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What CPAs can learn from Wal-Mart.

Why should practitioners study a company that went from being a small backwater retailer to the United States' largest retailer in a little more than a decade? According to Mike Ballard, principal, Ballard Marketing Group, North Las Vegas, Nevada, and Frederick W. Langrehr, PhD, Paul H. Brandt Professor of Business Administration, Valparaiso University, Valparaiso, Indiana, the keys to Wal-Mart's success are universal.

CPA firms that follow the retailer Wal-Mart's example should succeed in a competitive environment if they develop a market niche, keep close contact with both customers and employees, define and focus on a unique mission and use technology to exploit new opportunities. These concepts may not make the partners billionaires, but they should help the firm outmaneuver competitors and better serve its customers.

The steps to success are to clearly define the firm's customer, mission and greatest strengths and then to focus the entire firm on implementing this mission consistently and delivering a value to the targeted customer that sets the firm apart from its competitors. Wal-Mart, along with other successful organizations, owes its success not only to its management concepts but also to their implementation.

Some may believe only price-oriented, discounting CPA firms can learn from Wal-Mart's success. We believe, however, all firms can learn valuable lessons. Wal-Mart's core benefit is value retailing, generally defined as offering the lowest price for comparable quality products. However, how it achieved its success is as relevant to a full-service firm as it is to a value-oriented operation. The goal is to emulate Wal-Mart techniques and not necessarily its mission or main strength.


The keys to Wal-Mart's success have been

* Niche marketing techniques and distribution leverage.

* Close contact with customers.

* Focus on the primary mission.

* Employee motivation.

* Technology.

* Opportunity-oriented management staff.

Niche marketing and distribution leverage. Wal-Mart began as a niche marketer. Sam Walton saw an opportunity in serving small, rural Southeastern communities with stores providing wide selection and low prices. Because other retailers either did not offer the same breadth, quality or price in this market or assumed it would not be profitable to do so, Wal-Mart had a protected base in which to experiment and to perfect its retailing method. This niche also gave it a profitable base from which to grow in the expansion years.

For CPA firms, Wal-Mart's experience suggests that new, underserved markets may still be available in what may look like mature markets. Further, seemingly low-volume markets for large firms may be lucrative ones for smaller entrants.

An example is McGladrey & Pullen, which concentrates on mid-sized cities, such as Peoria, Illinois; Des Moines, Iowa; Casper, Wyoming; Las Vegas; and San Bernardino, California, rather than major cities. With this strategy, the firm became one of the largest CPA firms in the country. McGladrey also caters almost exclusively to the privately held company so commonly found in these smaller cities, offering a breadth of services, such as family business counseling, disaster recovery planning and strategic planning, their competitors in these markets can't match.

Customer focus. The fundamental tenets of marketing are to know and serve the customer. Most CPAs have heard this a hundred times, but Wal-Mart's success was in the implementation. Its corporate executives must be in the stores a few days each year--a rule that's stayed in place as the company has grown.

In CPA firms, this experience suggests that partners need to spend time on client contact and not only at the executive level on the golf course. It is critical to meet and work with clients, middle managers and the firm's own junior staff. Such contact reduces the filtering that occurs in both the firm and the client organizations. Follow-through on the information gleaned from their visits also is critical. Problems can be solved and opportunities pursued during these visits.

Primary mission. Wal-Mart's mission is to provide the best price for a given quality or the highest quality for a given price. This mission forces the entire organization to seek cost reductions while holding quality without increasing costs. These principles have led to aggressive negotiations with vendors and to the company's refusal to accept gifts from vendors--the latter to keep the relationship strictly on a business level. Wal-Mart buyers also deal directly with manufacturers and not with distributors.

This doesn't mean CPA firms need to be low-cost suppliers, although with the current corporate emphasis on cost reduction the low-cost approach may be a viable strategy. The lesson is to have a clearly stated mission and then to be true to it. A firm must have a plan, system or set of policies that ensures its own competitive advantage. Continual accountability is required to ensure the firm consistently strives to fulfill its basic mission.

Employee motivation. Most industry observers are struck by the difference between Wal-Mart associates and workers at other discounters. Early on, the retailer had a choice between battling with unions or creating an environment in which employees felt they were treated with respect and did not need third-party representation. Wal-Mart chose the latter. One manifestation of its "we care" program is calling all personnel "associates" and not "clerks" or "stockers." Another is the use of associates' ideas. For example, Wal-Mart stores are unique in having a greeter at the front door. This idea came from an associate and not corporate headquarters. Sam Walton also was well known for cheerleading the troops, showing intense interest in the associates and customers and sharing with employees the financial benefits from cost-reduction programs and increased profits.

CPA firm leaders should ask themselves if there is a gap between the partners and the rest of the firm. Are there working relationships between, as well as within, the various levels? Who shares in the profits or gains from extra effort?

Technology. Without technology, Wal-Mart might still be a well-run company serving customers in the rural Southeast. Technology helped it both serve its original niche and grow to the giant it is today. If Wal-Mart had developed in an urban area, it could have relied on distributors to help it move information and goods among headquarters, warehouses and stores. But because it operated in rural markets, few distributors were available, so it had to develop systems to track store activities, communicate with stores and move goods to the stores.

The result is a sophisticated linkage of data capture, transmission and utilization. Wal-Mart was one of the first retailers to use fully point-of-sale technology and satellites and to make efficient use of centralized warehouses to purchase and distribute merchandise.

In the accounting profession, the Roseland, New Jersey, firm of Rothstein, Kass & Co. similarly uses technology to gain a competitive edge on its competitors in its market niche. The firm, which specializes in serving hedge fund companies on Wall Street, has created electronic links to major brokerage companies including Goldman Sachs and Bear Stearns. These links inform the CPAs immediately of transactions related to their clients' accounting activities.

Opportunity-oriented management. Wal-Mart's sales goal for the year 2000 is $100 billion to $125 billion. Fiscal year 1992 sales were $44 billion. How will it get there from here? Innovation, calculated risk-taking and opportunity-oriented management have been the keys to moving their revenues past those of Sears and K-Mart. Wal-Mart executives still believe this approach will push its growth. The company continually experiments in applying its basic mission and delivering its core benefit in different forms of discount retailing.

Arthur Andersen & Co. created a world-class consulting business by taking a few risks and doing things a little differently from their peers. In 1968, a group of the firm's high-ranking consulting partners got together to decide how to build their practice. At the time, Andersen, like most firms, had several separate consulting divisions without effective coordination. Their counterparts at other large firms focused on strategic planning and financial consulting. Andersen decided, however, to concentrate on computer consulting and made a huge investment in it.

The firm was scoffed at for its investment in a training facility, for its narrow focus and standardized practices. Other firms hired experts from industry or existing consulting firms who organized their practices as they saw fit. This approach was very cost-effective at the time, but Andersen proved its strategy was better for the long term. Because Andersen positioned itself differently from its competitors and took some calculated risks, it had tremendous success in its consulting practice.


CPAs can benefit from studying the reasons for Wal-Mart's success. Some firms may choose to be low-cost service providers. But for all firms, the lesson is to value customers and employees. Satisfied employees help maintain close customer contact.

A clear and consistently implemented business mission also is required so both employees and customers know what to expect from the firm. Applying technology to deliver the core benefit is critical. Finally, encouraging and rewarding innovation and calculated risk-talking are increasingly vital. Accordingly, it's necessary to empower all employees to effect change.

The accounting profession is going through dynamic and challenging times. If firms are going to succeed, as Wal-Mart has in its industry, they should make substantial changes and make them soon. As Will Rogers said, "Even if you are on the right track, you'll get run over if you just sit there."
COPYRIGHT 1993 American Institute of CPA's
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Article Details
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Author:Langrehr, Frederick W.
Publication:Journal of Accountancy
Date:Nov 1, 1993
Previous Article:Accounting for multiyear RRCs and sales and lease-backs of assets leased to other parties.
Next Article:Watch your attitude.

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