Wal-Mart and the United States and Global Economy
Azusa Pacific University
Table of Contents
History of Sam Walton 3
Background of Wal-Mart 5
Management Philosophy 9
Use of Information Technology as a Competitive Weapon 10
Purchasing Power 12
Supply Chain and Inventory Management 14
Supply Chain and Distribution 14
Inventory Management 18
Expanded Operation in Groceries 21
Labor Unions and Wal-Mart 22
Role of the Largest Company and Employer on Planet Earth 23
Strengths, Weaknesses, Opportunities, and Threats Analysis (SWOT) 24
STRENGTHS 25
Wal-Marts broad inventory and customer base 25
The ability to customize to and meet any customer segment 25
Partnerships 26
Wal-Mart management and Corporate Culture 27
WEAKNESSES 28
OPPORTUNITES 29
Other potential growth opportunities 30
THREATS 30
References 32
Sources of Images 33
History of Sam Walton
Sam Walton was born on March 29, 1918 in Kingfish, Oklahoma. While growing up in
Missouri, he was an active student of retailing. His first job was working for his fathers
store while he was attending school (Galiano, 2005). Later, Sam attended the University of
Missouri and majored in Economics. During his senior year of college Sam was elected
Senior Class President (Kennon, 2005).
After college, Sam started his career in the retailing business by running several Ben
Franklin five-and-dime franchise stores in Arkansas. He learned some of his first lessons
about buying, pricing, and passing good deals on to customers from Harry Weiner, a
manufacturers agent from New York. Sam learned “by cutting your price, you can boost
sales to a point where you can earn far more at the cheaper retail than you would have by
selling them at the higher price” (Wal-Mart Stores, 2005).
Sam was convinced that this new discount retailing concept was the wave of the future. If
a local barber named Herb Gibson could operate a chain of profitable discount stores
outside the same towns where Sam ran his variety stores, Sam knew he could do even
better (Huey, 1998). By this time, Sam owned 15 variety stores and was a rich merchant.
He was in fact so rich, that he and his wife, Helen, fronted 95 percent of the money needed
to open the first Wal-Mart store in Rogers, Arkansas in 1962 (Wal-Mart Stores, 2005).
Surprised by the initial success, Sam later opened up a small chain of Wal-Mart stores
across several states. Prior to opening a store, he would fly over small towns and study the
lay of the land. He would then buy farmland at major intersections and order another
Wal-Mart store to be built (Huey, 1998).
In 1970, Sam was one of the leading pioneers of offering a profit sharing plan for his
employees. Employees at Wal-Mart were offered stock options and store discounts. Sam
believed that “individuals dont win, teams do” and that happy employees meant happy
customers and more sales. By making an employees success dependent on the companys
success, the employee would care more about the company (Galiano, 2005).
Sam was never bothered by the fact that many small-town merchants were driven out of
business. He believed that any merchant could compete if they were willing to make major
changes and to adapt to the new retailing philosophies. Sam saw where the future of
retailing was going, so he chose to eat rather than be eaten (Huey, 1998). Wal-Mart soon
passed the sales revenue of their competitors K Mart, Target, and Sears. “The secret of
successful retailing is to give your customers what they want. And reallyyou want
everything: a wide assortment of good quality merchandise; the lowest possible prices;
guaranteed satisfaction; friendly, knowledgeable service; convenient hours; a pleasant
shopping experience” (Wal-Mart Stores, 2005).
By 1992, Sams vision of discount retailing turned him into one of the worlds richest and
most respected businessmen. However, he lived most of his life largely unnoticed by the
public or press. He was known to prefer pickup trucks over limos and the company of his
family and dogs over that of investment bankers (Huey, 1998). Sam died on April 5, 1992,
leaving his approximated $100 billion fortune to his four children and his wife. Just before
he died, President George Bush presented Sam Walton with the Medal of Freedom, the
nations highest civilian award (Wal-Mart Stores, 2005).
People often asked Sam what his secret was for Wal-Marts success. He answered that
question by explaining ten simple rules he followed for building a better business (Walton,
1992):
Commit to your business and your goals. Believe in it more than anyone else.
Share your rewards and your profits with your associates. Treat them as partners.
Energize and motivate your colleagues. Money and ownership alone are not enough.
Communicate all you know to your partners.
Value your associates and appreciate everything they do for the business.
Celebrate your success and dont get bogged down in your failures.
Listen to everyone and figure out ways to keep associates talking.
Deliver more than you promise and exceed your customers expectations.
Work smarter than others. Control your expenses better than your competition.
Blaze your own path. Swim upstream. Ignore conventional wisdom.
Background of Wal-Mart
Discount retailing was first seen in the United States in 1962 with the opening of the first
Kmart, Target, and Wal-Mart. Sam Walton, a fairly wealthy variety store owner, opened his
first Wal-Mart in Rogers, Arkansas in 1962. In took only five years for Wal-Mart to
demonstrate significant growth, and in 1967 it had a total of $12.6 million in sales from its
24 stores, all located in Arkansas. In 1968 Wal-Mart expanded its discount stores outside
of Arkansas and opened stores throughout Missouri and Oklahoma. However, it was not
until October 31, 1969, that Wal-Mart became Wal-Mart Stores, Incorporated.
During the 1970s, Wal-Mart began to see a rapid growth period moving from a small chain
to a large chain. By the early 1970s Wal-Mart had grown to over 1,500 associates in 38
stores across five states. With sales at $44.2, Sam Walton saw a tremendous opportunity
for growth and realized he needed to raise funds to build more Wal-Mart stores. In 1970 he
decided it was time to take his company public, so Wal-Mart began to trade over the
counter stock as a publicly-held company. In 1972 Wal-Mart stock was finally approved
and listed on the New York Stock Exchange (NYSE). During this time, Wal-Mart was
growing so quickly that their stock went through two 100 percent stock splits in just two
short years after being listed on the NYSE. By 1979, Wal-Mart had 276 stores in eleven
states and employed over 21,000 people. It had become the first company in America to
reach over $1 billion in sales ($1.248) in less than a decade. This reflected an increase of
almost 5,000% (50 fold) since Wal-Mart became incorporated in 1969 (Wal-Mart Stores,
2005).
The 1980s saw the emphasis being placed on the further expansion of the company into
other markets, as well as the growing use of technology as a competitive weapon.
Wal-Mart opened its first warehouse club, SAMS Club, in April, 1983. The first Wal-Mart
Supercenter, which had 36 general merchandise departments and a complete grocery
department, opened in 1988. They implemented people greeters at all stores, thus
increasing their focus on customer service. Technology was also initiated as a competitive
weapon during this time. Early in the 1980s, Wal-Mart was one of the first businesses to
utilize Universal Product Code bar-code scanning capabilities to help automate the
inventory process. By 1988, 90 percent of Wal-Mart stores used bar-code scanning
(Kennon, 2005). In 1987, the Wal-Mart Satellite Network became the largest privately
owned satellite communications network in the United States. Its purpose was to link all
company operations and the General Office with voice, data, and video communication
technology. This network was also used to track the location of Wal-Mart delivery trucks.
Expansion continued within the Wal-Mart Company. By Wal-Marts 25th anniversary in
1987 the company had 1,198 stores in 23 states and had employed over 200,000 associates.
Additionally, they had acquired two major retailer acquisitions, owned and operated
sixteen decentralized distribution centers, and had reached an all time high of $15.9 billion
in sales (Wal-Mart Stores, 2005).
The 1990s witnessed Wal-Mart going international for the first time. The first international
Wal-Mart store opened in Mexico City, Mexico in 1991. In 1992, Wal-Mart continued its
international expansion and entered into Puerto Rico. This expansion proved to be
extremely successful. The international sales helped Wal-Mart to set a billion-dollar sales
week record in December of 1993. Further expansion was seen in 1996 when Wal-Mart
entered China. The success of this international expansion is seen today. Mexico contains
the largest number of Wal-Mart stores outside the United States and China produces
approximately 70% of all merchandise found in Wal-Mart (Goldman & Cleeland, 2003).
This period of growth for Wal-Mart allowed the company to position itself in 1999 as the
largest private employer in the world, with over 1,140,000 associates.
Today, Wal-Mart is a global company and the worlds largest retailer in general
merchandise, food, apparel, health and beauty care, home textiles, and toys. They currently
employ over 1.3 million associates and operate 5,000 stores and wholesale clubs across ten
countries. By 2003, Wal-Mart ranked number one on the Fortune 500 list as the nations
most profitable company. During that year it reached $259 billion in global revenue. They
also ranked number one on Fortune magazines Americas Most Admired All-Stars list and
