Walmart and the Necessary Change
Economic issues have presented plenty of problems for all types of organizations in our country, especially retail businesses. While not invincible, Walmart appears to have a leg up regarding survivability. This survivability seems ingrained into the company culture, which has existed since the beginning. This paper explores Walmart’s ever-expanding role regarding its survival when other businesses fail in droves. Focusing on Walmart’s organizational changes, strategic moves, and posturing regarding speed bumps, as well as the leadership at the organization’s helm over the past decade, I examine and compare the implications these changes have had on their organization and the industry. I have researched numerous resources, from company websites to media outlets, and found that Walmart’s survivability has more to do with its strategic posturing concerning the economic climate. They build and expand on the premise of the lowest price when the economy needs it most and where it is needed most. These findings signify a continual growth and expansion model in the face of inevitable and quickly approaching economic strife.
Walmart and the Necessary Change
Economic issues have presented plenty of problems for all types of organizations in our country, especially retail bubusinessesBusinesses are dropping like flies all around the country. Still, some remain and sometimes even thrive. Are changes made inside of the organization that helps to keep their doors open?
Today, we examine Walmart, a company with a sorted and exciting history. Walmart’s assets and liabilities have continued to grow over the maars it has operated. We need to examine and compare some of their organizational changes over the last decade regarding leadership within the organization and also changes regarding ethical standards and technology. Then we need to examine and compare these changes’ implications on the organization and the industry.
We begin this journey with the leader himself, Sam Walton. We do this to understand the company culture better. Sam started his journey by borrowing $25,000 from his father-in-law to buy his first store, a Ben Franklin franchise, in Newport, Arkansas, in 1945 (Biography, 2014). He would eventually own 15 Ben Franklins. However, Walton had a vision that the leadership at Ben Franklin did not share. That vision; expanding such stores into rural areas. This rub between the leadership of Ben Franklin and Sam would set the tone for what Sam Walton envisioned moving forward. In 1962 Sam opened up his first Walmart store in Rogers, Arkansas (Biography, 2014). Within fourteen years, Walmart would be a publicly-traded company worth over $170 million. Sam had figured out the recipe for success, and the company began to explode.
Many say that Walmart is a different company today than during Sam’s reign, suggesting that perhaps the priorities are different. Sam died of cancer in Little Rock, Arkansas, on April 05, 1992 (Martin, 2013). Some say the “real” Walmart died along with him. According to Arkansas Business, “some put the blame on Walmart’s management team, saying it has drifted away from Walton’s essential philosophy of offering the lowest price” (Friedman, 2012).
Can that be so? Was Walmart just a pure company whose success was predicated on serving the customer with the lowest prices? Was Sam simply the most extraordinary mind in the retail business that just happened to have the biggest heart? Ironically not, and that model has not gone anywhere. It seems that perhaps controversy is in the blood of Walmart. For instance, in 1967, a federal court ruled that Mr. Walton had set up his first few stores as separate corporations to avoid paying minimum wage under the Fair Labor Standards Act (Friedman, 2012). Of course, this would not be the last time Walmart was accused of exploiting its workers to lower prices.
David Glass was Walmart’s first CEO after Walton’s death (Longo, 1988). Glass was the one who pushed forward with the international expansion that fueled the retailer’s growth. Focusing on the last decade, we must focus on H. Lee Scott, Jr., CEO from 2000 to 2008, who succeeded David Glass. Of course, 2000 was a big year for the company under Scott. For the first time, Walmart topped the Fortune 500 ranking of America’s largest companies (Wal-Mart, 2014). This was a big step in many ways but did not come by accident, and it did not come without some growing pains and significant mistakes.
Walmart saw some of its most substantial changes under Scott, primarily in the technology and health sectors. These are great examples of changing when the iron is hot. In 2003, less than 5% of households were even connected to the internet, but in 2013 there were five internet-connected devices within the average American household. Walmart had a few websites early on, but the internet was not a focus until it saw its real potential through competitors’ sales. However, in 2000 Walmart.com was founded, allowing U.S. customers to shop online (Wal-Mart, 2014). The problem was that other retailers already had a bit of a jump and gained retail confidence early on, so it would take a few years for the retail giant to gain a market share online. In 2007, Walmart.com launched a service called “Site to Store,” which enabled customers to make a purchase online and pick up that merchandise in the store of their choosing, free of charge (Wal-Mart, 2014). This helped substantially.
Walmart started to impact the market when it began focusing on customer needs rather than trends. Hearing the national cries about increasing healthcare costs, in the fall of 2006, Walmart introduced $4 generic prescription drugs and followed that up a year later with in-store health clinics (Wal-Mart, 2014). Business boomed as a result, but sales increased across the board as they saw that people would pick up other items while waiting for the prescriptions. These moves ensured their place in the market and secured the jobs of more than 1.1 million associates in the 3,989 stores and clubs worldwide that the company boasted. More expansions and more jobs were on their way.
H. Lee Scott, Junior’s reign over the retail giant, was not without controversy, though. In 2005, Walmart made a public commitment regarding environmental sustainability (Wal-Mart, 2014). Out of nowhere, Walmart announced a goal to create zero waste and use only renewable energy. They even opened up new lines, selling products that sustain people and the environment. This was great PR for the company that benefited the company substantially in the long run. Of course, a significant focus on the environment has recently erupted worldwide. In 2005, the Kyoto Protocol officially went into effect. The Kyoto Protocol is an international environmental treaty, though the United States did not sign the treaty (Hartman, 2013). Still, environmental issues were and remain hot topics for many.
However, Walmart Stores have since paid multiple millions of dollars for what prosecutors have said was for negligently dumping pollutants from stores into sanitation drains (Neuman, 2013). Was their environmental generosity a positive change or a preemptive strike for what would surely be fallout over such a lawsuit? The violations occurred between 2003 and 2005 and resulted in $81 million in penalties as part of a guilty plea on criminal charges of improperly disposing hazardous waste in California and Missouri. This would not be the last time the company was forced to pay for environmental issues to either state (Neuman, 2013).
Also, in the early 2000s, Walmart saw substantial expansion all over the world. However, in 2005, according to documents released by U.S. Congress members and a former company lawyer, Walmart used a state governor in Mexico to facilitate $156,000 in bribes meant to help open stores. Among details released by Waxman and Cummings, Walmart paid at least $273,000 in bribes to local officials and managers of a power company to expedite construction projects (Feeley, 2013).
Ethical violations and environmental issues, but a solid technological business model. Walmart had a mixed bag, and moving into 2009, even Walmart began to slide when the U.S. was suffering through the worst economic “recession” in decades. So in 2009, Mike Duke took over as CEO, and Walmart launched a project to renovate most of its U.S. stores. That same year, Walmart would enjoy, for the first time, revenues exceeding $400 billion in annual sales (Wal-Mart, 2014). By 2010, Walmart would become the world’s largest company.
Duke introduced a new approach to how Walmart would conduct business at this time. His idea was simple. If the company wanted to survive and improve sales, it would need to return to its focus of having the lowest prices. Walmart began to step away from the cut-throat business model they had become known for under Scott regarding the vendors. Instead, Duke decided to prop up vendors and invest in them. Duke saw that the primary goal should be market share, which would drive demand and volume and lower prices if the vendors were taken care of. He also sought to expand internal and external brands to help further that effort. His plan also included diversification within the company.
As of October 2009, Walmart stores operate in Argentina, Brazil, Canada, Chile, China, Costa Rica, El Salvador, Guatemala, Honduras, India, Japan, Mexico, Nicaragua, Puerto Rico, the United Kingdom, and the United States. In 2010, Walmart confirmed acquiring the video streaming company Vudu, Inc. In 2011, Walmart also received 51% of Massmart Holdings. This acquisition gave the company access to the African countries of South Africa, Botswana, Ghana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Swaziland, Tanzania, Uganda, and Zambia (Wal-Mart,2014).
The explosion of banners has occurred as well. Aside from acquiring other companies, Walmart has created a few of its own. Neighborhood Markets, Express, Walmart Supercenters, Sam’s Club, Supermercado de Walmart, Asda, and many more now cover the globe employing millions of people. Walmart is now the world’s third-largest employer, closely behind the United States Department of Defense and China’s People’s Liberation Army (Alexander, 2012).
The growth, the power, and the prestige were great. Their Shareholder’s Meetings bring in some of the biggest names in Hollywood and the music business. However, being such a big player also creates a mighty big target. Controversy persists about wage law violations, inadequate health care for employees, exploitation of their workers, and the retailer’s anti-union stance. Though most employees would say these claims are unfounded, outsiders continue scrutinizing them. Nation-wide protests, primarily organized by the unions seeking a piece of the pie, continue to spring up at major events each year, such as Black Friday, arguably one of Walmart’s biggest sales days. Of course, with billions in revenue, many opportunists see a chance to get something for nothing. So what are the opportunist’s weapons of choice? Frivolous lawsuits. Altogether, roughly 17 lawsuits are filed against Walmart per working day, and many are settled out of court (Jordan, 2014).
Walmart is a company of constant change, innovation, ruthless growth, and sometimes some major controversy. Walmart has succeeded because of Walton’s focus on keeping prices low and the return to that idea after greed forced that vision off the road for a while. Profit, of course, has sometimes occurred at great sacrifice from those in the field. True, people continue to protest at some of Walmart’s seemingly odd or even unethical business practices. Still, the fact remains that people continue to shop and work there nonetheless. As far as labor practices go, people are not quitting their jobs in droves. Just the opposite is true.
A hiring center is created when a Walmart is about to open a new location. Hundreds, if not thousands, of applicants tend to show up to land a job with the retail giant. Union-backed activist groups such as “Our Walmart” continually accuse the company of showing disrespect to its employees because it does not pay so-called “living wages.” Yet, while nobody is forced to work for Walmart, the truth is that Walmart provides a competitive wage for many jobs requiring little or no work experience or technical skills (Lutz, 2012). This is an excellent opportunity for these people who need to acquire skills and knowledge before landing a better job. That being said, Walmart also promotes from within, and those promotions usually come with substantial pay increases, stock options, bonuses, and much more. Many associates will spend their careers with Walmart, holding many jobs throughout their tenure (Hosier, 2014).
The question of how this has all impacted the organization, and the industry is summed up by a couple of simple sentences. Walmart operates more than 11,000 retail units under 69 banners in 27 countries. They employ some 2.2 million associates worldwide, 1.3 million of whom are in the United States (Wal-Mart, 2014). They boast revenue in the multiple billions, and their shareholders remain happy. The price for a share of stock in 2003 was $56.32. In 2013 it was $71.40 a share (Yahoo Finance, 2014). This does not mean that Walmart is immune from economic distress.
As mentioned earlier, economic issues have presented plenty of problems for all types of organizations in our country, especially retail businesses. The sad part is that the experts have been quoted repeatedly in headlines across the globe, discussing the doom and gloom on the horizon. Many claim these headlines are only the tip of the iceberg for the retail industry. For instance, CNBC recently released information stating that people need to “get ready for the next era in retail—one that will be characterized by far fewer shops and smaller stores” (Gustafson, 2014). The article demonstrated how businesses like Sears, JC Penney, Macy’s, Target, etc., are all currently making plans to shut down many of their stores, lay employees off, and reduce the square footage of the few stores they aim to keep. On the other side of this coin, Walmart plans to and is continuing to open new stores all around the country.
Retail businesses are dropping like flies; still, some remain and sometimes even thrive. Walmart is an excellent example of this. Are changes made inside the organization helping to keep their doors open? The answer to this is a resounded yes. Walmart’s primary competition includes department stores like Kmart, Publix, Target, ShopKo, and Meijer, which are all stores a part of that retail tsunami closing trend discussed earlier. Walmart appears to embrace the changes and roll with them. Does that mean that such changes are easy or do not come without some setbacks? Of course not, but keeping up with strategic trends based on economic factors appears to be crucial. Fashion or “want” oriented stores or even product lines appear to be failing, as clearly demonstrated by the competition.
I see Walmart enjoying at least a little more success in the coming months and perhaps years. At the very least, I see them as one of the last retailers standing when the storm gets underway. Looking at the bigger economic picture, we see an out-of-control unemployment rate that the feds are trying desperately to keep under wraps (22.9-32.7% by legitimate estimations), and even that is getting worse (Bedard, 2014). We have a declining and unbacked dollar that other nations are trying to get rid of. According to economists such as John Williams (Hunter, 2014), we have the potential for hyperinflation in the not-too-distant future. We also see repeated headlines about the stock market making records in the category of “worst since.” Bernanke just stepped down and left us a debt that can NEVER be paid. We have a population spending more money than they can save in a given year, of which over half require some form of government monetary aid, and the list goes on and on. The point is that Walmart’s business model puts itself in an excellent position moving forward if it keeps its prices lower than its competitors. They will also continue to gain loyalty by creating jobs in a market where so many have lost one. This, all while the consumer will soon be forced into a position to ONLY shop at Walmart so they can live at all.
When we examine Walmart, we see a company with a sorted and exciting history but continually sees growth when it listens to the fundamental needs of the communities they serve. “Saving Money to Live Better” may be great, but the company appears to continually reap the benefit when they keep their “Everyday Low Prices.”
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