variety of mostly non-grocery products, though emphasis has now shifted towards
supercenters, which include more groceries. As of January 31, 2018, there are a total of 4,761 Walmart
U.S. stores. In the United States, 90 percent of the population resides within 10 miles of a Walmart
store.[99]

The president and CEO of Walmart U.S. is Greg Foran.

Walmart Supercenter

A Walmart Supercenter in Windham, Connecticut.

Walmart Supercenters, branded simply as "Walmart", are hypermarkets with sizes varying from 69,000 to
260,000 square feet (6,400 to 24,200 square meters), but averaging about 178,000 square feet (16,500
square meters).These stock general merchandise and a full-service supermarket, including meat and
poultry, baked goods, delicatessen, frozen foods, dairy products, garden produce, and fresh seafood.
Many Walmart Supercenters also have a garden center, pet shop, pharmacy, Tire & Lube Express, optical
center, one-hour photo processing lab, portrait studio, and numerous alcove shops, such as cellular phone
stores, hair and nail salons, video rental stores, local bank branches (such as Woodforest National Bank
branches in newer locations), and fast food outlets.

Many Walmart Supercenters have featured McDonald's restaurants, but in 2007, Walmart announced it
would stop opening McDonald's restaurants at most of their newer stores, most likely due to nutrition.
Most locations that opened up after the announcement had Subway as their restaurants, and some
McDonald's inside the stores were replaced with Subways. In some Canadian locations, Tim Hortons
were opened. Recently, in several Supercenters, like the Tallahassee, FL location, Walmart added Burger
King to their locations.

Some locations also have fuel stations which sell gasoline distributed by Murphy USA (which spun off
from Murphy Oil in 2013), Sunoco, Inc. ("Optima"), the Tesoro Corporation ("Mirastar"), USA Gasoline,
and even now Walmart-branded gas stations.

The first Supercenter opened in Washington, Missouri, in 1988. A similar concept, Hypermart USA, had
opened a year earlier in Garland, Texas. All Hypermart USA stores were later closed or converted into
Supercenters.

As of January 31, 2018, there were 3,561 Walmart Supercenters in 49 of the 50 U.S. states, the District of
Columbia, and Puerto Rico.Hawaii is the only state to not have a Supercenter location. The largest
Supercenter in the United States, covering 260,000 square feet (24,000 square meters) on two floors, is
located in Crossgates Commons in Albany, New York.

A typical supercenter sells approximately 120,000 items, compared to the 35 million products sold in
Walmart's online store.

The "Supercenter" name has since been phased out, with these stores now simply referred to as
"Walmart", since the company introduced the new Walmart logo in 2008. However, the branding is still
used in Walmart's Canadian stores (spelled as "Supercentre" in Canadian English).

Walmart Discount Store

The exterior of the Walmart Discount Store in Charlotte, North Carolina

The exterior of the Walmart Discount Store in Charlotte, North Carolina


Walmart Discount Stores, also branded as simply "Walmart", are discount department stores with sizes
varying from 30,000 to 206,000 square feet (2,800 to 19,100 square meters), with the average store
covering 105,000 square feet (9,800 square meters).[11] They carry general merchandise and limited
groceries. Some newer and remodeled discount stores have an expanded grocery department, similar to
Target's PFresh department. Many of these stores also feature a garden center, pharmacy, Tire & Lube
Express, optical center, one-hour photo processing lab, portrait studio, a bank branch, a cell phone store,
and a fast food outlet. Some also have gasoline stations.[102] Discount Stores were Walmart's original
concept, though they have since been surpassed by Supercenters.

In 1990, Walmart opened its first Bud's Discount City location in Bentonville. Bud's operated as a
closeout store, much like Big Lots. Many locations were opened to fulfill leases in shopping centers as
Walmart stores left and moved into newly built Supercenters. All of the Bud's Discount City stores had
closed or converted into Walmart Discount Stores by 1997.[106]

As of January 31, 2018, there were 400 Walmart Discount Stores in 41 states and Puerto Rico.[1][2]
Idaho, Montana, Nebraska, North Dakota, South Carolina, South Dakota, Utah, District of Columbia,
West Virginia, and Wyoming are the only states and territories where a discount store does not operate.

Walmart Neighborhood Market

Walmart Neighborhood Market in Houston, Texas

Walmart Neighborhood Market sometimes branded as "Neighborhood Market by Walmart" or informally


known as "Neighborhood Walmart", is Walmart's chain of smaller grocery stores ranging from 28,000 to
65,000 square feet (2,600 to 6,000 square meters) and averaging about 42,000 square feet (3,900 square
metres), about a fifth of the size of a Walmart Supercenter.[11][107] The first Walmart Neighborhood
Market opened in 1998, yet Walmart renewed its focus on the smaller grocery store format in the
2010s.[108]
The stores focus on three of Walmart's major sales categories: groceries, which account for about 55
percent of the company's revenue,[109][110] pharmacy, and, at some stores, fuel.[111] For groceries and
consumables, the stores sell fresh produce, deli and bakery items, prepared foods, meat, dairy, organic,
general grocery and frozen foods, in addition to cleaning products and pet supplies.[107][112] Some
stores offer wine and beer sales[107] and drive-through pharmacies.[113] Some stores, such as one at
Midtown Center in Bentonville, Arkansas, offer made-to-order pizza with a seating area for eating.[113]
Customers can also use Walmart's site-to-store operation and pick up online orders at Walmart
Neighborhood Market stores.[114]

Products at Walmart Neighborhood Market stores carry the same prices as those at Walmart's larger
supercenters. A Moody's analyst said the wider company's pricing structure gives the chain of grocery
stores a "competitive advantage" over competitors Whole Foods, Kroger and Trader Joe's.[111]

Neighborhood Market stores expanded slowly at first as a way to fill gaps between Walmart Supercenters
and Discount Stores in existing markets.[115] In its first 12 years, the company opened about 180
Walmart Neighborhood Markets.[115] By 2010, Walmart said it was ready to accelerate its expansion
plans for the grocery stores.[115] As of January 31, 2018, there were 701 Walmart Neighborhood
Markets,[1][2] each employing between 90 and 95 full-time and part-time workers.[116]

Former stores and concepts

2015 photo of a Walmart Express branded as a Walmart Neighborhood Market in Alma, Georgia that
closed in 2016

2015 photo of a Walmart Express branded as a Walmart Neighborhood Market in Alma, Georgia that
closed in 2016

Walmart opened Supermercado de Walmart locations to appeal to Hispanic communities in the United
States.[117] The first one, a 39,000-square-foot (3,600-square-meter) store in the Spring Branch area of
Houston, opened on April 29, 2009.[118] The store was a conversion of an existing Walmart
Neighborhood Market.[119] In 2009, another Supermercado de Walmart opened in Phoenix,
Arizona.[120] Both locations closed in 2014.[121] In 2009, Walmart opened "Mas Club", a warehouse
retail operation patterned after Sam's Club. Its lone store closed in 2014.
Walmart Express was a chain of smaller discount stores with a range of services from groceries to check
cashing and gasoline service. The concept was focused on small towns deemed unable to support a larger
store, and large cities where space was at a premium. Walmart planned to build 15 to 20 Walmart Express
stores, focusing on Arkansas, North Carolina and Chicago, by the end of its fiscal year in January 2012.
As of September 2014, Walmart re-branded all of its Express format stores to Neighborhood Markets in
an effort to streamline its retail offer. It continued to open new Express stores under the Neighborhood
Market name. As of January 31, 2018, there were 99 small-format stores in the United States. These
include Amigo (17 locations), E-Commerce Acquisition / C-stores (59 locations), and other store formats
(23 locations). On January 15, 2016, Walmart announced that it will be closing 269 stores globally,
including all 102 U.S. Walmart Express stores, including those branded as Neighborhood Markets.[122]

Initiatives

In September 2006, Walmart announced a pilot program to sell generic drugs at $4 per prescription. The
program was launched at stores in the Tampa, Florida, area, and by January 2007 had been expanded to
all stores in Florida. While the average price of generics is $29 per prescription, compared to $102 for
name-brand drugs, Walmart maintains that it is not selling at a loss, or providing them as an act of
charity—instead, they are using the same mechanisms of mass distribution that it uses to bring lower
prices to other products.[123] Many of Walmart's low cost generics are imported from India, where they
are made by drug makers that include Ranbaxy and Cipla.

On February 6, 2007, the company launched a "beta" version of a movie download service, which sold
about 3,000 films and television episodes from all major studios and television networks. The service was
discontinued on December 21, 2007 due to low sales.

In 2008, Walmart started a pilot program in the small grocery store concept called Marketside in the
metropolitan Phoenix, Arizona, area. The four stores closed in 2011.
In 2015, Walmart began testing a free grocery pickup service, allowing customers to select products
online and choose their pickup time. At the store, a Walmart employee loads the groceries into the
customer's car. As of December 17, 2017, the service is available in 39 U.S. states.[128]

In May 2016, Walmart announced a change to ShippingPass, its three-day shipping service, and that it
will move from a three-day delivery to two-day delivery to remain competitive with Amazon.[129]
Walmart priced it at 49 dollars per year, compared to Amazon Prime's 99-dollar-per-year price.[130][131]

In June 2016, Walmart and Sam's Club announced that they would begin testing a last-mile grocery
delivery that used services including Uber, Lyft, and Deliv, to bring customers' orders to their homes.
Walmart customers would be able to shop using the company's online grocery service at
grocery.walmart.com, then request delivery at checkout for a small fee. The first tests were planned to go
live in Denver and Phoenix. Walmart announced on March 14, 2018 that it would expand online delivery
to 100 metropolitan regions in the United States, the equivalent of 40 percent of households, by the end of
the year of 2018.

Walmart's Winemakers Selection private label wine was introduced in June 2018. From domestic and
international sources, selected by an in-house expert with the help of a small number of trusted
distributors and importers, they are notably good for inexpensive wine. Available in about 1,000 stores,
the wines are identifiable by a large W in a banner on the label.
Chapter 2
What Is Globalization?
Globalization is a process of interaction and integration among the people, companies, and governments
of different nations, a process driven by international trade and investment and aided by information
technology. This process has effects on the environment, on culture, on political systems, on economic
development and prosperity, and on human physical well-being in societies around the world.
Globalization is not new, though. For thousands of years, people—and, later, corporations—have been
buying from and selling to each other in lands at great distances, such as through the famed Silk Road
across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries,
people and corporations have invested in enterprises in other countries. In fact, many of the features of the
current wave of globalization are similar to those prevailing before the outbreak of the First World War in
1914.
But policy and technological developments of the past few decades have spurred increases in cross-border
trade, investment, and migration so large that many observers believe the world has entered a
qualitatively new phase in its economic development. Since 1950, for example, the volume of world trade
has increased by 20 times, and from just 1997 to 1999 flows of foreign investment nearly doubled, from
$468 billion to $827 billion. Distinguishing this current wave of globalization from earlier ones, author
Thomas Friedman has said that today globalization is “farther, faster, cheaper, and deeper.”
This current wave of globalization has been driven by policies that have opened economies domestically
and internationally. In the years since the Second World War, and especially during the past two decades,
many governments have adopted free-market economic systems, vastly increasing their own productive
potential and creating myriad new opportunities for international trade and investment. Governments also
have negotiated dramatic reductions in barriers to commerce and have established international
agreements to promote trade in goods, services, and investment. Taking advantage of new opportunities
in foreign markets, corporations have built foreign factories and established production and marketing
arrangements with foreign partners. A defining feature of globalization, therefore, is an international
industrial and financial business structure.
Technology has been the other principal driver of globalization. Advances in information technology, in
particular, have dramatically transformed economic life. Information technologies have given all sorts of
individual economic actors—consumers, investors, businesses—valuable new tools for identifying and
pursuing economic opportunities, including faster and more informed analyses of economic trends around
the world, easy transfers of assets, and collaboration with far-flung partners.
Globalization is deeply controversial, however. Proponents of globalization argue that it allows poor
countries and their citizens to develop economically and raise their standards of living, while opponents
of globalization claim that the creation of an unfettered international free market has benefited
multinational corporations in the Western world at the expense of local enterprises, local cultures, and
common people. Resistance to globalization has therefore taken shape both at a popular and at a
governmental level as people and governments try to manage the flow of capital, labor, goods, and ideas
that constitute the current wave of globalization.
To find the right balance between benefits and costs associated with globalization, citizens of all nations
need to understand how globalization works and the policy choices facing them and their societies.
Globalization101.org tries to provide an accurate analysis of the issues and controversies regarding
globalization, without the slogans or ideological biases generally found in discussions of the topics. We
welcome you to our website.

Globalization pros and cons


Globalization is such a complex phenomenon that here we are going to dissect its pros and cons across
three different dimensions or angles: economic, cultural and political
Economic globalization
Economic globalization echoes the views of neoliberal and neoclassicist thinkers in which states lose
prominence and the world becomes a single global market of individual consumers. These consumers are
characterized by their material and economic self-interest – rather than cultural, civic or other forms of
identity. The expansion and dominance of global companies and brands is another key feature. These
corporations contribute to deepen global interconnectedness not only by uniformly shaping consumption
patterns across societies, but by binding economies together through complex supply chains, trade
networks, flows of capital and manpower.

Pros of economic globalization:


 Cheaper prices for products and services (more optimized supply chains)
 Better availability of products and services
 Easier access to capital and commodities
 Increased competition
 Producers and retailers can diversify their markets and contribute to economic growth
Cons of economic globalization:

 Some countries struggle to compete


 Extractive behavior of some foreign companies and investors in resource-rich countries
preventing economic diversification
 Strong bargaining power of multinational companies vis-à-vis local governments
 “Contagion effect” is more likely in times of crises
 Problems of “social dumping”
Cultural globalization
It refers to the process of transmission of values, ideas, cultural and artistic expressions. In the era of the
Internet and fast communications people can interact more easily with each other. Multiculturalism and
cosmopolitanism are to some extent manifestations of cultural globalization. Communities are less
insulated than ever in history, even those who cannot travel can have today a good understanding of other
cultures and meet virtually people from other parts of the world. People change their views and lifestyle
influenced by global cultural and consumption trends.
Pros of cultural globalization:

 Access to new cultural products (art, entertainment, education)


 Better understanding of foreign values and attitudes. Less stereotyping and fewer misconceptions
about other people and cultures
 Instant access to information from anywhere in the world
 Capacity to communicate and defend one’s values and ideals globally
 Customization or adaptation of global cultural trends to local environment (“mestisage”)
Cons of cultural globalization:

 Spread of commodity-based consumer culture


 Dangers of cultural homogenization
 Westernization, cultural imperialism or cultural colonialism
 Some small cultures may lose their distinct features
 Dangerous or violent ideals can also spread faster (note the international character of the terror
group IS)
Political globalization
The political dimension is a newer feature of the globalization debate, as over the last 30 years there has
been a rise in the influence and power of international and regional institutions such as the European
Union (EU), Organization for Economic Cooperation and Development (OECD), the United Nations
(UN), the World Trade Organization (WTO), MERCOSUR in South America, and the Association for
Southeast Asian Nations (ASEAN). These international and supranational actors increasingly shape
domestic politics.
Pros of political globalization:

 Access to international aid and financial support


 It contributes to world peace. It reduces risk of invasions, more checks on big powers and
limitation on nationalism
 International organizations are often committed to spread values like freedom and to fight abuses
within countries
 Smaller countries can work together and gain more influence internationally
 Governments can learn from each other
Cons of political globalization:

 State sovereignty is reduced


 The functioning of international and supranational organizations is often not “democratic” in
terms of representation and accountability
 Big countries can shape decisions in supranational organizations
 Sometimes countries can veto decisions and slow down decision-making processes
 Coordination is difficult and expensive
To summarize, no matter from which angle we look at globalization, whether economic, cultural or
political, both the opportunities and drawbacks are numerous.
Our economic development will forever be defined as our ability to succeed internationally. PwC
forecasts India’s real annual GDP growth until 2050 at 8.9 percent, Vietnam’s at 8.8 percent, and China’s
at 5.9 percent. The list of fast-growing emerging markets goes on and on. The U.S. forecast is a meager
2.4 percent, comparable with most Western economies. The domestic companies that are likely to see
incremental growth in the coming decades are those that are not only doing business internationally, but
that are developing the strategic skill set to master doing business across cultures. Cross-cultural core
competence is at the crux of today’s sustainable competitive advantage.
If one day you’re asked to manage a supply chain in Malaysia, the next day you’re managing your virtual
team in China, and the next you’re optimizing your company’s call center in India, you know that it’s just
not possible to be an expert in every culture or geography in which you do business. What is possible is
developing the mindset of a globalist — or, in other words, mastering cross-cultural core competency.
If I tell you that when you engage in a sales call in the United States, the acceptable spatial proximity
between you and your prospect is 2.5 feet, I have accomplished the equivalent of a fisherman giving you a
fish. If I demonstrate to you, instead, how uncomfortable you feel when I say hello and proceed to shake
your hand while standing 6 inches from your face, I have accomplished the equivalent of teaching you to
fish. You now know that every culture has a specific, acceptable space proximity. By sheer observation,
you have added this to your cross-cultural tool belt. The next time you get off the plane anywhere in the
world, you will look around and observe how far apart people are standing, log that information
somewhere in your busy brain, and proceed to your next meeting armed with information that will avoid
instant discomfort and a potential disconnect that may jeopardize business with your international
counterpart.
Now imagine if you could augment this simplistic metaphor incrementally, to every aspect in which
culture impacts business.
A Framework for Understanding
Culture has many definitions. My own definition is that culture is our collective experience as a society,
and its impact on our reaction and decision-making relative to every-day facts and circumstances.
Why is cross-cultural competence critical to your professional future and the viability of your company?
It’s omnipresent in every business interaction and strategic decision. According to a May 2006 Accenture
study, optimizing this process through training can increase productivity by 30 percent. For example, if a
company’s director of marketing embarks on a campaign demonstrating how speedy its service is, when
the underlying cultural motivation of the international customer is almost completely focused on customer
service, the value proposition consists of selling ice in the wintertime — there’s plenty of it, and it was
never wanted to begin with.
It is not feasible to be an expert on all the world’s cultures. It is possible, however, to incorporate a cross-
cultural framework that improves cross-cultural understanding and interactions. One such framework, the
Business Model of Intercultural Analysis [BMIA™], uses the following six “comprehension lenses” to
examine enterprise-wide cross cultural challenges: cultural themes, communication, group dynamics,
‘glocalization,’ process engineering, and time orientation. Let us examine some examples of American
executives interacting with Chinese executives to illustrate how a few of these comprehension lenses
impact business.
Cultural Themes
Every society has its own “cultural themes,” which have a substantial impact on how that culture does
business. Chinese cultural themes are rooted in folk belief and Confucian values, including filial piety,
thrift, endurance, and trustworthiness. These values are deeply engrained in the Chinese psyche. The
Confucian value of endurance has a profound impact on the business process. The members of a Chinese
negotiations team will seek protracted negotiations to test their counterpart’s endurance. They will,
therefore, typically initiate with an offer that is inconceivably low to enable extensive haggling, so as to
demonstrate endurance and evaluate an adversary’s endurance. The unwitting Westerner may misinterpret
this as unreasonable and storm out of the meeting, instead of participating in the “haggling dance” the
Chinese executive is eagerly anticipating as normal and expected. The total disconnect causes a loss of
business opportunity, or alternatively, leaves dollars on the table as the exhausted Westerner, unprepared
for the duration of the exchange, makes price concessions way too early.
Communication
An understanding of the subtle challenges in the use of English with non-native speakers, as well as the
nuances of non-verbal communication, is critical to achieving business objectives when operating across
cultures. In East Asian cultures, communication is very subtle and indirect. Thus, the direct style of
Western communication can easily create serious offense, despite the best of intentions. The term “no,”
for example, is rarely used in deference to more indirect methods of communicating and an American
may hear the Chinese cue for the word “no” — including the phrases “maybe,” “we shall see” and “we
shall study it,” without ever realizing that these phrases are the Chinese equivalent of “no.” Failure to
understand these cues wastes time and money, and is the basis of communication failure that can
jeopardize the business objective. Failure to understand simple but subtle issues in communication may
also cause both you and your counterpart to lose face. Creating a loss of face for your Chinese counterpart
is devastating to the business relationship and often unrecoverable — leading once again to loss of
opportunity.
Group Dynamics
This comprehension lens involves the understanding of how individuals from certain cultures interact in
groups. An understanding of group dynamics in the target culture significantly impacts the sales process.
In individualistic cultures, such as the United States, customers make most of their buying decisions
individually, whereas in collectivistic cultures, decisions are significantly influenced by the group
(family, extended family, network of friends and colleagues, and the community at large). While the
decision-maker may appear to be at the negotiation table because that individual is the chairman of the
company, the shots may be being called by individuals not present (father, grandfather or uncle, for
example). In China, a highly collectivist culture, the marketing collateral and sales process needs to be
targeted toward the group, and not toward the individual.
Glocalization
Global branding, messaging, corporate values, and marketing all have to be localized — thus the term
“glocalization.” If a company’s headquarters is in Asia, with satellite offices in Europe and North
America, the global brand, messaging, and indeed every type of communication, whether internal or
external, needs to be translated in a way that is culturally fluent — not merely linguistically fluent. The
value proposition of any communication may be entirely valid, but if it is presented in a way that cannot
be “heard,” or that violates cultural norms or expectations, then the messaging, however significant, will
fall on deaf ears.
Picture the financial loss when Disney opened “Euro Disney” in Paris and made the following mistakes:
Naming it the equivalent of “Dollar Disney” — as “Euro” is the nomenclature is associated by Europeans
as their currency, not an abbreviation for their continent
Using plastic cutlery in a country that prides itself in the culinary experience
Touting Mickey Mouse and other characters as childhood heroes at the expense of the society’s actual
childhood cartoon icons
Ignoring the necessity of providing kennels to a culture that so frequently travels with dogs
Not considering the “product unfriendliness” of having product instructions in English (despite the fact
that most products were ready-to-use)
Not offering wine with meals
That failure to “glocalize,” among other strategic go-to-market mistakes, cost them dearly: After only two
years in operation, they ran out of cash and had to borrow 175 million dollars to keep operating.

Process Engineering
There is a significant difference between a company that is multinational, and a company that is truly
global. The difference is that a multinational company simply operates in multiple nations; a global
company has embarked upon the journey of systematically updating its policies, procedures, and systems
across multiple cultures. Some of the most significant challenges are often IT-related. Even given the
incredible advances in modern-day technology, global companies still suffer from program and platform
inconsistencies. Where technological practicality or the realities of budget do not permit complete
integration, that disconnect must be evaluated and corrected. At a minimum, all offices in the operation
must “know what they don’t know” regarding the business processes, IT systems, and the roll-out of
global policy and procedure, to assure maximum efficiency, risk reduction and cost optimization. Typical
examples include requests from finance in HQ in the United States requesting financial reports from
satellite offices around the world. The HQ platform might have the capability to generate the report with
the specific information and format requested in a blink of an eye (or at least the click of a mouse), but a
satellite office in Senegal might require a programmer or a wiz with an excel spreadsheet over the course
of a week to effectuate the same result. Knowing means that reasonable expectations for the deliverable
can be set.
Time Orientation
The concept of time orientation refers to the way in which a society values, executes and utilizes time. In
Western cultures, time is a commodity. If you’re not early, you’re late. Time is money. Time is divided
into the sixty minutes of a standard clock. In two-thirds of the world, time happens “when it’s supposed
to,” and is characterized as flexible and elastic. The most striking difference between China and Western
cultures in this regard is the long-term orientation of the Chinese culture. The culture has survived for
thousands of years, through flood and famine and having been invaded on all sides by multiple forces.
The longevity of the culture combined with Confucian philosophy yields a long-term orientation that
materializes in the business world in several ways. Short-term wastefulness in a supply chain, for
example, is despised because thrift is a significant virtue, but professional development training that will
lead to long-term corporate growth may see lavish expenditures. Business planning is not quarterly or
annual, but often is anticipated for the next decade, or even decades.
Leveraging the Power of Culture
While the U.S. has enjoyed decades of domestic economic prosperity, recent economic challenges remind
us that our future economic success revolves around succeeding in the global economy. It’s not about
who’s bigger, better, brighter, or faster; it’s about who is empowered to leverage the power of culture to
optimize an organization’s bottom line. Cross-cultural differences have time and time again been
identified as the most significant impediment to successful international ventures and projects. These
obstacles can be transformed into opportunities with a framework for tackling them head-on.

Resources and Capabilities of Walmart


Wal-Mart is one of the largest private sector employers in the world, with employee strength of greater
than 2.1 million [i] . The company’s founder, Sam Walton has always focused on improving sales,
constantly reducing costs, adopting efficient distribution and logistics management systems and using
innovative information technology tools. (P. Mohan Chandran, 2003)

Discount Industry Value Chain

Wal-Mart Value Chain

Four Criteria of Sustainable Competitive Advantage

Valuable

Wal-Mart’s skills in developing and using POP data collection to control inventory

Long-term relationship with vendors

Rare Capabilities

For years, Wal-Mart’s POP system was rare

Ability to allure customers by lowest costs

Costly to Imitate

Wal-Mart’s shorter value chain compared to its competitors

Brand Value

Non-Substitutable

If Wal-Mart continues to expand and sustain sales, there should be no fear of direct substitution in near
future

Wal-mart’s Basic Value Chain

ii

Procurement and Distribution


Wal-Mart has always emphasized the need to reduce its costs of purchasing and offer the best prices
possible in the market to customers. Wal-Mart procures goods directly from manufactures, bypassing all
other intermediaries. Whereas its industry competitors have a longer value chain as shown above. In case
of Wal-Mart, it has built a core competency for itself by being a leader in the distribution and retail
division, which in turn has led them create a competitive advantage for itself. Wal-Mart is a tough
negotiator on prices and finalizes a purchase deal only when it is sure that the price at which they are
procuring in the minimum possible. Wal-Mart spends a significant amount of time with vendors and
understanding their cost structure. The retailer ensures that manufacturer does the best to cut down prices.
Wal-Mart believes in establishing long-term relationship with the vendors. [iii]

Wal-mart has distribution centers located at different geographical locations in the US. Wal-Marts own
warehouses provides 85% of the inventory, as compared to 50-60% for its competitors. Wal-Mart is able
to provide replenishments within two days, whereas, its competitors in at least five days. Shipping costs
for Wal-Mart is roughly 3% compared to 5% for its competitors. The distribution centers ensured a steady
and consistent flow of products to support the supply function.

As Wal-Mart uses sophisticated barcode technology and hand-held computer systems, managing the
center becomes easier and more economical. It’s technological systems ensures that information
regarding the inventory level of all the products is accessible to every employee. The hand-held computer
enables the employee to keep track of the location of a particular product from a particular bin or shelf in
the center. The quantity of product required from the center is entered into the hand-held computer which
gets updated in the server. The hand-held computer also enables the packaging department to get accurate
information about products to be packed. It displays all information about the storage, packaging and
shipping of a particular product thus, saving time on unnecessary paperwork. This enables the company to
satisfy customer needs quickly and improve the level of efficiency of the distribution center management
operations.

Logistics Management

The main feature of Wal-Mart’s Logistics infrastructure is its transportation system. The distribution
center is serviced by more than 3500 trucks of its own. These dedicated trucks that Wal-Mart owns help
them in shipping goods from the distribution centers to the stores within two days and replenish the store
shelves twice a week. Wal-Mart believes that it needs drivers who are committed and dedicated to
customer service. The company hires only experienced drivers who have driven more than 3,00,000
accident free miles, with no major traffic violation.
To make its distribution process more efficient, Wal-Mart also made use of a logistics technique known
as ‘cross-docking’. In this system, the finished goods were directly picked up from the manufacturing
plant of a supplier, sorted out and then directly supplied to the customers. The system reduced the
handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.

In Cross docking , requisitions received for different goods from a store were converted into purchase or
procurement orders. These purchase orders are then forwarded to the manufacturers who convey their
ability or inability to supply the goods within a particular period of time. In cases where the manufacturer
agrees to supply the required goods within the specified time, the goods are directly forwarded to a place
called staging area. The goods are packed here according to the orders received from different stores and
directly sent to different customers. Traditionally, decisions about merchandising, pricing and promotions
had been highly centralised and were generally taken at the corporate level. The cross-docking system,
however, changed this practice. The system shifted focus from “supply chain” to “demand chain”
(Byrnes), which meant that instead of the retailer ‘pushing’ products into the system; customers could
‘pull’ products, when and where they need it.

Inventory Management

Wal-Mart has invested heavily in IT and communication systems to effectively track sales and
merchandise inventories in stores across the country. With rapid expansion of Wal-Mart stores across US,
it was essential to have a good communication system. Hence, Wal-Mart set up its own satellite
communication system in 1983. Its benefits are as Sam Walton rightly said that he can go to any
technician and talk on the phone to any store that might have a problem with system and gauge how a
particular day is going. On the screen, he could see total of the day’s bank credit sales adding up as they
occur. If something important is to be conveyed to the stores and distribution centers, he or any Wal-Mart
executive can walk to the TV studio and get on the satellite transmission and get it right there.

Wal-Mart is able to reduce unproductive inventory by allowing stores to manage their own stocks,
reducing pack sizes across many product categories, and timely price markdowns. Instead of cutting
inventory across the board, Wal-Mart made full use of IT capabilities to make more inventories available
in case of items that customers wanted the most, while reducing the overall inventory levels. Wal-Mart
has also networked all its suppliers through computers. Employees at Wal-Mart have hand-held
computers which are linked to the in-store terminals through a radio frequency network. These help them
track the inventory in stores, deliveries and backup merchandise in stock at the distribution centers. The
order management and store replenishment of goods were entirely executed with the help of computers
through the Point-of-Sales (POS) system. Through this system it is possible to monitor and track the sales
and merchandise stock levels on the store shelves. Wal-Mart also made use of the sophisticated algorithm
system which enabled them to forecast exact quantities of each item to be delivered, based on inventories
in each store. Wal-Mart also uses a centralized inventory data system using which the personnel at stores
can find out the level of inventories and the location of each product at any given time.

In 1991, Wal-Mart has invested approximately $4 billion to build a retail link system. More than 10,000
Wal-Mart retail suppliers used the retail link system to monitor the sales of their goods at stores and
replenish inventories. The details of daily transactions, which approximately amounted to more than 10
million per day, were processed through this integrated system and are furnished to every Wal-Mart store
by 4AM the next day. Wal-Mart tied up with Atlas Commerce for upgrading the system through the
Internet enabled technologies. Wal-Mart owns the largest and most sophisticated computer system in the
private sector.

By making effective use of computers in all it’s company operations, Wal-Mart is successful in providing
uninterrupted service to its customers, suppliers, stockholders and trade partners.

The Benefits Reaped

Wal-Mart strongly believed and constantly emphasized on strengthening its relationship with its
customers, suppliers and employees. The company made efforts to capitalize every cost saving
opportunity. The savings on cost were always passed on the the customers, thereby adding value at every
stage and process. Wal-Mart enjoyed the benefits of low transportation costs since it had its own
transportation system which assisted Wal-Mart in delivering goods to different stores within 48 hours.
The company enjoyed good bargaining power as it purchased huge quantities. Low pricing ensured that
the sales volume were high and consistent. The benefits of an efficient supply chain management system
included reduction in lead time, faster inventory turnover, accurate forecasting of inventory levels,
increased warehouse space, reduction in safety stock and better working capital utilization. It also helped
reduce the dependency on the distribution center management personnel resulting in minimization of
training costs and errors. The stock-out of goods and the subsequent loss arising out of it was completely
eliminated. Wal-Mart’s Supply chain management practiced resulted in increased efficiency in operations
and better customer service. Cross docking also helped Wal-Mart to reduce inventory storage costs. It
also helped to cut down the labor and other handling costs in loading and unloading of goods.

Walmart Value Chain Analysis:


all the criticism leveled against Walmart, it is known to have changed the face of retail in US and around
the world in many more countries. Known for its cost leadership strategy, Walmart has expanded its
international presence quite fast. It has seen rapid growth and the popularity of the brand is due to the
matchless deals it provides. Its more than 11500 units are operational across 28 countries. In 11 of these
countries, its e-commerce websites are operational.
The retail brand employs more than 2.3 million globally. The credit of the growth and financial success of
Walmart apart from Sam Walton’s leadership and values goes to successful value chain management.
Here is a value chain analysis of Walmart that analyses how the brand has managed activities down its
value chain to derive extraordinary value. A value chain includes all the activities involved in the
production and sales of the brand from the conception and sourcing of raw material to final sales and
service. It is an analytical tool introduced by Michael E Porter of Harvard Business School. Optimizing
the value chain can make it more efficient and can help generate sources of competitive advantage for the
business.

Primary Activities:
Inbound logistics:
Walmart’s suppliers are thousands of businesses spread globally. To keep its costs lower than the
competitors, Walmart has to depend on it suppliers. Since Walmart buys in bulk from its suppliers, it has
no difficulty managing prices. Based on its financial clout and size, Walmart is able to press the suppliers
for lower prices. Apart from it Walmart has also focused on efficient supply chain management and
inventory management to manage its supply chain costs. It has made use of technology and apps to
manage supply of material and inventory which also helps keeping costs low. The suppliers are
responsible for providing materials in real time as per requirement. Apart from it Walmart has also
applied a code of conduct for the suppliers. It has focused on managing long term relationships for
efficient sourcing and for keeping prices low. It offers its suppliers the potential for high volume
purchases in the long term for the lowest prices. This strategic partnership with the vendors has helped it
better manage its supply chain.
Operations:
Walmart operates in the retail sector and this sector has seen a lot of growth during the recent three years.
Today, Walmart operates across 28 countries and under 63 banners. It has more than 11500 retail units
operational worldwide. Sam’s club is a retail membership-based warehouse club that 662 retail units
operational in United States. In US alone, Walmart has 4,692 retail units operational. The number of
Walmart Super centers is 3,534 and that of discount stores is 412. There are 48 small format Walmart
retail stores and 698 neighborhood markets in US. Today, more than 1.5 million associates are employed
across more than 5,000 retail stores of Walmart in US.
Outbound logistics:
At the core of Walmart’s inventory management technique is a supply chain practice called cross
docking. The products received from the suppliers are cross docked at the distribution centres and then
forwarded to the stores. This keeps the inventory and transportation costs low and cuts down on the time
needed for transportation and thus eliminates inefficiencies. In this way, the Walmart stores are
immediately replenished without having to wait for long periods. This has reduced the costs for Walmart
and the benefits can be passed on to the customers. Its more than 150 distribution centres are the hub of
activity for its business. These distribution centres serve the stores, clubs and deliver to the customers
directly.
Marketing and sales:
Walmart’s slogan is “Save money. Live better”. Its pricing strategy is one of the key elements of its
marketing strategy. The everyday low prices strategy has helped it build a reputation of the best price
retailer. However, apart from it Walmart also spends billions on marketing. It advertises and promotes its
brand and deals through several advertising channels including traditional and digital channels. From
promotional videos to social media, Walmart uses them all for the promotion of its brands. Apart from it,
customer service is also a key part of its strategy that helps create a positive brand image and better
reputation.

Support Activities:

Technology:
Walmart has made extensive use of technology for better supply chain management and sales as well as
customer service. From smarter apps for inventory management to ecommerce websites it has used
technology to gain efficiency. A number of technological tools are used to keep the managers updated and
the stores well supplied. Technology has become indispensable for efficiency in the retail business.
Human Resource Management:
In the past, Walmart has faced severe criticism for its poor Human resource practices. However, things
have changed in the recent years. It had faced most criticism over its wage policy. Now, it has improved
the minimum wages to more than $13 and is investing $2.7 billion in wages, education and training. Last
year, it also promoted more than 200,000 people to jobs with higher responsibility and better pay.
Procurement:
One of the key focus areas at Walmart is procurement. It has managed strategic relationships with its
suppliers to keep costs of material lower. These suppliers provide standard products and services as
mentioned in the suppliers’ code.
Firm Infrastructure:
The infrastructure of any organization plays a key role in the success of that firm. Walmart has built a
very large infrastructure that includes its management, supply chain, human resources, its distribution and
fulfilment centers and more. Apart from excellent management of its technological and financial
resources now it is focusing on managing its employees better to be more successful. It has kept
increasing its investment in technology and people during the recent years considering their importance
for the faster growth and success of the brand.

Porter's generic strategy framework


Porter (1985) argued that competitive advantage depends on selection of the most appropriate generic
strategy for achieving companies’ objectives in the context of the competitive environment. Framework
distinguishes three types of competitive strategies: a cost leadership, differentiation and focus strategy,
which are shown in Figure
Source: G. Stonehouse, D. Campbell & J. Hamill, Global and transnational business, 2004, p. 175.
Cost leadership strategy emphasizes low costs in the relation to costs of competitors, but does not
neglect other aspects like service or quality of the products. This type of strategy can be most efficient in
situations, where price elasticity of product demand is high. Companies can sell at average or even below
average prices to gain big market share. When the prices in the maturity/saturation phase decline,
companies can still maintain its leading position and profitability in contrary to other firms in the
industry. However, this is a strategy, which can be imitated by competitors at any given time, since the
products itself do not offer any competitive advantage.
Differentiation strategy should allow companies to charge above average prices due to uniqueness of
products, superiority of brands or superior services. This strategy can be achieved with better research and
development (hereinafter: R&D) capabilities, creative development team, better marketing, brand name,
and many more. Companies adapting this type of strategy can face various challenges, such as changes in
customers preferences, imitation by competitors or niche players, who are pursuing a focus strategy.
Focus strategy is used, when companies target only a special group of customers and within that aim to
achieve either a cost advantage or differentiation. Due to narrow market and low volumes of products or
services these companies may have lesser bargaining power with their suppliers, but on the other side,
they can pass on higher costs to their customers. Challenges that companies have to face with are mainly
copycats, pressure from other focus players and threats from cost leaders (Grunda, Stankevičiūtė &
Bartkus, 2012). Good examples of focus strategy are Porsche and Ferrari in automotive industry, where
they only focus on the performance car segment and do not produce for other segments, therefore the cars
are sold on the basis of the brand, consumer perception and preferences - better design, superior
performance, etc.