Case Analysis of Walmart

A case analysis of Walmart Inc.

Jennie L. Howell

April 23, 2011

Executive Summary

Walmart has created a retail empire bordering on a monopoly. Walmart faces many public relations issues and needs to determine a strategic plan to improve their image with stakeholders and external critics. Many of the issues Walmart faces were made worse by internal leaks, including internal memo's that do not portray Walmart in a positive light, specifically defining practices of taking away from the work force and giving little or nothing in return. Like all corporations Walmart must pay attention to the image they portray, especially in ethical concerns.

Management and Strategy: A case analysis of Walmart Inc.

Walmart is faced with many challenges regarding key issues within the organization, many of their own making. Chief among these challenges are health benefits and pay rates that are considered to be substandard and below the market norm. Walmart is a giant in the retail world, with a history of focusing on financial returns. Walmart is documented trying to reduce costs by taking money away from employees, including targeting 401k and retirement funds and hiring part-time employees rather than full-time in order to save money on wages and benefits. Every proposed cut that Walmart makes will come under increasingly more scrutiny from outsiders.

Walmart actually benefited from the slowed consumer spending during the recent market recession. O'Brien (2009) stated that Walmart now faces the challenge of keeping the consumers that abandoned the overpriced retail stores during the recession. Walmart has begun an ambitious store remolding initiative, coupled with an effort to improve its merchandise line (Obrien 2009 p.1). It is evident that customers are saving more and spending less. Walmart is striving to reduce inventory, and in the second quarter succeeded with numbers down 6%, in the midst of this expansion (Obrien 2009 p.1).

Walmart Corporation has four North American based operations. Payton (2005) explained that Walmart's Neighborhood Markets division includes 85 stores which are strictly grocery, Sam's Club includes 551 stores which are warehouse membership stores, targeting small businesses and another operation base is the original Discount Store business model which totals 1353 stores with general products and little to no groceries. According to Payton (2005) the Supercenter stores number 1713 stores, designed as an all in one store that encompasses general merchandise and groceries. International expansion began in 1992 with Walmart entering into a joint venture with Cifra S.A.; an endeavor that allowed both Walmart and Cifra to hold 50% interest in the others retail operations (Payton 2005). Walmart acquired a controlling interest from Cifra in 1998 and changed the name to Walmart of Mexico in 2000. One of Sam Walton's main themes for the company was remembering that the customer is the main concern, and the organization will cater the business to fit the local's needs. This idea was used in creating the store in Mexico, with a business standard to judge the customer base background and economy and respond with items most needed by the customer base. Walmart did have success with the store in Mexico, but the first international attempt in 1997 and 1998 was to open stores in Germany. This attempt was not successful and as of 2005 the store is still not profitable. German competitors actually copied Walmart strategies and used them against Walmart. Aldi and Lidl, Walmart's main competition in Germany reduced cost and developed and implemented supply-chain management, reducing Walmart's competitive advantage. Aldi and Lidl were able to take advantage of their locality and size compared to Walmart in Germany and uses the price reduction advantage to outsell and outsmart Walmart. (Payton, 2005)

It has been questioned if Walmart is indeed a 21st Century capitalist. They encapsulate power that reigns over all others; they are an American capitalism itself due to there massive size. Walmart seems an improbable candidate for corporate gorilla because of belonging to a specific sector, retail. Head (2004) stated that Walmart had 1.4 million employees worldwide,