History of Company
The biggest wholesale and retail chain is called “Walmart.” A US corporation conducts business abroad in the U.S., Mexico, Canada, South America, China, Japan, and South Africa. Sam Walton established Walmart in the United States on July 2, 1962, in Rogers, Arkansas. Since 2003, the firm has topped practically every list of the 500 largest U.S. corporations in the Fortune 500 (Weinstein et al., 2022).
It also tops the list of the 250 largest retailers in the world according to the Global Powers of Retailing Index. Sam Walton developed his sales skills while still a young child. He assisted his parents in selling milk and made up to $5000 a year distributing newspapers—a pretty respectable sum for a boy (Weinstein et al., 2022). After graduating from college, I worked as a manager, honing my sales skills and learning all there was to know about dealing with customers. He simultaneously studied retail and store management guides he purchased or obtained from the library.
After leaving the service, he decided to open his own Butler Brothers franchised business. The project cost $25,000, of which $20,000 was donated by his wife’s father (Weinstein et al., 2022). In addition, Butler Brothers had to be contacted for up to 80% of the items (Weinstein et al., 2022). The businessman and his brother Budd decided to build a new store, but this time in Bentonville.
He only consents to a 99-year lease because he has learned from previous mistakes. His father-in-law assists him in reestablishing business operations, and Walton’s Five and Dime opens. The businessman is not disturbed when the first few years’ earnings are less than $30,000 since he is fixated on starting his chain (Weinstein et al., 2022). Sam continues to build the Ben Franklin convenience shop concept while working for the Butler Brothers brand. The businessman owns 15 outlets by the early 1960s, generating $1.5 million in revenue (Carden et al., 2021). The businessman then took out a sizable loan and used the funds to start his own Walmart in Rogers, Arkansas, in 1962 (Carden et al., 2021). It was a discounter market that drew people in with its lowest pricing.
The merchandise on the shelves was placed in a disorganized and illogical manner since the founder had not yet established his unchangeable “Walton rules” in those early days. Customers were not put off by this, either; after all, they visited Walmarts for prices that were 20% less than those of rival stores (Carden et al., 2021). The sales exhibitions and ongoing upgrades were further highlights. The rivals were the “textbook” for the Walmarts, who studied their achievements and mistakes to grasp the cutting-edge Art of the Trade. There were 20 bargain stores in the United States in 1967, with $12 million in sales overall (Carden et al., 2021). They were hardly a “unified network,” though, as the name and owners differed.
The chain of stores increased to 125 due to the shift, which was very advantageous. The first takeover happened in the 1980s when the brand purchased Mohr-Value shops(Carden et al., 2021). Establishing “Sam’s Clubs” in 1983, a tiny wholesale chain with even better rates than discounters, marks a significant turning point for the business (Catană et al., 2020). All a person needed to do was pay a $40 monthly fee to join Sam’s Club (Carden et al., 2021). By the end of the 1980s, the network had expanded to 27 states and was gradually engulfing major cities (Carden et al., 2021). The first Walmart was established in Washington in 1988 (Carden et al., 2021). Later, Sam steps down from his position as general manager, and David Glass takes over as CEO.
Pessimistic forecasts were wrong; the retailer did not “die” following Walton’s passing. In South America, 1000 discounters had been established by 1997 (Catană et al., 2020). 1998, they arrived in Germany and purchased a local network of 21 department stores called Wertkauf. Britain’s turn came in 1999 when Asda outlets were bought (Catană et al., 2020). The Chinese and Indonesian markets’ Conquest continued during the same period. The company grew even more successful and robust precisely because it expanded internationally; the share price rose by 500% (Catană et al., 2020). Despite its success, Walton was criticized for its cheap staff wages, which did not shield the company from controversies. Glass was charged with employee discrimination, working beyond hours, and receiving low pay.
Organizational Profile
A nine-member executive council oversees Walmart, including President and CEO Doug McMillion, who has served in that capacity. The executive committee of Walmart also includes the other CEOs of Walmart, as well as directors of technology and human resources, among other high-ranking roles. A senior management staff of roughly 40 executive and senior vice presidents supports Walmart’s executive committee (Catană et al., 2020). These people run Walmart Inc.’s different functional divisions, geographical divisions, commercial subsidiaries (Walmart International, Walmart U.S., and Sam’s Club), philanthropic foundations, and other business units. Sam’s Club director of marketing, Walmart U.S. Southwest manager, and Walmart International chief financial officer are positions on Walmart’s senior management team.
The size of Walmart’s activities should come as no surprise. Walmart requires a robust organizational structure to support its 2 million workers, roughly 11,000 shops, and activities in 24 countries (Catană et al., 2020). What’s known as a matrix structure exists at Walmart? It combines several functional hierarchies and organizational divisional organizational structures; many major multinational businesses use this structure—or one that is very similar—to conduct their operations. According to the organizational chart of the corporation, each Walmart location runs like a typical hierarchy, with management levels reporting to one another until they reach the CEO (in Walmart’s case, the CEO of Walmart U.S. or International). Employees are divided according to their functional departments, talents, and competencies within the organization’s functional structure.
This makes sense, given that Walmart is split up into several businesses that engage in retail and e-commerce. It is logical to employ a hybrid strategy with several organizational structures to handle different aspects of the corporation. It also includes specialized shops, Supercenters, and Walmart Realty under its corporate umbrella. Since the company is too large and changing quickly, it would be challenging to manage Walmart with a single hierarchical structure. By utilizing a matrix framework, Walmart gains from the capacity to give distinct project objectives, practical resource usage, open information flow, and training for project managers.
Environmental Pressures
Business and related structures and phenomena have recently emerged as one of the primary pillars of society. The relationship between business and society is growing closer, influencing both organizations’ growth. The four primary themes that the business community deals with are the public (consumers), the state (the government), rivals, and suppliers. Positive attitudes from all of these parties are essential for the development of any firm.
The feedback, which precedes the construction of a comprehensive picture of business in society, is developed utilizing all those forms and means of communication that are now most in demand and acknowledged in today’s circumstances of diverse types, technologies, and communication channels (Catană et al., 2020). Due to the company’s recent mistakes and its unheard-of rate of expansion, the media and civil society organizations in the US and overseas have been at the forefront of the examination and criticism of Walmart.
Companies need help in marketplaces with significant pricing pressure and increased competition. Another environmental element that caused Walmart to alter its strategy and operational style is competition. Due to fierce competition from other international retailers, including Tesco, Home Depot, and Target, Walmart has embraced an expansionist growth strategy and cost leadership (Catană et al., 2020). Walmart utilizes new technical advancements to maximize its prospects and competitive advantage. Technology is at the heart of Walmart’s competitive advantage over its rivals based on its prioritization of cutting-edge logistics, distribution, and inventory management solutions.
Porter’s Five Forces
Competition is an outside issue that significantly affects a company’s general health and ability to stay in business. First off, there are many stores on the market. Usually, reliable merchants like Whole Foods and Costco are Walmart’s rivals. These businesses collectively produce billions of dollars in revenues and are all retail behemoths. They are also quite diversified. Numerous items may be found at one store but not any other, even though they sell comparable goods like food, clothes, and home supplies. Also worth noting is how aggressive retail businesses are (Carden et al., 2021). Each business in this industry is continuously vying for consumers’ attention by developing fresh concepts, goods, and promotions. This enables them to keep up their aggressive tactics until they force their rivals out of business.
New market entrants may threaten a company’s sales volume and market share, an external factor. Above all, creating a new brand might be moderately expensive. Therefore, the requisite capital would be needed to start a chain like Walmart. There are individuals in the United States and other countries who have the resources necessary to carry this out. Closing one or two of Walmart’s 10,500 locations globally would result in a significantly lesser loss for the company than for the owner of a small neighborhood shop; it should be underlined (Carden et al., 2021). In conclusion, new entrants are a powerful force for Walmart and pose a significant challenge to its position in the market due to their moderate to high expenses associated with building their brands, low operating costs, and moderate capital expenditures.
Buyer power is the capacity of purchasers to change pricing. Individual customers, however, have no detrimental effects on the business’s total income. Due to the high number of consumers, someone else may recoup the revenue. Customers at Walmart come from New York to China, and because Walmart stores are located worldwide, they are diverse owing to their varied wants and preferences (Cardenet al., 2021). This broad diversity diminishes the influence that customers can have over the business. Lastly, shoppers at Walmart often make modest purchases. As a result, the volume of purchases must drastically decline for the firm’s performance to decline.
The capacity of suppliers to increase input costs is known as supplier power. First off, Walmart has access to a variety of vendors due to the existence of various suppliers. Walmart would need to choose suppliers more carefully since they would have more negotiating power if only one or two were available. Walmart, however, has more influence since it can always choose a different supplier because of the enormous number of vendors. Finding a supplier that meets a company’s requirements is often easy because most of the products Walmart sells are essentials and everyday things.
Most things may be replaced with alternative options, albeit they may fall into different categories. There are a few reasonable alternatives available when it comes to Walmart. Even while some Walmart items may be replaced, many are needs that people will always require, including bread, milk, paper towels, or diapers. In addition, Walmart and other retail establishments would likely carry a replacement for these requirements if one existed. Additionally, the selection of alternatives is limited. Some items’ alternatives are not all that dissimilar from those sold at Walmart.
Business/Product Architecture
Walmart’s first sign read, “We Sell Cheaper. From the beginning, Walton understood that bringing pleasure to customers was not only about guaranteeing high-quality goods and services but also saving them money. To ensure low prices, it was necessary to use funds intelligently within the company. To do this, they adopted unwritten rules, the first of which calls not to rely on sales agents – to negotiate directly with producers so as not to pay a percentage for the services of intermediaries. The second is to deliver goods – order all products to a regional warehouse and then deliver them to the stores. Third, the company tries to keep track of competitors’ prices – Walmart’s markup was always supposed to be at least a few cents less (Carden et al., 2021). Third, the business monitors rivals’ pricing; Walmart’s markup was always anticipated to be at least a few cents lower.
The company worked under the tenet that every dollar Walmart wasted was money that should have been saved and that every dollar it spent intelligently put it ahead of the competition. Walton acknowledged that Walmart initially could have paid its employees better. Salespeople received no incentives in addition to their hourly minimum pay. But over time, the CEO came into a paradox: The more earnings a person distributes to the workforce, the more money the business makes. The explanation is straightforward: if a salesperson serves consumers well, they will return with their money again. In addition to raising compensation, the corporation developed programs to incentivize employees financially.
Each year, a portion of the earnings was distributed to each employee who put in more than a year and a thousand hours of effort. When he was fired, he could get the accrued sum back in cash or Walmart stock. Employees can access 15% off the market price for chain stock (Ragas & Culp, 2021). After introducing this program, 80% of the workforce had Walmart stock (Ragas & Culp, 2021). The corporation specified the maximum number of shortages that might occur in the shop, and if the actual number was fewer, the staff split the savings equally. The chain created non-scale thinking tenets to prevent total centralization. Before anything else, it is essential to consider the particulars of the shop. Managers considered the store’s location and target market while planning the inventory. For instance, while five kilometers away, Panama City and Panama City Beach’s retail establishments cater to different audiences.
Second, the on-site management selected the inventory, made orders, hired, and devised promotions. The management then displayed the amount of profit they had made and the amount of money they had spent. Third, Walmart’s corporate offices concluded that regional markets should generate new marketing concepts. The manager could thus pick one product to advertise in any way he chose in each store as an experiment. The management then evaluated the outcome; if it was successful, the concept was adopted by nearby establishments.
Process, Data, Systems, and Infrastructure Architecture
The business started using the business architecture idea in 2011 to improve its financial operations. It produced a comprehensive model of the procurement process, from product delivery to arranging the next round of purchases(Pearlson et al., 2019). Walmart was able to increase inventory control and streamline procedures thanks to this methodology. The organization significantly streamlined its financial procedures due to utilizing the business architecture. The business enhanced departmental cooperation, saved purchasing expenses, and improved inventory management. The bank’s mobile application was designed to streamline financial procedures and enhance user experience, which should increase the number of active users.
Every day, the extensive data ecosystem at Walmart processes many terabytes of new data and petabytes of archived data. The data includes 100 million consumers and millions of goods from various sources (Ragas & Culp, 2021). Walmart’s analytics algorithms review around 100 million daily keywords to optimize bids for each term (Ragas & Culp, 2021). They are optimizing the shopping experience for customers at a Walmart store, on the Walmart website, or browsing on a mobile device while driving, which is the main objective of Walmart’s usage of big data. Global websites are being redesigned with the help of Walmart’s big data technologies.
Walmart has a complicated system architecture spanning several organizational silos, geographical locations, and technologies. To build and deploy an architecture that would support more than 5,000 U.S. shops, scale as the business grows, manage Black Friday transaction volumes, and combine in-store, online, and mobile data, Walmart enlisted the help of Cognitect professionals. To create an adaptable data architecture that interacts with and integrates data from Walmart’s current systems, Cognitect engineers collaborated closely with WalmartLabs. A solid data management system was developed and implemented by a small team of only four developers in less than six months. As consumer demands change, Walmart can quickly deploy new apps across several internal systems and data repositories thanks to the new design.
Despite being a store by name, the corporation describes itself as a distribution organization. It focuses on getting its products from source to customer through transmission networks as rapidly and affordably as feasible. Walmart’s repetitious and agile retail structures are the cornerstones of its ever-expanding empire, yet they are only based on a few prototypes. These components cannot be considered independent since they are increasingly automated and connected to the retailer’s logistical networks (Pearlson et al., 2019). Additionally, Walmart is increasingly concentrating on cities since its suburban and rural markets have practically reached saturation. However, the company has so far needed help constructing in metropolitan areas.
Dynamic Capabilities
The issues facing merchants throughout the world are rising as a result of economic globalization. A pressing issue faced by the retail business in many nations is the marketing strategy, which is a means to make adjustments and changes in marketing and a significant influencing factor in the market competitiveness of merchants. Since its beginning, Walmart has strongly emphasized brand development; now, it has 69 brands and more than 200,000 goods, and all its stores follow the same supply, pricing, and design policies (Ragas & Culp, 2021). It also has a significant advantage in product pricing, distribution methods, information, and other factors, strengthening Walmart’s brand influence and market competitiveness worldwide while protecting it.
The second key aspect that affects customers’ decisions is pricing. Walmart emphasized the slogan “low price every day” to maintain its price advantage. It paid close attention to market conditions to adjust product prices promptly, allowing staff members to compete with rivals’ price wars. Through sophisticated management strategies and tools, Walmart also improves the employees’ feeling of thrift and maximizes control over production costs and product pricing. As a result, Walmart has the chance to grow dynamically by utilizing its strengths due to globalization.
Value Proposition
Walmart has made a name for itself as a quality-focused, budget-friendly grocery store. Although many of its rivals will make the same deal, Walmart often prevails because of its popularity with consumers in the middle class and the economy. No matter what time of year it is, a visit to their website quickly displays a list of discounts to the client, and a trip to their store frequently includes several advertisements for new discounts. Walmart’s value offer shines, though, not just because it benefits low- and middle-income customers but also because it continues to be handy for everyone. Walmart’s benefits appeal to customers from all walks of life. Its seamless supply chain management helps the company get products to customers quickly, which keeps prices low. It is a simple formula – Walmart has kept it simple, affordable, and standards-compliant.
Outsourcing
Walmart utilizes 95% internally produced software, unlike many other retailers that outsource IT infrastructure development. Walmart has a competitive advantage because of its innovative supply chain management system (Winata & Ellitan, 2023). Programmers at the firm create an information system to support this technology. Using the Retailnetautomatic replenishment technology, Walmart “outsources” inventory management to its suppliers. Although Walmart refers to this as a “partnership with suppliers,” outsourcing occurs. Many human resource tasks, including temporary employee employment, staff medical examinations, and tax program knowledge, are outsourced since they call for specialized knowledge that Walmart professionals still need to gain. Walmart voluntarily does things itself. As a result, outsourcing would be more expensive at any time.
Governance
Long-term value creation depends on effective company governance. Our approach to governance is built on our values of respect for the person, service, quality, and integrity. The Board established corporate governance guidelines that serve as a flexible framework to help the Walmart Board of Directors (“Board”) carry out its duties. These guidelines are examined at least once a year and amended as appropriate to reflect changing regulatory requirements, best practices, the outcomes of the Board’s annual performance evaluation, and shareholder suggestions.
IT-Business Planning and Alignment
The critical element in Walmart’s success was integrating information technology into the corporate structure. The corporation started this procedure significantly sooner and with greater vigor than its rivals. It was among the first to employ computers in 1969, bar codes in 1980, e-commerce in 1985, wireless scanners in the late 1980s, and RFID tags at the beginning of this century (Ragas & Culp, 2021). First things first, however. In many fields, Walmart is a pioneer.
However, the chain could become the undisputed global leader in retail, which could be made possible by automating transportation procedures. Implementing barcoding and logistics management systems enhances the accuracy of accounting and planning for the retailer’s international operations and the timeliness of customer payments. Based solely on the usage of IT, Walmart’s success criteria include streamlining data across the company and being quick to meet consumer needs.
Today, the business attempts to spread a novel idea called silent commerce. Based on the application of RFID technology. A logistics system based on RFID cost Walmart and its 100 biggest suppliers $250 million in 2004 (Ragas & Culp, 2021). The price of an RFID tag was formerly as high as $0.5, but it is currently only between $0.12 and $0.22(Ragas & Culp, 2021). Executives at Walmart anticipate that the new technology will rapidly pay for itself, primarily through lowering order processing mistakes and the labor intensity of the inventory process. Even so, the workers at this firm are constantly looking for ground-breaking new ideas, and the computer center at Walmart, which serves as the brain of the entire organization, is one of the most secure locations in Arizona.
Future iterations of the company’s IT strategy must demonstrate how other resources may be coupled with information technology. These resources include the workforce’s abilities, operational expertise, clientele, and reputation. Of course, an IT plan also includes other crucial components. It should include technological investments, sensitive data protection, personnel training, and other crucial things (Ragas & Culp, 2021). Nevertheless, any strategy must align with the enterprise’s primary business procedures and objectives. The successful use of information technology depends on this task.
Grand Challenge
Sam’s Club, a small-box store for more affluent customers, the Neighbourhood Market, and the Supercenter are just a few of the store types that Walmart has to use to attract more customers. The world is constantly changing, and introducing new rivals is the leading cause of this problem. These elements propel Walmart ahead and serve as the foundation for ongoing development. A clever pricing strategy and a more aggressive rollout of Private Labels should be the tools used to battle for market dominance. Walmart has lowered the cost of various product categories in some areas, particularly in the first quarter. The rationale behind the price drop was described by Steve Bratspies, executive vice president of buying at Walmart U.S. He said, “In our pricing, we will be assuming that the value of items online should be between private label (CTM) and nationwide brands.” The store plans to set aside several billion dollars for this purpose over the following years.
Additionally, Walmart intends to significantly boost the stock of STM goods throughout all of its shops. The company thinks people frequently choose STMs since they are typically less expensive than well-known national brands. A Walmart spokesperson claimed that private-label goods aid the corporation in luring price-conscious shoppers. These suggestions are being implemented gradually but steadily by Walmart. These suggestions address a significant difficulty by attracting more clients and boosting competition.
References
Carden, A., Courtemanche, C., & Harris, R. (2021). The Vital Two: Retail Innovation by Sol Price and Sam Walton. Web.
Catană, Ș., Grădinaru, C., & Toma, S. G. (2020). Sam Walton, a visionary entrepreneur. Network Intelligence Studies, 16, 113-117.
Pearlson, K. E., Saunders, C. S., & Galletta, D. F. (2019). Managing and using information systems: A strategic approach. John Wiley & Sons.
Ragas, M. W., & Culp, R. (2021). Growth, innovation, and transformation. In Business Acumen for Strategic Communicators: A Primer. Emerald Publishing Limited. Web.
Weinstein, A. T., Anti, K., & Ochoa, E. (2022). World’s biggest retailer launches Walmart Plus and customers have their say. Journal of Business Strategy, 43(6), 381-390. Web.
Winata, M., & Ellitan, L. (2023). The effectiveness of technology development towards walmart’s sustainability supply chain management. J-CEKI: Jurnal CendekiaIlmiah, 2(2), 224-248. Web.