Wal-Mart's German Misadventure
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Case Code: BSTR082 Case Length: 13 Pages Period: 1990 - 2003 Pub Date: 2003 Teaching Note: Available |
Price: Rs.400 Organization: Wal-Mart Industry: Retailing, Countries : Germany Themes: International Marketing |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background Note
In 1962, Sam Walton (Walton) and his brother 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. It floated its first public issue the same year. 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. In 1977, Wal-Mart acquired 16 Mohr-Value stores based in Michigan and Illinois. In 1978, it 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.
The number of stores increased to 640 with annual sales of $4.5 billion and profits of over $200 million by 1984. In the 1980s, strong customer demand in small towns drove the rapid growth of Wal-Mart. Walton said, "When we arrived in these small towns offering low prices every day, customer satisfaction guaranteed, and hours that were realistic for the way people wanted to shop, we passed right by that old variety of store competition, with its 45% mark ups, limited selection and limited hours." In 1988, Walton appointed David Glass (Glass) as CEO of Wal-Mart. Soon after taking over, Glass started Hypermart USA. It was originally a joint venture with Cullum Companies (a Dallas-based supermarket chain). In the following year Wal-Mart bought out Cullum's stake in the venture. The Hypermart was a discount store/supermarket chain, which sprawled over 200,000 sq ft. It featured branch banks, fast food outlets, photo developers and playrooms for shoppers'children. This concept was later retooled as Wal-Mart's Supercenters...
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