Walmart has been phenomenally successful, with operations larger than those of some countries. But can the Bentonville powerhouse sustain its half-a-trillion-dollar enterprise much longer?, asks Professor Jim Heskett. What do you think?
There is a body of research that seeks to relate economics to human biology. It's usually associated with the notion that the life cycles of businesses parallel stages of biological life: birth, rapid growth, maturity, and death. Companies are categorized as growth or value investments. Managers think of businesses in their portfolios as question marks (too early to tell), stars, cash cows, and dogs. Entrepreneurs "harvest" the spoils of startups once the rapid growth period is nearing its end. This work has presented evidence that there is a surprising amount of turnover among the largest business firms, characterized in the United States by the fact that only one company, General Electric, has survived in the Dow Jones Industrials index since its beginning.
We are reminded of the matter as Wal-Mart Stores, Inc. names a new CEO, Doug McMillon, who faces a number of very large challenges, including that of how to grow a nearly half-trillion-dollar organization charged with everything from bribery in its Mexican operation to discrimination in its labor policies, and blamed for low wages and reliance on indirect societal subsidies for its labor policies. Is it possible that Walmart is just too big to pursue its business model in the longer-term future?
This is not a trivial question. Walmart, as the world's largest private organization, has a bigger population than several United Nations member countries. Its revenue base is larger than many of the world's economies. And its borders extend far beyond the US.
Everyone has an opinion about Walmart. Mine is influenced by my only visit to Bentonville, Arkansas 20 years ago. Even then it was a big company. The Saturday morning management meeting I witnessed was attended by a thousand members of the Walmart "family"—employees, their families, and guests like me. Every effort was made to recognize individual effort. New products were introduced. Decisions under consideration were even discussed from the stage. The biggest display in the room was an electronic counter on the wall that every two seconds added up the savings delivered to Walmart's customers over the company's lifetime.
How you feel about Walmart's future may depend on how you feel about its policies and business model. Clearly, leadership has chosen to distribute the profits from its remarkable productivity increases to customers and, at least in the early years, owners and investors that largely included managers. More recently, the benefits have gone primarily to customers. Walmart's managers are not among the most highly paid, especially in light of the dedication, travel, and on-the-ground involvement expected of them. Investors do not regard the stock as a "growth" stock....MORE
