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Block 2.

1 International Logistics and Management

Case study: Wal-Mart


Done by Edgar Nebylitsa

Hogeschool Zuyd, Maastricht International Business and Management Studies September 2008 Work description
I should study case of Wal-Mart by finding appropriate sources of information on the Internet and library. I should answer 10 questions related to this topic.

Introduction
Wal-Mart is a chain of a large size discount department stores through all America, Canada, Mexico, Japan, and many other countries. Wal-Mart was found by Sam Walton 1962 and was listed on NYSE after 10 years in 1972. In 80s Wal-Mart was growing rapidly and operated 1,198 stores around North America. By this time Wal-Mart had its own satellite and communication system. Sam Walton gave its CEO place to David Glass but still remained in company as a chairman of the board. In 90s company opened stores in South America entering this market in 1995. By acquisition of ASDA in UK it came on to European market. In October 2005 Wal-Mart decided to implement some measures to increase energy efficiency by powering their shops with wind turbines and solar panels. First shops operated on this energy were located in Las Vegas and Texas. In 2007 Wal-Mart introduced new advertising campaign. For over 19 years Wal-Mart kept using slogan Always low prices, always, however they have replaced it with slogan Save money, live better. Today Wal-Mart is one of largest employees in the world. Total amount of people working as its employees is more then 2.000.000.

SWOT analysis
I will use several criterions to complete SWOT analysis: 1. For internal analysis: 1.1. management and executive staff 1.2. marketing 1.3. finance and accounting 1.4. production 1.5. research and development

2. External analysis: 2.1. economics and market 2.2. social, cultural, environment 2.3. political, legal, governmental 2.4. technology 2.5. competitive advantage

Strength
Management and executives: Wal-Mart has a focused strategy on relations inside company. Quality designed hierarchy of employees from execution to cashiers. Managerial staff is loyal to company and its interest, because to become a member of managerial teem one has to reach this top over some time. They are implementing new ideas for higher efficiency. Marketing: Powerful and trusted brand. Company is not outsourcing its marketing operations (has its own central unit). Wal-Mart has professionally breed teem which focuses on certain goals of company. Constant researches allow following trends on the market and react immediately to a change of climate. Newly developed ideas allow creating owned and certain trends on the market giving company a leading position. Finance and accounting: Financial position of Wal-Mart is desirable by many companies. Low margin (about 4 percent) and delivery cost reduction allows them to put affordable prices that are almost impossible to compete if you are a smaller retailer. Stable financial position gives opportunity for accessing capital market and borrowing funds for development. Production: Innovative technologies and ideas decrease prices constantly. For many suppliers Wal-Mart is a desirable buyer because they dont charge slotting fee. Almost 70 percent of goods sold in Wal-Mart are produced in China therefore cost is low. 40 percent of goods sold in Wal-Mart are private label brands produced only for WalMart. Research and development: Development is based on goal to make products even cheaper. Wal-Mart uses new technologies in trading methods (i.e. online sales), in delivery and production methods. Through logistics it decreases prices of each good. It launched its own satellite to track the deliveries and organize sales.

Weaknesses
Management and executives: Pressure from feminists: Wal-Mart is called a sexist organization due to only 33 percent of women in managerial circles. Pressure from labor unions and antiglobalist organizations striking central offices. Such a big structure is heavy to manage even with such professionals in charge.

Marketing: Due to its diversity of product assortment it is hard to concentrate on specific fields and this makes them not so flexible in certain product demand. Does not represent premium market products.

Accountancy and finance: In case of financial crisis on market there is an option of going totally bad with only 4 percent margin. Being a public company makes them available for hostile takeover (however that is almost impossible). Production: 70 percent of sold goods are manufactured in China and are of lower quality then of those manufactured in EU or inside US.

Stakeholders of Wal-Mart
Wal Mart stakeholders: The owners. Executives so the director and other office personnel. Employees who work for the whole company. Family members of employees. Communities where Wal Mart is located and makes an impact on the local society. The customers and consumers who shop there or are the final customers, someone may buy a gift for a friend or a family member. Local government and authorities, wall mart might have contract with local government about waste, other authorities like healthcare, insurers and national bank.

Competitive advantage
Wal-Marts competitive advantages are: Low prices All you need in one place Fast reaction on climate change in demand Well organized logistics through the distribution centers (one of cornerstones of their competitive advantage) Implemented RFID technology allows faster distribution center functioning Corporate culture allowing to economize Strong influence on market demand

Key objectives

"The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good-quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience." - Sam Walton (1918-1992) The central goal of Wal-Mart is to keep retail prices as low as possible no matter what. Even with a margin of 3 4 percent and the company has been very successful at this. Experts estimate that Wal-Mart saves shoppers at least 15 percent on a typical cart of groceries. Everything - including the technology and corporate culture - feeds into that ultimate goal of delivering the lowest prices possible. Wal-Mart also pushes its suppliers, some say relentlessly, to cut prices. Not only Wal-Mart is economizing on expenses, their objectives are higher than that. All their system is built on HRM and corporate culture they implement.

How objectives are pursued by philosophies and principals


Wal-Mart is headquartered in Bentonville, Arkansas, instead of an expensive city like New York. The building is drab and dull. It is not possible to catch executives in limousines or see them dragging into work at 9:30 a.m. Executives fly coach and often share hotel rooms with colleagues. They work long hours, typically arriving at work before 6:30 a.m. and working half-days on Saturdays. Store managers often work more than 70 hours per week. They are expected to pinch pennies wherever they can, even on things like the heating and cooling of the stores. In the winter, stores are kept at 70 degrees Fahrenheit, and in the summer, they stay at 73.

Organizational culture of Wal-Mart


Since Wal-Mart was founded in 1962, it has been committed to maintaining an environment in which their associates were proud to work. Suppliers and other business partners know they are being treated fairly, and shareholders can invest in Wal-Mart with confidence. Therefore Wal-Mart managers and all staff in all shops contribute to Statement of Ethics of Wal-Mart. Statement of Ethics first of all is document, secondly it is a tool to make sure all store operate with the highest integrity at all times. Document must be obeyed by staff and is available to customers on their website. Statement of Ethics is based on three pillars: Respect for the Individual Service to our Customers Striving for Excellence

These principles are major ones in the Statement to help associates make the right decisions, and to act with integrity:

Always act with integrity. Lead with integrity, and expect others to work with integrity. Follow the law at all times. Be honest and fair. Reveal and report all information truthfully, without manipulation or misrepresentation. Work, actions, and relationships outside of your position with the company should be free of any conflicts of interest (discussed later in this guide). Respect and encourage diversity, and never discriminate against anyone. Ask your manager or the Global Ethics Office for help if you have questions about this Statement of Ethics, or if you face an ethical problem. Promptly report suspected violations of the Statement of Ethics. Cooperate with and maintain the private nature of any investigation of a possible ethics violation. When involved in an ethics investigation, you should reveal and report all information truthfully. You should present all the facts you are aware of without personal opinion, bias, or judgment.

Management process of Wall-Mart


A Wal-Mart manager shares four crucial steps for launching new projects within a big corporation. Alicia Ledlie, one of top executives in Wal-Mart chain describes the main rules of their management processes and they look like this: Exploit Your Companys Competitive Advantages: manager should always know what is the main advantage of his company and use it as much as possible even sometimes persuading the approach more aggressively. Enlist Key Supporters at the Top: have passionate supporters in all management by giving them updated information on your projects progress so they feel empowered with the latest news. Recruit Allies in Other Departments: in addition to friends in high places, youll also benefit from alliances in mid- and entry-level positions, where people develop valuable specialized knowledge. When youre refining product features or developing a business plan, look to people in other departments for ideas and feedback Look Beyond Quantifiable Metrics: dont blindly believe in market surveys and research papers, use more powerful tools to confirm facts. There is no more powerful way to communicate on your idea for an improvement than to use the words of a customer or employee who is clamoring for it.

These are the basics for Wal-Mart managers. Of course no one can force to obey them in 100 percent way, every manager is building his own instruments on these fundamentals, however the basis is mandatory.

Planning and controlling process of Wal-Mart


Wal-Marts real business takes place not in Bentonville, but in thousands of discount stores and supercenters. Here the essential corporate cadres are the managers and assistant managers. They are responsible for meeting the sales targets and expense ratios that Bentonvilles computers relentlessly put before them each week. The WalMart corporate culture may smooth their way, but the job of the manager, sometimes the only salaried employee in the store, and his assistants, is essentially labor management. Planning is done by management on basis of researches done by marketing department. Information is automatically collected through the IT system developed specially for Wal-Mart. Information is gathered from sale points, distribution centers and suppliers of the company. Then it is processed and delivered to executives.

HRM
Looking at Wal-Marts Human Resource Management, one of the most important aspects is Wal-Marts employee advancement program. Currently, 65% of the companys managers began working hourly jobs, such as cashiers. Wal-Mart has taken great efforts to ensure that there are opportunities for their employees to rise up through the ranks so to speak. Wal-Mart has taken an additional step with college students by offering management training for college students while they are still in school so they are more developed and prepared upon their graduation. This program serves the purpose of making college students consider careers with Wal-Mart, and over the last two years, the program has had immense success. In fact they are raising up an employee for certain purposes and with certain attitude.

Sam Waltons 10 factors of building a successful business


1. Commit to your business 2. Share profits with associates and treat as partners 3. Motivate your partners 4. Communicate everything you possibly can to your partner 5. Appreciate everything your associates do for the business 6. Celebrate your success 7. Listen to everyone in your company 8. Exceed your customers expectations 9. Control your expenses better than your competition 10. Swim upstream Wal Mart is a global giant that keeps to these ten factors to run successfully in the long run, all the managers and executives are well motivated and keep they employees motivated so that they can carry tasks successfully.

Sam Walton defines these factors as the main engine of running a successful retailing company that over take globally and even make an alliance of superstores as they swim upstream grow and grow.

Conclusion
Indeed, Sam Walton has made a huge investment in establishment of such giant and properly functioning chain. Company from inside is strictly hierarchical and reminds of small state with its own life style. All inside processes are regulated by a series of principals, ethical issues and market situation at certain timeline. Today company has already involved such a number of regulated aspects in its activities that will help hold its leader position for a longer period, however they should be revising their business directions on yearly basis due to changing nature of market environment. Orientation should be pressured to retain competitive advantage on rapidly developing market with severe competition. For instance in 2008 Wal-Mart is already oriented on more premium sectors then earlier, this tactics will keap them in shape for several more years, then comes change of tactical vectors again.

Reference:
Bernstein, Aaron "Labor Finally Puts A Target on Wal-Mart" Business Week, Dec. 6, 2000 Canadian Business and Current Affairs "A giant, yes. Gentle, no: Wal-Mart stumbles into a cultural chasm" January, 1996 Reid, Keith. "The Wal-Mart Approach" National Petroleum News: May 2001 www.walmart.com, Fact Sheets, various, 2001, 2002, Found on "News," "About WalMart," and "Investor Relations" sections. www.walmartfoundation.org www.fortune.com Alicia Ledlie about management in Wal-Mart, http://www.bnet.com/2403-13070_23196887.html