Unique Expansion Strategy
Sam Walton had served in the army, and had employed military strategy of winning post by post and strengthening it before moving to another post, he applied same strategy in the retail industry. Instead of expanding to the main metropolitan cities to quickly gain national coverage, Wal-Mart has been expanding itself to adjoining territory (within 200 miles of the existing stores) and covering the small towns by opening up stores before penetrating the next big territory [2].
This concept kept marketing and advertising costs significantly low 0.
20% of the total sales in 1998, compared to its competitors’ average of 1. 5% of total sales. The hallmark of Walton’s strategy, however, was to become “Best Cost Provider”, selling at everyday low prices. This could be realized by the continuous implementation of the latest available information technology and distribution control systems at a time. The Retail Link computer system is one of the secrets of WalMart’s success. Furthermore, due to its unique geographic expansion strategy, the company is able to operate its own distribution centers with a truck fleet to supply its stores.
Wal-Mart has a tremendous distribution cost advantage over its competitors (0.9% of total revenue whereas Sears had incurred 3.8% and Kmart 2.9% in 1998).
Corporate and Management Culture
Wal-Mart founder Sam Walton, was an ardent believer in frugality, hard work, constant improvement, and dedication to customers and genuine care for employees. He had incorporated the same strong ideologies in Wal-Mart culture. The company over a time has developed a shared vision that is simple, clear and understood till the lowest level in the company.
The company put lot of stress towards developing its human resource. Employees for management posts are very carefully recruited mostly from within the company and once the appropriate candidates are chosen they are provided with the necessary training. The leaders lead by an example for their employees. David D. Glass, President and CEO 1998 worked as a People Greeter in one of the stores as promised by him to the team on achieving 15% earning growth.
The same commitment is shown by Wal-Mart: Global Expansion Strategy employees towards customers by going way beyond call of duty to help customers. The company has a very informal environment where ideas of every employee are taken seriously and management decisions are open for discussions. He developed corporate ideologies through traditions and sagas. Wal-Mart corporate mission “Growth by design with a strategy for improving returns on our investment base, Wal-Mart focuses on customer and shareholder value”.
The Competition in the United States
Sears Roebuck and K-Mart were considered to be Wal-Mart’s main competitors, but according to recent figures of the retail industry, K-Mart is the only big chain that might be able to keep Wal-Mart’s fast pace. K-Mart is the second-largest U. S. retailer (total sales in 1998 of $33 billion) and recently has initiated an image brand initiative for 1999. By yearend, almost the entire chain of about 2,000 stores will be converted to the Big K format, similar to Wal-Mart’s Supercenter concept, K-mart’s new store format has been boosting sales, “contributing to a 90% jump in fiscal fourth quarter net income.”.
With the adaptation of a concept that Wal-Mart already proved successful, K-Mart is giving the evidence that Wal-Mart at present is the undoubted industry leader. Therefore, according to, Wal-Mart’s toughest rivalries are overseas; global competitor Carrefour (France) originated the hypermart concept, and Metro AG, which operates department and specialty stores, is the #2 retailer worldwide (neck-and-neck with Sears Roebuck) and the leader in Europe.
In 1997 Wal-Mart acquired German hypermart chain Wertkauf, bolstering its push to conquer Europe as well as the US.
Wal-Mart: Global Expansion Strategy
Wal-Mart has been trying to integrate its Multinational strategy more towards Transnational Strategy, including National responsiveness, international operations and learning from its worldwide operations. Through this approach the company wants to become best low cost goods provider not only in USA, but globally.
Wal-Mart puts much more emphasis on customer orientation since it is in retail industry, acquiring and distributing goods at low cost and worldwide learning through decentralization, shared knowledge, and competitiveness across borders. Since Wal-Mart is very new to International Business it is still in process of becoming a global player. Emphasis on National Responsiveness has led to a decrease in efficiency of its operations, as it can’t achieve the economy of scale that one enjoys in standardized products.
Wal-Mart formulates a blueprint of all the strategies for managers to follow. The company stays near to its market and adapted itself to the need and culture of people, it acted very sensitive and responsive to a distinct nation’s needs. The company works very close with the Government of a State/Nation, so when government make any rules or pass any legislation they take their concerns into account. The company works for the community, giving sponsorships to students and contributing to welfare in the countries it operates.
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