Wal-Mart Company’s Impact on Stakeholders

Introduction

Every corporation has its respective stakeholders. Without them the company cannot survive on its own even if it is an organization as big as Wal-Mart. The retail giant started small and yet through innovative business practices and the commitment to provide low-priced items, the Arkansas based company rose to the top of the Fortune 500. Along the way various stakeholders benefited from its rapid growth. There are also times when they struggle because success brings with both opportunities and problems. Since Wal-Mart became a multi-billion dollar business empire it has attracted admirers and critics alike. The various stakeholders that will be examined here are the employees, customers, shareholders, suppliers, and the members of the community where a Wal-Mart store is located. The relationship between the stakeholders and Wal-Mart can be bittersweet because on one hand they profit from their association with Wal-Mart and at other times they suffer from the negative impact of Wal-Mart’s policies and business strategies.

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Background

Sam Walton was the founder and he incorporated the fledgling retail business into Wal-Mart Stores in 1969 but more than thirty years later it has become a global retailing powerhouse that posted revenues in excess of $400 billion (Thompson, Strickland, & Gamble, 2008). Wal-Mart is known to be the largest retailer in the United States, Canada, and Mexico. It can even be argued that since it is the biggest retailer in North America then perhaps it can also have the distinction of being the largest retailer in the world. This view is strengthened by the fact that Wal-Mart is planning on expanding outside the United States through acquisitions also through the construction of new stores (Thompson, Strickland, & Gamble, 2008). This kind of success will surely attract both critics and admirers.

Admirers would be aspiring businessmen who would not mind having the kind of revenues that Wal-Mart currently enjoys. Another set of admirers would be the shareholders who invested in the early days of Wal-Mart and now are enjoying the windfall from the high-value Wal-Mart Stocks. On the other hand Wal-Mart also attracted critics because its size and influence is changing the landscape of the retail market and not all changes are positive. Many of America’s giant corporations are often viewed with suspicion there is always that idea that they are getting so much without giving back to the community. In some cases there are suspicions that they are destroying the environment and that these corporations will attempt to make a profit at all costs.

The same standard of scrutiny is leveled against Wal-Mart not only because it is a multi-billion dollar company but also because it is the largest retailer in the U.S. with an estimated 3,000 stores and counting (Price, 2005). With its size and influence the business strategies and activities of Wal-Mart is a hot topic in the media and when reporters and journalists write or talk about Wal-Mart many people will listen. and influence it is easy to understand why the media and various interest groups are focusing on its every move. It is also easy to understand why the its difficult to keep its labor problems, environmental issues, and conflict with shareholders away from the limelight. A company with its level of profitability and with a company that employs more than a hundred thousand, the slightest mistake can be fodder for the evening news. The

Employees

From one point of view employees of Wal-Mart are fortunate to find work. It is always a good thing to be employed rather than to continue the frustrating work of job hunting and be rejected at the end. It is a good thing to receive money every pay period and be able to support oneself or ones family. But there are those who are saying that being an employee of Wal-Mart is not a good thing. In recent years Wal-Mart had been embroiled in labor problems. There are numerous civil cases filed against the retailer that includes labor law violations and anti-discrimination practices ranging from bias over race and gender to wage claims (Fisk & Coleman-Lochner, 2007). Aside from these labor problems there are serious allegations regarding violations regarding child labor laws.

There is the headline that grabbed the attention of many readers in 2005 when the news stated that “Wal-Mart Fined for Child Labor Violations” (Price, 2005). I must be clarified though that there are no children working inside any Wal-Mart store. The headline was the product of a journalist’s license to exaggerate and the term child, actually meant minors that are between the ages of 16 and 17. This is easy to understand considering that Wal-Mart on a daily quest to reduce prices. Employing a minor is one way of reducing the cost of operations.

While it is Wal-Mart’s strategy to employ minors it can be argued that the rights of these teenagers can be potentially violated because Wal-Mart can force them to accept below standard wages. In an in-house audit that was released a few years, the report warned Wal-Mart executives that there is evidence of extensive violations of child-labor laws and state regulations that require rest periods and time for meals (Greenhouse, 2004). This is a glaring problem because this time around it is not the critics or activists that are pointing an accusing finger at Wal-Mart but a third party hired by the organization to examine the way they do business.

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This means that for many years employees were forced to work without rest but they endured this kind of treatment. It is possible that they were really desperate to have a job and therefore it took some time for the issue to surface. There are more serious problems that minors working in Wal-Mart had to deal with on a daily basis. In one complaint it was discovered that 21 Wal-Mart employee that are under the age of 18 were tasked to perform hazardous jobs that include activities such as loading, operating scrap paper balers, and operating fork lifts (Price, 2005). In one interpretation of the Fair Labor Standards Act (FLSA), “A young person’s early work experience should be positive and educational and should never jeopardize their health and well-being” (Price, 2005). It can be argued that Wal-Mart does not force people to join their organization but on the other hand principles of corporate social responsibility dictate that Wal-Mart executives must be conscientious enough to find out what the law prohibits.

Customers

Aside from the number of stores nationwide and the revenue that it generated on a yearly basis, another notable feature of the company is its commitment to offer everyday low prices. According to one commentator, “None of the world’s major retailers could match Walt-Mart’s zeal and competence in ferreting out cost savings and finding new and better ways to operate cost-efficiently” (Thompson, Strickland, & Gamble, 2008). Discounted prices and everyday low prices is very helpful especially for customers who struggle to make ends meet. It is a tremendous boost to the finances of customers who wanted to increase their savings.

Aside from the savings that they can have from shopping at Wal-Mart the other benefit is having a store that offers a one-stop shopping experience. Customers surely appreciate the ability of Wal-Mart to provide a wide assortment of products. They will also benefit form a broad lineup of general merchandise as well as full selection of supermarket items so that the customer will find cheap products in one convenient location. Moreover, Wal-Mart offers merchandise that has name-brand as well as nationally advertised products. Aside from that Wal-Mart also has merchandise produced by some 20 private-label brands as well as licensed brands such as General Electric, Disney, McDonalds, and Better Homes and Gardens (Thompson, Strickland, & Gamble, 2008). Thus, even the most discriminating and yet price conscious customer can be satisfied while shopping at Wal-Mart.

Shareholders

For many years Wal-Mart shareholders benefited from the rapid rise of Wal-Mart from a fledgling store in the early 1970s to becoming the biggest retailer in the United States. It will not require a genius to figure out that shareholders that invested in the company in the very beginning and held on to their shares up to the 1990s were able to cash in and enjoyed the massive windfall from highly valued Wal-Mart stocks.

On the other hand shareholders in the 21st century is faced with numerous problems, especially when it comes to civil cases filed against Wal-Mart. They are not only affected by the negative image that resulted from such lawsuits but also the financial impact that is the direct result of a judge awarding legal damages to complainants. For instance in 2005 juries in Pennsylvania awarded Wal-Mart workers a total of $251 million in pay and damages as a result the shares of the company has fallen 11 percent (Fisk & Coleman-Lochner, 2007).

Suppliers

From the very beginning the company pursued a low-cost leadership strategy. This was achieved in two ways. First, Wal-Mart’s founder, Sam Walton, instilled the discipline of finding new ways to operate cost-efficiently. If the company spends less in its day-to-day business operations then it can afford to reduce prices. Wal-Mart executive and employees are looking for ways to save money and this starts at the suppliers all the way to logistics and distribution related activities. Wal-Mart expects every supplier to submit their lowest price for consideration. Once chosen the supplier is guaranteed a steady profit from its partnership with Wal-Mart and thus there is incentive to sell at reduced prices to the retail giants. On top of that, Wal-Mart takes an active role in suggesting ways to reduce the suppliers’ expense when it comes to manufacturing and delivery of goods. In other words, Wal-Mart is concerned about how products can be delivered from the factory to Wal-Mart’s distribution centre in a more cost-efficient manner. For instance, suppliers are not expected to wine and dine Wal-Mart executives and there is also no need to supply them with basketball tickets or other expensive gifts.

Another way to adhere to a best-cost strategy is to look for suppliers who are dominant in their category. So Wal-Mart can hit two birds with one stone. First, the company can bargain hard with suppliers to get their bottom prices while at the same time get items from reputable suppliers that in turn will create strong brand-name recognition. But there are times when this relationship can be difficult to maintain and can force suppliers to dissociate with Wal-Mart and find other ways to make money.

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Community Members

A company of its size will have difficulty in covering all the bases. In December 2005 Wal-Mart was investigated because it mishandled merchandise classified as hazardous waste. This means that Wal-Mart is efficient in many aspects of the operation but may have overlooked this part of the business operation. In the 21st century it is part of sound business practice to be mindful of the environment. Aside from that there are other problems that Wal-Mart needs to deal with.

It is one thing to sell products at rock-bottom prices, it is also another thing to monitor how these products are sold to the public. There are products that should not be sold just like other commodities where one can simply get them from store shelve. This is especially true when it comes to guns. Wal-Mart was forced to stop selling guns at 118 stores across California because they violated state laws with regards to gun sale. This is another example of how a big operation such as Wal-Mart can overlook some aspects of their business operations. They needed to improve their system when it comes to monitoring hazardous wastes as well as the sale of dangerous items such as handguns.

During the 2003-2005 period, Wal-Mart was criticized for its capacity to build superstores that were unsightly and destroyed the small merchant atmosphere in many locales (Thompson, Strickland, & Gamble, 2008). Aside from that the company also suffered from a negative publicity when the media coined the term “Wal-Mart effect” which means that local businesses who carried merchandise similar to Wal-Mart is expected to fail within a year or two of the company’s arrival in the area. This is the same reason why there is sometimes fierce local resistance to the entry of a new Wal-Mart store from local merchants as well as local residents.

Conclusion

It seems that only the customers benefited greatly from the presence of Wal-Mart stores. In the 21st century shareholders are not too happy with the current performance of the company. Suppliers are also finding it hard to maintain its association with Wal-Mart because of globalization and the difficulty to lower prices while faced with the problem of rising costs. Community members that live near a Wal-Mart store will also find so many problems associated with a giant retailer in the neighborhood.

References

Fisk, M. & L. Coleman-Lochner. (2007). Wal-Mart Shareholders, Rebuffed on Labor Issues,

Press for Vote. Bloomberg.com [online]. Web.

Greenhouse, Steven. (2004). In-House Audit Says Wal-Mart Violated Labor Laws. New York Times. [online] 2009. Web.

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Price, Alan. (2005). Wal-Mart Fined for Child Labor Violations. HRM Guide. [online] 2009. Web.

Thompson, A. Jr., A. Strickland III, & J. Gamble. (2008). Crafting and Executing Strategy: The Quest for Competitive Advantage, Concepts and Cases. New York: McGrawhill.

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