Faiez Hassan Seyal | Authored in 1991
This brief article is an extract from my research paper written during my master’s degree in the United States. During my initial research to find a success story, I read in a magazine about the world’s 50 richest people. On that great list, there was a name that caught my attention and compelled me to know more about that person and story of his business success. This name was Sam Walton – the founder and the chief executive of the largest retailing chain in the United States of America namely “Wal-Mart”. This was suggested in that magazine that this person will be soon in top ten richest person of the world and most successful businessmen by 1990. Therefore I wrote a paper on the performance of “Wal-Mart”. The extract of that paper is being produced here. Sam Walton was declared as the eighth richest person of the world having the net wealth of U.S. $ 7.3 billion. Now there are 1,438 Wal-Marts in the United States with the total earnings of $ 1.1 billion on sales over $ 25 billion annually. This paper is a success story of a businessman and provides the strategies used by him to be one of the best. It is presented with a hope that it will serve as a guideline to Pakistani businessmen.
First Wal-Mart store opened in Arkansas, U.S.A. on July 02, 1962. The primary goal of the company was to provide people, in small towns with cheap but quality products, so they don’t have to leave the town to get good bargains. At the time of its silver jubilee in 1987, Wal-Mart had more than 1050 stores and 160 “Sam’s Wholesale Clubs”, (Sam’s wholesale clubs provide wholesale merchandise at 25 % less price to its members i.e. students, govt. servants, educators, retired citizens and non-profit organizations), in operation. About 80 % of all Wal-Mart stores were located in small towns. In 1987, Wal-Mart employed 183,000 people; total sales were in excess of 19118.5 million dollars with total profit of 761.2 million dollars. The performance data for Wal-Mart is shown in the table.
|SALES||GROWTH %||COSTS||GROWTH %||STORES||
* All the dollar values in 1000 of nominal dollars.
Reasons for Success
After looking on the unbelievable and outstanding performance of the Wal-Mart, one question comes in mind. What was the reason for this great success of Wal-Mart? To find the answer to this question I talked with the employees of different stores starting from the top level to the most fundamental levels and consulted different annual reports of the company and finally identified four major reasons for the success of the Wal-Mart. Among these four reasons, two very important ones are summed up in two slogans used by the company for the advertising purposes namely, “Every Day Low Prices” and “Our People Make Difference”. The first one catches the customer’s attention immediately and the second one tells the importance given to the employees of the company.
Customer’s Satisfaction: At Wal-Mart, as Sam M. Walton said that there is only one boss and that is customer, this customer priority plus the concept of “Every Day Low Prices” took Wal-Mart to one of the biggest retail chains in just 25 years. The concept of customer’s priority means that every shopping experience of the customers should be satisfying one.
The concept of “Every Day Low Prices” means that quality brand merchandise is offered at every day low prices without waiting for sales. This promise of the lowest possible prices is the merchandise pricing format at Wal-Mart. The company guarantees the lowest possible prices and offer refunds to the customers if its prices are higher than competitors. In addition, efficient and friendly check-out experiences and no hassle merchandise refund and exchange policies, without asking the reasons for refunds or exchanges, are important incentives given to the customers.
Vendor’s Relation: Wal-Mart’s unprecedented growth in retailing requires a reliable supply line of quality merchandise. This needs good relations with vendors and suppliers. In Wal-Mart they both work with management as a partner on new product development and test marketing to satisfy ever changing customer’s demand. Joint efforts are made in package, design and display techniques and quantity packing decision. This general framework of partnership and cooperation creates the right product at lowest possible price.
Associate Relations: Every associate is an individual with certain God-gifted talents and the abilities. If they are treated with respect and dignity and they are allowed to use their talents and abilities, it can really make difference in working atmosphere. At Wal-Mart, they are trained by sharing information, open door communication, computer net-work, gross roots meetings, weekly store meetings, Saturday morning meetings in the general office and year-end management meetings.
Educational experiences such as the Walton School of Retailing, retail management seminars, store within a store, Sam’s Operating School, department managers development guides, in-store seminars for development and customer service managers and clerks workshops facilitate the objective of “Our People Make Difference”, which is one of their slogans and a key factor in their success.
Community Relations: Another major reason for the success is the special attention given to the community. Wal-Mart’s support of national agencies, Wal-Mart foundation matching grant program, assisting local non-profit organizations, fund raising projects, hosting blood drives, assisting with voter registration and volunteering time to cleanup after natural disasters, provide the facilities to the communities.
During the period 1976-1987, Wal-Mart annual average sales growth was 76.3 percent. Over the period it grew by 840 percent. On average, Wal-Mart opened 84 stores a year in the said period. This is an excellent performance when compared to growth in the retail industry at that time, which grew only by a little more than 2.5 percent each year with a total of 20 percent in the same time period. It is worthwhile to notice that from 1980-1982, when the economy took a slump, the industry took a slump too but Wal-Mart continued to increase its operation and had a record growth of 48 percent in the year of its 20th birthday. The major reasons for this excellent and outstanding success were excellent goals, cost controls, sales strategies, customer’s satisfaction, good relations with the vendors and employees, excellent management and active participation in the community relations. (Looking at its great success, I would not be wrong if I predict that Wal-Mart will become the largest retailing company in the world, not in too distant future, if it continues adhering to those principles that lead to its success at the first place). I leave the decision to our business community to defining their own business ethics considering our social, cultural and religious background because that is the only way for their own, their business and the country’s success and excellence.
 By the fiscal year ending January 31, 2002 Wal-Mart had become the world’s largest company with over US$ 218 billions in sales and employing over 1.3 million people in its 3200 stores in the US and more than 1100 stores in other countries. More than 100 million customers visit various Wal-Mart stores worldwide on a weekly basis. (Information with the courtesy of www.walmart.com)