The Decline of Wal-Mart

Wal-Mart is an American icon that now reaches across the globe. As the company becomes larger it will begin to experience major problems from both its internal structure and its customers. Wal-Marts decline is just around the corner and the Company will have to change its strategy so that it doesn't cannibalize itself. Even now Wal-Mart's profit margins are becoming to decline because of Corporate Obesity, a Poor Public Image, and Offer Everything Mentality. Corporate Obesity:

Wal-Mart is a huge company that encompasses many different stores in a multitude of countries. There is difficulty coordinating the 2700 stores and 500,000 workers from all around the world. The in-house logistics portion of the business as well as all the other services that support the merchandize retail require Wal-Mart to delve into businesses that is not central to its main business of selling products. As Ford soon learned they will have difficult managing all these operations effectively.

When corporations become too large they have problems with maintaining a single corporate culture. Instead of uniform values and strategy each of the Wal-Marts within both the U.S. as well as stores in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, and the United Kingdom begin to develop their own cultures.

These multiple cultures can create difficulties in management for the corporate offices. As the cultures move farther away from the center they begin to splinter and the corporate offices have difficulty making changes. The whole organization becomes sluggish and unable to change quickly with the changes environment. When this happens profit margins diminish and small more nimble competitors start catching up.

Poor Public Image:

According to a Zogby poll Wal-Mart 4 in 10 have an unfavorable view and 6 in 10 have a less than favorable view of the Company. Fifty-Six percent of American's agreed with the statement "Wal-Mart was bad for America. It may provide low prices, but these prices come with a high moral and economic cost" (Kofinis, 2007).

Wal-Mart is not considered a trendy retailer like Macy's or Saks Fifth Avenue. Wal-Mart has an image of serving the poor and lower classes. Even though many middle class Americans shop at Wal-Mart the typical image of their customer is a slightly overweight blue collar worker.

Even if we ignore the stereotypical views of Wal-Marts customers we cannot ignore the negative publicity the Company has received over its benefits scandals, discrimination charges and its ability to wipe out small retailers for miles around. People view Wal-Mart as large, greedy and representing everything bad about corporate America.

Offer Everything Mentality:

No store can offer everything but Wal-Mart has come pretty close. At least it has gotten closer than any other store so far. However, as the product choices expand so does the difficulty in keeping them under a single roof. The stores will have to get larger and larger in order to encompass everyone's needs and desires. Wal-Mart is now offering the Super Wal-Mart just like K-Mart offered the Super K-Mart just before its bankruptcy. As the stores expand so does the risk of lost profits because the support network and associated costs can rise out of control.

It is also likely that when businesses offer too many services and products they will begin to lose focus. Their customer base will become wide and seek only generic products. However, people who want quality and specialty products won't go to Wal-Mart. Instead they will go to specialty stores which will become competitors with Wal-Mart. They won't become competitors for people who want to purchase cheap products but they will for those in need of quality material.

There will also be some limitations on how many products and services Wal-Marts managers can understand. Offering credit, the development of a new power plant, logistic companies and tens of thousands of products will simply become too complex for any single person to keep updated on. When this happens the organization will have to fragment even further which causes further management division. There will be no captain of the ship.

The Strategy:

Wal-Mart plans to counter its declining sales by implementing a new strategy. The strategy includes further price cuts, more stock and increased security. Wal-Mart plans on sacrificing margins for higher volumes of customers and "better stock shelves and reduce theft among customers" (Covert, 2007).

Theft is a major problem for Wal-Mart because they are being taken advantage of by customers, employees, venders and just about everyone else that touches their merchandize. Theft is one of the major reasons why Wal-Mart's profit margins are declining. They have revamped their theft policy and getting more aggressive prosecuting people who take more than $25.00.

Wal-mart would be wise to work on more then price cuts, loading their buildings with stock and security to increase processes. It would be beneficial for Wal-Mart to develop additional methods of communication within the organization, specializing offerings based upon larger geographic areas (i.e. Spanish, Europe, etc.), and streamlining of processes (cutting costs on the inside).