Wal-mart is an American public corporation that operates a chain of large discount departments in US and many other countries around the world. Wal-mart was founded in the late 1940s by Sam Walton in Bentonville, Arkansas. Sam Walton was raised in Missouri where he worked in his father's stores while attending school.
This was his first retailing experience and he is said to have enjoyed it. After his graduation from the University of Missouri, he commenced his career as a retail merchant when he opened the several of the first franchises of the Ben Franklin five-and-dime franchises in Arkansas. This allowed him to lay a strong foundation that later led to big and better things. He opened his first Wal-Mart store in Rogers, Arkansas in the year 1962.
Wal- mart specialized in brand-names at very competitive prices, a strategy that saw Wal-Mart succeed more that what Walton had initially anticipated. Soon a chain of Wal-Mart stores were started across rural America and spread everywhere. Today wal-Mart stands out as the largest retail outlet in the world that deals with endless variety of consumables and appliances. The stores are divided into departments that make shopping easier for instance electronics, grocery, furniture, pharmacy, apparel and jewelry, health and beauty and photo departments- that deal with affiliated items.
These departments are well equipped to give customers everything they want (Carmichael 2000).Wal-Mart seems to have used diversity to build a sustainable business empire that respects and embraces differences. Diversification usually occurs when accompany takes a strategic direction into other products and/or markets by means of either internal or external developments. This helps the company to improve efficiency, improve market power and help in stretching corporate parenting capabilities in markets and products and also aid in spreading risk.
Wal-Mart has used diversity as a foundation to build a sustainable business empire that is within the customers' needs and tastes. The diversity programs of wal-mart are often inclusive and bring everybody on board that is; customers, suppliers, communities and its associates. This is something that has made these programs have a positive impact in performance and success of the business (Sandra 2000).Despite the success of the diversification program in Wal-Mart, this system is always associated with many problems in work place and in business fraternity if not well implemented.
This may include slow growth in core business, increasing management cost and adding bureaucratic complexity. Diversification can also lead to negative synergies in business if proper care is not taken. Therefore it requires before diversification to consider what value the acquiring company can add to the acquired business such as putting quality management into the business and also weigh the merits and demerits of diversification and their short term and long term effects on a business (Richard 1998). Walton developed management style that was very popular among his employees, a strategy that made sure that his business never stumbles.
Some of the basic concepts of management that he developed are still in use up-to-date. For instance after taking the company public Walton introduced 'profit sharing plan' that was meant to improve its employees' income dependent on the profitability of the store. Although these benefits are common today, Walton was among the first to implement them. He based his management on the concept that 'individuals don't win, teams do. This management style acted as a motivation and incentive that enabled the whole Wal-Mart fraternity to work as a team, something that helped Wal-mart to successively expand at an extraordinary rate. Walton believed that by surrendering part of the company to employees and by making their success to dependent on the success of the company, they would dearly care for the company.
He also believed that once you have happy, satisfied and loyal employees then this translates to happy customers and therefore more sales. These ideas acted as one of the fundamental blocks upon which this store was built into a giant retail outlet (Carmicheal 2000).By 1980s Wal-Mart had over three hundred stores across North America with sales over one billion US dollars. Wal-Mart adopted a decentralized system of distribution system, an idea that was developed by its founder Walton. This system of management created a platform that was needed to spur growth in 1980s amidst growing complaints that the superstore was squelching the smaller, traditional mom and pop stores. By the year 1972 Wal-Mart gained the title as the largest retail outlet in the United States of America with over 1700 stores.
Wal-Mart stores operate now in Canada, Argentina, Brazil, china South Korea and Puerto Rico. Sam Walton's vision became a success despite his death in 1992 (Sandra 1994).Today Wal-Mart is spreading across the world putting in place large supercenters as well as neighborhood-scale markets in an ever stopping expansion that has already made it the world's largest retail company. Wal-Mart seems to have employed a simple formula to achieve this unstoppable growth.
Wal- Mart apart from being a retailer, it is also a sophisticated distribution company with revenues of over two hundred billion and with over five thousand stores in the United States and in nine other foreign countries employing about 1.9 million people. Despite this achievement, the company continues to project a folksy down-home image that includes a company cheer, something that has consolidated its expansion and success. The success of the company was clearly portrayed when Wal-Mart topped fortune magazine's list of largest companies and as the magazines most admired company making it the first company to have shared the same honors since the magazine started in 1955 (Sandra 1994). In order to diversify its operation, Wal-Mart acquired Philips cos.
which was a 20 store food retailer. The Philips acquisition denoted Wal-Mart's growing commitment to food retailing. Also in the year 1990, Wal-Mart positioned itself as the major outlet of foodstuff when it purchased the McLane Company, which was one of the largest food and general merchandise wholesaler and distributor in the United States. This strategy helped Wal-Mart in its later expansion by utilizing its lower prices on food to promote sales of its other profitable merchandise, something that helped to provide a strong financial base for its many stores.
Acquisition of Philips also provided Wal-Mart with experienced supermarket merchants (Sandra 1994).Due fierce competition in the retail industry, Wal-Mart developed simple strategies to out march its competitors and to make sure that in the course of its expansion, it does not become a victim of the ever increasing failure of large companies. The company did this by adopting a simple formula of low prices and rocket-science logistics to support its operations. Providing a low price for its products has been a consistent strategy that Wal-Mart has used to maintain a loyal chain of customers and lure many prospective customers to come on board to support its expansion and diversification.
Expansion usually comes with challenges such as keeping in touch with the local consumers and Wal-Mart knew this when it developed a well run management and building a strong brand that is trusted and adored by its customers.To increase sales, Wal-Mart offers very low prices on food. This helps to bring traffic to its supercenters and consequently luring customers to buy other more profitable merchandise. It has been estimated by Retail Forward that prices offered on food are up to 15% less as compared to other super markets. Wal-Mart use food stuff as a loss leader to drive up traffics in its center. Because of this, they have projected themselves above its competitors as the best option for shopping to most households in the United States in other countries where they operate (Caban 2007).
In its bid to diversify and expand, Wal-Mart has brought in new ideas, for instance, the famous 'neighborhood markets' which have been designed to fill gaps between supercenters. These are 60'000 square feet stores equipped with general merchandise and convenient items including drive through pharmacies, one- hour photo processing units and at the same time offer ready cooked meals. This diversification has helped stabilize its ever increasing number of stores. This strategy was meant to take sales from smaller and convenience stores where customers are likely to stop more frequently than they would do in superstores. By trying to get smaller as they grow, is one of the best strategy in any big business because this makes sure that the company does not lose touch with its customers and at the same time put in place a strong foundation to cope with challenges related to running big organizations ( Sandra 1994).Another strategy that has been employed by Wal-Mart that has played a big role in its success is working very close with its suppliers and incorporating their data with its own; something that that has enabled Wal-Mart to keep an eye on items that are selling most.
This keeps it well updated with demand for various items and to make sure that their diversification and expansion never goes outside what the customers want most and that it is always within the customers' tastes and preferences (Caban 2007).To consolidate its success and to boost its image, Wal-Mart has done a lot by in serving the community. For instance a store in Pullman Park helped to revive a neighborhood confounded by lack of jobs and lack of access to fresh groceries. Also of important to note is Wal-Mart's long 'life learning program' which through partnership with American public Universities is making college education accessible and affordable. In its bid to give back to the community, Wal-Mart and Wal-Mart foundation has committed $ 2 billion in cash and in kind, stepping up efforts to help bring to an end hunger in America (Wal-Mart ).
Continuous improvement and diversification is a very indispensable for survival of any business as it serves to meet ever changing customers' tastes and preferences and to beat competition. Wal-Mart stands to be one of the best achiever in this aspect. They entered the retail market when there were many players and stiff competition. Wal- Mart seem to have understood the nature of the retail world and has never stopped to meet its customers' demands, something that has made it stand above all.
Continuous improvement through diversification and innovational approach seems to be the most fundamental concept to success of any business.
