BUSN XXXXXXXXXXIntroduction to Business Wal-Mart: Angel or Demon? You Decide… For better or for worse, Wal-Mart dominates the retail industry. With annual revenue of more than $315 billion, Wal-Mart...

Wal-Mart: Angel or Demon? You Decide…

For better or for worse, Wal-Mart dominates the retail industry. With annual revenue of more than $315 billion, Wal-Mart ranks consistently in the top 10 on the Fortune 500 list of the largest U.S. corporations. Wal-Mart is also the largest corporate employer in the nation, with more than 1.3 million people on its payroll (only the Federal government employs more people). On the global front, Wal-Mart operates nearly 3,000 international stores, buys products from 70 countries, and generates about 20% of their sales from abroad. Given Wal-Mart’s aggressive expansion plans, those numbers are only likely to grow.

But beyond the basic facts, general agreement about Wal-Mart ends. Supporters portray Wal-Mart as a solid corporate citizen that fuels economic growth, while detractors criticize every dimension of Wal-Mart operations. The key arguments:

Wal-Mart Supporters:

• Wal-Mart boosts the standard of living for its customers by offering a plethora of quality products at the lowest possible prices. And by forcing its suppliers to become more efficient, Wal-Mart drives greater productivity and competitiveness throughout the economy.

• Wal-Mart boosts employment in every community where it operates, offering excellent opportunities from the entry level through management. Demonstrating the appeal of its jobs, a Wal-Mart that recently opened near Chicago received more than 25,000 applications for 325 positions.

• Wal-Mart revitalizes communities by building stores in economically depressed areas. In an interview with PBS, Wal-Mart VP Bob McAdam cites the example of Panorama City, CA: “When we came into that location, the mall that we're associated with there was basically boarded up and closed. Every storefront is full today with little businesses that are adjacent to the Wal-Mart store.”

• Wal-Mart has made an impressive commitment to the environment by slashing energy use in its stores and trucking fleet, eliminating waste in operations and product packaging, and promoting environmentally friendly products…even when they’re less profitable.

• Wal-Mart contributes more than $170 million to the community each year, which translates to $18,000 an hour, or $5 a second. Wal-Mart was especially visible in the wake of Hurricane Katrina, prompting an official to comment onMeet the Pressthat if “the American government would have responded like Wal-Mart, we wouldn’t be in this crisis.”

Wal-Mart Detractors

• Wal-Mart has destroyed both the livelihood and the unique flavor of local communities by wiping out small local businesses that just can’t compete. Richard Moe, president of the National Trust for Historic Preservation, says, “We know the effects that these superstores have. They tend to suck the economic and social life out of these downtowns, many of which whither and die as a result.”

• Wal-Mart offers low prices in part because of huge tax savings and government subsidies. Across the United States, Wal-Mart has received more than $1 billion in development aid from local governments. Both the subsidies and the tax breaks come from the pockets of local consumers, so in a certain sense, the dollars have simply shifted—the customers indirectly pay Wal-Mart for those low prices.

• Wal-Mart has highly questionable labor practices. The giant retailer has been fined for child labor violations, accused of cheating workers of overtime pay, fined for child labor violations, charged with sex discrimination in a class action lawsuit, criticized for buying goods from foreign sweatshops, charged with hiring undocumented cleaning workers, and accused of closing stores whose workers voted for unionization.

• Wal-Mart does not provide its workers with adequate healthcare. The company healthcare plan covers less than 45% of its employees. Wal-Mart doesofferinsurance, but requires its employees to cover for a big chunk of the cost—too much for many low-wage workers to afford. Not only that, full-time workers must wait six months for healthcare eligibility and part time workers must wait two years…tough given the high employee turnover. A number of critics have accused Wal-Mart of encouraging their employees to turn to Federal and State assistance programs, such as Medicaid, to cover their healthcare needs.

Despite Wal-Mart’s healthy financial performance, the intense, relentless criticism has helped drive Wal-Mart’s stock price down more than 25% in the past five years. An unflattering documentary film called “Wal-Mart: The High-Cost of Low Price” has further undermined Wal-Mart’s image.

But the fight is far from over. Wal-Mart has recently created a public relations “war room,” staffed by PR experts. They aim to publicize Wal-Mart’s accomplishments and contributions, and to neutralize criticism, using weapons that range from instant Web postings to spur-of-the-moment press conferences. In addition, Wal-Mart CEO H. Lee Scot has made himself available for interviews in a new spirit of openness and cooperation with the press. The success or failure of this PR blitz will almost certainly influence Wal-Mart’s long-term performance, both at home and abroad.

You Decide (answer ALL of these questions):

• After reading the arguments of Wal-Mart supporters and detractors, which do you find more compelling? Why - Support your Argument with research/facts/evidence?


• What are some of the external (macro environment) factors that might be impacting the way that Wal-Mart behaves in the marketplace?

• Wal-Mart has attracted far more criticism than competitors with similar records, such as Target. Why (again support your argument)? Can you think of other industry leaders who have been magnets for criticism while their competitors operate unscathed?
  

• Do you think Wal-Mart is responding effectively to the barrage of criticism? What other strategies would you recommend? Consider the upside and downside of at least two different approaches.

Remember to cite your sources for your research & to "Substantially" reply to a minimum of ONE other student for maximum credit.

(Sources: A New Weapon for Wal-Mart: A War Room by Michael Barbaro, New York Times, November 1, 2005,http://www.nytimes.com/2005/11/01/business/01walmart.ready.html?ei=5088&en=ec9edfc5f2f9841f&ex=1288501200&partner=rssnyt&emc=rss&pagewanted=all; One, Two, Three, Four…We Don’t Want Your Superstore, Frontline, PBS Website,http://www.pbs.org/wgbh/pages/frontline/shows/walmart/transform/protest.html, accessed May 2, 2006; Wal-Mart’s Healthcare Struggle is Corporate America’s Too by Reed Abelson, New York Times, October 29, 2005,http://www.nytimes.com/2005/10/29/business/businessspecial2/29health.html?ei=5088&en=448a18530a8d6220&ex=1288238400&partner=rssnyt&emc=rss&pagewanted=all; Thousands Apply for Jobs at New Wal-Mart by Leslie Baldacci, Chicago Sun-Times, January 26, 2006,http://archive.li/dwPhY; Some Uncomfortable Findings for Wal-Mart by Aaron Bernstein, BusinessWeek Online, October 25, 2005,https://www.bloomberg.com/news/articles/2005-10-25/some-uncomfortable-findings-for-wal-mart; Disaster as Relief: How Wal-Mart Used Hurricane Katrina to Repair Its Image by Philip Mattera, Corporate Research Project E-Letter, September-October 2005,https://www.corp-research.org/e-letter/disaster-relief; Wal-Mart Corporate Website,http://www.walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=316, accessed May 2, 2006)