Prof. Lakshmi Mohan's lecture on Walmart

The Indo-American Society Management Development Forum had invited Prof Lakshmi Mohan to give a lecture on Walmart this evening at Hotel Marine Plaza. All the eminent dignitaries were present such as the Founder of the Forum Mr. Jasu Shah, Chairperson Ms. Elizabeth Kauffman and President Mr. Balachandran. The audience comprised of 70% corporates and 30% SPJIMR students. Ms Elizabeth set the initial tone of the lecture by specifying that Walmart had planned to use the superstore concept in India. She also mentioned that the Indian market has the ability to absorb foreign influences. Also Walmart offers the lowest prices and it has the potential to overcome some of the infrastructural problems prevalent in India. With this, she handed over the podium to Prof Lakshmi.

Walmart- Its Growth and the Future

Some Facts

• Jack Welch benchmarked Walmart for the speed at which they performed.
• It is the World No 2 Company as far as size is concerned, the No 1 being Exxon Mobil.
• Failed in Germany and South Korea
• Sluggish growth in US market in the recent past
• They have the EDLP (Every Day Low Price) segment which they followed for years. But now they are rethinking on that front
• Best in inventory management and logistics – Sued Amazon for stealing their inventory management ideas
• Data warehouse is 2^nd only to that of the US government

Growth

• Information Technology played a major role in the company’s growth- extensive use of the same in its business
• It has robust management processes
• Partnership with its suppliers and employees
• Obsessive focus on Costs – always thinking of cost cutting methodologies
• Absolutely Iron tight process is what they follow

History

• Started by Sam Walton in 1962. The first store was launched on that year
• It was located at Bentonville, which was a town at the backwater of Arkansas, a place which was known to have ‘More number of chicken than number of people staying there’
• 1970, it went public

Business Model

• Located stores in small towns
• Problem – No proper infrastructure or logistics
• Kept overhead low
• Moved into food retail in 2001 which is comparatively difficult to maintain
• Paid very less to their employees but made them the stakeholders of the company (“Golden Cuffs”)
• Knocked off the wholesaler in the distribution chain which saved the money which would have otherwise gone as commission
• Incorporated Just in Time approach where he incorporated IT extensively
• Strict about prices with suppliers
• Shared information with its suppliers

Key Features

• No class system or segmentation – all employees known as Associates
• 60% of their managers are those who have moved up the chain over years
• Empowering of front lines
• Keeps track of the competitor’s prices by visiting the competitor’s stores and buying goods from there
• Disdain for extravagance – corporate offices itself has a worn out look
• On outbound trips, CEO is supposed to share a room
• Culture of cost consciousness adhered to strictly
• Thinks one store at a time – strategy executed at the detail level
• The department store managers or the sales managers in the various stores knows the profit margin of each of the goods sold
• Keeps ears close to the ground – The company’s managers themselves go out in public and gather customer feedback instead of sitting in their corporate offices
• Follows Scan based Trading
• Reaction time very quick
• Incorporated IT to help in Absentee Ownership i.e. ability of the manager to control and monitor the store even in his/her absence
• Roped in a young CIO for the same

Failures – Germany

• Entered Germany by buying 2 small stores
• Germany has very strict and stringent shop rules and regulations
• Already many local low priced stores or shops were present
• Walmart wanted to provide customer delight by providing bagging and other facilities to the customers without hiking the price. But the customers were suspicious about the quality and nature of products which Walmart was selling
• Faced a culture difference

Changes taking place

• Detail rich HR database
• Hired a director of diversity
• In China, they opened the doors to unionism
• Segments customers into six major segments and designs stores accordingly

With this Prof Lakshmi concluded the lecture saying that Walmart might prove to be a baggage of surprise for India.

Cheers,
Sonia Kar - Bistrobanter, Marine Plaza