Contents:
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Preface
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1. Introduction: The
Tailor of Retail Market
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2.Wal-Mart in the US
Then and Now
Wal-Mart’s First Lady
Social Responsibility: The Hungry
Face of America
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3. Criticism
Job Destruction
Impact on Obesity
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4. Wal-Mart in Mexico &
China
Walmex Getting Spicy in Mexico
The Great Wal-Mart Facing China’s
Great Wall
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5. Conclusion
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References
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Preface
In a world lead by capitalism, many concepts
and beliefs have dissolved. On the other hand, new ideas have emerged. These
ideas paved the road to the construction of new empires. The tools were not
arms and weapons, yet based on needs and wants. Money talks and it seems to be
the only language spoken in this century. Therefore, Wal-Mart was chosen by our
group to shed light on the phenomenon of the retail market, which Wal-Mart has dominated
successfully in a considerably short time. For the reader’s interest, we found
after extensive research that it is important not to waste the pages with
stating facts and numbers which could be found anywhere. Therefore, this paper
goes more in depth with all the good and bad associated with the literature of
Wal-Mart. The main topics which are going to be discussed are the destruction
of jobs, impact on obesity and the influence on Mexico and China.
Wal-Mart
: The Tailor of Retail Market
Inch
by inch, Wal-Mart started to grow rapidly shaping the new market order. Cutting
spending and cutting other competitors out of the game, Wal-Mart was able to
fit itself neatly on the top of the retail business. Listed number one in sales
by Forbes magazines and 7th in market value (Forbes,
2013). This status was not earned by chance, yet by a long term vision inspired
by a dedicated entrepreneur called Sam Walton.
Wal-Mart in the
U.S.: Then and Now
The
year 1962 marked the birth of the 1st Wal-Mart store in Rogers, Arkansas.
Nurtured by Sam Walton’s vision, the
company’s profit in 1979 exceeded $ 1 billion in sales for the first time. Six
years later, the number of stores reached 882 with sales of $ 8.2 billion. Wal-Mart
needed just 10 more additional years to assure its presence in all 50 state and
that was in 1995. In 2002, a new historical
record marked by Wal-Mart when its single-day sales hit $1.43 billion, thanks
to Thanksgiving day (Wailgum, 2007). Nowadays,
Wal-Mart is an unique giant empire with stores all over the world and a
huge army of employees.
Wal-Mart’s First Lady
It
is probably the feminine side which Wal-Mart kept hiding for a long time. Sam
Walton’s masculine toughness was faced with pressure from feminine groups since
the board was dominated by males. As a result, in 1986 a job was offered to a
lady with huge ambitions, Hillary Clinton (Frank, 2006) She had become
Wal-Mart’s first woman as a member of the board of directors.
However,
the happy story does not end here. In fact, being a member of Wal-Mart board of
directors, between 1986-1992, could be
one of the reasons why Clinton failed
when she ran for president against Barak Obama in 2008. Endorsed by numerous
unions, Clinton campaign made sure that any suggestions of her rule in
Wal-Marts is removed. The reason is because around that time some Wal-Mart
officials lead efforts which seems nothing but anti-union. A Wal-Mart official
said it bluntly that he views labour unions as “ …blood sucking Parasites.” (Ross,
2008).
Despite
Wal-Mart’s statement that the official represents his own opinion, his words
increased suspicions surrounding Wal-Mart’s anti-union approach. The
accusations on Hillary Clinton’s silence regarding the topic forced former
President Bill Clinton to defend his wife’s position in Wal-Mart board. Current
President Barak Obama, who was a senator at that time, raised the subject in a
CNN debate. As a result, the former President commented that the state of
Arkansas, where the Clintons lived and governed, had a weak labour movement (Ross,
2008). This struggle and Wal-Mart’s involvement proves the strengths of
Wal-Mart. Exploitation of events and placing huge weight on the economic and
political arena could be in favor of Wal-Mart’s interests or it could sway to
the opposite direction.
Social
Responsibility: The Hungry Face of America
Behind the
glittering dreams of America, hide a starving nightmare. Hunger in the United
States is hitting a warning level. In 2010, 17.2 million households were food
insecure, the highest number ever recorded. (World Hunger, 2013). Being food
insecure means not knowing what or when the next meal is going to be. Therefore,
Wal-Mart took the initiative and started a campaign to fight hunger. More than
35 million meals are to be given to local food banks alongside with a $2
billion commitment ( Philanthropy News, 2013). In addition, Wal-Mart is dedicated to partner and support
hunger relief programs across the nation. The support varies from recognition,
awards and cash donations.
The
philanthropic efforts do not stop at this stage. Wal-Mart Foundation, the
charitable arm of Wal-Mart Inc., has always been involved whenever a disaster
strikes. lately, as a response to Oklahoma Tornado which tragically hit the
city of Moore in May 20, 2013, Wal-Mart donated $ 1 million to help with the
relief effort of the aftermath of the deadly catastrophe. Wal-Mart continued to
cooperate with the Salvation army and the Red Cross together with similar
agencies. Sam’s Club offered free power station and free Wi-Fi. Temporarily,
Sam’s Club announced it is wavering membership requirement in order to help and
focus the efforts to those in need ( Wal-Mart Foundation, 2013).
Criticism: Job
Destruction
One
would assume that Wal-Mart would bring new jobs to any area it starts to
operate in. However, the exact opposite might be true. In a 2008 study, it has
been estimated that every new Wal-Mart store resulted in the reduction of
approximately 150 jobs since competitors could not face the challenges Wal-Mart
puts on them . Since Wal-Mart owns 25% share of grocery market, its influence
is enormous (Clawson, 2013). These
statistics raised concerns especially to small businesses. However, some argue
that one should not keep moaning over the opportunities offered by free market.
In an article published in early 2013 in Forbes, Tim Worstall notes:
“That is indeed the point of this entire capitalism/free
markets thing. Whatever the specific task is we want to continually find ways
of performing that task while using less human labour.” (Worstall, 2013)
Worstall
continues the argument by comparing how food business used to operate in the
past and nowadays. In the past, he states, the majority of the society had to
dedicate effort and time in order to provide food. Yet after advances in
farming facilities, roughly 1.5% only of the population need to farm and
provide food for the rest. In his point of view, this gave a chance for the
rest to innovate in other fields, contribute to the society and get wealthier.
He then compares Wal-Mart to Costco. According to Worstall, Costco causes more
job destruction than Wal-Mart, yet the attack on Wal-Mart seems harsher than
any other store.
Impact
on Obesity
Obesity in the
United States has become a serious dilemma. In 2008, more than one third of
U.S. adults were obese. A group of researchers have found a relationship
between increase in income and obesity (Ogden et al, 2010). In addition, Professor Charles Courtemanche conducted a
study in 2010 suggesting a link between increase in obesity and the presence of
Wal-Mart superstores. In the 60 pages study, Courtemanche claims that Wal-Mart
products are responsible for inactive life style which contribute to the rising
of obesity. The professor links the 10.5% rise in obesity since the 1980s to
the entry of Wal-Mart superstores (p.
5). The graph on the right, from
Courtemanche research, follows by years the number of
superstores
and the rate of obesity. The assumption was that cheap food and nonfood items,
which contribute to a sedentary life style, offered by superstore are behind
the worrying relationship between Wal-Mart and obesity (Courtemanche, 2010).
In
early 2011 and in the presence of First Lady Michelle Obama, Wal-Mart expressed
in a press conference its commitment to reduce sodium, sugar and remove trans-fats
from its products by 2015. Furthermore,
Mr. Leslie Dach, Wal-Mart’s executive vice president for corporate
affairs, promised to lower prices of healthy foods, like fruits, in order to
provide better food for more people (Stolberg, 2011). These strategies are
certainly going to enhance the image of Wal-Mart.
Walmex Getting Spicy in México
It may not be a
coincidence that the first international store of Wal-Mart opened in the neighboring country
México in 1991. For México is a luscious part of the new world. Just like
Columbus viewed America as a source of gold and spice, so did Wal-Mart. Walmex
is how they like to be called in México and Central America, and it is their
stock ticker symbol as well, with 3,041 operating units in that region. The
relationship between Wal-Mart and México dates back to 1977, when Wal-Mart’s
stock was first listed in the Mexican Stock Exchange ( Walmex Fact Sheet,
2013). Nowadays, Wal-Mart is the largest privet employer in México with
approximately 240,000 employees. Around 20% of Wal-Mart’s stores around the
world are situated in México (Godoy, 2013).
The
numbers and figures show the elevating success of Wal-Mart de México. Their
continuous growth is remarkable. In 2012, their net income was estimated by
4.94 billion pesos ($363 million ) (Reoder, 2012). The first-quarter profit
of 2013 climbed to 5.5% compared to 2012 (Reuters, 2013) .
These figures, however, are hiding some spicy scandals as Wal-Mart de México
was planning to further expand its presence.
In
late 2012, The New York Times published an article to which Walmex replied and
released a statement commenting on the article. The article claims that
Wal-Mart de México had bribed some officials in 2003 in order to ensure a
unique location in México very close to the ancient pyramids (Barstow, 2012).
The difficulty, as the article argues, emerged when new leaders were elected in
the town where the pyramids rest. The leaders had different vision regarding
the preservation of this archeological treasure. They wanted to reduce growth
around the pyramids which are already packed. Therefore, the leaders agreed on
a law in 2003 to forbid commercial expansions in the field. Yet Wal-Mart had
used a trick, according to the article, by bribing an official. In order for
the law to take effect, zoning map must be released in a government newspaper.
The bribed official altered the map before it arrived to the newspaper, paving
the road to Wal-Mart de México to build its historic store just a mile from an
ancient historical site.
The
outcome of this action may cost more than what Wal-Mart’s lawyers would expect. If punish for breaking FCPA ( Foreign
Corrupt Practices Acts), hundreds of millions of dollars should be considered
in fines. These expectations are based on a 2008 incident with Siemens when
they had to pay around $1,600 million. The expected costs for the ongoing case
is estimated to go over $157 million (Fox News Latino, 2013). These figures
could hit Wal-Mart’s profits yet the severity may or may not be significant.
What is more significant, however, is the unions movements not only in México
but around the world as well. The leader of the Federation of Trade Unions, who
represents 20 million employees around the world, expressed concerns on
Wal-Mart practices. Trade Unions in Canada, the U.S. and México have united to
protest and take legal actions against Wal-Mart. They not only ask for penalty,
but also to prohibit Wal-Mart de México from further expansions (Godoy, 2013).
These events could result in a severe damage to Wal-Mart’s reputation.
The Great Wal-Mart Facing China’s Great Wall
The Great Wall
of China had stood for centuries to protect its borders and to regulate goods
transported into China. Yet The Great Wall seems to be weak in front of the
invasion of Wal-Mart. The year 1996 witnessed the first Supercentre and Sam’s
Club in China (Wal-Mart China Fact Sheet). In the most populous nation in the world,
Wal-Mart could not miss this opportunity of expanding their empire in this country.
The image below shows the different locations and provinces where Wal-Mart
stores operate.
A Map of Wal-Mart stores’
locations in China (Schell, 2011)
In
fact, Wal-Mart China and its associates are concerned about their social
responsibility and had dedicated a significant amount of time and money to
charity. More than 200,000 hours as stated in their website and over 70 million
Yuan ($11.3 million) devoted to local charities (Wal-Mart China Fact Sheet,
2013). The influence of Wal-Mart China goes beyond solely making profit and
spreading some charities here and there.
In
the article “How Wal-Mart is Changing China”, the author Orville Schell (2011)
covers a number of ways by which Wal-Mart had influenced the social and
environmental behaviors of Chinese citizens. Chinese people have become more aware
of issues like pollution, contaminated foods and government corruption.
For
instance, around 300,000 Chinese milk consumers from local supermarkets were
poisoned and 6 children died in 2008 (Schell, 2011) [p. 2, para 16]. Investigations proved
that the consumed milk contained melamine, a coal-based chemical. This incident
had a huge impact on the diary industry and government regulation as well which
resulted in the Food Safety Law in 2009. Another even more dramatic episode of
poisoning occurred in the spring of 2011. Hundreds were taken to hospital in 16
provinces. The poisoning was a result of eating pork contaminated with toxic
additives. The additives were supposed to reduce fat in pork meat. The sequence
of poisonous foods, however, did not stop. After discovering approximately 40
tons of adulterated noodles, the Premier
of the State Council stated that the
“dishonesty and moral degradation” had
become a severe issue (Schell, 2011) [p. 2, para 16].
These
incidents, Schell argues, helped the reputation of Wal-Mart. As trust in local
supermarkets dwindled, Wal-Mart was
viewed as a trustworthy global brand. The health concerns by both individuals
and the government provided popularity and support to Wal-Mart stores in China.
Although some prices of essential foods like meat, eggs and oil are higher than
other stores, many Chinese costumers were willing to pay for the sake of their
own health and their families. In addition, green and organic food are gaining
tremendous popularity in China. “ If my salary was high enough, I would only
eat organic”, one young Chinese women noted when asked about organic products
of Wal-Mart (Schell, 2011). Another
women says that she “trust Wal-Mart to buy the best” (Schell, 2011) [p. 2, para
19-20].
Nevertheless,
Wal-Mart was not fully protected against incidents of poisoning. Therefore,
recently, just weeks ago, Wal-Mart had pledged to invest 100 million Yuan
($16.3 million ) into China food safety in 3 years starting from 2013 (Orland,
2013). This move was to boost its reputation after being hit by several
incidents and some of their workers in one province were arrested in 2011. The
arrest was due to allegation of labeling normal pork as organic. A further occasion
occurred after customers bought oil and squid with dangerous amounts of
chemicals (Orland, 2013). Not only will this initiative enhance the image of
Wal-Mart, but also the overall standards of food and consequently people’s
health and comfort. The aim of this investment is to develop food inspection and
to increase the number of testing centers (Jones, 2013).
Regarding
the environment, China is considered one of the major pollutant in the world.
The pollution is so cruel to the extent that some Japanese islands are believed
to be seriously ruined because, according to some specialists, of the air
pollution coming from their Chinese neighbor (Fackler, 2013). Therefore,
leaders became aware of that and Wal-Mart had utilized the issue smartly in its
favor and was ahead of other companies. One official commented on Wal-Mart
efforts to sustain the environment by saying that “ Wal-Mart is one of the
environmentally active and vocal companies”
(Schell, 2011) [p. 3, para
21]. Wal-Mart had developed a number of programs to lower energy, water and
emission. By pressuring their suppliers, Wal-Mart was able to modify the ways
and methods of production in order to maintain a green environment. For
example, one of Wal-Mart’s towels supplier called Loftex was presented as a
successful model of saving energy and cutting cost. In the Sustainability
Summit held in China, 2008, Wal-Mart offered the attendants to visit the towel
factory. After the visit, officials were amazed by the level of advanced
facilities which reflect an environmentally aware management (Schell, 2011) [ p. 3, para 8-12].
Conclusion
In
conclusion, It is inevitable that Wal-Mart had shaped the market and influenced
it in many ways. Its presence in all 50 states had a huge impact. Its
involvement in politics may be questionable by some opponents. The impact goes
beyond labour rights and what some view Wal-Mart practices as a war against
unions. Wal-Mart influenced the behavior of ordinary citizens that some scholars
linked obesity to superstores. Outside the borders of the U. S., Wal-Mart kept expanding around the
world namely in México and China. In México, it proudly expresses its contribution
to the Mexican economy. The giant retailer, however, is now facing a serious
legal issue inside México. In China, it had altered the way Chinese think and
work. Nevertheless, despite the controversy surrounding Wal-Mart, one should
not ignore their humanistic contribution to charitable work.
References:
