Walmart Case Study

Wal-Mart:

Where did all the small businesses go?

Rasha Burara

Anela Sehovic

Bader Al-Askari

Matt Meikle

Problem statement

The purpose of this assignment is to analyze Wal-Mart and find out their strength, weaknesses, threats and opportunities. We will identify the company's issues by looking at internal and external factors that influences the corporation.

In the analyzing part we have made an SWOT analysis to identify Wal-Mart's strength, weaknesses, opportunities and threats to get better overview of the company. In general we can say that Wal-Mart's strength is their ability to recognize what their customer needs are by offering low prices on all their products. We have also made Porte's five forces which help us to analyze the external factors and the position of the company. Furthermore, we have looked on the ethical aspects that Wal-Mart is facing.

* Problem 1 - How could Wal-Mart avoid shutting down small town, family owned businesses when they move into an area?

* Problem 2 - How can Wal-Mart avoid losing American suppliers to foreign country suppliers?

History

Wal-Mart Stores (Wal-Mart) was established in 1962 when Sam Walton, who had operated stores in Arkansas and Missouri, decided to open a discount store. The company went public and was traded over the counter in 1970, before being listed on the New York Stock Exchange in 1972.

Wal-Mart diversified into grocery (Wal-Mart Supercenters), international operations, and membership warehouse clubs (Sam's Clubs) during the 1980s. In 1983, the company opened Sam's Wholesale Club, a concept based on the successful cash-and-carry, membership-only warehouse format pioneered by the Price Company of California (now Costco Wholesale Corporation)

In 1992 Wal-Mart started expending to the international market, they entered Mexico in 1992 through a joint venture with Mexico's largest retailer, Cifra, to open Sam's Clubs. The next step was to enter Canada which they did in 1994. Wal-Mart continued to expand internationally, entering China in 1996.

Today Wal-Mart stores are the largest retail chain in the world. Wal-Mart Stores, Inc. is not only the largest retailer in the world, it is now also ranks as the largest corporation in the world. Wal-Mart operates over 6,000 stores in the US and 13 international markets including the UK, Canada, Japan, Mexico, Brazil and China. It also retails products through its online site. The company is headquartered in Bentonville, Arkansas and employs 1,800,000 people .

Wal-Mart is the leading employer of people of color in the United States. More than 125,000 African Americans and more than 74,000 Latinos work at Wal-Mart and Sam's Club store's nationwide. Two Latinos sit on the board of directors along with two women out of 15 board members. Only one woman serves as an executive officer of the company. Full-time employees are eligible for benefits, but the health insurance package is so expensive that less than half opt to buy it. Another benefit for employees is the option to buy company stock at a discount. Wal-Mart matches 15 percent of the first $1800 in stocks purchased. Yet most workers can not afford to buy the stock. In fact, not one in 50 workers have amassed as much as $50,000 through the stock-ownership pension plan. Voting power for these stocks remains with Wal-Mart management.

The company recorded revenues of $315,654 million during the fiscal year ended January 2006, an increase of 9.6% over 2005. The operating profit of the company was $18,530 million during fiscal year 2006, an increase of 8.4% over 2005. The net profit was $11,231 million in fiscal year 2006, an increase of 9.4% over 2005

Wal-Mart was ranked among the best 100 corporations to work for. Yet the employees on average take home pay of under $250 a week. The salary for full-time employees is $6 to $7.50 an hour for 28-40 hours a week.

Is Wal-Mart ethical

Wal-Mart also came under criticism for its impact on small retail businesses. Independent store owners often went out of business when Wal-Mart came to town, unable to compete with the superstore's economies of scale. Businesses that were suffering most were drug, hardware, five-and-dime, sporting goods, clothing, and fabric stores, while major appliance and furniture businesses picked up, as did restaurants and gasoline stations, because of increased traffic. Carolina Mills, a 75-year-old North Carolina company that supplies thread, yarn, and textile finishing to apparel makers--half of which supply Wal-Mart. Carolina Mills grew steadily until 2000. But in the past three years, as its customers have gone either overseas or out of business, it has shrunk from 17 factories to 7 and from 2,600 employees to 1,200.

Made in the U.S.A?

In January 1993 Wal-Mart's reputation was shaken when a report on NBC-TV's Dateline news program reported on child laborers in Bangladesh producing merchandise for Wal-Mart stores. The program showed children working for five cents an hour in a country that lacked child labor laws. The program further alleged that items made outside the United States were being sold under "Made in USA" signs as part of the company's Buy American campaign instituted in 1985. Buy American" banners are prominently placed throughout its stores; however, the majority of its goods are made outside the U.S. and often in sweatshops. 85 percent of the stores' items are made overseas, often in Third World sweatshops. In fact, only after Wal-Mart's "Buy American" ad campaign was in full swing did the company become the country's largest importer of Chinese goods in any industry. By taking its orders abroad, Wal-Mart has forced many U.S. manufacturers out of business. The chain was broadly criticized for being the primary distributor of many goods attracting controversy, including Kathie Lee Gifford's clothing line, Disney's Haitian-made pajamas, child-produced clothing from Bangladesh and sweatshop-produced toys and sports gear from Asia. Difficult working conditions also exist in the United States: In 1991, labor inspectors found labels for Wal-Mart brands being made in Manhattan's Chinatown.