The Background Ie all began in 1962 in a small town in Arkansas when Sam Walton noted the need for serving customers in small towns. Retailers such as Kmart and Sears focused on big towns. This created an opportunity for Wal-Mart to fill people’s needs in rural areas. This small-town orientation is reflected in the company’s values, which emphasize maintaining good relationships with staff 25 well as suppliers. Sam Walton’s values and his philosophy of simplicity and frugality live on after his death. The focus on cost Savings enables the company to offer “everyday low prices,” which has become the familiar company slogan. Planning: From Small Towns to a Global Strategy Besides the traditional stores, the company has Supercenters with a full line of groceries for one-stop family shopping. They may also include specialties shops with a vision center, tire and lubrication facilities, and photo Processing. In addition, Sam's Club is a members-only warehouse club for individual and business members. Since the early 1990s, Wal-Mart has gone international, starting with a Sam’s Club store near Mexico City. Now Wal-Mart operates clubs and stores worldwide in countries such as Argentina, Brazil, Canada, China, Germany, South Korea, Mexico, Puerto Rico, and the United Kingdom, employing more than 2,80,000 people. z The tremendous size of the company gives it a great deal of buying power, which in turn makes it possible to offer goods at low prices, a policy that differentiates Wal-Mart from other | [fetailers. The company is known for its national brand strategy, which allows consumers to com- Prices. In addition, Wal-Mart has its own private labels with product offerings in apparel, th and beauty care, dog food, and other items. In its hub-and-spoke distribution system, merchandise is brought to a distribution center, where it is sorted and prepared for delivery to the stores, These highly automated distribution Centers operate 24 hours a day and may serve some 150 stores. Other merchandise is shipped directly from the suppliers to the stores. Simple Organization Structure: Centralized and Decentralized While the company’s proprietary information system is centralized, the operation is decentralized with a great deal of authority delegated to local managers in, for example, pricing the merchan- Gise according to the local environment. The autonomy given to store managers makes them in a sense a small shopkeeper who can make decisions to adjust inventory according to local needs, “Employees, called associates, are informed and celebrated at the Saturda where they are cheered for their accomplishments. The meetings also to reinforce the notion that the customer is number one. Wal-Mart's organization culture is built on three basic values promulgated by Sam Walton. It Was established in 1962 and still permeates the organization. The values are individual, (2) service to the customer, and (3) striving for excellence. O the organization culture include exceeding the expectations of custom that they can make a difference, quickly approaching customers to hel be done today rather than postponing it, 'y morning meetings, Provide an opportunity (1) respect for the ther factors influencing lers, assisting people so Ip, doing today what can and pricing for providing value to the customer.Human Resource Management: People, the Most Important Assets Clearly, the organization culture has an impact on the staffing function Associates are treated with respect in this lean organization. Having a great deal of authority motivates people. Training is decentralized with management seminars offered at the distribution centers instead of at the company headquarters. The company atmosphere encourages employees to submit suggestions, many of them being implemented through the “Yes We Can Sam” suggestion system. Associates are rewarded bonuses for cost reduction through the “shrink incentive plan.” Supervisors and managers receive a salary as well as incentive compensation based on store performance. Associ- ates can also participate in a profit-sharing plan with Wal-Mart contributing a certain percentage. Leadership by Example: imple Frugality Communicated Effectively Sam Walton, the founder, provided leadership by example. His philosophy influenced his style. Once the richest person in America, he was a very frugal man, flying economy class and driving an old pickup truck. Similarly, Lee Scott, the present CEO, drives a Volkswagen Beetle. Sam Walton was a good communicator during his time as CEO, and his style was described as “management by walking and flying around” because of his frequent visits to his stores, Although he felt that trusting. people and giving them responsibility was essential in managing people effectively, he also had the necessary control systems. Although Walton passed away in 1992, his legacy and philosophy still permeate his organization, as shown by the spartanly furnished headquarters in Bentonville. Controlling a Large Organization: Sharing Information and Technolo- gies with Suppliers One of the key factors for Wal-Mart's success is the inventory system that uses modern tech- nology. The proprietary computer-controlled logistic system is considered one of the largest in ‘America, ranking just below the Pentagon's system. The store manager can easily find out how his or her department managers are doing and which products are in high demand. Wal-Mart's inventory turns over about twice as fast as the industry average, thus reducing greatly inven- tory costs. Suppliers, who are considered a part of the Wal-Mart family, also have access to the system and receive real-time data to help them plan for the fast-moving items. The relationship with suppliers is, however, very businesslike. Contracts are negotiated in no- nonsense rooms with a table and some chairs—no plush offices can be found. What is found, however, is a sign that says Wal-Mart’s buyers do not accept bribes, which could influence buying decisions. Global Challenges for the Future" Although Wal-Mart has been successful, there are considerable challenges ahead. To continue its growth, Wal-Mart would have to continue aggressively with opening new stores at home and abroad. In addition, product and service offerings need to be expanded, such as providing banking services as well as adding food. International expansion is another way to grow. The company has been successful in the expansion into Canada and Mexico, but other strategies