Sam Walton founded Wal-Mart in the year 1962. He started as a small store, which served cheap products to the local people. (Hamilton, 1976) Gradually Wal-Mart became big in America and soon due to globalization the Wal-Mart expanded to many countries now. They give importance to the price strategies.
They follow the concept called “Everyday Low Pricing”. (Richards & Hamilton, 2006) This is the reason for their success as world’s number one retailer. It employees around 2.2 million people around the globe and it’s the highest private employer in the world. (Ungar 2012) And its revenue for the year 2012 was US$ 447 billion. This shows the power and dominance of Wal-Mart.
Major two strategic factors focused by Wal-Mart: - 1. Social factors 2. Environmental factors
Social factors: -
Wal-Mart though being the global giant in retailing business it faces so many social issues through out, such as poor wages to its employees, from a report its proved that it gives 20% less wages to employees when compared to its competitors. Employees are made to work overtime without extra wages. (Micklethwait, 2004) Practices of gender discrimination like women were paid less when compared to male employees. The women get promoted after the average period of 4.38 years where as the male get promoted after 2.86 years. (Lorenzsonn, 2012) Wal-Mart didn’t allow employees to form a union this also caused so many issues.
As they provide products as the cheaper rates the small mom and popshops are being affected in the particular area. Many merchants close down their shops, as they cannot run their business. (Barrison, 2011) This is the reason why merchants in India tried very hard to avoid its entry into India. But as they have huge power they had collaborated with Bharti Airtel and opened stores in India. Environmental factors: -
Wal-Mart has more than 6000 stores spread across the globe. So all the agricultural land are being affected by changing into concrete and pavement. In 2005 Wal-Mart was sued for improper storage of pesticides and toxins in the store. (Kurtzleben, 2012) Wal-Mart faces many environmental problems such as the violations of the clean water in Georgia, polluting the air in eleven states of USA.
Increase in the discharge of carbon di oxide as many people drive to Wal-Mart daily. It only produces 2% of its energy trough its air and solar energy. Wal-Mart greenhouses gases are growing. (Tortorello, 2012) Wal-Mart provides cheap products so the consumers in America replace the goods frequently, so the rate of trash doubled when compared twenty years back.
Corporate governance in Wal-Mart: -
Wal-Mart was built on foundation of integrity. The board members and company leaders provide vales to serve customers and shareholders. (Duke, 2012) They believe in operating the business with high ethical standards. Top management works towards achieving sustainability.
In order to reduce social issues Wal-Mart had excellent corporate governance practices such as giving employment opportunities to the people around the store. Procuring directly from local farmers and increasing there revenue. (Duke, 2012) Giving back to the poor people in that society. Providing quality products at cheaper rate. Training facilities to the suppliers. Improving women enforcement.
Wal-Mart works hard to protect the planet like using 100% renewable energy, avoiding wastage, following the strategy of going green in order to create sustainability in the minds of customers. (Duke, 2012) (Appendix A) The corporate governance and corporate social responsibility are always interlinked. Wal-Mart being the global player has to follow those to have good image in the society. The components of corporate social responsibility in Wal-Mart: -
1) Economic responsibility: -
Wal-Mart is a profitable organization as it earned the revenue was US$ 447 billion in 2012. (Duke, 2012) From this we can say that they are more profitable. Wal-Mart sales volumes are also very high due to the cheap products.
2) Legal responsibilities: -
Wal-Mart faced so many legal suits by its employees for poor wages, gender discrimination and other work related problems. (Thompson, 2011) For example in 2001 Wal-Mart faced the biggest women discrimination case but after 10 years Wal-Mart won the case against the women employees.
3) Ethical responsibilities: -
Though Wal-Mart benefits a huge number of customers by providing quality variety goods at cheaper rate, they pay poor wages to employees, affect the small merchants and affect the environment too. (Micklethwait, 2004) This shows that they are not fully ethical.
4) Philanthropic responsibilities: -
In order to get good image in the society and remove its bad critics it spends huge amount to the poor children and charity purposes. (Duke, 2012) In 2011, Wal-Mart and the Wal-Mart Foundation gave $958.9 million in cash and in-kind contributions around the world.
Various ethical theories on issues of Wal-Mart: -
Ethical theories can be used to justify various issues that happened at Wal-Mart. It helps to understand clearly who is the cause for the issues.
Stake holder theory: -
The stakeholders are those who have interest and get affected by the any decisions made in the organization. (Carroll & Buchholtz, 2012) They are the employees, customers, and local community, suppliers, special interest groups, media and competitors. Wal-Mart doesn’t follow the stakeholder theory properly as it faces so many lawsuits on behalf of its employees such as low wages, overtime, gender discrimination. They also affect the local communities like small merchants can’t compete with them. (CBS, 2012)
Kantianism theory: -
Immanuel Kant theory states that to achieve an end no body should be affected. (Kant, 1790) But in Wal-Mart in order to provide goods at cheaper rates the employees are treated in unfair manner to reduce the cost they are paid less. This theory is used to argue against Wal-Mart.
Utilitarianism theory: -
This theory is just contrast to the Kantianism theory as it seeks to benefit a large number of people through any means. (Bentham & Stuart Mill, 1789) This is used to argue for Wal-Mart as they satisfy huge number of customers by providing quality goods at cheaper price.
Immoral management: -
Wal-Mart is said to be following Immoral management, this is just opposite to the ethical management. (Frederick, 1999) So many cases suits are on Wal-Mart. But Wal-Mart always gives some reasons to justify that it for a moral management.
Kohlberg’s level of moral development: -
There are 3 levels of moral development specifies into six stages, (Nairne, 2009)
1. Pre conventional approach 2. Conventional approach 3. Post conventional
The Pre conventional approaches are pre moral they are like elementary school children who are selfish and they take decisions that benefit them the best. Wal-Mart falls under this category as they pay very less and affect the environment to enjoy its profits. But Wal-Mart on the other hand proves that they are post conventional as they do give back to the poor people and society.
Principle of Justice: -
Wal-Mart didn’t follow the justice theory, as they didn’t allow employees to form the union. (HRW, 2007) Where as the Wal-Mart justify that they want to avoid external influence. So they don’t allow the unionization.
Issue management and Crisis management: -
There are so many issues, which are even happening now around Wal-Mart such as in India people are fighting against it for the entry. People fear that they will affect the local small retailers and merchants. Wal-Mart also faces the problem of lobbying to enter into India. (TOI, 2013) Issues can lead into big crises so the issue management and crises management teams should be established to look after all the problems and ensure sustainability. They can also hire external consultant groups for the particular task. Wal-Mart good practices to tackle social and environmental issues: -
Wal-Mart provides employment opportunity to 2.2 million people around the globe. Wal-Mart. They come out with protecting the society they work by giving huge amount of money for the poor and needy. (Handy, 2012) They created food bank to eradicate poverty and hunger death. (Appendix E) They provide money to the non-government organizations. They also procure directly from farmers and small manufactures. It is the concept of ethical sourcing. This helps to improve the society. Women discrimination is controlled in all the stores through the women economic empowerment program. (Goudreau, 2011) They provide training to employees to work better.
Wal-Mart faced many environmental issues in order to remove it they have brought in many protecting measures such as working towards 100% renewable energy, reduction in green house gas. (Watson, 2013) (Appendix B & C) They also have the goal of having zero percent wastage from stores, efficient packing, reducing the use of plastic bags and electronic recycling. (Appendix D & F) Wal-Mart started following transparency in all its operations to have good image. (Duke, 2012) They also follow good standards and good code of conduct to eradicate the bad image and get sustainability.
Wal-Mart has to follow good ethics to eradicate the bad image possessed by its stakeholders. If they don’t do it they will have to face the big crises that affects badly. Bad image will affect their profitability also. So from being number one retailer they will be pushed back. So its vital they take up all the issues and seek solution.
Everything in this world has its own pros and cons. Wal-Mart being the global player there will be surely some issues. It’s really hard to maintain 22 million people around the globe. Now they started to follow the triple bottom line, which is giving importance to profit, people and planet. Being an India I would support them putting up their stores as it provide employment opportunities, customers get variety of quality goods at cheaper rate, farmers and local manufactures will be benefited and it improves the economy and standard of living of the country.
Wal-Mart is a global player so small manufacturing company in India can easily sell its products around the world. It’s really unethical in making barriers for their entry. Myself a big supporter of Wal-Mart as many get benefited at the end.
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Appendix B: -
Appendix C: -
Appendix D: -
Appendix E: -
Appendix F: -