Case Study - Wal-Mart Stores Inc - Rapid Growth in 90s

Case 22 WAL-MART STORES, INC.(1998): RAPID GROWTH IN THE 1990s

I. CASE ABSTRACT

Wal-Mart Stores, Inc., in 1998, with corporate headquarters inBentonville, Arkansas, was not only the nation’s largest discountdepartment store chain but also had surpassed Sears, Roebuck & Companyas the largest retail organization in sales volume in the UnitedStates. The firm operated stores under a variety of names and retailformats including: Wal-Mart, discount department stores; SAM’S Clubs,wholesale and retail membership warehouses; and Supercenters, largecombination general merchandise and grocery stores. In theinternational division, it operated stores in Canada, Mexico,Argentina, Brazil, Germany and China. The McLane Company, a supportdivision with over 36,000 customers, was the nation’s largestdistributor of food and merchandise to convenience stores and selectedWal-Marts, SAM’S Clubs, and Supercenters. On January 31, 1998, Wal-Martoperated 2,421 Wal-Mart stores, 483 SAM’S Club stores, and 502Supercenters, which totaled 3,406 stores.A major concern was Wal-Mart’s spectacular growth and the dominance ofthe firm in the market. The firm was perceived to be in the accelerateddevelopment or growth stage of the institutional life cycle in whichsales are increasing rapidly, profits are high, new stores are beingopened, existing stores are being refurbished, the product line isbeing reevaluated, service offerings are being upgraded, automation isbeing introduced to store operation, and better management controls arebeing developed. What makes this situation unique is that the discountdepartment store industry was perceived as being at maturity. Theindustry faced increased competition, leveling of sales, moderateprofits by surviving firms, over-stored markets, and more complexoperations problems than previously.Another concern: what of Wal-Mart without Sam Walton? A new presidentand chief executive officer was in place. Management claimed:"There’s no transition to make because the principles and the basicvalues [Sam Walton] used in founding this company were so sound and souniversally accepted." Senior management felt that the firm couldcontinue to maintain its blistering growth pace by "outmaneuvering thecompetition with innovative retailing concepts."Reality was somewhat different, however. Sales were no longerincreasing each year in the 20% to 30% range as in the 1980s and early1990s. In Fiscal Year (FY) 1996 to FY 1997, sales increased only12.4%. Sales for FY 1990 were $32,601,000,000 and increased to$117,958,000,000. The increase was $85,357,000,000 (or 261.8%). Thestores were 3,406 (almost double) and 1,721 for FY 1997 and FY 1990,respectively. The growth as a percentage slowed because base saleswere so large. In FY 1997, Kmart had sales of $32,183,000 and sales of$32,070,000 in FY 1990. Kmart sales decreased by <$113,000,000> whileWal-Mart sales increased by $85,357,000,000 for the eight FYs (1990-1997). _______________Copyright © 1999 by Thomas L. Wheelen and J. David Hunger. Reprinted byour permission only for the 7th Editions of (1)

Strategic Management and Business Policy

and (2)

Cases in Strategic Management

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Case 22Wal-Mart Stores, Inc. (1998)

Decision Date:19981997 FY Sales:$117,958,000,0001997 FY Net Income: $3,526,000,000

(1995 Fiscal Year [FY] was from February 1, 1995 to January 31, 1996

)

II. CASE ISSUES AND SUBJECTS Retailing/Discount DepartmentStore Industry

Industry AnalysisExecutive SuccessionCorporate CultureCompetitive StrategyStrategy FormulationMission and ObjectivesMarketing StrategiesEnvironmental ScanningHuman Resources StrategyExecutive LeadershipEvaluation and ControlStrategic GroupsGrowth StrategiesDistinctive CompetenciesNation’s Largest Retailer andLargest Discount Store ChainImpact of FounderNew Strategic Management TeamCompetitive AdvantageTarget MarketsMarket Segmentation"Green" MarketingMature IndustryStages of DevelopmentStrategy ImplementationOrganizational Life CycleConcentration vs. Diversification22-2

III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS

(

see Figure 1.5 on pages 20 and 21)

Strategy FormulationStrategyImplementationEvaluation &Control

P e r f o r m a n c e S t r a t e g i c P o s t u r e C o r p o r a t e G o v e r n a n c e E x t e r n a l F a c t o r s I n t e r n a l F a c t o r s S t r a t e g i c F a c t o r s R e v i e w M B O & M i s s i o n S t r a t e g i c A l t e r n a t i v e s

1A 1B 2 3 4 5A 5B 6 7 8

O O O O O O O O O O

O = Emphasized in Case X = Covered in Case

IV. CASE OBJECTIVES

1. To discuss Wal-Mart’s successful growth strategies andperformance over the past decade.2. To discuss Wal-Mart’s entry into new retailing formats(superstores, SAM’S Club). Can these new retailing formats be assuccessful as the company’s discount store format?3. To discuss the concept of "green" marketing and its impact oncustomers and suppliers. How does "green" marketing relate tosocial responsibility?4. To discuss the phrase, "The Wal-Mart Way" and how it relatesto Wal-Mart’s strategic management.5. To discuss Sam Walton’s philosophy and its impact uponcorporate culture and daily company activities.

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To discuss how long this culture will continue after hisdeath.6. To review how Wal-Mart succeeded in its objective to becomethe nation’s number one retailer.7. To discuss what strategies Wal-Mart has in place to achievethis objective, and/or to suggest some new strategies to achievethis objective.8. To discuss how Wal-Mart can sustain its growth strategieswhile maintaining its financial position.9. To evaluate how successful Wal-Mart’s strategic management hasbeen in a maturing industry with intense competition.10. To evaluate Wal-Mart’s marketing strategies.

11. The case author provided the following six teachingobjectives:

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To show how the marketing concept is interpreted and appliedin retailing and how and why an organization becomes marketingorientated.