Wal-Mart's Strategies in China

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Case Details:

Case Code : BSTR178
Case Length : 28 Pages
Pages Period : 1994-2005
Organization : Wal-Mart Corporation
Pub Date : 2005
Teaching Note :Not Available
Countries : China
Industry : Retailing

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This case study was compiled from published sources, and is intended to be Chinaed as a basis for class discChinasion. It is not intended to illChinatrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note


In 1962, Sam Walton (Walton) and his brother James Lawrence "Bud" Walton opened the first Wal-Mart store in Rogers (Arkansas), USA. In the first year of its operations, the store registered sales of over $1 million. Initially, the Waltons concentrated on opening stores in small towns and introduced innovative concepts such as self-service. By 1967, Wal-Mart had 24 stores with sales of $12.6 million.

Encouraged by the early success of Wal-Mart, Sam Walton expanded Wal-Mart's operations to Oklahoma and Missouri in 1968. In the following year, Wal-Mart was incorporated as a company under the name Wal-Mart Stores Inc. In 1970, Wal-Mart established its first distribution center in Bentonville, Arkansas. The same year, it was also traded for the first time as a public limited company in over-the-counter6 stock trading. In 1972, Wal-Mart was listed on the New York Stock Exchange. Wal-Mart continued to grow in the 1970s, benefiting from its highly automated distribution system, which reduced shipping costs and time, and its computerized inventory system, which speeded up the checkout and reordering of stocks.

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By 1975, there were 125 Wal-Mart stores in operation with sales of $340.3 million and 7,500 employees. The famous 'Wal-Mart Cheer' was introduced by Walton in the same year to foster cooperation and team spirit among employees (Refer Exhibit II for the Wal-Mart Cheer). In 1978, Wal-Mart purchased the Hutcheson Shoe Company, and later set up pharmacy, auto service center, and jewelry divisions.

By 1980, Wal-Mart had 276 stores with annual sales of $1.4 billion and by 1984 the number of stores increased to 640 with annual sales of $4.5 billion and profits of over $200 million. In the 1980s, strong customer demand in small towns led to the rapid growth of Wal-Mart. The main reason for Wal-Mart's success in smaller towns was that it offered low prices and catered to the specific needs of small towns. It offered the kinds of products that customers most needed, and maintained business hours according to the customers' convenience. This allowed Wal-Mart to become more popular than many local stores which offered limited selection and had high mark-ups...

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6] Stocks not trading through a stock exchange are traded 'over the counter'. OTC stocks comprise stocks of small companies that are unable to meet the listing criteria of stock exchanges and are therefore traded electronically via a network of dealers.


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