Walmart Case Study

Wal-Mart

Wal-Mart may be the broadest and most powerful company in the history of US business. They were the first company to report one quarter of a trillion dollars in sales. Wal-Mart has incredible power and influence. This superstore is now the model for all types of companies, not just retailers. Their practices set standards for other firms and the nation as a whole. World wide retailers like Wal-Mart have become the most powerful companies in the global economy. They are a world leader in logistics and exhibit supreme productivity. Everyday low prices at Wal-Mart have benefited millions of Americans. With thousands of different items all in one store, this giant retailer is the epitome of one-stop shopping. Every week, a million Americans shop at 3400 stores nationwide.

Wal-Mart is disciplined when it comes to keeping costs down and customers happy. In order to keep prices low and the shelves full, Wal-Mart has implemented a sophisticated tracking system. This system uses a bar-code scanner called Telxon. Telxon knows the price of items, how many items are sold in a given period of time, and how many are in stock. Wal-Mart tells the manufacturers what to produce and when to produce it, not the other way around. This is an example of “pull production.” They call the shots when it comes to price. The manufacturer becomes the underling. Wal-Mart was Rubbermaid’s largest customer in the early 90s. When the price of resin went up, Wal-Mart did not accept the price increase and practically put Rubbermaid out of business, costing thousands of employees their jobs.

In 1992 there was an enormous influx of foreign cheap merchandise. Wal-Mart’s aggressive strategies saw this as an opportunity for huge profits. The mark up on these foreign items is 60 to 70 %. This means US manufacturers have to compete with these foreign companies and some manufacturers may have forced to move overseas. In the late 90s the US signed a permanent trade agreement with China. China was producing high quality, low cost products. Of the 6,000 global suppliers to Wal-Mart, 80% of them were in China. This is a far cry from Wal-Mart’s much publicized “buy