Corporate longevity questions come to the fore with each economic downturn. Each financial downturn causes the demise of corporations that are unable to survive. A marque company like Lehman Brothers could not survive the 2008 financial crisis. All businesses struggle with questions of corporate longevity at one time or the other during their journey.
Du Pont and Colgate are some of the oldest companies in the US. In India, the Tata group of companies are of the same vintage. These corporations are shining examples of corporate longevity. Then we have countless examples of really great brands just disappearing. The most quoted of them are Kodak and now GE.
No times are the same. It is especially so after the industrial revolution. Now in the internet world, change is happening at a pace faster than ever before. Consumer preferences are getting impacted by technology. Products are rapidly becoming obsolete, and in their place, new products are continuously being invented and launched.
During my stint in the private sector, I noticed that my erstwhile company, Tata Consultancy Services, would undergo a major makeover every three or four years. Organizational structures and business processes would undergo a massive change. The company was constantly looking for ways to maintain and improve its competitive advantage in the market. The status quo was disturbed now and then. The leadership was encouraged to transform and adapt. The only other option was to exit quietly. Corporate longevity and the will to show sustained growth could be seen in such companies’ corporate ethos and business practices.
Walmart’s retail product evolved out of necessity. They were underfinanced and undercapitalized businesses. The stores contributed significantly to the small communities where they operated. The success of these stores underscores the point that there was business potential in small-town America. Sam uncovered this potential in the retail business much before any other competitor.
Walmart stores were run on the principle of the lowest running costs. Stores were opened in locations offering the lowest rentals. In the small-town world, Walmart acquired a reputation where you were guaranteed products at a bargain. These innovations make for the enterprise’s continuing sales and customer base rise.
The supply chain, logistics, and distribution center innovations substantially improve Walmart’s profitability and operational efficiency. Subsequent investments into communication and technology added to these gains. On October 1, 1970, Walmart became a public company, trading over the counter. It has not looked back since.
The pace of opening new stores and warehouses was undertaken at a dizzy pace. The store-opening teams often find it challenging to keep up with the growth rate. Logistics management became a focal area for innovation. A spate of innovations in this area resulted in the competition getting left far behind.
Walmart’s growth sits on its supply chain. It continued the focus on sourcing merchandise from cheaper locations. China and other more affordable Asian sites became the major sourcing hub. Inventory procured there was shipped to North America. It has built a sourcing construct in which it and not the manufacturer hold pricing power. It leverages this power to drive sourcing prices lower than ever.
Walmart now has a network spread across the entire North American continent, South America, and Europe. Gone are the days of Sam Walton’s paper ledger sheets. Walmart today is a fully automated retailing sourcing, warehousing, logistics, sales, and replenishment supply chain behemoth.
Each store manager has a tight budget that forces him to run a tight ship where cost-cutting is the rule. Walmart emerged in the rural South that was facing stagnating living standards. Walmart now owns 80 percent of all general merchandise retail stores in the US. It does more business than all the other stores combined.
According to Walmart’s Corporate website, it currently owns 10,500 stores and clubs under 48 banners in 24 countries and eCommerce websites. They employ 2.2 million people worldwide. Of these, the US has 1.5 million workers. Walmart is another huge example of corporate longevity and sustained business growth.
Business strategies of corporations require to be reviewed every few years. These have to be re-aligned with the change in customer preference. It is not just technology that changes. It is the spillover impact on the way things are done that alters. A change in strategy results in a shift in business processes and organizational structures. People retrain and retool themselves to the new reality, or they exit. Companies that can adapt to continuously changing customer preferences survive and last. They die and disappear when they are unable to do so.