I. Introduction: This memo is in response to your request to assess the impact of corporate social responsibility implement by our competitor, Wal-Mart. Three main objectives of this analysis are: 1. How does Wal-Mart perceive itself as a socially responsible company? 2. Which contradictions exist in their CSR initiatives?
3. Are there direct correlations between CSR and consumer’s intent to make a purchase? II. Background: Wal-Mart is the largest private employer in the United States, employing over 1.3 million U.S. workers. According to their website, Wal-Mart is now operating at 26 countries with 9,600 retail units total, serving a global population of 200 million consumers per week.
Much of Wal-Marts’ success can be attributed to founder Sam Walton’s core values. His unconditional desire is to offer the best quality merchandise at the lowest price, saving fellow Americans money, in order to have a better quality of life. Wal-Mart continues this tradition and work constantly with suppliers to bring energy efficient products to the market, saving customers money in the long run (Wal-Mart). III. Research & analysis:
Wal-Mart established CSR by implementing key initiatives to battle environmental issues. They established a sustainability index that analyzes the manufacturing process of products that are sold at their store while also helping suppliers in developed markets produce “eco-friendly” products (Felted). Suppliers from China have been scrutinized for unsafe products such as tainted milk, hazardous pet food and toys with high levels of lead. Wal-Mart is issuing strict environmental and safety mandates to Chinese suppliers to ensure products are safe.
According to Lee Scott, former CEO of Wal-Mart, Wal-Mart will work with multiple inspectors to monitor compliance. Another reason for such scrutiny is the goal of eliminating customer returns due to faulty products by 2012 (Zimmerman and Fong). “Some people’s primary concern will be, ‘what will this do to cost?’ ” Mr. Scott stated. “However, with the implementation of our sustainability initiative we found that eliminating waste, downsizing packaging and improving transportation fuel efficiency led to a whole lot of savings.” CSR Health Initiatives:
Wal-Mart is promoting a campaign to provide customers with healthier food choices that are more affordable. The campaign is backed by First Lady Michelle Obama to increase child obesity awareness. The first phase of the program will be to open four new stores in the nation’s capital, a strategic plan to penetrate the inner-city market (Cassidy). Leveraging their logistical and transportation advantages, Wal-Mart is successful in lowering the cost to many consumers.
“We believe we can save Americans who shop at Wal-Mart approximately $1 billion per year on fresh fruits and vegetables,” said Andrea Thomas, Wal-Mart’s senior vice president of sustainability. In addition to reducing the cost of food, Wal-Mart’s ultimate goal is to promote healthier food by reducing the content of sodium by 25%, cut sugar by 10%, and eliminate trans fat in all packaged food products.
Wal-Mart plans to work with suppliers to reformulate thousands of products and phase in their mandate by 2015. With the astronomical number of customers who visit each week, Wal-Mart has the opportunity to benefit society by providing affordable healthier choice of foods (Wal-Mart Health Initiative). Emergency Relief Aid:
Wal-Mart participated in humanitarian aid when Hurricane Katrina devastated New Orleans in 2005. In a joint effort, Wal-Mart and America’s Second Harvest, an established food bank, fed thousands of Americans whose lives were destroyed by the devastating effects of Hurricane Katrina. With the nation in turmoil, Wal-Mart provided storage for the all the food that was being delivered.
They even provided direct aid by transporting necessary items to the victims. Although the natural disaster left many helpless, Wal-Mart’s benevolent acts of kindness have rejuvenated the local communities and enriched the company’s reputation as an “ideal corporate citizen” (America’s Harvest). Wal-Mart’s Negative Publicity:
Although Wal-Mart joined in on numerous humanitarian aids, many skeptics are still weary of the company’s true motives. Wal-Mart has recently been in the media for its lawsuit involving ethnic discrimination and harassment that occurred in one of its subsidiaries, Sam’s Club. U.S. Equal Employment Opportunity Commission sued Wal-Mart on behalf of the nine Mexican immigrant workers who were harassed because of their ethnicities. They were abused by one of their colleagues, forced to bear racial slurs and derogatory comments. “It was very nasty verbal stuff, things we are not used to hearing, especially at work,” said Sofia Alvarez, one of the victims.
Many of the victims expressed their anger to their supervisors, but were ignored because the offender was a top salesperson that was highly respected for her work (Bustillo). Wal-Mart agreed to settle and paid $440,000 for negligence on their part. Wal-Mart was involved in another class action lawsuit involving unfair labor practices. The plaintiff accused Wal-Mart of violating, “Pennsylvania Wage Payment and Collection Act” for forcing employees to work without rest and meal breaks.
They were also scrutinized for not paying their workers who worked overtime. Wal-Mart has neglected to treat each and every employee the same; they have contradicted their main values of equal employment opportunities for all different ranges of positions within the company (Class Action).
The outcome of this trial revealed a different side of Wal-Mart, a greedy corporate giant who took advantage of its employee and saved more than $49 million by not properly compensating their workers (Class Action). Ultimately, the aftershock of these lawsuits not only damaged the company’s image and shareholders’ value, but the trickle effect reached down to the employees as well. Additional future financial restitution will likely increase insurance premiums and additional costs, which will lead to higher priced goods (Voice defense bar). CSR Relation to Consumer Purchase:
Many corporate executives and stakeholders questions, whether CSR implementation truly has an affect on consumer’s purchase decision. With the initial up front costs, many question whether it’s necessary. According to “Cone Corporate Citizenship Study”, Americans are more likely to base a company’s reputation by the amount of CSR they implement. In a telephone survey of approximately 1,000 Americans, an astonishing 78% felt that companies have responsibility to support CSR.
After the scandals of Enron and World Com, 84% expressed that, “it is more important than ever for companies to be socially responsible (Cone, 2002)”. Many American consumers are changing their views about corporations. Catastrophic events such as Enron have devastated many Americans and they felt greed was the main factor that fueled the incident. Outcome of Negative CSR:
“Cone Corporation (2002) conducted a study to document consumer’s behavior towards a company with a negative CSR:” 91% of consumers switched to another company’s products or services 85% of consumers would speak against that company amongst family and friends 83% of consumers refused to buy shares of the company
80% of consumers refused to work for the company 76% of consumers would boycott the company CSR Brand Loyalty: Another important factor that influences consumer’s purchase intent is the type of cause the company is supporting. Companies can establish brand loyalty and acquire new customers, if they support a good cause (Cone). Brand loyalty creates an added value to a company, allowing them to reap the benefits of increased sales and charge a premium for their products. IV. Recommendation:
After the analysis of CSR implementation by Wal-Mart, it is in our company’s best interest to follow suit and follow a similar strategy as Wal-Mart. With the advancement of technology, many consumers are aware of finding different avenues to purchase the cheapest products. As the data show, price is not the overall factor in determining a consumer’s purchase intent. We need to start formulating a strategic plan to effectively reach out to our target market. We need to define our core values and inject them into our work place. We need to establish a CSR team and make sure we practice what we preach! It is crucial that we are not offering lip service and show that “actions speak louder than words.”
Energy efficiency is a big trend among big corporations. Wal-Mart and their sustainability initiatives is a prime example of creative measures to conserve energy and eliminate costs. They are working with suppliers to reduce packaging in their products reducing freight and storage. Simple transformation such as using corn based plastic instead of oil-based plastic in their fruit and salad packaging has reduced weight by 25% and cost by 13%, saving them $195,000 annually (Stanford).
This “eco-friendly” implementation by Wal-Mart has established new opportunities to create more sales. Seventh Generation Inc. is known for producing “eco-friendly” household products. Jeff Hollander, cofounder, despised the retail giant and disapproved of any of his products being sold by Wal-Mart.
However, Mr. Hollander had a change of heart after witnessing Wal-Mart transformation. Seventh Generation’s products are now widely sold across Wal-Mart, generating more sales while branding a new image (Byron). Using similar strategies will add value to our company and can open many more opportunities down the road. V. Conclusion:
As shown in the data stated above, CSR will play a huge role in determining a consumer’s purchase intent. We should use sustainability strategies to effectively cut costs and brand our image as environmentally friendly. Work Cited
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