A Case Study on Wal-Mart Stores, Inc.: a New Set of Challenges Essay

I. Statement of the Problem Wal-Mart was drawing increasing flak from organized labor about the company’s low wages and anti-union posture. It was confronting 6,000 lawsuits on a variety of issues, including one claiming that it discriminated against female employees. H. Lee Scott was understandably concerned about the raft of issues that threatened to mar Wal-Mart’s reputation and raise questions about the company’s efforts to secure the lowest prices for its customers. The problem for Wal-Mart now is how it can continue to grow and diminish the increasing negative issues about the company held through the years.

II. Objectives of the Study This study seeks the following objectives: – to learn about the Wal-Mart and its industry – to know the different strategies that the company uses – to be able to cite different issues concerning the company – to give solutions and suggestions to the company’s problem regarding the lawsuits and cases III. Scopes and Limitations of the Study The study includes the current situation of Wal-Mart, its consumers, partners, management and the problems that it faces.

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The nature of the company, the organizational background of the company and the different strategies that the company has already done to its sales, marketing and merchandise, are also some scopes included in the study. The study however, is limited with only secondary data based on the text or on the case itself and some research made through the company’s official website on the internet. This study has recommendations and points of view that are based from my own perspectives and thinking as a marketing student. IV. Nature of the Research A. Wal-Mart Inc.

On July 2, 1962, Walton opened the first Wal-Mart Discount City store located at 719 Walnut Ave. in Rogers, Arkansas. The building is now occupied by a hardware store and an antique mall. Within five years, the company expanded to 24 stores across Arkansas and reached $12. 6 million in sales. In 1968, it opened its first stores outside Arkansas, in Sikeston, Missouri and Claremore, Oklahoma. The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. In 1970, it opened its home office and first distribution center in Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44. million. It began trading stock as a publicly held company on October 1, 1970, and was soon listed on the New York Stock Exchange. The first stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart was operating in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma; it entered Tennessee in 1973 and Kentucky and Mississippi in 1974. As it moved into Texas in 1975, there were 125 stores with 7,500 employees and total sales of $340. 3 million. Logo used from 1992-2008 (2001-2009 in Canada, 1992-2009 in Mexico, although Mexico used the current logo in December 2008).

It is still used in Mainland China. Still seen on many American locations, even though a majority of Canadian locations have got this logo rather than the 1994-2001 Wal-Mart Canada logo with a hyphen. In the 1980s, Walmart continued to grow rapidly, and by its 25th anniversary in 1987 there were 1,198 stores with sales of $15. 9 billion and 200,000 associates. This year also marked the completion of the company’s satellite network, a $24 million investment linking all operating units of the company with its Bentonville office via two-way voice and data transmission and one-way video communication.

At the time, it was the largest private satellite network, allowing the corporate office to track inventory and sales and to instantly communicate to stores. In 1988, Sam Walton stepped down as CEO and was replaced by David Glass. Walton remained as Chairman of the Board, and the company also rearranged other people in senior positions. B. Company Strategies 1) Multiple Store Formats Wal-Mart has 4 different retail concepts: • Walmart Discount Stores Walmart Discount Stores are discount department stores with size varying from 51,000 square feet (4,738. m2) to 224,000 square feet (20,810. 3 m2), with an average store covering about 102,000 square feet (9,476. 1 m2). [43] They carry general merchandise and a selection of groceries. Many of these stores also have a garden center, a 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. In 1990, Wal-Mart 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 Wal-Mart stores left and moved into newly built Supercenters. All of the Bud’s Discount City stores closed or converted into Wal-Mart Discount Stores by 1997. As of December 2009, there were 810 Walmart Discount Stores in the United States. In 2006, the busiest in the world was one in Rapid City, South Dakota. • Walmart Supercenter Wal-Mart Supercenters are hypermarkets with size varying from 98,000 to 261,000 square feet (9,104. 5 to 24,247. 7 m2), with an average of about 197,000 square feet (18,301. 9 m2).

These stock everything a Wal-Mart Discount Store does, and also include a full-service supermarket, including meat and poultry, baked goods, delicatessen, frozen foods, dairy products, garden produce, and fresh seafood. Many Wal-Mart 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 (newer locations have Woodforest National Bank branches), and fast food outlets — usually Subway, but sometimes Dunkin’ Donuts, McDonald’s or Blimpie.

Some also sell gasoline distributed by Murphy Oil Corporation (whose Wal-Mart stations are branded as “Murphy USA”), Sunoco, Inc. (“Optima”), or Tesoro Corporation (“Mirastar”). The first Supercenter opened in 1988 in Washington, Missouri. A similar concept, Hypermart USA, opened in Garland, Texas a year earlier. All of the Hypermart USA stores were later closed or converted into Supercenters. As of December 2009, there were 2,737 Wal-Mart Supercenters in the United States. [50] The largest Supercenter in the United States, covering 260,000 square feet (24,154. 8 m2) and two floors, is located in Crossgates Commons in Albany, New York.

Since the introduction of the new Wal-Mart logo in 2008, the company has been phasing out the “Supercenter” portion of the name on these stores, simply referring to these stores as “Walmart. ” • Neighborhood Market by Walmart Neighborhood Markets by Walmart are grocery stores that average about 42,000 square feet (3,901. 9 m2). They are used to fill the gap between Discount Store and Supercenters, offering a variety of products, which include full lines of groceries, pharmaceuticals, health and beauty aids, photo developing services, and a limited selection of general merchandise.

The first Neighborhood Market opened in 1998 in Bentonville, Arkansas. As of December 2009, there were 151 of them in the United States. Neighborhood Market by Walmart now has the same logo as Wal-Mart does. However, this change took place a few months after the new logo was introduced on June 30, 2008. • Sam’s Club Sam’s Club is a chain of warehouse clubs which sell groceries and general merchandise, often in large quantities. Sam’s Club stores are “membership” stores and most customers buy annual memberships.

However, non-members can make purchases either by buying a one-day membership or paying a surcharge based on the price of the purchase. Some locations also sell gasoline. The first Sam’s Club opened in 1983 in Midwest City, Oklahoma under the name “Sam’s Wholesale Club”. Sam’s has found a niche market in recent years as a supplier to small businesses. All Sam’s Club stores are open early hours exclusively for business members and their old slogan was “We’re in Business for Small Business. Their current slogan is “Savings Made Simple” as Sam’s Club attempts to attract a more diverse member base. In March 2009, the company announced that it plans to enter the electronic medical records business by offering a software package to physicians in small practices for $25,000. Wal-Mart is partnering with Dell and eClinicalWorks. com in this new venture. According to Wal-Mart’s 2007 Annual Report, Sam’s Club’s sales during 2007 were $42 billion, or 12. 1% of Wal-Mart’s total 2007 sales. As of December 2009, there were 605 Sam’s Clubs in the United States.

Wal-Mart also operates more than 100 international Sam’s Clubs in Brazil, China, Mexico, and Puerto Rico. 2) Low everyday prices 3) Wide selection 4) Low operating costs 5) Innovative merchandising 6) Strong emphasis on customer satisfaction 7) Geographic expansion in new markets One of the most distinctive features of Wal-Marts domestic strategy was the manner in which it expanded outward into new geographic areas. Whereas many chain retailers achieved regional and national coverage quickly by entering the largest metropolitan centers before trying to penetrate less-populated markets.

Wal-Mart always expanded into adjoining geographic areas, saturating each area with stores before moving into new territory. By clustering new stores in a relatively small geographic area, Wal-mart could spread advertising expenses for breaking into a new market across all area stores, a tactic the company used to keep its advertising costs under 1% of sales (compared to 2 or 3 percent). 8) Use of cutting-edge technology Wal-Mart began using computers to maintain inventory control on an item basis in its distribution centers and stores in 1974.

In 1989 Wal-Mart established direct satellite links with about 1,700 vendors supplying close to 80% of the goods sold by Wal-Mart; these links allowed the use of electronic purchase orders and instant data exchanges. Throughout the 1990s Wal-Mart continued to invest in information technology and online systems, usually being a first –mover among retailers in upgrading and improving its capabilities as new technology was introduced. In mid-2003 Wal-Mart informed its suppliers that they would have to convert to electronic product code technology based on radio frequency identification systems by 2005.

The attention Wal-Mart management placed on using cutting-edge technology and the astuteness with which it deployed this technology along its value chain to enhance store operations and continuously drive down costs, had over the years, resulted in Wal-Mart’s being widely regarded as having the most cost-effective , data-rich information technology systems of any major retailer in the world. 9) Efficient distribution center operations Throughout the 1980s and 1990s, Wal-Mart had pursued a host of efficiency-increasing actions at its distribution centers.

The company had been a global leader in automating its distribution centers and expediting the transfer of incoming shipments from manufacturers to its fleet of delivery trucks, which made daily deliveries to surrounding stores. 10) Economical truck fleet operations Wal-Mart operated a fleet of 3,500+ company-owned trucks to get goods from its 100+ distribution centers to its almost 5,000 stores. Wal-Mart hired only experienced drivers who had driven more than 300,000 accident-free miles with no major traffic violations. 11) Store construction and maintenance 2) Providing superior customer service – Think like a customer. – Sell what customers want to buy. – Provide a genuine value to the customer. – Make sure the customer has a good time. – Exceed the customer’s expectations. C. Wal-Mart Company Culture Wal-Mart top management stressed 3 basic beliefs that Sam Walton had preached since 1962. – Treat individuals with respect and dignity. – Service to customers – Strive for excellence. There are 4 key core values and business principles underpinned S. Walton’s approach to managing. Treat employees as partners, sharing both the good and bad about the company so that they will strive to excel and participate in the rewards. – Build for the future, rather than just immediate gains. – Recognize that the road to success includes failing. – Involve associates at all levels in the total decision-making process. D. Wal-Mart Issues and Lawsuits As 2003 unfolded, it was apparent that Scott had to deal with a growing number of issues and obstacles that were being thrown in Wal-Mart’s path, some of which were embarrassing or threatening.

Some of the company issues are the following: • Wal-Mart had to temporarily stop selling guns at its 118 stores across California following what California’s attorney general said were hundreds of violations of state laws. • In New York, Wal-Mart had run afoul of the state’s 1988 toy weapons law. The toy guns Wal-Mart sold had an orange cap at the end of the barrel but otherwise looked real, thus, violating New York laws banning toy guns with realistic features. Immigration authorities were investigating certain Wal-Mart managers for knowingly hiring janitorial contractors who were using illegal immigrants to clean stores. • United Food and Commercial Workers (UFCW) was exerting all the pressure it could to force Wal-Mart to raise its wages and benefits for associates to levels that would be comparable to union wages and benefits at unionized supermarket chains. Wal-Mart’s labor costs were said to be 20% less than those at unionized super markets. In Dallas, 20 supermarkets had closed once Wal-Mart had saturated the area with its Super centers.

According to one source, for every Wal-Mart super center opened in the next 5 years, 2 other supermarkets would be forced to close, thus casting some doubt on whether Wal-Mart’s entry into a community resulted in a net increase in jobs and tax revenues. • Wal-Mart had been criticized for refusing to stock CDs or DVDs with parental warning stickers (mostly profanity-laced hip-hop music) and for either pulling certain racy magazines. V. Areas of Consideration The areas to be considered upon pursuing the study are the following: A. Increasing number of lawsuits and cases

There are recently 6,000 reported lawsuits and cases against the company. Most of these cases is about employee, union attacks to the company. B. Company’s Size The company’s size and market standing made it an attractive target for critics to push negative ideas and issues against the company. VI. Alternative Course of Action A seminar in each Wal-Mart branch should have the following perceptions: Overcome workplace negativity in this onsite seminar. Participants learn skills and techniques to improve employee attitudes, reduce complaining and griping, and create a more positive workplace.

In this training session, managers learn how to confront negative employee behavior head on and turn it around. When work pressures, problems, or change create feelings of uncertainty, negativity is going to surface. Often, the rumor mill is running rampant. Management needs to confront it. But many managers have not had training on specific skills and communication techniques to effectively deal with employee negativity. Plus, the managers and supervisors themselves must be careful of how they display their own emotions to staff. Moments of anger and frustration can end up being displayed in ways that create negative reactions from staff.

The manager’s reaction to events – both good and bad – are seen and emulated by employees. Training managers how to effectively interact and communicate in challenging situations can be a key to their ability to control employee negativity and improve their success as leaders. Do these negative workplace issues sound familiar? • A lack of trust is keeping morale low. • Employees make preventable mistakes because they don’t seem to care. • No one seems to have fun at work anymore. • Employees spend too much time complaining and griping. • The rumor mill is out of control. Employees talk badly about management, other departments, customers, or each other. • Department negativity is causing employees to request transfers, or even quit. • Workplace absenteeism is increasing. • Back-stabbing and back-biting are creating an adversarial environment. • People stop talking when the manager comes in. • Employees just don’t seem to care about doing a good job. Through interactive discussions, exercises, and case studies, managers learn to communicate effectively when dealing with negative individuals, teams, and departments.

Managers learn how deal with negative employees by: • Helping employees vent feelings and share complaints and gripes appropriately • Developing listening skills to understand the real issues and hidden agendas • Taking effective action to turn negativity into positive work behaviors • Appling specific techniques to control gossip and limit animosity, tension, and ill-will Participants discover how to focus on what is good and help others, regardless of their position, make their workplace a better, more positive environment.

Everyone leaves with new skills to replace apathy, pessimism, and negativity with positive enthusiasm and winning work attitudes. Who Should Attend This training seminar is designed for executives, managers, supervisors, and human resource personnel who need to control workplace negativity or turn around a negative work culture and negative work behaviors. Overcoming Workplace Negativity Training Benefits ? Increase the productivity and quality of the work being performed ? Increase employee loyalty, and morale ? Improve communication between people and departments ?

Decrease employee turnover rate by improving interpersonal relationships ? Eliminate the underlying causes of negativity, complaining, and griping ? Reduce employee absenteeism and turnover ? Overcome negative attitudes before they affect others and become widespread ? Recognize and reverse organizational negativity Overview of Concepts and Deliverables Provided in this Training Session  ? How to better understand the current level of negativity by completing a negativity survey ? How to identify the specific type of corporate negativity that exists ?

Recognize the causes of management distrust ? How to develop trust between the employees and management ? How to improve the trust of management communication   ? Develop listening and questioning skills to uncover the “real” issues ? How to deal effectively with the five emotional responses to organizational distrust ? Implement a step-by-step recovery process to re-establish trust between employees and management ? Reduce the underlying causes of employee griping, complaining and negativity   ? How to confront the negations Implement specific steps to turn negativity around ? Handle disgruntled employees effectively ? How to get buy-in from employees to changing their behavior ? How to establish clear expectations and boundaries of acceptable behavior ? How to successfully deal with disgruntled employees ? How to implement change management techniques to gain support    ? Turn negativity and complaining around through assertive communication ? Use positive approaches to squelch gossip and back-stabbing ? How to Improve employee morale and reduce the most common cause of absenteeism  ?

Identify and eliminate workplace negativity that leads to employee turnover ? Discover ways to spread a positive attitude to others ? Develop your Personal Action Plan to Implement Changes for a More Positive Work Environment VII. Recommendation Wal-Mart should not tolerate workers in any capacity. Wal-Mart should not give employees or other people in or out of the company, the fuel or trigger them to attack the company. The management should have proper communication with its employees, partners, suppliers and customers.

I have come up with some steps for Wal-Mart to turn around its criticisms and continue to grow as a well-known productive company. 1. Stop Defending and Start Examining You can’t address what you can’t acknowledge. Be prepared to accept responsibility, acknowledge difficult truths, and construct a plan for productive change. Begin a truly transparent process. 2. Fire your consultants For years, Wal-Mart stayed clear of any form of PR following Sam Walton’s policy that it’s a waste of money. But when it did, it hired a rogue’s gallery of spin masters who’ve worked for Clinton, Bush, Kerry, etc.

All they did was reinforce Wal-Mart’s defensive posture, collected fat checks, and tried to win debating points in the consumer culture. Remember, consumers don’t pay attention to all those fancy words. They go for fairness. 3. Leverage your size to help your 1. 6 million employees in unexpected ways Make Wal-Mart an employer of choice instead of exhaust system of American economy. Support the communities you do business in by using your infrastructure and helping local school districts pool their buying and save on textbooks and other merchandise. 4. Talk to unions You’ve spent years fighting.

It’s time to think about the impossible: a solution that would let the unions in. Consumers wouldn’t mind spending an extra penny, knowing it’s providing for health and care for families. 5. Expand your vendor base Actively seek out small, innovative companies with exciting new products and help them grow. Help the new entrepreneurs get stronger. Customers get bored by the same products on the shelf and they want to see you reach out to everyone. 6. Stop treating your employees like commodities Demonstrate your commitment to getting people out of the minimum wage sinkhole as quickly as possible.

Encourage your employees in entrepreneurship. Take pride in how many employees start a new company each year. You lose employees but it’s great PR to lose good people for the right reasons. 7. Use your extended warranty marketing as model for other new services Don’t give a chance to consumer advocates to raise a finger on the credibility of these policies. Offer discounts on future purchases, upon a single purchase above a certain amount. 8. Kill the big holiday TV campaigns You can’t afford health care benefits but you can afford to pay over-priced celebrities to dance around the TV screen?

No one would believe that these celebrities shop at Wal-Mart. Instead, run advertising that shows how Wal-Mart democratizes the holiday for real people. VIII. Conclusion I therefore conclude that if Wal-Mart follows those strategies that the researcher recommends and conducts such seminar in all branches in the world, then they could have a better, harmonious and productive sales and company as a whole. It is in the change of workplace attitude that can solve the company’s problems and it is also due to its increasing size and population. It becomes very attractive for critics.


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