In the late 1940s, when Sam Walton was franchising a Ben Franklin’s variety store in Newport, Ark., he had a simple but momentous idea. Like any retailer, Walton was always looking for deals from suppliers. Typically, though, a retailer who managed to get a bargain from a wholesaler would leave his store prices unchanged and pocket the extra money. Walton, by contrast, realized he could do better by passing on the savings to his customers and earning his profits through volume. This insight would form a cornerstone of Walton’s business strategy when he launched Wal-Mart in 1962.
Walton understood that a major requirement for keeping costs down was controlling the payroll. He said, ...view middle of the document...
Technology, in particular, put the company ahead of its competitors. Already by the 1970s, Wal-Mart was using computers to link its stores and warehouses. Sales data allowed Wal-Mart to keep track of specific items and reduce inventory miscalculations. Only years later would Kmart realize how far it had fallen behind. Throughout Walton’s career, a focus on innovation of this sort would make Wal-Mart a consistent leader in efficiency.
As Wal-Mart continued its rapid growth, it also made its first acquisition of other retail chains. In 1977, it purchased sixteen Mohr-Value stores in Michigan and Illinois and acquired Hutcheson Shoe Company the following year. By the end of the 1970s, Wal-Mart had expanded into a number of different services in its stores—selling pharmaceuticals, adding auto service centers, and introducing jewelry divisions. Such diversification quickly proved fruitful, as the company announced in 1979 that, for the first time, annual sales had reached more than $1 billion. As its stock continued to rise—splitting in 1980 and again in 1982—Wal-Mart built dozens of new outlets across the United States.
In 1983, Wal-Mart introduced several innovative changes and also opened its first Sam’s Clubs, wholesale stores that offered members the opportunity to purchase goods in bulk. s its stock soared to more than eighty dollars per share in late 1983, Wal-Mart acquired Woolco Stores, initiated its “People Greeter” program, and established one-hour photo labs within its outlets. By 1984, Wal-Mart had become a leader in the retail industry, and to celebrate the company meeting its fourth-quarter goals for the previous year, Walton fulfilled a promise made to shareholders by hula-dancing on Wall Street. He named David Glass as company president that same year. Under Glass’s leadership, Wal-Mart entered its most expansive and profitable period. Glass, who would be named Chief Executive Officer (CEO) in 1988, began a new phase in the company’s history, launching a massive expansion program resulting in hundreds of new stores over the next decade.
In 1988, the first Wal-Mart Supercenter opened, offering twenty-four-hour shopping, groceries, and, eventually, banking, gas stations, and McDonald’s fast food. By 1990, Wal-Mart sales had surpassed rivals such as Kmart and Target. In 1991, the company made its first foray into the international market, opening Club Aurrera in Mexico City. This would become the next phase of Wal-Mart’s strategy for success: expansion into foreign markets such as Europe, Asia, and South America. In 1996, the company gained access to lucrative emerging markets in China and South Korea.
By the late 1990s, Wal-Mart had become the target of critics who charged that the company’s aggressive tactics hurt small businesses. Complaints also came from major manufacturers such as Rubbermaid, which claimed that Wal-Mart unfairly negotiated prices. In 2004, the company faced the largest class action suit in...