Walmart History, Development and Growth

Case Analysis: Wal-Mart

History/Development/Growth

Sam Walton founded wal-Mart in 1962. Much of Wal-Mart’s success can be attributed to him. He was very simple and ran his company that way. He emphasized hard work and ambition. When the company was in its earlier stages he made it a point to visit every Wal-Mart once a year. He didn’t just visit each Wal-Mart and talk with management. He would lead a cheer with the associates. The term associates, which he picked up from his experience working for JC Penney’s. He also ran a Ben Franklin franchise with his brother that became extremely profitable. He eventually lost the lease on the store and founded Wal-Mart. They originally started off with 15 stores in the state of Arkansas. David Glass took over as president of the company in 1984. Then in 2000 Lee Scott was named CEO. Scott happened to be recruited by David Glass early in his career. Wal-Mart is now the largest retailer in the world with revenues of 165 billion.

Internal Strengths and Weaknesses

At first glance Wal-Mart seems to be exactly like the next retailer such as Kmart. There are a few distinguishing characteristics that separate them from the rest. First, they always build distribution centers before opening store locations, which saved costs on distribution overhead. Second, they have the most sophisticated inventory system. It operates in real time. As soon as an item is scanned at checkout it is directly sent to inventory and new products are automatically ordered. This process also helps with speedier projections and sales information. Third, they have an outstanding company culture. The same culture that Mr. Sam himself had emulated. Along these same lines, they emphasized a high value for associates, which is what they call their employees. As well as being more service oriented. They also found the delicate balance between having low prices and appearing too cheap.

External Environment

During the 80’s and early 90’s retailers when through some difficult times. There was a large increase in competitive pressure, which resulted in much lower margins. At the time most households did not have much discretionary spending. Therefore consumer spending was very limited. There was only enough money for the “essentials.” The entire economy was in a recession. Around 1998, unemployment was at an all-time low. Total household income was up and inflation was very low. All of a sudden buying power was higher and consumers were willing to buy. The United States is still experiencing one of the longest periods of economic expansion in its history.

SWOT