Throughout the world there is a large shift in our demographics. There currently is a larger aging population than ever before, and at the same time the birthrate in developed countries is decreasing, as it is increasing in underdeveloped countries. Due to advances in medicine individuals are living longer and longer, as it seems we can beat any disease. Health is becoming more and important to individuals as they exercise and eat better; everyone wants to stay healthy longer. At the same time in the United States in particular the population is getting fatter and fatter, preschool age children are being labeled as obese. Shopping has turned into a favorite pastime for the whole family, and when buying big-ticket items, everyone has a say. Increasingly there are more single-parent households, which does not leave much disposable income. Most two-parent households have both parents working and earning more, living in bigger houses, taking more vacations, and owning more cars. On the other hand we are currently experiencing a great deal of the American public has been downsized, and may be unemployed, starting a new career, or back in school.
Due to the current recession the government has been looking for any way possible to save money, and unfortunately research and development, non-military that is, was one of the first things to go. However many of the suppliers to retail are forced to continue their R&D programs as competition is stiff and their product line needs to continually be updated. Technology is growing at an incredibly rapid pace that no one can keep up with it. There have been amazing growths in the areas of health, consumer goods, and food due to technology. As consumers are used to the ever-growing technology they are not as wary of it as in the past, but do not buy the newest thing, as quickly because the item it replaces is less than a year old. Production is becoming more and more automated which is pushing individuals out of jobs. The Internet is widely available in the United States, but that is not the case in the rest of the world. Even in parts of Europe many houses do not have computers much less access to the Internet. Telecommunications structures continue to be improved upon or even built.
Click to hear a report regarding Wal-Mart's suppliers which aired on NPR's Morning Edition: http://discover.npr.org/features/feature.jhtml?wfId=1285049
Being the largest non-government employer and corporation in the world, Wal-Mart is bound to have an interesting internal structure put in place. So what exactly is the method to all the madness? Let's look inside Wal-Mart's Internal Environment.
Wal-Mart is a public corporation, however the majority of the stock is still held by Walton family members. Therefore, there is lots of family involvement at the top level. The headquarters are in Bentonville, Arkansas, along with the control and decision making ability of the organization. There is a very hierarchical structure in place which only fuels the "good 'ol boys club" for top management. The other unique element in Wal-Mart's corporate structure is a strong culture that is fueled by the Wal-Mart way of doing things, which as far as they are concerned is the only way.
The top management and most support functions are centralized at the headquarters in Arkansas. Most of the top management started by working their way up for a store manager and making a name for themselves. It is assumed that in order to be an effective executive the individual needs to have the experience from the store in order to know what they are talking about. The control also lies in Bentonville, each day the store managers in each and every store must submit reports and update the inventory, where the results are sent to headquarters and reviewed.
Click to hear the Wal-Mart Cheer!
Culture at Wal-Mart conjures up store cheers, and the early morning meetings where all of a particular stores employees get together and pump each other up for another day of serving their customers. Sam Walton believed that a strong culture would help them to be a retail giant. He was once quoted as saying: "The reason for our success, is our people and the way that they're treated and the way they feel about their company." Wal-Mart has worked to keep a small-town feel for its stores while becoming a retail powerhouse. Wal-Mart's primary concerns are low cost, low cost, and low cost. Their entire success and being is built around this philosophy and therefore their culture also. They are continuously looking for ways that they can save money and cut prices. This low cost strategy has led to several investigations and lawsuits concerning child labor and sweatshops overseas and current litigation involving Wal-Mart alleges that they have not been paying overtime, thirty six states currently are taking action regarding the refusal of over-time payments. Wal-Mart really sells itself as being a great place to work, that its employees have a lot of fun at work, and are ready to help its customers out. However, there are several accounts of former employees that do not present employment at Wal-Mart positively, these can be found on www.walmartsucks.org and in the book Nickled and Dimed by Barbara Ehrenreich.
Wal-Mart works hard at marketing itself as "the" low-cost or discount retailer. It has also recently begun airing more and more advertising focusing on employees and how much they love working at Wal-Mart. Wal-Mart wants to be able to market itself as a full-service organization and is aligning its marketing strategies with this goal. They are looking to expand into areas such as banking, used car dealers, and real estate. While there seems to be several organizations and individuals that are out to make life horrible for Wal-Mart, there has been a great deal of damage control done by Wal-Mart. Wal-Mart portrays itself as the "American" store, starting from nothing by a guy from Small town, U.S.A. and even helped to begin a "Buy American" campaign to encourage the consumption of American made goods.
Wal-Mart is facing the challenge of continuing to grow when margins are continuously shrinking. In order to help their bottom line, Wal-Mart needs to introduce more products on its private label brand, where the margins are higher. In addition to the private label, apparel and house wares is an area with high margins that Wal-Mart will focus on increasing sales. In the past Wal-mart was one of the first retailers to embrace the idea of "green" products, and not only introduced them to their customers, but also educated them on the idea of what a "green" product is. Also, Wal-Mart is looking to expand into many areas as mentioned in the marketing segment, in addition to opening a different type of store, Neighborhood Stores, and the fringe market. Neighborhood stores are Wal-Marts answer for the urban area, these are smaller stores, or "marts", that sell fruits and vegetables, photo lab, pharmacy, and a few other staples. These stores will be more like Walgreen's or Rite-Aid but with a little different product offering.
Pictures of overseas stores courtesy of Wal-Mart's 2003 Annual Report
In the world of retailing, Wal-Mart has what is considered to be the most sophisticated distribution system called Retail Link. This system connects each store with headquarters and over 2,000 suppliers so that they will never run out of or have too much inventory. Wal-Mart turns over their inventory more than any other retail store. The current challenge exists with supplying their overseas stores, especially while this is the area that they are concentrating on growing. In order to become more efficient overseas, Wal-Mart has started is on Customs Brokering division to take care of its global procurement, which saves them brokering and freight forwarding fees, and also gives them more control. They have also started to "request" strongly that their suppliers also be physically located in the countries where Wal-Mart is to better supply them.
Wal-Mart is the largest non-government employer in the world. They realize that turnover is high in retail, but that their associates are one of their most important assets. Their written policy regarding associates is as follows: "they are encouraged to maintain the highest standards of honesty, morality, and business ethics". In order to become a Wal-Mart associate, candidates must take a multiple-choice test and select what are considered the appropriate "Wal-Mart" responses in order to be hired. Due to the fact that Wal-Mart strives to keep their costs low, they do not offer high wages. They exist on many part-time and temporary workers, do not offer these employees benefits, and do not pay their employees enough to live on. Wal-Mart has a 20-30% cost advantage over competition, as their labor is not unionized. Besides facing current litigation for not paying employees for overtime there are and have been several cases regarding discrimination on the basis of gender (female) that females are often not hired or promoted to be managers.
Wal-Marts inventory system, Retail Link, is a web-based technology that ties ALL Wal-Mart stores to thousands of suppliers to allow for suppliers to be aware of what is needed by stores. Wal-Mart was the first chain to have computers in all of its stores and to have them connected to each other. This system connects to headquarters, which sends reports on what the store is selling, what's just sitting on the shelves, and what stores are selling the most items.
