Background of the Study

Wal-Mart is the largest retail store in the United States, and is larger than any other
retail chain in the world. Currently Wal-Mart operates over 4,150 retail facilities
globally. Also, the company is the dominant retail store in Canada, Mexico, and the
United Kingdom (www.walmart.com).
According to the Fortune 500 index of the wealthiest and most powerful
corporations in the world, Wal-Mart holds the number one spot, ranked by its total
sales. The company is ranked as the second most admired company in the world by
Fortune (www.fortune.com).
Wal-Mart provides general merchandise: family apparel, health & beauty aids,
household needs, electronics, toys, fabrics, crafts, lawn & garden, jewelry and
shoes. Also, the company runs a pharmacy department, Tire & Lube Express, and
Photo processing center as well (www.walmart.com).
When Sam Walton created Wal-Mart in 1962, he declared that three policy goals
would define his business: respect for the individual, service to customers, and
striving for excellence (www.walmart.com). Wal-Mart's corporate management
strategy involves selling high quality and brand name products at the lowest price
(Vance, 119). In order to keep low prices, the company reduces costs by the use of
advanced electronic technology and warehousing. It also negotiates deals for
merchandise directly from manufacturers, eliminating the middleman (Vance, 72).
Wal-Mart's 2002 sales topped $218 billion, with sales growth at 13.8 %. Its 2002 net
income was $ 6.7 billion, a growth of 6 %. Wal-Mart has 1,283,000 employees, as of
2002; a growth of 11.2 % (www.fortune.com).
Wal-Mart's community outreach focuses on the goals of providing customer
satisfaction, involving itself with local community services, and providing
scholarships. Its emphasis is on children and environmental issues
(www.walmart.com). After the Second World War, the style of retailing in the US
evolved into discount merchandising. It took the form of departmentalized retail
business. A discount retail store such as Wal-Mart can provide lower priced goods
for consumers at lower prices by accepting lower margins, while selling greater
quantities of goods. The company launched its business in small-towns throughout
the South and Midwest, eventually expanding into larger cities (Vance, 69).
During the 1970s, the retail industry became highly competitive, but, at the same
time the economy became weak due to inflation. Sears was the leading retailer in
the nation, during the 1970s, however, the recession of 1974-1975 and inflation
affected Sears adversely. Sears targeted middle class families and expanded its
overhead. WalMart's strategy was to compete with its rivals and lower overhead
expenses. Compared with Sears, which consisted of more than 6,000 distribution
centers, Wal-Mart had only 2,500 comparable units. Wal-Mart grew rapidly during

the 1980s due to diversification of the company. WalMart's fundamental business

principles at that time were to provide "high-quality," brand name merchandise at
low-prices and to locate stores in small towns (Vance, 113).
Wal-Mart centered on small-towns first, and then tried to move to large cities. This
happened while other retailers centered on larger urban centers. However, as the
economy faced a downturn, people wanted low price stores. Furthermore, as people
became mobile, they moved to small towns and suburbs and were willing to travel
further to buy low price products. During the 1980's, local chambers of commerce
supported Wal-Mart because they believed that the company helps a local economy
by providing good quality products at low prices (Vance, 148). Unfortunately, critics
contend that the success of Wal-Mart hurts the existing local independent
merchants. Despite the criticism that Wal-Mart destroys small-town competitors, the
local chambers of commerce endorsed Wal-Mart (Vance, 72).
In addition, the chambers of commerce account that the arrival of WalMart provided
jobs for people and a more diverse opportunity for local merchants by adapting to
the new business environment. They said that Wal-Mart contributes to their local
economy (Vance, 149). Nonetheless, local newspapers began to scorn Wal-Mart
because the company did not nurture amiable relationships with local advertisers.
Once local competition was eliminated, Wal-Mart began to cut back and eliminate
local advertising in favor of direct mailing of a centrally produced circular Vance,
72).
Today, Wal-Mart has 1,636 retail stores. There are 1,093 Wal-Mart Super centers,
502 Sam's Clubs, 31 Wal-Mart Neighborhood stores and 1,183 international stores
(www.walmart.com). Its core retail business can be divided into four retail divisions:
Wal-Mart stores, super centers, Sam's Club warehouses and neighborhood markets.
Wal-Mart stores and Super centers provide "one-stop family shopping"; combining
groceries and general merchandise departments. Sam's Club is the nation's leading
members-only warehouse club. Neighborhood Markets offer a convenient shopping
experience for customers who need groceries, pharmaceuticals and general
merchandise.
Internationally, Wal-Mart has more than 1,000 stores in nine countries.
(www.walmartstore.com Retail Division) Sam's Club provides more discounted prices
for members by eliminating the middlemen by buying directly. Founder Sam Walton
believed that low-prices and deep discounting would appeal to customers most and
beat competitors. (Vance, 115) Further, Sam Walton intended to implement deep
discounting which was designed to provide 40- 60 % discounted prices for
customers. Thus, he focused on supermarket and super drug store businesses
(Vance, 113). When Wal-Mart first arrived on the scene with their low prices, K-Mart
stores was unable to discount brand-name products. Customers wanted to buy good
quality brandname products.

K-Mart provides non-name brand goods cheaply, however, it could not maintain
constant low prices with its name-brand products (Vance, 160). K-Mart and Sear
could not beat Wal-Mart due to several reasons: First, Sears' prices are higher than
Wal-Mart's because the Sears infrastructure gives it higher overhead costs (Vance,
159). K-Mart declined in customer appeal because it neglected its store environment
and could not provide satisfactory levels of service for its customers. Widespread
complaints of poor customer service at K-Mart began to surface while Wal-Mart
placed emphasis on customer satisfaction and neat store environments (Vance,
161).
Today, Wal-Mart's competition in the retail market are K-Mart and Target, which
come behind Wal-Mart in the US retail market (Vance, 166). Wal-Mart is also on top
of their game because of the management strategies they employ. The
management strategies of Wal-Mart emphasize its workforce and its corporate
culture; that being a morally conservative, religious, and family-oriented business
(Vance, 163). Wal-Mart emphasizes how it listens to the needs of its workforce so
that each employee is able to suggest improvements to company policy and
practice. At Wal-Mart, store employees are called "associates." In addition, in order
to promote esprit de corps, the company publishes "Wal-Mart World," an internal
magazine for its associates (Vance, 74).
The company offers generous financial rewards for employees by means of profitsharing plans such as stock-purchase options (Vance, 74). Furthermore, the
company provides comprehensive training programs for all employees (Vance, 75).
It should be noted that most Wal-Mart employees do not get paid "generous" wages.
The bulk of Wal-Mart's employee base work at Wal-Mart stores. They are part time
workers who are paid the local minimum wage. Most employees are not entitled to
any benefits, as it takes a part-time employee over five years to become eligible for
benefits, profit-sharing, or other such compensation. There is a high turnover rate
among these employees, which means most do not reach the requisite level of
seniority. In many cases the local minimum wage is far below the poverty line
(Quinn, 35-47).
Timeline
1960s and 70s 1962 Wal-Mart opened the first store In Rogers, Ark.
1970 Wal-Mart opens first distribution center and home office in Bentonville, Ark.
1970 Wal-Mart traded stocks as a publicly held company
1971 Wal-Mart in five states: Arkansas, Kansas, Louisiana, Missouri and Oklahoma.
1972 Wal-Mart approved and listed on the New York Stock Exchange.
1973 Wal-Mart in Tennessee.

1974 Wal-Mart stores now in Kentucky and Mississippi, Texas becomes 9th.
1977 Wal-Mart entered Illinois. 11th state: Alabama.
1980s 1981 Wal-Mart opened at Georgia and South Carolina
1982 Wal-Mart opened at Florida and Nebraska. 1983 First SAM'S CLUB opened in
Midwest City, OK People Greeter implemented at all store. Wal-Mart enters Indiana,
Iowa, New Mexico and North Carolina. 1984 David Glass named company president.
Wal-Mart enters Virginia 1985 Wal-Mart has 882 stores with sales of $8.4 billion and
104,000 Associates. Company adds stores in Wisconsin and Colorado. 1986 WalMart enters Minnesota. 1988 David Glass named chief executive officer of Wal-Mart
Stores, Inc. First Super center opened in Washington, Mo. 16 Wal-Mart distribution
centers in operation. 1989 Wal-Mart is now in 26 states with the addition of
Michigan, West Virginia and Wyoming. 1990s 1990 Wal-Mart becomes nation's No. 1
retailer. McLane Company of Temple, Texas acquired Wal-Mart enters California,
Nevada, North Dakota, Pennsylvania, South Dakota and Utah. 1991 Wal-Mart enters
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New
Jersey and New York. "Sam's American Choice" brand products introduced.
International market entered for first time with the opening of a unit Mexico City.
1992 Sam Walton passes away April 5. S. Robson Walton named chairman of the
board April 7. Wal-Mart has entered 45 states with the addition of Idaho, Montana
and Oregon. Wal-Mart enters Puerto Rico. 1993 Wal-Mart enters Alaska, Hawaii,
Rhode Island and Washington. 1994 Wal-Mart enters Canada by the acquisition of
Woolco, and takes over 123 former Woolco stores across Canada. It opens 96 stores
in Mexico. Three value clubs open in Hong Kong. 1995 Wal-Mart enters its 50th state
- Vermont - and builds three units in Argentina and five in Brazil. 1996 Wal-Mart
enters China 1997 Wal-Mart replaces Woolworth on the Dow Jones Industrial
Average 2000s 2000 Wal-Mart ranked 5th by FORTUNE magazine in its Global Most
Admired AllStars list. H. Lee Scott named president and CEO of Wal-Mart Stores, Inc.
Wal-Mart ranked #1 Corporate Citizen in America in the 2000 Cone/Roper Report, an
annual national survey on philanthropy and corporate citizenship. 2001 Wal-Mart
has the biggest single day sales in history: $1.25 billion on the day after
Thanksgiving.