The Hindu Business Line : What makes the retail juggernaut roll

"My father never set out to run the world's largest company," reminisces S. Robson `Rob' Walton, Chairman of Wal-Mart, about Sam Walton, who opened the first Wal-Mart store in 1962. But create a retail revolution he did. The 10 Rules of Sam Walton tells you how. More tips come your way in Globalisation of Business: Practice and Theory, and the Financial Times Handbook of Management.

Wal-Mart's `international operations data sheet,' as on November 1, on www.walmartfacts.com makes no mention of `India,' at least as yet. The last country in the list on the site is Nicaragua, with 37 retail units, `date of entry' being September 2005. Since the retail juggernaut is only days old in India, as the joint venture partner of Bharti, the data sheet may perhaps take note of the development in the next update.

"For the fiscal year ending January 31, 2006, Wal-Mart reported net income of $11.2 billion on $316 billion of sales revenue (3.5 per cent profit margin)," informs Wikipedia. In perspective, the turnover exceeds Saudi Arabia's GDP (gross domestic product) of $309 billion, and is not too far from half of India's $770 billion, going by the numbers on http://en.wikipedia.org. Wal-Mart's employee strength of 1.8 million `associates' exceeds the Indian Railways' numbers by about four lakh. Sales is growing at 10 per cent, and it may be a matter of time before the Bentonville behemoth catches up with the $370 billion turnover of the world's largest company, Exxon Mobil (www.exxonmobil.com).

"My father never set out to run the worlds' largest company," writes S. Robson `Rob' Walton, Chairman of Wal-Mart, about Sam Walton, who opened the first Wal-Mart store in 1962.

"He wanted to provide value for customers, create a great workplace for his associates, and be a positive force in the communities we call home," adds Rob, in his foreword to a new book, The 10 Rules of Sam Walton, by Michael Bergdahl.

The rules are:

Commit to achieving success and always be passionate.

Share success with those who have helped you.

Motivate yourself and others to achieve your dreams.

Communicate with people and show you care.

Appreciate and recognise people for their effort and results.

Celebrate your own and others' accomplishments.

Listen to others and learn from their ideas.

Exceed expectations of customers and others.

Control expenses and save your way to prosperity.

Swim upstream, be different, and challenge the status quo.

The book devotes a chapter to each of the rules, and gives `the detailed story behind' the rules. Thus, you would read about how: The pilot Sam `flew out in his own plane almost every week of the year to visit people in his stores'; the hirer Sam quizzed interview candidates `to increase his own knowledge of the successful practices of other companies'; and the entrepreneur believed in `grass roots philosophy' — that `the people closest to the work in a distribution centre have the most creative solutions to business-related problems.' The author distils the ten rules into `five buckets,' viz., communicate a clear business strategy and tactics, take care of your employees, control your costs, exceed your customers' expectations, and challenge the status quo by taking calculated risks.

"Wal-Mart has forever changed the world of business competition," declares Bergdahl, nicknamed by Sam as `Bird Dawg.' Reliably, therefore, the book is an adulatory read. Yet, as Sun Tzu advises in Art of War, "If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle."

Keep global backlash at bay

Global corporations have three major characteristics, writes Abbas J. Ali in Globalisation of Business: Practice and Theory, from Jaico (www.jaicobooks.com). The first feature is inner security, that is, `confidence in the ability to compete and shape the future.'

Second, inner direction, which translates as `clarity of mission, vision, and foresight.'

And third, inner coherence, meaning `strength of culture, and commitment to clearly defined purposes.'

Though Wal-Mart doesn't find mention in the book's index, of interest should be the chapter on `global strategies,' in which Ali discusses, among other things, `global-local focus,' citing many examples. "P&G (Procter & Gamble) has full-time professionals who study consumer needs around the world. These professionals, along with other P&G employees, interact yearly with more than 7 million consumers to discover their particular needs," says Ali.

No wonder, therefore, that "What began as a small, family-operated soap and candle company now provides products and services of superior quality and value to consumers in 140 countries," as www.pg.com informs.

"Three billion times a day, P&G brands touch the lives of people around the world," is a line from `who we are' on the site. Another example in the book is about Li&Fung, a 100-year-old Hong Kong-based trading company, which `seeks to create a customised value chain for every customer order.' It purposefully structures itself around customers, explains Ali about the company. "Li & Fung will take advantage of China's ever-growing consumer market, rising manufacturing standard and improving logistics infrastructure to optimise the country's supply-chain capability and integrate it with our existing global supply chain network," announces www.lifunggroup.com, `building for the next 100 years.' Catch up with the `seven principles' of the firm's SCM on the site.

The final chapter is on `global backlash.' Key forces behind the backlash are `political elites and think-tank intellectuals,' watch out! To counter them, "involve the participation of management and organisation scholars along with business executives in shaping social theory of life and international events," counsels Ali. "Their skills and resources are vital instruments for profound global changes."

Supply chain asymmetry

What is the raison d'être of strategy? "To ensure that an organisation boldly goes where none has gone before," writes Peter Brews in an essay titled `Start Trek Strategy', included in Financial Times Handbook of Management (third edition). "The critical test for any real strategic idea is whether it describes an ambitious, imaginative yet feasible foray into a new quadrant of the competitive universe," says Brews.

He presents five examples of `true star trek strategy,' viz. Wal-Mart stores, Canon's personal copier, Cementos Mexicanos ready-mix concrete on demand, Caterpillar's just before failure (JBF) technology, and Siemens Medical Solutions' digital hospitals. On Wal-Mart, Brews notes: "Despite conventional wisdom that held full-line discount stores required populations of 1,00,000 or more to be sustainable, Sam Walton set out to build a discount store chain to serve small southwestern towns.

The idea was to offer the same or a wide range of products at prices as good as or better than those offered by existing metropolitan-based, high-volume discount stores." Time will tell if a similar strategy will work in India.

The book, edited by Stuart Crainer and Des Dearlove, and published by Pearson Education (www.pearsoned.co.in), begins by arguing that in the post-Enron age, values matter. "For the better executives there is a choice. They work for companies that are in accord with their own value systems. If they don't want to work for a polluter, they will not." The editors reason, why: "After all, people want to hold their heads up when they are with their peers. They don't want an embarrassed silence when they announce who they work for." Will Wal-Mart pass the values test? For, elsewhere in the book, you would read `The laws of logistics and supply chain management,' by Alan Braithwaite and Richard Wilding.

One of the laws is on asymmetry — that is, `the commercial interests and strategic priorities between entities in the supply chain are never symmetrical.' A prominent example is of how Wal-Mart progressively builds its position `by offering suppliers the potential for huge volume' and in return demands cut in margins and responsive delivery to distribution centres.

"The benefits are tangible for both Wal-Mart and its suppliers, but it is a two-edged sword for the suppliers," opine the authors. "The one thing it is not is a cosy or balanced relationship in which they look out for the interests of each other."

Retail reads, for a detailed read.

http://BookPeek.blogspot.com

D. Murali