Walmart Political Risks

Wal-Mart has a great history of leadership, innovation and success. The founder, Mr. Sam Walton had a vision and traveled the country studying discount retailing because he had a vision of selling quality products at a lower price. He opened his own store, Wal-Mart, in Rogers, Arkansas in 1962. Today, Wal-Mart is the largest retail chain in the world with over 9,000 stores, servicing over 176 million customers, and over two million employees in 15 countries; Mexico, Puerto Rico, Canada, Argentina, Brazil, China, the United Kingdom, Chile, Japan, Costa Rica, El Salvador, Guatemala, Honduras, India, and Nicaragua.

Wal-Mart has also expanded with gas stations as well as the Sam’s Club, which opened in 1983. Mr. Sam Walton had a personal philosophy, “the secret of successful retailing is to give your customers what they want. And really if you think about it from the point of view of the customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction; pleasant shopping experience” (walmart.com). From this, Wal-Mart operates its stores with one main philosophy and that is to provide everyday low prices as well as excellent customer service.

Wal-Mart continues to strive for excellence and attempts to come up with new ways to provide excellent customer service and continue to increase revenue and maintain customers. For example, their main competitors are K-Mart and Target but because they strive for great customer service there are greeters welcoming customers to Wal-Mart at every store. This contributes to the fact that Wal-Mart is the number one retailer in the world. Some ways Wal-Mart can continue to be successful is to monitor and maintain the customer service level, always trying to continue to improve products as well as employee relations, and deliver products and services and the lowest price.

When dealing with a larger corporation like Wal-Mart, there are many stakeholders to satisfy to be and remain successful. Shareholders have an economic stake in what a company does. In other words, these are people that own shares and would like a return on their investment. Executives and employees are considered shareholders. Executives receive stock options as part of their salary and employees depend on their jobs because for many it is their main source of income. The communities where Walmarts exist are also considered stakeholders because it creates and maintains jobs for the citizens of the community.

More importantly, the consumers are stakeholders because they have a stake in the success of the store. With Wal-Mart also becoming the largest grocery retail, many people rely on being able to buy groceries as well as household products at one time. Some oil companies have stakes because Wal-Mart also has contracts with some gas companies, and this is why we are able to purchase gas at some Sam Clubs stores. The process of satisfying stakeholders internationally can be a challenge for several reasons. Stakeholders would like to see a higher return on their investment, wanting additional sales and productivity. Depending on the country, employees may want more hourly wages.

Society as a whole would like corporate taxes and involvement in social functions. Management must be aware of all of these various interests, considering gains may go to consumers and stakeholders at different times. International business is more difficult because each country may have different interest. Political risk can be considered the execution of political power in a way that threatens a company’s value.

This can include changes in legislation that change the ways of conducting business, target criminal activity and possibly even terrorism. Political risk can include changes in currency and/or changes to the tax code. This comes directly from the specific country government or come from the various social situations. For example, labor laws in some countries allowing children to work at much younger ages than in the United States. Because of this Wal-Mart was accused of employing teenagers and having employees operate hazardous equipment. Some political risk analysis firms generate country specific reports, in some cases calculating risks based on government, society, security, and economic factors.

These reports can give a company a better understanding of the specific country’s current situations. When approaching political risks, it is best to develop risk profile to identify possible or potential political risks. By developing a profile, it can help with any unexpected and unwanted surprises. One must understand the social, political and corporate environment.

Evaluating and measuring potential effects and more importantly, monitoring evolving risks are extremely important when dealing with political risks. Wal-Mart has a wonderful corporate social responsibility program. China in particular focuses on environmental protection, community involvement, child welfare, educational support, and disaster relief. With this program, many countries have received a tremendous amount of financial support for world disasters.

They have donated to earthquake stricken areas as well as training courses. China Wal-Mart has contributed $500,000 to Haiti and Chile for earthquake victims. Wal-Mart uses Datacert Passport for Legal Department Management. It helps Wal-Mart manage domestic and international legal processes. Datacert is a technology innovator and global provider of legal management software that allows departments to manage legal systems more efficiently.

With a combination of all things discussed, political risks, customer service, social programs, legal processes and most important awareness, an international company can be productive as well as successful. There are always going to be stumbling blocks and Wal-Mart will not always succeed in every country, such as Germany, and if these things are not accomplished, this can cause the company to crumble.

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Datacert. (2011). Retrieved from http://walmartstores.com/aboutus/297.aspx

Hayden, P., Seung, L., McMahon, K., & Perieira, M. (2002). Wal- mart:staying on top of the fortune 500. Retrieved from http://allman.rhon.itam.mx/~oromero/Wal_Mart_CaseStudy.pdf

Vida, Bella. (n.d.). Political risk - a huge consideration for international businesses. Retrieved from http://hubpages.com/hub/INTERNATIONAL-RISK-MANAGEMENT- DEFINING-POLITICAL-RISK

Bekefi, T., & Epstein, M. (2006). Integrating social and political risk into management decision-making. Retrieved from https://daedalusadvising.com/Integrating_%20Social_Political_ Risk.pdf