Copyright material reproduced under license from John Wiley and Sons, Inc. 457 22 Case 6: Wal-Mart Stores Inc., June 2012 This case was prepared by Robert M. Grant. ©2012 Robert M. Grant. If you don’t want to work weekends, you shouldn’t be in retail. - Sam Walton (explaining the Saturday corporate meeting) Wal-Mart’s shareholders’ meeting on Friday June 1, 2012 was to have been the culmination of the company’s 50th anniversary celebrations - 50 years previously, founder Sam Walton had opened his first store in Rogers, Arkansas. About 6,000 shareholders and employees (including 2,000 from Wal-Mart’s international operations) gathered at the University of Arkansas’s Bud Walton Arena to be hosted by Chairman Rob Walton (son of the founder) and entertained by Justin Timberlake, Lionel Ritchie, Juanes, and Celine Dion. Despite the massive build-up to the meeting, Forbes described it as “a gloomy affair.” 1 The “one big happy family” festive atmosphere typical of Wal-Mart events had been overshadowed by employee and shareholder disquiet over the Mexican bribery scandal that had erupted in April 2012 concerning payments by Wal-Mart Mexico to local officials to facilitate the issue of building permits for new Wal-Mart stores, followed by a corporate cover-up. Yet, despite the mood of disappointment and suspicion that had affected Wal-Mart’s relations with employees and investors alike, the business was in rude health. On May 17, Wal-Mart had reported results for the first quarter of its financial year. Sales were up 8.6% on the previous year, operating income was up 8.3%, and return on equity for the 12-month period was 18.1%. The day before the shareholders’ meeting, Wal-Mart’s stock hit an all-time high. For all of Wal-Mart’s huge size - with 2.2 million employees, it was the world’s biggest private-sector employer and was second only to ExxonMobil in terms of sales - a constant theme of the chairman, Rob Walton, and the CEO, Mike Duke, was Wal-Mart’s continuity with its roots: continuity as a family-owned company, continuity of its low-price strategy, and continuity of its small-town values. Yet, for all this emphasis on continuity and Wal-Mart’s timeless character, it was clear to Duke that times were changing for Wal-Mart. As Wal-Mart continually expanded its range of goods and services - into groceries, fashion clothing, music downloads, online prescription drugs, financial services, and health clinics - so it was forced to compete on a broader front. While Wal-Mart could seldom be beaten on price, it faced competitors that were more stylish (T. J. Maxx), more quality-focused (Whole Foods), more service-oriented (Lowe’s, Best Buy), and more focused in terms of product range. In its traditional area of discount retailing, Target was proving an increasingly formidable competitor. In warehouse clubs, its Sam’s Clubs ran a poor second to Costco. Increasing size boosted Wal-Mart’s buying power but it also brought problems. Wal-Mart’s success had rested heavily upon its ability to combine huge size with remarkable speed and responsiveness. Critical to this was its short chain of command and close relationship between the top management team and individual store managers. A key component in this linkage had been Wal-Mart’s Saturday-morning meeting at its Bentonville HQ. In January 2008, the growing size of the meeting and increasing difficulty of getting all Wal-Mart executives back to Bentonville resulted in the company changing these meetings, which the company had described as “the pulse of our culture,” from weekly to monthly. 2 Increased size also made Wal-Mart a bigger target for opponents. For years Wal-Mart had been under attack by organized labor seeking to unionize Wal-Mart’s two million employees. More recently, “The Beast of Bentonville” had attracted the ire of environmentalists, anti- globalization activists, women’s and children’s rights advocates, small-business representatives, and a growing number of legislators of varying political hues. In response, Wal-Mart had become increasingly image-conscious and was a late but enthusiastic convert to social and environmental responsibility. The result was a series of senior appointments to new executive