Walmart Business Process Reengineering Case Study

Introduction

Today, with annual revenues exceeding the budgets of dozens of countries and retail operations in 28 nations, Walmart stands apart in a retailing category by itself. Yet this company did not achieve this spectacular level of success by resting on its corporate laurels. Indeed, it is reasonable to suggest that the business processes currently in place at Walmart only resemble the original strategies used in its single Bentonville, Arkansas store in spirit. The purpose of this paper is to provide a case study of Walmart examining how it has historically applied the tenets of business process reengineering to achieve and sustain the competitive advantage it enjoys today, followed by a summary of the research and key findings in the conclusion.

Headquartered in Bentonville, Arkansas, Walmart operates a chain of retail stores across the country and around the world under the Walmart discount stores, Supercenters, Neighborhood Markets, and Sam's Club warehouse membership clubs formats in the United States, as well as more than 6,300 Walmart stores in 28 countries as of 2017 (Walmart stores, 2018). As can be discerned from the data in Table 1 below, the company experienced year-to-year growth in its Sam's Club, discount stores, and neighborhood markets during the period from 2012 through 2017, with some modest declines noted in the year-to-date data for 2018. The company's Supercenter format, however, enjoyed strong year-to-year growth during this same period.

Facilities, Location, and Capacity

Table 1: Number of Walmart Stores in the United States, 2012–2018 (year-to-date)

Sam's Club: 611 (2012) | 620 (2013) | 632 (2014) | 647 (2015) | 655 (2016) | 660 (2017) | 597 (2018)
Discount stores: 629 | 561 | 508 | 470 | 442 | 415 | 400
Neighborhood markets: 210 | 286 | 407 | 639 | 667 | 735 | 800
Supercenters: 3,029 | 3,158 | 3,288 | 3,407 | 3,465 | 3,522 | 3,561
Total: 4,479 | 4,005 | 4,203 | 4,516 | 4,574 | 4,672 | 5,358

Source: Walmart stores, 2018

Business Strategy and Cost Leadership

As of 2017, the company also maintains at least 173 distribution centers in the United States alone, totaling nearly 130 million square feet of space, with plans to add another 4.2 million square feet in the near future (Walmart distribution centers, 2018). Combined with its total retail square footage in the United States of around 775 million square feet, Walmart's operations are almost 1.4 times as large as New York's Manhattan island at 661 million square feet (Walmart distribution centers, 2018).

The company's success to date has been fueled by its overarching cost-leadership business strategy. In this regard, Ferguson (2017) reports that "Walmart's generic strategy is cost leadership. In cost leadership, the firm's focus is on maintaining low prices of goods and services. Walmart is known for low prices, which is the main selling point of the business" (para. 3). Although the company achieves significant cost savings on its purchases due to its enormous purchasing clout, Walmart is also well known for its focus on keeping human resource costs low, reducing waste at every opportunity, and streamlining its supply chain operations to the maximum extent possible (Ferguson, 2017).

There are additional ways Walmart achieves competitive advantage through its cost-leadership strategy. According to Schiff and Schiff (2009), cost leadership is also achieved by developing an organizational culture that places a high priority on cost savings as a matter of routine. Effective cost-leadership strategies such as the one used by Walmart are characterized by four main criteria:

The extent to which these criteria are satisfied should be matched by the extent to which employees are recognized and rewarded for their efforts, and these successes should be communicated organization-wide (Schiff & Schiff, 2009).

To date, Walmart has not only satisfied these criteria — the company is setting the standard for others to follow. Schiff and Schiff (2009) emphasize that "[Walmart's] blend of cost consciousness and customer focus across their value chain, including key suppliers, is part of what's sustaining them as a leader in this challenging economy, especially for retailers" (p. 36). It is especially noteworthy that Walmart's organizational culture has consistently placed a high priority on satisfying these four main cost-leadership criteria, even during the Great Recession of 2008. Schiff and Schiff (2009) add that "Wal-Mart's cost leadership achievement was built, established, and embedded in their culture during the 'good times' that preceded the [2008] recession and not as a reaction to it" (p. 37). This success is all the more impressive given the bewildering array of products and services offered by the company in the United States and abroad, and the supply chain challenges these represent.

Conclusion

While there may be other retailers that surpass the company's current size and economic clout in the future, the research showed that there has never been a corporate giant quite like Walmart. The company is essentially in a category by itself, yet it remains vulnerable to the same types of threats shared by its major competitors: downturns in the global economy, disruptive new technologies, and the ever-present shifts in consumer tastes and preferences. Nevertheless, the research also showed that Walmart has experienced consistent success with its cost-leadership business strategy even during tough economic times — a fact that clearly reflects both the effectiveness of this approach and the core appeal of its products and services to budget-conscious consumers. While it is reasonable to suggest that some people in countries where Walmart operates have never visited one of its stores, it is equally reasonable to conclude that the overwhelming majority of the world's population has not only heard of Walmart — they are eager to shop there as well.