Running Head: WAL-MART STORES, INC.

Wal-Mart Stores, Inc.

Dana L. Clinton
Benedictine University
MBA603: Cost Analysis, Profit Planning and Control
November 1, 2015
Wal-Marts success has come in the execution of control systems that allow them to meet
strategy goals and leverage any opportunity to achieve a competitive advantage. The companys
organizational systems stem from the foundation of a low cost strategy for its consumer and the
company, providing products at a lower cost while minimizing the costs to the company to
manufacture, purchase and distribute its products. As the organizations business strategy
evolves, it has been able to adapt to market and consumer demand, use established systems and
evolve with new technologies and discoveries from research and development. Wal-Mart
established four key components used when it began expanding globally that define how they

Running Head: WAL-MART STORES, INC.

cloned their organization. Any transformation for Wal-Mart is focused on the work force, its
retail stores, its customers, and the companys business model (Govindarajan & Gupta, 2002).
Two of the components are strategically focused on people. The company instituted
policies that provide quality customer service internally with its associates and externally to
consumers. Wal-Mart makes a distinct classification in referencing its employees as associates.
Offering profit sharing from 1971 shows they wanted individuals that worked for them to reap
the benefits the entire company earned from their efforts (Anthony & Govindarajan, 2007). The
company also understood that managers equipped with the best tools to succeed would trickle
down to results in the marketplace with consumers and with investors focused on financial
results.
At the core of Wal-Marts business model was its low cost strategy. Managing all costs
from production, to distribution to store layout was a part of determining the organizational
structure and at the core of Wal-Marts strategies were to create efficiencies and keep costs as
low as possible. Effective supply chain management is a control system Wal-Mart uses as an
important competitive advantage over competitors and results are seen financially as well. At one
time, the distribution costs are only 1.3% of sales compared to 3.5% for the closest competitor
(Anthony & Govindarajan, 2007). Cost savings are an important part of any strategy for WalMart. The corporate culture established by a frugal Sam Walton is the foundation of Wal-Marts
corporate strategy to this day.
Another component to Wal-Marts business strategy was its relations with vendors and
suppliers and required standards for business relations and agreements. Specific transportation
restrictions and technology requirements were put in place to maintain a level of control over
operations. With these standards in place, Wal-Mart managed inventory levels, in-store

Running Head: WAL-MART STORES, INC.

operations, and implemented cost management techniques that prove to show positive results in
the bottom line. Global operations were a key to Wal-Marts industry growth and dominance. If
Wal-Mart maintained a focus on domestic operations, the market growth might not have been so
dramatic. The operational systems in place made the transition in strategy more efficient along
with the companys market strategy adjustments.
Wal-Marts ability to build and transform organizational systems is important to the
company meeting its goals and a successful execution of its business strategy. In 2010, WalMarts CEO Mike Duke stated, Our results demonstrate the underlying strength of our business
and our strategies of growth, leverage and returns but the CEO also stated the company
understands success is never guaranteed and they must continue to evolve and maintain its global
commitment as part of its business strategy (Walmart CEO Mike Duke Outlines Strategies for
Building the "Next Generation Walmart", 2010). Wal-Mart began receiving negative public
attention 2000s when big box image of them taking over in areas that would put mom and pop
locations out of business. This was a transition for Wal-Marts former strategy of focusing on
dominating the availability of being the largest and most accessible store in rural areas. Even
with the community relations challenges, Wal-Mart shifted strategy while using operational
systems to gain competitive advantage in different market segments than it was familiar with.
History shows that Wal-Mart is equipped with the operational fortitude to use its business
strategy to remain a dominant force in the industry.
References
Anthony, R. N., & Govindarajan, V. (2007). Management Control Systems. New York,
NY: McGraw-Hill/Irwin.

Running Head: WAL-MART STORES, INC.

Govindarajan, V., & Gupta, A. K. (2002, June 19). Taking Wal-Mart Global: Lessons
From Retailing's Giant. Retrieved from strategy and business: http://www.strategybusiness.com/article/13866?pg=all
Walmart CEO Mike Duke Outlines Strategies for Building the "Next Generation
Walmart". (2010, June 4). Retrieved from Walmart: http://news.walmart.com/newsarchive/2010/06/04/walmart-ceo-mike-duke-outlines-strategies-for-building-the-next-generationwalmart