Part One: Introduction to Management
New Improved Walmart Hits No. 1 in Midst of Global Recession
We live in turbulent times. Since the collapse of the U.S. housing market in 2008, the unemployment rate has more than doubled. Iconic American businesses have gone belly up or been bailed out with taxpayer money. Entire nations have teetered on the edge of bankruptcy. Yet, despite widespread turmoil, some organizations have actually defied the global recession-Walmart is a case in point.
During this same period of economic decline, Walmart increased profits, created thousands of new jobs annually, expanded its operations overseas, launched a sustainable-business revolution, extended health coverage to 1.2 million people, unveiled a hunger-relief program, developed 75 percent of store management from hourly associates, and saved the average American household $3,100 annually. In the words of the company motto, Walmart has helped people "Save money. Live better."
As the world's largest corporation and private employer, Walmart possesses a massive economic profile. In 2010, the Bentonville, Arkansas-based retailer hit No. I on the Fortune 500 list and was ranked among the Top-10 world's most admired companies. Fiscal year sales reached $405 billion, and the company's diverse workforce grew to more than 2 million people worldwide. The big-box leader operated 8,400 retail units in 15 countries, including 2,747 supercenters, 803 discount stores, and 596 Sam's Clubs in the United States alone. It donated more than $400 million to charities and maintained partnerships with 61,000 suppliers. If Walmart were a country, its economy would rank among the top 25 nations, rivaling Saudi Arabia and Sweden.
The company's recession-defying growth springs from a familiar-but-groundbreaking retail formula: unbeatable low prices made possible by high volume purchasing, ultra-efficient logistics, and advanced supply chain technology. Significant cost reductions from increased efficiencies and economies of scale enable Walmart to sell merchandise at rock-bottom prices and still make a profit. Walmart supercenters are the visual embodiment of such economies of scale: Spanning the length of multiple football fields, the massive one-Stop marketplaces offer mountains of discounted brand name and private label merchandise across a range of categories, from groceries and electronics to housewares and automotive.
Walmart's success traces back to a legendary American businessman, Sam Walton, Born in 1918 to a farm family in Kingfisher, Oklahoma, Walton recognized early in life that his ability to milk cows, deliver papers, and quarterback a team to a state football championship could lead to greater achievements. At college Walton was head of the ROTC, the founder of a newspaper delivery business, and class president. After finishing studies at the University of Missouri with a degree in economics, the young graduate went to work for J.C. Penney Co., where he learned retail sales and a technique called "management by walking around."
After serving his country as a World War II Army captain, Walton began to realize his full entrepreneurial potential. Upon leaving the service in 1945, Walton became a franchisee of Ben Franklin Stores, where he honed his trademark strategy of purchasing in high volume while lowering markups. In 1950 he launched his own store-Walton's Five and Dime-in Bentonville, Arkansas. The rest is history: Walton opened the first Walmart Discount City store in Rogers, Arkansas, in 1962, and in 1969 the business incorporated as Wal-Mart Stores, Inc. After growing his company regionally for two decades, the affable "Mr. Sam" transitioned to chairman of the board and set managements sights on national and international expansion. Walmart opened its first supercenter in 1988, moved into all 50 states by 1995, spread to 15 countries by 2005, and planned a global 50th anniversary for 2012.
Samuel Moore Walton passed away in 1992, but his spirit lives on in the company. From the first moment Walmart opened as a single store in Rogers, Arkansas, the retail giant has borne the stamp of Walton's industriousness and ambition. The company now boasts hundreds of millions of customers worldwide who save money by shopping for all their needs at one convenient location.
Today a new era of Walmart is emerging. While the retailers storied past was marked by relative tranquility and folksy Americana-"Mr. Sam," the yellow "Smiley" mascot, and low prices sloganeering-being No. 1 has attracted powerful opposition from competitors, governments, unions, and special interests. Unlike the former halcyon days, the new age of Walmart is fraught with legal and political contests that threaten Walmart's brand, attack its profitability, and undermine the cost-cutting formula on which the company is built. To reposition Walmart for the challenges of the twenty-first century, former CEO H. Lee Scott, Jr. commenced a companywide makeover at the midpoint of his ten-year tenure. After leading the company's disaster-relief effort following Hurricane Kattina in 2005, Scott and fellow executives infused Walmart with fresh initiatives that cast the company in a greener, more humanitarian light. The changes culminated in the acclaimed "Save money. Live better." campaign-a campaign that has expanded under the leadership of new CEO Mike Duke. By 2015, Walmart plans to add 500,000 new jobs to the economy, tackle world hunger, create industry benchmarks for sustainable business, elevate working conditions for global workers, and roll back prices for increasingly cash-strapped global consumers.
If management pursues its ambitious, forward-looking agenda with the same drive and determination that animated founder Sam Walton, Walmart may be on the cusp of a new business revolution-one that holds maximum potential for people, profits, and the planet.
What social, political, and economic forces are shaping the practice of management at Walmart in the twenty-first century?