Bus 285 - Case Study on Walmart the Retail Giant

Final Project: Case Study # 5

Wal-Mart

LaNeika R. Johnson

Bus 285 0901- Management Issues

Fayetteville Technical Community College

Company Overview

Organizational Specifics

(Corporate Structure, Sales, History)

The Fortune 500 Company that I chose to research is a company that America loves to hate, Walmart or "Wally World" as it is often referred. Being ranked #1 on the Fortune 500 list for 2010 "Walmart is the largest grocery retailer in the United States" (www.cnnmoney.com). They have reached this position through having over 100,000 suppliers, 2 million Walmart associates and 8,400 stores in 15 countries. Wal-Mart had revenues that reached 408,214,000 and profits of 14,335,000 as stated on cnnmoney.com. As it relates to Revenues and Profits, Wal-Mart's competition came from other types of businesses such as Exxon, Chevron, AT&T, Bank of America, and Ford Motor Company instead of through retailers such as Target, Kmart, or Meijer's. Many of the other top ten companies experienced a reduction in profits compared to Wal-Mart's 7% increase from 2008. Ruling this leading position is not new to this retailer. Through surpassing the previous year's revenues and profits surging through the roof, Walmart's destined to appear on top yet again.

"Saving people money to help them live better" was the belief that Sam Walton envisioned when he opened the doors to the first Walmart store (www.walmartstores.com). Over 40 years after its initial launch, Walmart is continuing to provide the service and commitment to its customers as Sam Walton desired. Walmart started from a truly humble beginning in Rogers, Arkansas in 1962, headquartered in Bentonville, Arkansas. Walmart the largest grocery retailer in the U.S. and it is also the largest private employer. Sam Walton gained his retail and business experience through working for companies such as J.C. Penny and another discount store, where he realized the importance of appealing to the small communities. Walmart expanded from one store to over thirty-five stores by October 1970 generating 44.2 million in sales (www.pbs.org). During 1970, Walmart also became a publicly traded company, listed on the NYSE in 1972. In 1988, Walmart opened the doors of its first super center in Missouri. In a few short years, Walmart expanded internationally by opening its doors in Mexico City, Mexico. By 1995, Walmart has stores in every state and various locations globally including Canada, Mexico, Puerto Rico, Hong Kong, Brazil, Argentina, and China. By 1997, Walmart's success had reached exponential success by reaching $100 billion in sales for the first time, which now commonplace for the retail giant. Walmart made history in 2002, by having its largest sales day on "Black Friday" by reaching $1.43 billion in sales.

Walmart's corporate structure has changed over the years. As of January, 29, 2010, the EVP and COO of Walmart US implemented a new organizational structure. The new structures are a culmination of three operating divisions, including Store Operations, Logistics, and Real Estate. Walmart incorporated three geographical units called Walmart North, Walmart South, and Walmart West. The units will handle all of the functions of Walmart's growing organization. Through the implementation of these new divisions, Walmart feels this will allow them to maximize all of its business potential in its current and new markets. Walmart's business structure allows opportunities for the careers of its associates, which is a new step for them. Through proper delegation of a manager's span of control, they can now focus on the region's development and knowledge required for their continued success.

Financial Specifics

(Past Sales and Predicted Sales)

Walmart combined sales for fiscal year 2011(ended Jan, 31 2011) is a staggering $418 billion according its fiscal year 2011 annual report. Last year, Wal-Mart had revenues of $405 billion which allowed it to return to the number one place according to the Fortune 500 list. Walmart's net sales have progressively grown since 2007. In FY07 nets sales were 345 billion; FY08 374 billion; FY09 401 billion; FY10 405 billion, FY11 net sales reached 419 billion which was a 3.4% from the previous year. As stated in Walmart annual report, for "FY12, Walmart expects their net sales to grow between 4% and 6% through new square footage and comparable sales. Walmart International remains a major contributor to growth."

Business Model

After Walmart earnings per share struggled in 2006, they regrouped and changed their usual game plan for their business model. Prior to 2006, Walmart focused on the supply side of their company. Walmart refocused their business model to the demand side of things by focusing on the products they sell, which improved their bottom line since 2006 as reflected in their overall sales growth. Walmart adapted a strategy to sell more products to current customers, rather than trying to appeal to new customers selling the same amount of goods.

Walmart also incorporated into its business model the use of the Internet by adding online shopping a few years ago. In April 2011, Walmart signed an agreement with the California based social media technology company Kosmix. Through this partnership, Walmart will expand its WalmartLabs sector, and continue to maintain its dominance in the retail community by enhancing its social media capabilities through creating a relationship with brick and mortar stores and e-commerce.

Walmart is the forerunner of retail companies in this day and age. They've beaten their rivals through incorporating a advanced delivery system that is highly effective and allowed their production to outperform the competition. None of Walmart's competitors had a system of production and distribution which gave them an edge. Many of its rivals transported goods over longer traveling distances, while Walmart strategically placed distribution centers in small towns to maximize their travel time and expenses. This level of information technology has made tracking, production and distribution much simpler for the company. The competition noticed Walmart's business model and tried to emulate it as close as possible. Overall Walmart's ultimate goal with its business model is always to provide a variety of products at low prices.

Mission