Wal - Mart

Wal-Mart is more than just the world's largest retailer. It is an economic force, a cultural phenomenon and a lightning rod for controversy. It all started with a simple philosophy from founder Sam Walton: Offer shoppers lower prices than they get anywhere else. That basic strategy has shaped Wal-Mart's culture and driven the company's growth.

Now that Wal-Mart is so huge, it has unprecedented power to shape labour markets globally and change the way entire industries operate. In this article, you will learn the key reasons that Wal-Mart has been able to keep its prices low -- cutting-edge technology, a frugal corporate culture and a push to make suppliers sell merchandise at cheaper and cheaper prices. We'll also take a look at the scope of Wal-Mart's impact on the economy and the controversies surrounding Wal-Mart, as well as the future of the company.

A Little History.
Sam Walton opened his first five-and-dime in 1950. His vision was to keep prices as low as possible. Even if his margins weren't as fat as competitors, he figured he could make up for that in volume. He was right. In the early 1960s, Walton opened his first Wal-Mart in Rogers, Arkansas. The company continued to grow, going public in 1970 and adding more stores every year. In 1990, Wal-Mart surpassed key rival Kmart in size. Two years later, it surpassed Sears. Walton continued to drive an old pickup truck and share budget-hotel rooms with colleagues on business trips, even after Wal-Mart made him very rich. He demanded that his employees also keep expenses to a bare minimum -- a mentality that is still at the heart of Wal-Mart culture more than a decade after Walton's death. The company has continued to grow rapidly after his death in 1992 & now operates four retail divisions -- Wal-Mart Supercenters, WalMart discount stores, Neighbourhood Market stores and Sam's Club warehouses

How Big

WalWal-Mart

Is Today

Wal-Mart employs 1.6 million people.

Wal-Mart had sales of $312.43 billion in January 31, 2006. 2nd-largest Home Depot, posted sales of $81.5 billion billion. Wal-Mart has 6,200 retail outlets. Home Depot has 2,040 2,040.

Wal-Mart Strategy
Establish the universal bar code which forced manufacturers to adopt common code, labelling. The bar allowed retailers to generate all kinds of information -- creating a subtle shift of power from manufacturers to retailers. Wal-Mart became especially good at exploiting the information behind the bar code & is considered a PIONEER in developing sophisticated technology to track its inventory and cut the fat out of its supply chain

Wal-Mart became the 1st major retailer to demand manufacturers use radio frequency identification technology (RFID). The technology uses radio frequencies to transmit data stored on small tags attached to pallets or individual products. RFID tags hold significantly more data than bar codes. During the first eight months of 2005, Wal-Mart experienced a 16 percent drop in out-of-stock merchandise at its RFID-equipped stores.

Frugality

At Its Best

The company has been Criticized for the relatively Meagre wages & health care plans that it offers to rank-&-file employees. It has also been Accused of demanding that hourly workers put in overtime without pay. Store managers often work more week. 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. This culture is also present at the company's headquarters. Wal-Mart is headquartered in WalBentonville, Arkansas, instead of an expensive city like New York. ~ The building is drab and dull. ~ You won't catch executives in limousines and you won't 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.

Wal-Mart's headquarters in Bentonville, AR

The

PLUS ONE

Concept

The central goal of Wal-Mart is to keep retail prices low -- The company has been very successful at this. -- Experts estimate that Wal-Mart saves shoppers at least 15% 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. Wal-- In "The Wal-Mart Effect," author Charles Fishman discusses how the price of a four-pack of GE light bulbs decreased from $2.19 to 88 cents during a five-year period. -- Wal-Mart demanded that each supplier either lower the price or increase the quality every year on every item. This philosophy is known as

PLUS ONE. ONE.

Power

&

Controversy

Because of Wal-Mart's Massive Size; Wal~ It wields incredible Power. ~ It has driven smaller retailers out of business. ~ Forced manufacturers to be more Efficient often leading these suppliers to move Efficient, Overseas; manufacturing jobs Overseas and changed the way that even large & established industries do business. There is plenty of Anecdotal Evidence that a new Wal-Mart in town spells DOOM for; ~ Grocery stores, ~ Local pharmacies, ~ Sporting goods stores.

Economist Emek Basker, Ph.D. Found that in a typical United States city, when a
Wal-Mart opens; ~ Three other retailers close within two years and ~ Four close within five years. ~ While the Wal-Mart might employ 300 people, another 250 people working in retail lose their jobs within five years in that city.

IMPACT On Supply Chains!

Suppliers are also heavily Impacted by Wal-Mart. Gary Gereffi, a Duke Professor who studies Global Supply Chains; put it this way in a PBS Interview: Wal-Mart has life or death decisions over (almost) all the consumer goods industries that exist in the United States, because it is the # ONE supplier-retailer of most of our consumer goods -- not just clothes, shoes, toys, but home appliances, electronic products, sporting goods, bicycles, groceries, food, etc. The stories of how Wal-Mart pushes manufacturers into selling the same product at Lower & Lower prices are legendary.

One example is Lakewood Engineering & Manufacturing Co. in Chicago, a fan manufacturer. In the early 1990s, a 20-inch box fan costs $20. Wal-Mart pushed the manufacturer to lower the price, and Lakewood responded by automating the production process, which meant layoffs. Lakewood also badgered it own suppliers to knock down the prices of parts. Then, in 2000, Lakewood opened a China, factory in China where workers earn 25 Cents an hour. By 2003, the price on the fan in a Wal-Mart store had dropped to about $10 from $20.

WalWal-Mart

&

outsourcing?

You may have heard that Wal-Mart sends manufacturing jobs overseas. But also remember that Wal-Mart once touted a "Buy America" campaign.

Here's how the discrepancy sorts out;

~ In 1985, Walton launched a "Bring it Home to the USA" program, offering to pay suppliers as much as 5 percent more for products made in the United States. ~ However, that philosophy quietly faded in the 1990s, as Wal-Mart joined other retailers in a quest to find the Cheapest Sources Of Production around the world. ~ In 1995, Wal-Mart said that 6 percent of its total merchandise was imported. A decade later, experts estimated that Wal-Mart imported about 60 percent of its merchandise.

High

Retailer

Involvement

WalWal-Mart's Impact extends beyond just small suppliers; It also affects how even
major, established companies like Coca-Cola and PepsiCo do business. At Wal-Mart's request; ~ Pepsi also came up with a line of diet drinks, called Slice One, to initially be Sold Exclusively in Wal-Mart. ~ Coke and its largest bottler Coca-Cola Enterprises announced that they are Changing the way they Deliver PowerAde in the United States, Altering a Basic Distribution Method for drinks that has been in place for more than a century.

Wal~ Coke also now Allows Wal-Mart in on the research-and-development process. In 2005, Coke planned to launch one new diet cola called Coke Zero. At Wal-Mart's request, it changed the name to Diet Coke with Splenda & launched a separate product called Coke Zero.
This kind of retailer involvement was Unheard of at Coke a decade ago.

The

Controversy !

WalWal-Mart is a Polarizing Force.

The controversies have involved a broad range of topics from; ~ Outsourcing of jobs, ~ Wal-Mart selling guns, ~ The company's environmental policies, ~ The kind of health care Wal-Mart offers to its employees.

Wal-Mart has come under fire on a number of Labour Issues as well. There may be
a Dark Side to the Frugal Culture. At the end of 2005; ~ The company faced dozens of Lawsuits across the country for allegedly not paying workers overtime. ~ Women have also accused Wal-Mart of Discrimination Discrimination, ~ Employees have said that it Squashes efforts to unionize & doesn't provide Decent Healthcare.

Not every1 is

DOWN on Wal-Mart
Ambassador Andrew Young with Lawrence Jackson, executive vice president of WalMart's people division, Lee Scott, president and CEO of WalMart Stores, Inc.

Andrew Young a former UN ambassador & Mayor of Atlanta, heads up a group backed Young, by Wal-Mart that is supposed to spread a +ve message about the company. "You need to look at who's complaining about Wal-Mart" WalYoung told USA Today in March 2006. "If it's not 100 million people shopping there every week & it's not 8,000 people competing for 500 jobs [at a new Atlanta store], who is it? They're complaining because they're wrong & they don't understand that ending poverty means generating wealth & not just fighting to redistribute the existing wealth."

Cri Critics
Critics say that Wal-Mart can only push prices so low, and that the company may have
already reached that Threshold. ~ The U.S. is Saturated with Wal-Mart stores. 90% of the U.S. population already lives within 15 miles of a Wal-Mart, according to "The Wal-Mart Effect." Wal~ Also, Wal-Mart's growth in same-stores sales has slowed considerably in recent years. Same-store sales, a key measure in the retail industry, measure the sales versus the year before in stores open at least one year. ~ Target, while much smaller, is currently growing its same-store sales more than Wal Mart. Target doesn't just compete on price. Instead, it sells style as well as a good price. Sales at Wal-Mart stores open for at least one year grew, on average, 3.6% a month in fiscal year 2005, compared with a 5.8% gain for Target, according to the International Council Of Shopping Centres (New York Times). Some experts disagree that Wal-Mart has peaked, arguing that Wal-Mart can always enter New Retail Segments. After all, it didn't sell groceries originally & now that is a huge part of the company's business. Wal-Mart also has plenty of growth opportunity in the International Market.

Wal Marts 10 Year Income Mart

The
There is Heated debate.

Economists View

Debate about whether Wal-Mart is good for the American economy, & well-respected economists come down firmly on Both Sides of this

Some experts say it is Good for the economy because it keeps prices low, both at its stores & at other retailers.

Other experts argue that Wal-Mart is Bad for the economy because it drives competing retailers out of business & forces manufacturers to move jobs overseas to keep expenses down.

The

WalWal-Mart
1970 Wal-Mart has IPO. 1970:

Timeline

1950 Walton opens 1st five-and-dime. 1950: five-andWal1962 Walton opens 1st Wal-Mart in Rogers, Ark. 1962:

1979 Annual sales top $1 billion. 1979: 1985 Wal-Mart has about 880 stores and $8.5 billion in revenue, smaller than 1985: competitors Kmart and Sears. 1990 Wal-Mart Surpasses Kmart in size. 1990: 1991 Wal-Mart opens 1st International Store in Mexico City. 1991: 1992 Wal-Mart Surpasses Sears in size; Sam Walton Dies. 1992: 1994 Wal-Mart Surpasses in size Kmart and Sears 1994: Combined.

Thank

You