Please answer the following questions in the end of this case study
Wal-Mart: the largest global corporation
Wal-Mart, the world’s largest retailer, is expanding rapidly. With worldwide sales of $245 billion in 2002 (profits of $8 billion) it could well double this figure in five years. With over 3,200 stores in the US it is aiming in particular to be a strong presence in the world’s top twenty countries, which account for 60% of all retail activity. It has been estimated that between 1995-99, 25% of the US economy’s productivity gains came from efficiencies at Wal-Mart. It is expected that 800,000 new jobs will be created by Wal-Mart in the US between 2003 and 2008. Some of the most significant stages in the expansion of the company are:
• The first Wal-Mart store opened in 1962 in Rogers, Arkansas. In 1968 the company expanded outside its ‘home state’ by starting outlets in Missouri and Oklahoma.
• In 1972 Wal-Mart was listed on the New York Stock Exchange.
• Wal-Mart makes its first acquisition, 16 Mohr-Value stores in Michigan and Illinois.
• In 1979 it became the first company to reach $1 billion in sales in such a short period of time. By now there were 276 stores in 11 states employing 21,000 people or ‘associates’ as they are called by Wal-Mart.
• Expansion continued at a rapid pace and by 1985 the company boasted 882 stores with sales of $8.4 billion and 104,000 employees.
• In 1987 the Wal-Mart Satellite Network (the largest private satellite communication system in the US) was completed, linking all operating units and the General Office.
• First Supercenter opened in Washington, Missouri in 1988.
• In 1990 Wal-Mart became America’s largest retailer.
• In 1991 the company opened its first foreign outlet, in Mexico City. Expansion into Puerto Rico (1992), Canada (1994), Hong Kong (1994), Brazil (1995), Argentina (1995), China (1996), Germany (1998), Korea (1998), the UK (1999) and Japan (2002)
• Within the USA the company entered its 50th state, Vermont in 1995. In 1997 it became the largest employer in the US with 680,000 employees, with an additional 115,000 workers in other countries.
• In 1997 Wal-Mart exceeded the $100 billion annual sales mark for the first time.
• By 1999 the worldwide workforce had reached 1,140,000, making the company the largest private employer in the world.
• In 2002, Wal-Mart became No.1 on the Fortune 500 list of the world’s largest corporations, surpassing Exxon Mobil. By now the company was employing more than 1.3 million people worldwide through more than 3,200 facilities in the US and more than 1,100 units abroad.
More than 100 million customers per week were visiting Wal-Mart stores worldwide. It was not until 1998 that Wal-Mart ventured into Europe when it bought Germany’s Wertkauf. It reached the UK in mid-1999 with the $10.7 billion acquisition of Asda’s 229 stores. The Wal-Mart name appeared on a UK store for the first time in 2000 when the first Asda-Wal-Mart Supercenter opened in Bristol. Now there are seven of these facilities throughout the UK. More recently Wal-Mart established a presence in Japan, its tenth operating country, buying 34% of Seiyu, a leading retailer. In China the plan is to increase the number of stores from 25 to 40 in 2003. A recent article in Time magazine quoted Lee Scott, Wal-Mart’s Chief Executive Officer as saying ‘Simply put, our long-term strategy is to be where we’re not.’ As the overall size of the company has increased, Wal-Mart has reached farther back into the supply chain to source products previously bought from intermediaries. The company has opened 21 offices around the world to oversee its supplier factories. The objective is to source goods universally for all stores where feasible, so that the 250 locations in Britain and the 20 locations in Brazil can get the same price as US outlets. It is also aiming to reduce inventory expenses by speeding up the supply lines. Wal-Mart buys big – in 2002 it purchased about $6 billion worth of goods from China alone. Its enormous size gives it a huge pricing leverage over suppliers.
Wal-Mart is constantly trying to stay ahead of the competition. Many of its standard stores are being replaced by huge supercentres. It has expanded its product range significantly in recent years and is now on the verge of moving into services such as selling cars and banking. The company is also maximising its use of advanced technology. Efficient air transport is an important part of company strategy, with a fleet of 20 jets kept near its Bentonville, Arkansas, headquarters. The objective is to allow managers to visit multiple markets in a single day and maintain tight central controls. Such is the size of the company that its sales figures are as much an indicator of America’s economic health as the latest government statistics. Although the company has a very positive image at home and abroad it has not been immune from criticism:
• Wal-Mart has attracted more lawsuits that any other firm in the US. This is largely as a result of its employment practices as it has battled aggressively to remain non-unionised.
• Civic activists accuse the company of turning CBDs ( Central Business District, or the "downtown" of a city) into ghost towns by constructing stadium-sized superstores on the fringes of moderately sized urban areas.
(a) Examine the development of Wal-Mart over its 40 year history.
(b) Why do some large companies like Wal-Mart decide to expand beyond the boundaries of their ‘home’ countries?
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The foundation of Wal-Mart dates back to 1962 when its founder, Mr. Sam Walton had started the first store in Rogers, Arkansas. Walton had a vision to provide the lowest prices anywhere and anytime and this was reflected in the corporate strategy of Wal-Mart. It was focused towards becoming the lowest-cost retailer. Achieving efficiency and effectiveness in operations was its primary strategy as it continued to open newer stores in the state of Arkansas. By 1967, there were 24 stores and the revenues had reached a record level of $12.7 million within first 5 years of operations. The company started diversifying nationally by expanding operations to the states of Missouri and Oklahoma. In 1970, the company became public and was...
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