The Walmart Conundrum
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THE WAL-MART CONUNDRUM
Wal-Mart, the worlds largest company, is a test case for CSR:
Wal-Mart is three times the size of the No.2 retailer, Frances Carrefour. Every week,
138 million shoppers visit Wal-Marts 4,750 stores; in 2002, 82% of American house-
holds made at least one purchase at Wal-Mart.
Wal-Mart-whose total annual revenue represent “a sum greater than the economies of
all but 30 of the worlds nations.” and is growing faster than any of them-is an extremely
successful and influential company. At the foundation of the companys success, however, is its strategy of minimizing costs, which relies on many policies that affect stakeholders in different ways.
The argument against CSR offers up Wal-Mart as its main case in point. Wal-Mart has
suffered considerable criticism about its alleged insensitivity to local communities, employees, and other constituents. Yet, if stakeholders really cared about CSR, Wal-Mart would not be nearly as successful as it is. The result is a mixed picture. Why is it that whenever the company enters a new market, some greet it like a liberating force and others see it as a conquering imperialist? As one headline read,
Wal-Mart Invades, and Mexico Gladly Surrenders.”
A brief survey of article headlines indicates the negative feelings the company generates
and concerns about its long-term influence:
Is Wal-Mart Too Powerful??
The Wal-Martization of America”
Will Wal-Mart Steal Christmas?”
Wal-Mart: Cruising for a Bruising?”
Is Wal-Mart Good for America?”
The paradox that surrounds Wal-Mart and the controversy generated by its success is
why the company is a case study in so many different business disciplines. Overall, does
the company provide a net positive or net negative impact on the societies in which it is
based? As one writer observed, “Wal-Mart might well be both Americas most admired and most hated company. And does the fact that consumers continue to shop at the store (20 million customers pass through Wal-Marts doors every day”) critically undermine the economic argument for CSR?
IS WAL-MART GOOD FOR SOCIETY
Is it healthy for an economy to have companies with the size and power of Wal-Mart? As
Fortune observed, “Wal-Mart CEO Lee Scott rules the commercial strip the way Julius Caesar once ruled the Roman republic,”!” For Wal-Mart, “Everyday low prices” has become its all- encompassing mantra and the means to the companys success: “It is the fundamental tenet of a cult masquerading as a company?”
Proponents of the pro-Wal-Mart case credit the company with directly saving U.S. consumers $20 billion, because of the downward pressure it exerts on prices, and another
$80 billion due to the price reductions it forces on competitors, on an annual basis. It gives consumers what they indicate (with their shopping practices) they want-low prices. Yet the methods by which Wal-Mart achieves these cost savings and low prices are also having a lasting impact, often negative, in the eyes of other stakeholders:
CSR: Do Stakeholders Care?
“Its become a social phenomenon that people resent and fear,?”
The Wal-Mart conundrum is magnified when the long-term impact of the companys policies are followed through. We suspect that the same people who are complaining today about the number of U.S. jobs being exported overseas, particularly manufacturing jobs, also form a significant percentage of Wal-Mart consumers, to whom the companys low prices are so attractive.
“Wal-Mart is a double-edged sword, and both edges are quite sharp,” Bernstein of the
Economic Policy Institute said. “On the price side, consumers wouldnt flood Wal-Mart
if there wasnt something there they liked, the low prices. On the other hand, by sticking
solidly to the low-wage path, they create tons of low-quality jobs that dampen wage and
income growth, not just for those who work in Wal-Mart but for surrounding Communities as well.?
The potential dangers for Wal-Mart are many. What if consumers begin to worry about
the impact the company is having on the economy and society more than they welcome the lower prices the company brings? Communities that worry about a megastores impact on rural downtowns have already restricted Wal-Marts growth.” Will employees continue to apply for positions at Wal-Mart if better paid alternatives exist? As the company continues to expand, will the government begin to fear the monopolistic characteristics of such a huge market influence? Suppliers are stakeholders who both relish Wal-Marts market size and reach and fear their pricing pressures. How will these various stakeholder reactions affect Wal-Marts business strategy over the longer term? What is the outlook for the company from a CSR perspective?
Is Wal-Mart Good for the U.S. Economy?
Lower prices for consumers (lower inflation) Wide range of products
Loss of U.S. jobs to overseas suppliers /Jobs in economically deprived regions
Strong opposition against union representation of workforce
Low employee wages, benefits
Redefinition of supply chain management ,Competitors (and sometimes suppliers) go out of business, reducing competition
General pursuit