Walmart’S Strategies
Walmart was started in the year 1950, when Sam Moore Walton acquired a store from Luther E. Harrison. Sam Walton Officially opened Walmart 1962. The first Walmart an American discount department chain store was at Rogers, Arkansas (1). Walmart has become the most powerful retail sector. Walmart was incorporated in 1969. In the larger scale operations, the corporates ask the suppliers to reduce the prices which will eventually lead to the higher economy and results in the reduced prices which is given to the consumers. Now Walmart’s Efficiency can be measured from different integrated information systems which has the database of the orders which has to be tracked, sales, and other related information in real time. These information’s can be accessed, analyses and evaluated at each outlet.
The most primary success is due to the logistics and supply chain management. Walmart has many ranges of products compared to another retail store which attracts wide range of customer to be with Walmart store. Walmart sells products on much lower price than its competitors due to Cost Leadership Strategy. From 1960’s till now Walmart has around 11,000 operating space which sell products and services globally under 63 banners in 28 countries, they also own E-commerce websites in 11 countries. The Company works in three sections Wal-mart U. S. , Wal-Mart International and Sam’s Club (Wal-mart Inc. , 2016a)(2)Wal-Mart took a decision to hard bargain with the concept of “Vendor partnership” was initiated by Sam Walton (AR,1988, p. 10). The idea was developed to strength the relationship between the vendors and Walmart. They started sharing their sales and inventory information by reducing the transaction cost and increasing the productivity, the replenishment problem faced by the company in the early stage were solved by locating the distribution centers (Walton, 1992, p. 52). which saved money through discounts from vendors by purchasing in bulk. This is an Ideology strategy as discussed in the Henry Mintzberg and James A. waters (1985). When the members of the organization have a collective vision and they pursue it as an ideology, they would exhibit patterns in their behavior and the resultant strategy is called ideological strategy. The intentions of this strategy are positively embraced members of the organization. The ideology is overt and often articulated and controlled through indoctrination so that it is deliberate in nature.
The vision of Walmart “Everyday low prices on a broad assorted – anytime, anywhere” (4) Everyday low price was a major success turned into the major distributor for various vendors. The vendors accounted for more than 2. 8 % of the company’s total purchases in 1985 (Ghemawat, 1989). Lee Scott took over the Walmart from (2000 – 2008) after David Glass stepped down as CEO. During the early 2000’s except for human resource practices, Scott did not change any of the major business models of Walmart, but he had to fight with few changes in the environment externally. Walmart went through lot of criticisms regarding with a human resource practices. They were reports made that the non-managerial workers were paid low wages and provided with low benefits (Dube and Jacobs, 2004; Dube and Wertheim, 2005). The company way suspected for favoring men over women in a Lawsuit filed in the year 2001. These are the external issues. The Public or workers became unhappy with the way Walmart was treating their workers. Scott decided to overcome these challenges, the company offered improved health benefits to workers (AR, 2006, p. 13) and announced new job and salary structures for non-managerial workers (AR, 2005, p. 26). This is a perfect example for imposed Strategy. Where the environment forces the organization into a pattern of actions regardless of the presence of central control, it can be termed as an imposed strategy (Mintzberg and Waters 1985). For the organization, it was indeed an emergent strategy that happened because of changing circumstances. Walmart increased its charitable activities and its efforts to improve its public image. The company helped New Orleans for Hurricane Katrina, became largest contributor to charity in the U. S. (AR, 2005, p. 10), invested more money in advertising, and created a webpage to fend off criticism (AR, 2005,p. 14). David Glass was an operational wizard who helped Walton towards the vision of the company and transform Walmart into world’s largest discount retailer. David followed the same Business model which was from Walton to make Walmart go globally. There was expansion in the private brands at Walmart. These were initiated to produce opening price points among the customers (AR, 2003, p. 6), that is it shows the lowest price of a product at the store.
The price private brands were aligned with walmart’s pricing lever expanded the use of private brands. Walmart developed these brands to offer customers opening price points (AR,2003, p. 6), the lowest price available in the store for an item. The use of private brands was well aligned with Walmart’s pricing lever (EDLP, as under Walton). Walmart also included groceries in its products open at Supercenter. When Walton stepped down as CEO there were three supercenters. But David changed the discount stores to supercenters. This is one good example of Entrepreneurial strategy, one individual who has control over the organization can impose his or her vision to development of organization. Certain intentions must exist in this strategy although it may not be articulated to other members. Where Walton was the one who imposed the vision and David glass was the operator of the ideas. Though it is found in smaller firms, it can exist in larger organizations as Walmart as well, particularly in crisis conditions where all the actors are willing to follow the direction of a single leader who has vision and will (Mintzberg and Waters 1985). Davis glass took over Walmart in 1988- 2000. Glass came up with investing more into Information technology to connect stores with the vendors (AR, 1997, p. 12). The vendors became dependent on Walmart for their revenue. Walmart continued Walton’s growth strategy in the U. S. and opened stores in all fifty states.
The number of stores increased from 1,364 in 1988 to 3,989 in 2000. However, there were also changes in the geographic expansion policies he had inherited from Walton. Specifically, Glass built more of its stores in suburban locations and also invested heavily abroad (AR, 2001, p. 6). This happened to be planned strategy, leaders who have decision making powers formulate their intentions and then strives for its execution by translating it into collective actions (Mintzberg and Waters 1985). David Glass planned what he has to do to make Walmart go globally with its resources. The revenue of Walmart started increasing in both established and establishing international markets. The reason why Walmart entered into international market is because of lesser price and high quality products. And also Walmart took benefit over declining value of dollar increasing the sales in international markets. The value of other currencies increase, when purchasing power of US dollar is decreased. By the working on international transactions, Walmart was able to earn profits in foreign currencies, later it is converted to US dollars. The invested dollars will be less than the return revenue. The wall street published a journal, “the weak dollar” saying $106 million to profit and about $1. 7 billion to sales” (McWilliams A2).
For the last quarter of 2007, its market share rose by 1. 7% (7). This is an example of planned strategy with clear approach of deliberateness. The leadership had pure intension to make profit out of the international market when the dollar value was decreased. As a part of this Walmart also established its market. ( Strategic Analysis of Wal-Mart Fan Yang Professor Richard Linowes MGMT-458-002H May 1, 2009)Wal-mart international sector is owned by the affiliate operators in Mexico, Brazil, Canada, Argentina, china, South Korea, United Kingdom, Japan, Germany, India, Chile, South African countries. It’s a collaborative venture in India with Bharti enterprises Ltd. Walmart Inc started Walmart India Private Limited as its own subsidiary. Walmart announce its entry into India in 2007. Almost a decade later, the reality looks very different. They had grand plans into India to open their signature stores along with Bharti enterprises Ltd. Walmart is a most successful retailers around the globe, they have reached this success through good supply chain efficiencies and sourcing. But Bharti is a leading telecom industry in India. They have no prior presence in retail but expected to create a massive impact on India retail along with Walmart (6). Source: Wal-mart Inc. , 2001 annual report, 2001, p. 8; Wal-mart Inc. , 2003 annual report, 2003,p. 25;Wal-mart Inc. ,2008 annual report,2008,p. 40; Wal-mart Inc. ,2010 annual report, 2010,p. 7; WAl-mart Inc. , 2012 annual report, 2012,p. 19.
The Government of India allowed 51 percent of FDI in single brand retailing, and the wholesale cash and carry format and back-end logistics with 100 percent. The Government did not allow Walmart to do multi-brand retailing. In India FDI can be either a franchisees or Cash and carry outlet (6). The Bharti and Walmart joint venture broke was no longer desirable. Walmart’s joint venture with bharti is an Umberalla strategy. According to Mintzberg and Waters (1985), umbrella strategy emerge in constraints. Leadership in partial control of organizations define organizational boundaries within which other actors respond. Walmart approached Bharti for partnership. This is a highlight of Umbrella strategy where the leadership defines the boundaries about how they will merge to libarise into indian retail sector. Krish iyer took over the Walmart,India during this period, Four years later even though Walmart was facing with certain issues it led in the traditional strength of selling directly to retail consumers to small whole sale buyers in india with the chain of cash and carry stores. By this method Walmart, India started showing profit at store level. Walmart so far has 20 cash and carry stores in India and it is expecting to launch 50 stores by 2021 at an over1. 7 all investment of $500 million. (https: //www. thehindubusinessline. com/companiesOn May 2018 Walmart announced its investment in Flipkart, it has acquired a 77% stake in India’s largest e-commerce firm Flipkart, for $16 billion India’s leading E-Commerce marketplace Bharti and Walmart had secrete plans of investing in Indian E-commerce sector to start a online store since their tie up broke, Walmart invested in Flipkart. Flipkart is competing with the US based company Amazon in India. Where Flipchart’s home ground is India.
According to Mintzberg and Waters (1985), in this strategy different players converge on same pattern without any prior intention. It evolved because of certain individual actions and not as a result of any intention of the central management. This is a consensus Strategy. Walmart invested in Flipkart because it had a plan earlier to open a store in India along with Bharti, Since it got dissolved they invested in Flipkart to mark their ecommerce entry into Indian ecommerce sector where amazon is performing fairly well. Consumers in India have spent $21 billion on ecommerce. Indian E-commerce market is 10th biggest e-commerce market in the world, it was proven by the research conducted by digital research firm e marketer. The initial success in cash and carry stores has given Walmart the confidence to move into other formats. India is growing on par with China in retail sector. Investing in Flipchart is an entirely emergent strategy as it emerged from the response to the market condition and not as a result of prior planning.
