Background

Last year, Wal-Mart had revenues of $191 billion. 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
%. 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 . 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 . 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 .
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 . 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
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 .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

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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.

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 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.

Wal-Mart Company Strategy

This section will examine Wal-Mart's company strategy in several sections. Three
elements of successful strategy formulation and a fourth element, which
exemplifies the implementation process of company strategy, will be looked at.
Followed by this, an analysis of key factors contributing to this strategy will be
detailed. These include looking at Wal-Mart's competitive strategy, the CEO's
leadership, and company strategy strengths and weakness assessment. The material
used to analyze Wal-Mart strategy consists of the company's annual reports, its
Fact Sheets and other information found on the company Internet site. Other
information is obtained from outside sources such as Fortune Magazine, and from
outside groups who are critical of the corporation. The focus of this analysis will
be placed on identifying the resources of the firm, its weaknesses and strengths in
terms of its competitive environment. The sections examined will highlight the
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leadership style of Wal-Mart CEO H. Lee Scott, who inherited the corporate
legacy of Wal-Mart founder Sam Walton. Other elements such as the culture, the
corporate organization and values of the company come to play.

1. Strategic Goals
This section looks at three successful elements of strategy formulation and a
fourth element, where the strategy is implemented successfully. These are as
follows:
• Dominate the Retail Market wherever Wal-Mart has a presence.
• Growth by expansion in the US and Internationally.
• Create widespread name recognition and customer satisfaction with the
WalMart brand, and associate the retailer with the reputation of offering the
best prices.
• Branching out into new sectors of retailing such as pharmacies, automotive
repair, and grocery sales.

2. What is the company's competitive strategy?

The company's competitive strategy is to dominate every sector where it does
business. It measures success in terms of sails and dominance over competitors.
Its strategy is to sell goods at low process, outsell competitors, and to expand.
Generally, Wal-Mart does everything it can to win over competitors.

3. How does the strategy relate to the company’s strengths and resources?
The company uses its size, financial power, immense resources to dominate
retail. That translates into effective use of strategy whether its operating a local
store, to acquiring another retail chain in another country. The power and size
of the company enables it to realize its goals with ruthless efficiency.

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4. How clear and long term is the strategy?
The strategy is very clear and direct. It was put into place in the 1960's by Sam
Walton, and refined over the decades. The company is proud of its strategy and
even incorporates it within its moniker "Always Low prices, Always."

5. What was the CEO's public message?

The public message of the company is consistent, and has been so over time.
Founded by Sam Walton, the company has grown considerably. The core
message is that WalMart is a "family friendly" store, and that it is good to its
customers, and that it is an asset to the local community. CEO H. Lee Scott, in
the 2001 Wal-Mart Annual report is consistent in repeating the core message of
the company, restating the corporate culture espoused by founder Sam Walton.
The messages of selling for less, respecting employees and communities, and
expanding are all echoed in the report .

6. Company Strengths
The company is the world's number one retailer, the number one retailer in the
US, and the number one retailer in various countries. It was recently ranked
number one in sales in Fortune Magazine.
7. What are the company's weaknesses?
There are several areas of concern for Wal-Mart. These can be divided up into
categories: Extensive labor relations problems, Community Relations
Problems, and Miscellaneous PR Problems.

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 Wal-Mart Policy Issues

Wal-Mart Stores Inc. became the largest company in the world this year,
surpassing Exxon Mobil Corp. to become #1 on Fortune Magazines annual
"Fortune 500" list. WalMart took in $220 Billion in revenue last year, and has
firmly grasped the spot that it has long aspired to hold: that of the #1 retailer in the
world. However, Wal-Mart does not plan to sit on its laurels. There are still several
policy issues that they face. These include:

1. Wal-Mart's expansion into the foreign market

Wal-Mart has moved in the past year to further expand into the world
marketplace. The retailer already has close to 400 European stores, mostly in
the UK and Germany .Where Wal-Mart wants to grow is in the Asian market.
On March 15th of this year, Wal-Mart entered into the Japanese market based
on an agreement with partner Seiyu Ltd. Wal-Mart bought 6.1% of Seiyu in an
attempt to gain a foothold in the Japanese market .That market has been
notoriously unkind to overseas companies, with most shutting down their
operations their and heading home.

2. To expand beyond just retail and move into other sectors

Wal-Mart has shown a definite desire to move just beyond retail shopping. Of
the nearly 3000 stores in the US, 475 are Sam's Club warehouses, specializing
in bulk sales from food to electronic items .Their chief competitor in this area is
Costco, another warehouse chain, but Wal-Mart has the advantage of having
more stores and the regular Wal-Mart stores to back up their investments. Wal-
Mart will often attach a Sam's Club near a regular Wal-Mart store, to give
consumers two options to choose from. Since Sam's Club also features fresh
food and produce, it is also a competitor for supermarkets. Although the cost of

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 obtaining membership in Sam's Club and the sometimes long distance between
stores has kept many, especially urban dwellers, from shopping at Sam's Club,
Wal-Mart is continuing to expand into areas where Costco's and supermarkets
already exist in an attempt to drive them out of business. As long as Wal-Mart
can offer low prices on food and other bulk items, they will continue to grow
and compete at the warehouse and supermarket level.

3. Dominance in Labor Relations

Wal-Mart has long tried to hold the upper hand over its work force. They have
consistently fought attempts by several segments of their work force to
unionize. A recent example is Wal-Mart's battle against the United Food and
Commercial Workers (UFCW). There have been several disagreements
between the Union and Wal-Mart, as Wal-Mart will not allow its workers to
unionize. Several battles have been fought in court and in the U.S. Congress
over Wal-Mart's questionable labor practices. Wal-Mart's policy has been one
of delay and "terror" in the words of one union representative who has accused
the company of oldfashioned union-busting tactics.

Stakeholder Analysis

In determining the public affairs strategy of Wal-Mart, there are many groups and
individuals who have a stake in what Wal-Mart does. These stakeholders can be
divided into two groups: the market and non-market stakeholders. The market
stakeholders are those groups and individuals who have an economic stake in what
the company does. The non-market stakeholders are those groups and individuals
who have a non-economic stake or political stake in what course the company
takes.

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 Market Stakeholders

1. The Stockholders
The first group that has an economic stake in what Wal-Mart does is its
shareholders. These are the people who actually own shares of Wal-Mart and
therefore are interesting in seeing a return on their investment. They hope the
value of their stock will rise and they will see dividends. According to the 2001
Annual Report, last year, Wal-Mart paid out $.24 per share in dividends .

2. The Wal-Mart Executives

The top executives of Wal-Mart also have an economic stake in the company
just as the regular stockholders do. Many of the top executives received stock
options are part of their salary. Obviously, they want their stock value to rise
because a large part of their compensation comes from how well the Wal-Mart
stock is doing.

3. The Employees
While some of the employees may have stock in the company, many of them
have an economic stake in the company just because their job is their primary
source of income. They want Wal-Mart to do well because then they will keep
their job and their source of income. Their financial compensation from Wal-
Mart sustains them. WalMart employs more than 885,000 people nationwide .

4. The Communities where Wal-Mart is located

Each of the communities that has a Wal-Mart located in it has a stake in how
well the company is doing. Many of these communities rely on Wal-Mart not
only for jobs but also for a place to purchase many of their day to day

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 necessities are a low price. Without Wal-Mart in these communities, there
would be people without jobs and families paying higher prices for the
goodsthat they need.

5. Consumers
Consumers have a stake in how well Wal-Mart is doing. According to the 2001
Annual Report, Wal-Mart is the country's largest grocery retailer and therefore
many people rely on Wal-Mart for their groceries.

6. Non-profit Organizations
Many non-profit organizations have an economic or market stake in how well
Wal-Mart is doing. The Wal-Mart foundation provides many non-profit
organizations with funding and if the company is not doing well, the
Foundation is not going to do as well either. According the Wal-Mart Good
Works Foundation, 97 percent of their funding goes to non-profit organizations
in the communities where their stores are located. The WalMart Good Works
Foundation provides funding to programs that deal with community, education,
environment and children. Therefore, if a Wal-Mart is located in a certain
community, the non-profit organizations can look to the Wal-Mart foundation
as a possible source of funding.

7. Other Retailers
Other retailers have a stake in how well Wal-Mart is doing and how much they
are expanding. If a Wal-Mart moves into a community, changes are the other
retailers in that community, especially if they are privately owned are going to
lose money and may even be forced to close down. Because Wal-Mart is the
largest retailer in the United States and number 1 on the Fortune 500 list, they
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 have the ability to lower their prices and therefore can force other retailers out
of business because they can not match WalMart's low prices.

8. Online Retailers
Like other retailers in communities where there is a Wal-Mart, online retailers
also have a stake in how well Wal-Mart is doing. Wal-Mart totally revamped
their website in 2000 in order to make it a more profitable part of their retail
empire. Wal-Mart, unlike many other e-tailers closed down their website in
September 2000 in order to revamp their site. While Wal-Mart's online sales
only represents a small portion of their overall sales, the website is a low cost
way for Wal-Mart to deliver goods to consumer who live in communities
without Wal-Mart stores.

9. Gasoline Retailers
In 1996, Wal-Mart made its first partnership with the gasoline industry. Today,
Wal-Mart has contracts with companies such as Murphy Oil USA, Sunoco, and
Tesoro Petroleum. Wal-Mart contracts with these companies and leases real
estate on their lots in order for the company to offer gasoline at Wal-Mart
stores. Both the oil companies who have contracts with Wal-Mart and local gas
stations have a stake in this. The local gas stations often cannot compete with
Wal-Mart in either price or convenience. Over the next year, the oil companies
that contract with Wal-Mart plan to expand to offer cheap gasoline at more
Wal-Mart locations. For example, Murphy plans to expand to 600 Wal-Mart
sites by 2003 and the other gas retailers have similar plans.

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 Non-Market Stakeholders

1. Labor Unions
Labor unions have a political stake in Wal-Mart has a strict policy about not
having their workers unionized. Wal-Mart takes the position that they are better
able to take care of their employees and provide them with the best benefits and
compensation plans. Wal- Mart does not want interference from unions.
Recently, Wal-Mart was charged by the National Labor Relations Board with
violating federal law by keeping employees from holding elections and joining
the United Food and Commercial Workers International Union.

2. International Retail Stores

One of Wal-Mart's key policy issues has been to move into the international
retail market and open stores in other countries. Last year, Wal-Mart's
International Division's sales increased by 41 percent . Currently, Wal-Mart has
stores in Chine, Korea, the United Kingdom, Brazil, Argentina, Germany,
Canada and Mexico . Wal-Mart must work closely with Public Relations firms
in those countries in order to make sure there is no backlash against them
moving into other countries. They must also be careful to follow the laws of
each of those countries when they open new stores. Wal-Mart has been careful
in moving into the international markets. They have acquired companies
already well established in those countries and have made sure that 90 percent
of their international products are locally sourced.

3. Politicians
Politicians have a non-market stake in Wal-Mart for several reasons. First of
all, politicians may or may not want Wal-Mart opening in their district. On one

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hand, it may be good for the community. However, if it is a district with a large
union presence, the politician may not want Wal-Mart is that area. Also,
politicians may rely on Wal-Mart for campaign funding. Last cycle, Wal-Mart's
political action committee, Wal-Mart Stores Inc PAC for Responsible
Government contributed $752,500 to various committees and candidates during
the 2001 cycle.

Political/Public Affairs Strategy

1. Public Affairs
Wal-Mart's power position relative to the key policy issues and stakeholders
is one of domination. The size, wealth, and financial power of the company
is impressive. It is the largest retailer in the United States. It is the largest
political donor in the retail sectors. This dominance, and the company's
finances, coupled with retaining the top lobby shops in the US give the
company an advantage in Washington.

2. PACs and Giving Strategy

Wal-Mart has a Political Action Committee: Wal-Mart Stores INC PAC for
Responsible Government. In 2001, up to February 2002, Wal-Mart has
contributed $461,000 to federal candidates. The donations are distributed
roughly 75% to Republicans, and 25% to Democrats.

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 Alternative Strategies for Wal-Mart

Wal-Mart is currently enjoying a record year in which they have vaulted to the top
of the Fortune 500 listing. However, they have not implemented their strategy in
the best possible way; especially in regards to public relations. Many in retail see
the company as a bully and a tyrant. They present the impression of a corporate
bully that destroys communities and clamps down on workers rights . Alternative
strategies available to Wal-Mart are to adopt a friendlier corporate attitude. While
they display a cheery attitude in public, off camera they are quite aggressive.
Coming to an understanding with organized labor is needed. They must ease their
way into foreign markets, instead of barging in and buying up companies. If these
strategies are used, Wal-Mart will not only be the largest retail chain in the world,
it could become one of the most popular stores in history.

Conclusion

In conclusion, Wal-Mart is the number one retailer in the United States and is at
the top of the Fortune 500 listing. Wal-Mart operates in many countries world-
wide and is moving into new countries every year. Wal-Mart is also expanding as a
retailer. They have expanded into many other sectors of the marketplace, including
groceries, gas stations, electronics, and auto maintenance. Each year, Wal-Mart
finds new ways to grow and offer more services to their customers. Each year, the
number of people who have a stake in Wal-Mart also grows. Each year, more
claims are made against Wal-Mart by the unions and other businesses that have
been forced out of business.

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