Walmart Stores, Inc. Case Analysis

Wal*Mart Stores, Inc

Case Analysis

In the 1950s, Wal-Mart started with few discount stores situated only in small and rural towns. From the beginning, Sam Walton has built a culture with & quot;low-cost" products, a unique value culture where value are preferential to luxury.

Nowadays, Wal-Mart is the most valuable firm in the world. According to the 2008 Fortune 500 index, Wal-Mart Stores Inc. is the number one retailer. In 2008, Wal-Mart stores, Inc. possessed 971 discount stores, 2447 supercenters, 591 Sam's Clubs, and 132 Neighborhood Markets in America. Wal-Mart in addition operates overseas, in 12 countries that include Canada, Mexico, UK and China.

No other company has been growing to achieve such rapid growth as Wal-Mart due to its specific management, high technology and superior logistics. Everywhere, Wal-Mart is admired like a giant.

Q1: How do you explain Wal-Mart’s extraordinary success in discount retailing?

During the 1950s, Wal-Mart possessed only small supermarkets, located in rural and small towns. Sam Walton focused on a unique niche, where no other American discounters were located. People did not need to travel up three hours to do shopping. It was a very simple business with no information technology, no computer, and unluxurious fixtures. Moreover, ancillary services, for example delivery and in-store selling were scarce. In addition, discount stores charged gross margins 10-15% lower.

At this time, Sam Walton's main goal was to sell a wide range of services and products at low prices, in big quantities. For these reasons, Wal-Mart built its own warehouses. The second aspect for growing Wal-Mart was a pattern of expansion.

By offering a wide range of cheap products in small areas Sam Walton seeked to become a pioneer of the discount retailing. As a result, in 1962, the first Wal-Mart discount store opened. From day one, Wal-Mart's founder created a value culture in which low costs are preferred to luxury. American people, well-informed by TV advertising, were ready to accept the "discount".

Between the end of the 1950s and the beginning of the 1960s, the debate to how making profit in industry attractiveness was growing. By attractiveness within an industry, it is meant to make supernatural profits, in other words, economic rents to create value for companies. To describe how and why Wal-Mart was an unattractive industry, Porter's five Forces framework, is essential. Because of the attractiveness of an industry change all the time, it has been decided to focus here only in the 1950s period. The framework as follows, establishes the competitive strength and consequently the attractiveness of the market:

Below is the Porter's five Forces model for Wal-Mart in the 1950s: