The Business Philosophy Of Wal Mart Management Essay

Summary

This report is mainly a case study about Wal-Mart Stores, Inc. (branded as Walmart), and also includes a comprehensive analysis for the retail giant.

Firstly, there will be an analysis concerning values and philosophy of business, logistic system, and information technology. Secondly, an external environment examination will be given. It would be discussed by market segmentation, Porter’s Five Forces Framework, because of the business philosophy of Wal-Mart, it would mainly focus on the buying power and competitors of retail industry, there is also one analysis regarding PESTLE follows. After that, a prospect of future development of Wal-Mart would be given. To summary the analysis above, it is a SWOT result of Wal-Mart.

In the next section, Wal-Mart’s strategy for China market would be mainly described. Because China market will be one part of the most important market in Wal-Mart’ Asia strategies, the recommendation both on strategic level and business level would be made based on all kinds of analysis for China market. Finally, there will be a conclusion which will be a brief summary combined all analyzing results and recommendations, and it is the end of this report.

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SWOT analysis

Values and philosophy

The culture of Wal-Mart is simple but difficult to achieve – keep price low to customers everyday, According to Sam Walton’s belief, there is only one boss: the customer, As a result, Wal-Mart earns the sales, customers’ unshakable loyalty, and I noticed a detail, which showed the most vital advertising way of Wal-Mart is the world of mouth communication of customers but not the regular ways. In addition, because of the low price everyday, the price is quite stable which can help easily predict the sales, therefore, the possibility of out of stock and overstock is reduced. Sam Walton, he advocated thrift, not only his personal life, but also the principle he did business. Even he passed away, his spirit of questioning the cost of every single item of expenditure had been deeply planted in the Wal-Mart, and it became a culture.

Wal-Mart as a major retail business, knows the value of the customer is not buying the amount of his time but his life will bring the total spending of goods, including his own family and friends and word of mouth effect. Customer satisfaction and corporate profits there is a linear causal relationship, but also loyal customers and corporate profits a positive relationship exists between the. Practice shows that, for more than 90% of the firms, its source of profit for 1 / 10 brought about by the general customers, 3 / 10 brought about by customer satisfaction, while 6 / 10 brought about by the loyal customers. Therefore, the enterprise has brought an important revelation, bringing customers the greatest satisfaction, and then to win customers.

So, Wal-Mart’s service strategy, customer satisfaction is the most important strategy. Customer satisfaction strategy is simple and that is the need to stand in the position of consumer users, rather than stand on the position of producers and consumers to consider and deal with problems. And this customer first, always put the customer first philosophy at the Wal-Mart from procurement to final sales of goods as a whole.

For after-sales service, Wal-Mart has also done very well. In the Wal-Mart store, a shopping more than a certain limit, you can enjoy the delivery service. Wal-Mart customers in any store to buy any commodity that can be returned to stores within a month, and take back all the money. In comparison, for large retail stores with Carrefour in Return the score is far lower than Wal-Mart. Carrefour often adorned the walls of “promotional goods will not be refunded,” the interests of consumers, which do not comply with provisions of the law, even if it is normal product’s return, in the Carrefour also need a number of persons signature.

Wal-Mart to provide customers with “high-quality services” and “unconditional refund” commitment is by no means nice slogan. In the United States, Wal-Mart not hesitate to refund policies which will ensure that every customer no worry. Wal-Mart has four refund principles:

(1) If the customer is not a receipt – a smile to the customer returns or refunds.

(2) If you are not sure whether Wal-Mart to sell such a commodity – a smile to the customer returns or refunds.

(3) If the goods sold in more than a month – smiling, to the customer returns or refunds.

(4) If you suspect that goods have been improperly used – a smile to the customer returns or refunds.

Logistic management system

Wal-Mart is the leader of the retail distribution revolution. Its unique distribution system can greatly reduced costs and accelerated inventory turnover, and this is the best way to support its “every day low prices” policy. Wal-Mart to add inventory method is called “cross docking” – “a system where goods arriving on inbound trucks were unloaded and reloaded on outbound trucks without entering warehouse inventory”(Grant, R. 2008). The non-stop delivery system comprises parts as follows:

An efficient distribution center – Wal-Mart’s suppliers of the various branches of the orders of goods sent to Wal-Mart distribution center, distribution center is responsible for the completion of the selection of goods, packaging and sorting work. Wal-Mart distribution center with a highly modern mechanical facilities, 85 percent of goods sent here have adopted mechanical processing, which greatly reduces the cost of manual processing of goods. At the same time, due to the large number of purchases of goods, so that automatic machinery and equipment are fully utilized, the scale advantage of the full show.

Rapid transport system – Wal-Mart’s motor fleet is its delivery system to another incomparable advantages. In 1996, when Wal-Mart already has the 30 distribution centers, more than 2000 vehicles cargo trucks, to ensure that any purchase from the warehouse to a store no more than 48 hours, compared to other stores with the industry average of once every two weeks meeting cargo once, Wal-Mart store shelves can guarantee an average of twice a week fill. Fast delivery, so that all Wal-Mart stores, even if only to maintain minimal inventories can maintain normal sales, resulting in substantial savings in storage space and costs. However, as the effective operation of efficient transport systems, Wal-Mart 85% of goods transportation through their own distribution centers, while only 5% of Kmart, the result is a Wal-Mart’s cost of sales is less than the industry average cost of sales 2 % ~ 3%, the year Wal-Mart’s low-cost strategy to become a solid foundation.

Information technology

Retail sector, especially transnational business groups and large retail chain enterprises, raising the level of modern management rely mainly on the use of high-tech. Information gathering and dissemination, sales data, category management, inventory and merchandise inventory, supply chain management, depend on high-tech electronic technology can be completed efficiently.

One of the most important logistic supports is its information technology support. It’s advanced satellite communications network – Wal-Mart heavily in building a satellite communications network to supply the system more perfect. The application of this system, so that distribution centers, suppliers, and each branch can be formed for each connection point of sale operations, can be completed in just a matter of hours “to complete orders – orders for the various branches Summary – Submit Order” the entire process, greatly increased the operating efficiency and accuracy.

Human Resource Management

Wal-Mart relationship with employees is a real sense of partnership, peer relationships. This is the company’s outstanding performance in the face of competition can be one of the reasons.

You mention the “associates,” There’s a story. • The company founder Sam Walton in a vacation with his wife Helen to the England trip, half-way out Weiss visited the company a retail store – J • W • Lewis Partnership stores. The store, he saw a sign above lists the names of all staff colleagues, which left a deep impression on him. Back to the company, Mr. Sam, after the first thing is to change Wal-Mart employees in all referred to as “associates” of. Indeed, the “employee”, “associates” It’s two words there is a great difference. “Employee” refers to people who work for someone else; “peer” refers to the same as the allies to forge partnerships.

Wal-Mart employees in the establishment of equal partnership, this is only the beginning of innovation. Soon each employee for Wal-Mart began to implement its “profit-sharing plan,” while implementation were “buy stock plans,” “Employee Discount provides,” “Scholarship Program” and so on. In addition to these, staff also enjoy some of the basic treatment, including paid vacation, holidays, grants, medical, personal and housing insurance. Some of these plans reflect the economic partnership, plans are to follow each one, Mr. Sam said, “true partnership” and developed this partnership means a frank relationship, so that each one involved in those who have become the winners, which makes Wal-Mart’s attractive enough.

The company’s “profit-sharing plan” provides: Any one to join Wal-Mart is more than one year and in the year for at least 1,000 hours of employees, are eligible to participate in “profit-sharing plan.” Used in the profit growth the company produced on the basis of a formula, one from each eligible to participate in the wages of employees to allocate a certain percentage into the scheme.

“Buy stock plans” can make it easier for employees to carry out stock investment and benefit from. Require their staff to opt to pay in their own detention of a fixed amount each time, or one-time payment to buy the stock; also be acceptable provided funding to purchase shares of its employees may be subject to subsidy equivalent to the amount of 15%. Any have reached the age of majority in their state of full-time staff or staff employed by the peak season are eligible to participate in the program.

According to the “employee discount rule”, staff, staff spouses and their dependents who, in the Wal-Mart stores, Wal-Mart shopping plaza, and Wal-Mart’s U.S. stores HyperMart shopping, and many kinds of normal price of goods can play a 10% discount .

For those who work more than one year in Wal-Mart employees, Walton Foundation to the children they are about to provide scholarships to high school graduation. Upcoming high school graduation, while working for Wal-Mart, or not yet eligible for scholarships provided by the Walton Foundation, the staff will be helped.

Employees at the Wal-Mart’s inspired contribution to the their own strength. They make plans to cut costs and design ingenuity of the goods on display, but also invented a flexible sales promotion. Wal-Mart to pay an employee found that home delivery services can be traveling the same from the original route of the Wal-Mart trucks to replace it with the proposed Wal-Mart’s expenditure each year for more than one million U.S. dollars. An employee on the cash flow of income and expenditure rationalization recommendations at an annual cost savings of more than 9000 U.S. dollars.

This is why Wal-Mart has such a strong cohesion of the reason.

PEST

Political factors

U.S

Economic factors

Social factors

Technological factors

Five Force Analysis

Industry rivalry

Threat of entry

Threat of substitutes

Threat of suppliers

Buyer power

SWOT results

Strengths

The philosophy of business and organisation culture – low price every day.

Solid financial strength.

Gain advantages from its logistic management system.

A high degree of information technology applying for its entire business.

Unbeatable cost advantages.

High quality of services.

Strong negotiation ability with suppliers to get lower purchasing price.

High customer loyalty because of its low price policy.

Weaknesses

Wal-Mart is one international organisation; however its main market is still within U.S, its oversea market share is not satisfactory, for example, it encountered ALDI and Carrefour in Europe and suffered big loss.

Although it acquired ASDA in UK and it seems the only success in Europe market, ASDA still need to face a lot of other UK retailer giants like Tesco and Sainsbury.

The history of oversea development is quite short.

Wal-Mart only covers a few countries in the world.

Opportunities

Oversea market is still the priority consideration for Wal-Mart, like China (get more area coverage), East Europe, and South Africa.

If Wal-Mart can understand the characteristics of government regulars and market running situation of potential market, it would be helpful for Wal-Mart to enter new market.

Threats

All industries suffered from the financial criss and recession.

Wal-Mart is the No.1 Retailer in the world, which means all other retailers are its competitors.

Wal-Mart’s leading position would force other retailers form alliances, which would make Wal-Mart new threatening rivals.

Wal-Mart encountered more and more critics concerning its squeezing employees and suppliers

Market in China

From the theoretical point of view, Wal-Mart sales in China seems to be successful. However, we can not ignore a fatal problem, as the world’s best-performing companies, Wal-Mart in China, has never been profitable! Looking at Wal-Mart stores in China, the actual operation, only 1 billion in sales. Wal-Mart in the Chinese market has begun to lag. Wal-Mart in China today, from the plight of half a decade ago to enter the ill-considered strategy of China, and half also comes from Wal-Mart’s marketing of its traditional over-reliance on the concept of lack of work, resulting in the implementation of the localization principle is not enough completely, resulting in a series of problems.

(A) “encircling the cities from a” strategic failure

Since 1962, Sam Walton in Rogers, Arkansas City, Wal-Mart opened its first department store since Wal-Mart has been to avoid the fierce competition in the big cities, take the “development of small towns line”, which in the United States Tried and tested marketing strategy in China has repeatedly thwarted. Although the number of China’s non-urban population, but the larger cities, economic underdevelopment, low purchasing power of townships developed countries is simply two concepts. Wal-Mart to wait until re-occupation of cities you want to go back to the market, the big half of the country has long been out from the big cities, and are familiar with the operation of city marketing, Carrefour and other partition.

(B) “parity strategy” can not be achieved in China

Wal-Mart has always pursued the “Every Day Low Price” strategy in China, met with “Chinese-style low-cost,” when the price of its price advantage became a disadvantage.

China’s retail industry developed, compared with the United States to a higher degree of its competition. First, the Chinese hypermarkets to traditional department stores from the professional, from the alley into the early morning roadside tuck shops inside the gathering morning and had formed a three-dimensional pattern of competition. Secondly, the Chinese people’s shopping habits different from Americans. Americans are used to a one-time purchase one to two weeks of food and supplies, and the Chinese people are used to how much to buy the amount of fresh is better, the average consumer is go to the market, where you can buy the freshest vegetables and meat, prices can be very cheap. However, Wal-Mart, is absolutely not so fresh and cheap Meat products.

(C) “Winning the logistics system” could not be established in China

Wal-Mart is using satellites to support the background information processing system, the system will be manufacturers, logistics providers and other fully integrated into their own information under its control. A commodity from the factory to the shelves, the average time control in 5 to 7 days, while the competitors usually have to spend 30 days. This is ahead of all rivals Wal-Mart’s core competitiveness. But in China, the satellite would not do much, policy constraints make it impossible to share the global procurement systems, global logistics system. China’s business environment constraints of the Wal-Mart this advantage into full play.

Recommendation

First, understand the Chinese market and make the appropriate adjustments to Successful experience in Europe and the United States is not entirely suited to the Chinese market. Although Wal-Mart in logistics management, global procurement, information technology, etc., with an advanced experience, but in the grasp of the market still lacks a lot of Wal-Mart. Through surveys, the study of Chinese market environment, extensive investigation and research of various regions (especially in Shenzhen, Shanghai and Beijing respectively represent the various consuming districts) consumer spending habits, to find satisfaction for consumers shopping service entry point, to re-positioning, dividing their target consumer groups, according to the needs of target consumer groups, adjusting product structure and business strategy, and only so, Wal-Mart be able to truly realize that they have shouted for years, “localization”, was able to compete intense competition in the retail market foothold.

Second, to achieve localization of management

Should be localized for the transformation of consumers, it was necessary to gradually realize the localization of senior management. Only the localization of management, be able to understand how to effectively to local customer service, we will not take “American Color” glasses to look at China’s market environment. At present, the accumulation of talent in China, already has a high level of management capabilities in Asia, while also other Asian countries such as Japan, Singapore, the market environment than in Europe and the United States has a more profound understanding of the manager. More and more international companies choose China or Hong Kong and Taiwan, President of Asia, the manager, the reason it is.

Third, increase community shop in the building, reducing the development of member stores.

Bibliography

Grant, R. (2008), Contemporary Strategic Analysis: Concepts, techniques and applications (6th edition), Blackwell Publishing

Grant, R., (2008b), Cases in Contemporary Strategy Analysis, (6th edition), Blackwell Publishing