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Wal-Mart: Global retailer

By T.K.MALOY, UPI Deputy Business Editor   |   March 23, 2004 at 6:29 PM   |   Comments

WASHINGTON, March 22 (UPI) -- For the third year in a row, Wal-Mart Stores, the Arkansas-based retailer, is No. 1 on the Fortune 500 list, the magazine's annual ranking of America's largest companies.

With sales of nearly $259 billion last year, this onetime five-and-dime has long since grown into a globe-straddling giant.

Of the overall list this year, Fortune writer Janice Revell reports that in this year's rankings, "the nation's largest companies smashed existing sales records, and obliterated the dismal, accounting-damaged performance of the past two years. Making the accomplishment even sweeter was the fact that few observers had expected it."

By year-end, the top 500 companies had raked in a record-breaking $7.5 trillion in revenues and $445.6 billion in profits, reports Revell.

"The weapons of choice were rock-bottom interest rates (driven down by the Federal Reserve to the lowest levels in four decades) and the Bush administration's tax cuts and spending increases, all aimed at encouraging consumers and businesses to spend like never before," writes the Fortune reporter.

The annual ranking is in Fortune's upcoming April edition and is based on 2003 sales figures reported by companies in their financial statements.

Leading the pack, once again, was Wal-Mart -- a company that has grown so huge that it can single-handedly influence the price of various commodities and whose sourcing decisions greatly affect job creation throughout the world -- but which had humble origins in a sleepy southern state when the late Sam Walton opened Walton's Five and Dime in 1950.

"Why put off to tomorrow what can be done today," is a famous Waltonism, and it would seem Walton never put much off in growing his company.

In his 1992 book "Made in America" Wal-Mart founder Walton set forth 10 "Sam's Rules for Success" which are still actively promulgated throughout the company and can be found on the company Web site. The first rule -- "Commit to your business. Believe in it more than anybody else."

In the past two decades, the company has grown to a staggering size, with the various conglomeration of Wal-Mart properties consisting of thousands of stores, in the United States and globally, online retail, and other partnerships. Retail and business experts note that in order to maintain this global scale of success, Wal-Mart has taken often bold and aggressive stances, including being on the forefront of retail technology.

For legions of business students, professors and analysts the company has provided an ongoing case study in distribution management, retail marketing, and the creation of a company "culture" in workers, who are taught the company's set goals of excellence in customer relations and satisfaction. It doesn't take long upon entering a Wal-Mart to hear the friendly "Welcome to Wal-Mart" greeting.

There has also been some vocal criticisms of company work practices over the years, including hiring of illegal immigrants, not properly accounting for overtime, on-average low wage levels, and what some would say is an ardent anti-union stance.

On the issue of illegal-immigrant workers, Wal-Mart spokeswoman Sarah Clark said that the company no longer hired outside cleaning contractors many of who had been using crews of illegals. The company now uses in-house staff for cleaning to prevent the use of undocumented workers.

Regarding unionization of Wal-Mart's legion of employees, a statement at the company Web site said, "At Wal-Mart, we respect the individual rights of our associates and encourage them to express their ideas, comments and concerns. Because we believe in maintaining an environment of open communications, we do not believe there is a need for third-party representation."

Also, there is the issue of Wal-Mart's sheer size. In general there are two competing schools of thought about the company -- that it is a model of efficiency, or that it is a behemoth with little regard for its suppliers or the impact on the many communities where it has built its stores. For some critics and small businesses, the entry of a Wal-Mart (and other "big-box" type of stores) into the community spells death for longtime local businesses along Main Street.

Media coverage and books on the subject of Wal-Mart also range between two poles, with such tomes as Pulitzer-prize winning reporter Vance Trimble's "Sam Walton, Founder of Wal-Mart: The Inside Story of America's Richest Man," giving a fairly favorable account of Walton's life and success in building Wal-Mart, or Wall Street Journal staff reporter Bob Ortega's "In Sam We Trust: The Untold Story of Sam Walton and How Wal-Mart is Devouring America," which paints a scathing account of Walton as a ruthless businessman.

Now the world's largest retailer, Wal-Mart holds its No. 1 rank among U.S. publicly traded companies by virtue of its 2003 sales of nearly $259 billion. In the United States, the company operates 2,485 Wal-Mart stores and 456 SAM'S CLUB stores. In addition, the company operates 13 stores in Argentina, 14 in Brazil, 166 in Canada, 95 in Germany, 450 in Mexico, 15 in Puerto Rico, and 232 in the United Kingdom. Also under joint venture agreements, Wal-Mart is starting to ease into China with six stores, and has six stores in Korea under joint venture.

Wal-Mart employs an army of workers -- who are called "associates" -- boasting 1.2 million associates in the United States and 330,000 associates internationally.

The company offers a wide array of merchandise at discount, such as home furnishings, lawn furniture, shoes, fabrics, sporting goods, housewares, jewelry, and more.

To give an idea how the company has come to control various commodity prices, it is illustrative to note, for instance, that Wal-Mart is the largest buyer and seller of gold in the world.

To gauge some of growth of Wal-Mart, one might look back to 1983, the year the company opened its then new line of branded stores, SAM'S CLUB. While the company was a well-established regional discount chain, with around 550 discount stores in the southern United States, it was just one-fifth the size of rival Kmart. For that year, the company has sales of $3.3 billion (vs. around $259 billion currently) while Kmart posted $18.6 billion in sales for 1983 from its 2,361 stores in the United States and Canada.

Somewhere along the line, Wal-Mart passed and then eclipsed Kmart.

Business strategist Matthew Luban, head of Strategic Advisory Services, LLC, said that "Wal-Mart has single-mindedly pursued one of the 'generic strategies' -- often outlined by professor Michael Porter of Harvard Business School -- that of price competition targeted to a broad market segment."

Luban added, "Their relentless pursuit of low costs, both in operations/logistics, inventory management, and product purchasing has enabled them to continually take market share, especially on commodity items, because no one else can buy and deliver products as cheaply as they can."

As part of a upward spiral, Luban noted that Wal-Mart growing larger every year only increases the company's buying power with suppliers, enabling them to maintain their price competitive position.

"Over the next five years they will surely continue to pursue the same strategy, and will lead the way in investing in operational and logistics innovations that drive cost efficiencies in their business. For example, Wal-Mart is a pioneer in assessing Radio Frequency Identification in packaging, which would allow them to know the moment that 'Tide' is nearly out of stock and reorder without human intervention," Luban said.

In the area of e-commerce, the company has quickly forged ahead. On its way, perhaps, to becoming the largest seller of music in the world, Wal-Mart announced Tuesday that it was officially launching its online music store, which been under test since December. The cost for downloads is currently 88 cents per-download (as compared to 99 cents for Apple's iTunes).

The company said the Curb Record label is making its online catalog of songs available exclusively through Walmart.com for the next two months. The label, which includes more than 3,000 digital songs, is home to such major country stars as Tim McGraw, LeAnn Rimes and Jodee Messina.

Also available at the new service are exclusive singles by artist such as Jessica Simpson, 3 Doors Down, Black Eyed Peas, Hilary Duff, Shania Twain, Shakira, POD, and JC Chasez.

"Customer response during our test phase has been extremely positive, with strong customer demand across a variety of genres from rock, pop, and rap to R&B and country," said Kevin Swint, Walmart.com's director of entertainment categories. "The official launch of this new service is being supported in Wal-Mart stores nationwide with a comprehensive, integrated awareness program."

The company grows on.

Shares of Wal-Mart closed at $58.21 in trading Tuesday, up 11 cents or 0.19 percent, but off its 52-week high of $61.31 hit on March 4.

© 2004 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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