Valerie Dupont

University of Maryland University College

Bachelor of Science in Business Administration

BMGT-495

Lucia Worthington

Final Case Study Assignment - Wal-Mart: The Power of a Giant

Word Count: 5,539

July 27, 2009

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Table of Contents
Section 1 : Analysis of Wal-Mart’s external environment...........................................................................3
Introduction................................................................................................................................................... 3
Company overview................................................................................................................................... 3
Wal-Mart’s external environment..............................................................................................................4
Economic ............................................................................................................................................. 4
Political................................................................................................................................................. 4
Legal..................................................................................................................................................... 4
Social.................................................................................................................................................... 5
Demographics...................................................................................................................................... 6
Technology........................................................................................................................................... 6
EFE Matrix................................................................................................................................................ 8

Section 2 : A competitor analysis................................................................................................................10

Competitive analysis................................................................................................................................... 10
1. Rivalry among competing firms..........................................................................................................10
2. Potential entry of new competitors.....................................................................................................11
3. Bargaining power of suppliers............................................................................................................11
4. Bargaining power of consumers.........................................................................................................12
5. Potential development of substitutes..................................................................................................12
Competitive profile Matrix........................................................................................................................... 14

Section 3 : Strategy analysis, recommendations, and implementation..................................................16

Wal-Mart’s current strategies......................................................................................................................16
General................................................................................................................................................... 16
Cost strategy.......................................................................................................................................... 17
Differentiation strategy........................................................................................................................... 17
Strategy recommendation and timeline..................................................................................................18
Expansion timeline table........................................................................................................................ 19

Section 4: Company culture and ethics......................................................................................................21

1. The current situation........................................................................................................................... 21
2. An increasing number of ethical issues..............................................................................................23
3. Strategies to improve ethics and company culture.............................................................................25

Conclusion..................................................................................................................................................... 28
Reference list................................................................................................................................................. 29

Section 1: Perform an analysis of the external environment of Wal-Mart.

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Introduction: The purpose of this case study is to perform an external audit of

America’s giant retailer: Wal-Mart. The external factors that affect Wal-Mart such

as technology and social influences will be analyzed and will be set against the

retailer’s current strategies. A discussion of Wal-Mart’s future possibilities will

also take place. Next, the giant’s current and future competition will be studied.

Then, the third section will analyze how effective Wal-Mart’s strategies have

been and recommendations will be made on what future strategies the giant

retailer should adopt and how these strategies will improve Wal-Mart’s

competitive advantage. Finally, the giant’s ethics and culture will be analyzed to

respond to why we observe such an increasing number of ethical complaints

from different stakeholders.

Company Overview: “Like any retailer, Walton was always looking for deals

from suppliers. Typically, though, a retailer who managed to get a bargain from a

wholesaler would leave his store prices unchanged and pocket the extra money.

Walton, by contrast, realized he could do better by passing on the savings to his

customers and earning his profits through volume” (Frank, 2006). It is with this

innovative idea that Sam Walton founded Wal-Mart in 1962 in Arkansas. Wal-

Mart Stores, Inc was first incorporated in 1969, and listed on the New York Stock

Exchange in 1972 (Wal-Mart Stores, 2009). Wal-Mart Stores, Inc is directed by a

thirteen-member Board of Directors which is elected by the shareholders. Mike

Duke is the President and Chief Executive Officer of Wal-Mart Stores, Inc and H.

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Lee Scott is the Chairman of the Board of Directors. Wal-Mart’s success is due to

three factors: Sam Walton’s revolutionary view, effective use of technology, and

employees’ motivation. Over the years, Wal-Mart has become the face of

America’s retail sector and has transformed its mission statement into a national

slogan: “help people save money so they can live better” (Wal-Mart Stores,

2009). Wal-Mart’s mission statement reveals the company’s overall strategy

which is to have the lowest prices possible and to make customers come first.

Information about Wal-Mart can be found at: http://walmartstores.com/

Wal-Mart’s external environment:

 Economic: Despite the global crisis and the extreme recession that the

U.S. endured, Wal-Mart’s sales still grew by 7.2% in 2009. This is twice as

much as comparable sales increase of competitors (Wal-Mart Stores,

2009).

 Political: Wal-Mart never used to be involved into politics until

management realized how much influence Washington had on the

retailer’s operations. Labor laws, tariffs, environmental policies can be

very costly so Wal-Mart created its political action committee in 1998 and

started its political career. Donations were multiplied by 10 between 1998

and 2004 and all tended to go to Republican candidates (Smith, 2004).

 Legal: Cases that involve Wal-Mart concerning employee discrimination,

low benefits, working conditions or unions are numerous. Wal-Mart did not

hesitate to open its wallet in order to settle cases concerning

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 discrimination against the disabled. Wal-Mart also paid in cases

concerning poor working conditions. Other cases concerning

discrimination against female employees and sweatshop workers are still

pending. Wal-Mart has been highly criticized concerning the low benefits it

provides to its employees. Despite an effort to increase benefits, Wal-Mart

still puts many families into precarious situations by excluding part-time

employees from the health care program and by underinsuring the others

(Frank, 2006).

 Social: Wal-Mart always targeted low-income customers and it did so by

building warehouse-like stores with little design and décor accessories

(Ledesma, 2008). However, for many, Wal-Mart hurt people more than it

helped them. This is because of the closing of small businesses, mostly

other grocery chains and smaller discount stores, due to the opening of a

Wal-Mart Supercenter. Many of the smaller competing businesses laid

claim that they had to reduce wages and cut pricing when Wal-Mart

opened a store. This caused costs to go above revenue leading to the

closing of the business. There is also the issue with the influence that

Wal-Mart has over its suppliers. Many suppliers of Wal-Mart have to

curtail their inventory processes to Wal-Mart’s standards in order to keep

supplying to Wal-Mart. This has caused suppliers to outsource jobs to

foreign countries, taking away employment in the Unites States. These

outsourcings have also piqued different organizations to believe that Wal-

Mart is hurting the local economies more than helping them (Frank, 2006).

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  Demographics: Wal-Mart created 63,000 jobs worldwide in 2008 including

33,000 in the U.S. (Wal-Mart Stores, 2009). The giant retailer is also the

number one private employer in the country with over 1.3 million

employees that it calls its “associates” (Ledesma, 2008).

 Technology: Sam Walton “exploited the magic of the information hidden in

the barcode” by making it a retail standard (Smith, 2004), and boosted

management trends by computerizing its supply chains. More recently,

Wal-Mart and its suppliers adopted the RFID (radio frequency

identification) technology to better track merchandise. RFID tags are put

on pallets and contain a lot more information than regular barcodes.

According to a study from the University of Arkansas, out-of-stock events

were reduced by 16% (Wal-Mart Stores, 2009). Wal-Mart’s online

presence is not as developed as it could be and the retailer is struggling to

keep up with competitors such as Amazon or Target (Wailgum, 2007).

The external factor that will have the most influence on Wal-Mart’s future

is technology. Wal-Mart has built its edge based on the barcode technology, but

now that competition has caught up, the giant retailer needs to maintain its

advantage. As Thomas Wailgum explains, Wal-Mart used technology to improve

its supply chain (2007). Now, it is time for the retailer to use IT to focus on

customers and use the data it collects in a constructive way. Wal-Mart’s legal

issues will continue to darken the retailer’s image in the future so the company

should focus on improving its own code of conduct. Globalization is also a major

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factor in Wal-Mart’s future. The retailer has not been as successful as it could be

internationally with failures in Germany and South Korea. Thus, most

opportunities remain abroad so the giant retailer should focus on adapting to

other cultures to be successful.

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EFE Matrix:

Key External Factors Weight Rating Weighted

Score

Opportunities

The internet market is growing. Online market only 0.15 2 0.30

represents 7% of retail market so there is room to
grow (Saxena, 2008).
Foreign markets are available. Europe and Asia are 0.13 1 0.13
almost untouched.
Aging population is growing (pharmacy market). 0.14 3 0.42
People over 65 years old will represent 20 % of the
Population in 2030 (Aging Statistics, 2009).
People are becoming more “green”. 0.08 3 0.24

Retail sales should increase. Allbusiness.com 0.07 4 0.28

predicts that Wal-Mart will reach $500 billion
in sales by 2010.
Threats

Discrimination cases give a bad image to the 0.06 3 0.18

retailer. According to Frank (2006), “The company
keeps its payroll costs down by paying women less
than their male counterparts for performing the
same work”.
Global crisis could take its toll on U.S. retail sales. 0.09 3 0.27

Intense competition from retailers such as Target or 0.11 3 0.33

Kmart that are gaining market share.
Opposition against Wal-Mart stores. Over the years, 0.06 3 0.18
a strong anti Wal-Mart culture has developed and
could limit the retailer’s expansion.
Rising unemployment leading to less disposable 0.11 4 0.44
income. The unemployment rate jumped by 4.6
points since 2007 reaching 9.5% in June 2009
(bls.gov, 2009).
Total 1.00 2.77

Wal-Mart’s score of 2.77 is above average which shows the company is

doing rather well, but there is still room for improvement to reach the 4.0. Wal-

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Mart has taken advantage of the aging population by developing its pharmacy

branch and generic medicine. The company also is putting a lot of effort in

becoming “greener” and the retailer has done a great job at attracting customers

to its stores with good advertising campaigns, good product mixes, and low

prices. However, the two biggest opportunities which are the internet and foreign

markets are still not being fully explored. Wal-Mart has improved its website and

its internet presence, but it is still behind its competitors. Also, not having stores

in Europe where the retail market is far from being saturated is a big mistake and

the company definitely needs to come up with a plan of attack for this.

Wal-Mart has handled its threats rather well over the years. Recently, it

released a letter promising to improve employees’ benefits in terms of health

coverage to embrace Barack Obama’s plan to get coverage to all employees.

The retailer went through the past tough year by keeping its prices low despite

rising fuel costs and increased its sales by 7.2% in 2009 which is above the

industry’s average (Wal-Mart Stores, 2009). Wal-Mart is facing competition by

keeping its profit margins lower and by offering more variety to its customers. For

example, the retailer expanded its clothing line as well as its “great value” line of

products to compete with brands such as Kraft. Finally, Wal-Mart has become

more involved in communities to respond to some negative feedback and started

charity and scholarship programs for example. It seems that Wal-Mart is doing a

great job at responding to threats and this shows that the company is very

responsive to changes. Now, Wal-Mart has to fully embrace its two biggest

opportunities to perhaps become the next world’s giant.

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Section 2: A Competitor Analysis

Wal-Mart is facing competition from many other discount stores in the U.S. and

worldwide. Competition in the retail industry is intense so growth is limited.

Moreover, profit margins are already so slim that it is difficult for discount stores

to increase their earnings. Over the years, Wal-Mart has managed to become

and remain number one by keeping its prices at the lowest, providing one-stop

shopping and by keeping its stores open 24/7. Wal-Mart has succeeded in

building strong competitive advantages, but let’s see if they are sustainable by

doing a competitive analysis based on Porter’s Five-Forces Model.

Competitive Analysis:

1. Rivalry among competing firms: Wal-Mart’s main competitors are Target,

Kmart, Costco, and Carrefour. As I said, competition is fierce in the

discount industry and the median profit margin is only 3.03% (Hoover’s

Inc, 2009). As of July 21, 2009, Wal-Mart’s net profit margin was 3.31%

which is above Target’s (3.28%), Costco’s (1.54%), and Carrefour’s

(1.74%). Wal-Mart’s higher profit margin indicates that the company is

more profitable and keeps more dollars per sale as earnings than its

competitors. Although Wal-Mart competes mainly in the discount, variety

stores industry, it has competitors in many other industries due to the

extent of its product coverage. It competes in subdivisions of the retail

industry such as the pharmacy, food, clothing, and department sectors.

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 Despite strong competition, Wal-Mart is number one with sales of over

$400 billion (Hoover’s Inc, 2009).

2. Potential entry of new competitors: At first glance, entering the retail

market is relatively easy. The initial investment is not too high and

operating a retail store is something that can be learned rather easily.

When looking around a neighborhood, most small retail stores are

proprietorships. However, when Wal-Mart opens a store, many smaller

retailers cannot compete with the giant’s low prices and have to close

down. In other words, small retailers do not stand a chance unless they

clearly differentiate their products and services from Wal-Mart’s.

3. Bargaining power of suppliers: Wal-Mart is very powerful over its

suppliers. Wal-Mart knows that the suppliers rely on its orders and won’t

have any other choice but accept the giant’s requests. Wal-Mart’s

inventory system is the just-in-time which means that orders are made

only when merchandise is needed in order to lower stock. Suppliers have

to be ready at all times and cannot plan any shipment ahead. Reduced

inventory means fewer warehouses which leaves more floor space for

sales. Wal-Mart is also very powerful from a “labor” stand point because

most of its positions do not require prior knowledge or experience.

Consequently, employees have to accept the retailer’s low wages and

cannot seriously think about unions when they are so easily replaceable

(Hummer, 2006).

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4. Bargaining power of consumers: Products offered by Wal-Mart are

standard and undifferentiated so the bargaining power of consumers is

high. Wal-Mart has succeeded in gaining consumers’ trust by consistently

offering low prices. However, with the internet, consumers have easier

access to price and product comparison tools so consumers are becoming

more powerful.

5. Potential development of substitutes: Other discount stores provide easily

accessible substitutes. The increase in online shopping also broadened

consumers’ shopping range. The strong presence of substitutes reduces

the price which is ultimately good for consumers, but also bad for

companies that have to reduce their profit margins more and more

because of intense competition.

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 Wal-Mart operates in an industry that is tight and that already shows signs of

saturation due to the number of competitors. Wal-Mart has managed to remain

profitable by lowering its inventory costs and by having an extremely effective

supply chain. Wal-Mart is so big that its closest competitors (Target, Costco) are

not really even close. Wal-Mart has developed strong relationships with suppliers

over the years and has build trust with its customers. Domestically, the giant’s

power seems to be unbreakable. The future competition seems to be abroad with

Carrefour and online with Amazon where Wal-Mart still has to impose its

presence.

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Competitive Profile Matrix:

WAL-MART TARGET KMART

Critical Success Weight Rating Score Rating Score Rating Score
Factors
Price 0.20 4 0.80 2 0.40 3 0.60
Market Share 0.20 4 0.80 3 0.60 2 0.40
Product Quality 0.15 2 0.30 4 0.45 2 0.30
Breadth of product 0.05 4 0.20 3 0.15 3 0.15
line
Advertising 0.15 3 0.45 4 0.60 3 0.45
Location 0.05 4 0.20 3 0.15 2 0.10
Financial Position 0.10 4 0.40 2 0.20 1 0.10
Global Expansion 0.10 2 0.20 1 0.10 1 0.10
Total 1.00 3.35 2.65 2.20

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 Wal-Mart is superior to its two main competitors in everything except in

product quality and advertising. Wal-Mart’s products are considered lower in

quality compared to Target’s and this is a big advantage. Target can take

advantage of this difference in quality to attract different customers. Quality is a

good tool to differentiate products and Target should definitely use it in its

advertising. Wal-Mart could try to get higher quality products, but prices would

probably rise so this is not really an alternative. However, Wal-Mart could

intensify advertising considering that it makes over $400 billion compared to $65

billion for Target (Hoover’s Inc, 2009). Overall Wal-Mart beats competition

because it has lower prices, more market share, a wider product line, more

stores in better locations, more money, and a stronger international presence.

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Section 3: Strategy Analysis, Recommendations, and Implementation

This last part aims at analyzing Wal-Mart’s current strategies and how

they have helped the company improve its competitive advantages as well as

weakening competitors. Based on the results that current strategies have

yielded, recommendations will be made on what direction the giant retailer

should follow next and how it will benefit the company.

Wal-Mart’s Current Strategies:

General:

Wal-Mart’s strategy when it started its expansion a few decades ago was

to provide low prices, and a one stop-shopping experience. Sam Walton wanted

to attract selective customers with extremely low food prices and then tempt

them to buy non-food items with more expensive price tags. This is the magic of

“crossover” sales (Gogoi, 2008). This strategy seems to have worked since “the

average check-out bill at Wal-Mart has gone up” (Gogoi, 2008). Wal-Mart was

the first retailer to adapt the crossover sales strategy and attracted many

customers who realized how convenient shopping at one place was. Moreover,

many Wal-Mart stores were located in the country where people had to travel

long distances. Today, this strategy still works as people have less time for

shopping and as gas prices keep rising. The crossover sales strategy helped

Wal-Mart impose its presence, but today, it has become a standard for all

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discount and even grocery stores so this strategy is not enough anymore for Wal-

Mart to maintain a competitive advantage.

Cost strategy:

Wal-Mart has succeeded in the discount industry because it was able to

keep its costs low. The firm’s infrastructure reveals how Wal-Mart keeps its costs

low. There are not too many managerial layers and planning practices are kept

simple (Ledesma, 2008). Wages are kept low and training programs were

carefully designed to improve workers’ productivity and effectiveness.

Investments in technologies such as the barcode or RFID have kept the supply

chain management’s costs low and have led to economies of scale. Keeping

costs low is more than essential in the discount industry. Wal-Mart has managed

to keep away competitors by lowering its costs and passing on the savings to its

customers. Wal-Mart’s cost strategy has given the company a great advantage.

Differentiation Strategy:

Wal-Mart’s main differentiation tool is its low prices, but over the years, the

company mainly took advantage of technology to stand out. Wal-Mart integrated

information systems to better understand its customers’ tastes and thus improve

the overall shopping experience. The retailer’s investment in technology and

research helped develop strategies (barcode and supply chain management) that

had been unexplored before. Wal-Mart also developed private labels such as

Great Value or Canopy that allow the giant to have even lower prices

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(Datamonitor, 2009). The giant retailer also launched programs such as “Store of

the Community” to transform its stores in order to better suit a community

(Datamonitor, 2009). More recently, Wal-Mart reconciled with its pioneer views

and announced a future labeling program that would indicate a product’s “green”

level (Bustillo, 2009). Wal-Mart was always the first to try new things and that’s

how it differentiates its company from others. However, competitors always

eventually catch up, so Wal-Mart has to stay alert to not lose its edge.

Strategy Recommendation and Time Line:

Wal-Mart is doing very well. The company is very responsive to threats

while being innovative and aggressive. As the EFE matrix reveals, Wal-Mart

could improve online and internationally. Since the company has made great

improvements online in the past few years, my main recommendation would be

to turn towards untouched markets before it is too late. Wal-Mart is already

ahead of its U.S. competitors in terms of global expansion, but the U.S. market

will reach saturation sooner than later so to increase earnings, the company

needs to expand to new markets. Wal-Mart has done very well in Central and

South America, but not so well in Asia and Europe. Failures were due to poor

culture adaptation from the giant retailer. The American formula didn’t work

abroad so Wal-Mart needs to spend time analyzing markets and consumers

before making a move. According to Mr. Schultz, Germans were turned off by

employees’ greetings at the door and baggers (2006). Also, the discount grocery

market is already saturated in Germany with chains such as Lidl or Aldi.

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However, the superstore concept does not exist yet so Wal-Mart might want to

focus on products other than food. Also, Wal-Mart was not the only chain to fail

so the company might to consider another country to start with in Europe. Wal-

Mart will most likely have to abandon its global strategy and adopt a more multi-

domestic one if it wants to penetrate European markets. When I do not have a

specific recommendation on where Wal-Mart should expand because it requires

extensive analysis, I can draw a time line of what steps Wal-Mart should take in

the next three years to make its expansion successful.

Expansion timeline:

Year 1 Year 2 Year 3

Analyze foreign markets. Send

representatives that
will analyze consumers’ habits, market
potential, laws, and cultural differences.
Based on the gathered information, pick a country and decide of penetration
method (acquisition, joint venture, etc).
Design a plan. Product mix, prices, suppliers,
size of store, company structure, advertising
etc
Hire local labor force and launch operations.

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 Being number one at home is great, but most consumers live outside of

the U.S., so expanding to those markets is a must for companies that want to

keep growing. By having a foot in North America, South/Central America, Asia,

and Europe, Wal-Mart will become the true world’s largest retailer and will

experience great growth potential. The biggest threat to the discount industry is

competition so by reaching out to foreign markets, Wal-Mart will put its U.S.

competitors behind for good. No other retailer has Wal-Mart’s potential in terms

of growth, so as a long-time pioneer, the company ought to keep expanding

internationally. Moreover, if Wal-Mart’s plans go well abroad, its U.S. operations

will only be positively affected by them. Wal-Mart’s reputation and image will

grow even stronger; reinforcing the giant’s power over its suppliers and its

customers’ loyalty.

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Section 4: Company culture and ethics:

1.The current situation:

Wal-Mart is a very controversial company and seems to bring the best as

well as the worst to people. Wal-Mart’s primary stakeholders are the consumers

and the shareholders. Consumers enjoy the savings, but are concerned with

various issues surrounding the retail giant. Shareholders are happy with the

chain that has been growing constantly and that has improved shareholder value

over the years. The secondary stakeholders (employees, suppliers, communities)

are not as happy with Wal-Mart and face many disputes with the giant retailer.

Wal-Mart has always put customers first in its growth strategy. When

companies such as Starbucks or Wegmans Food Markets put their employees

first, Wal-Mart has adopted a totally different strategy giving more importance to

consumers and shareholders than to employees. This strategy can seem

surprising because for many, employees make up a company and happy

employees serve customers better. However, the powerful Wal-Mart has

managed to use its employees to its own interest. In many towns, Wal-Mart has

become the main employer which considerably reduces employees’ bargaining

power.

Cases that involve Wal-Mart concerning employee discrimination, low

benefits, working conditions or unions are numerous. Wal-Mart did not hesitate to

open its wallet in order to settle cases concerning discrimination against the

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disabled. Wal-Mart also paid in cases concerning poor working conditions. Other

cases concerning discrimination against female employees and sweatshop

workers are still pending. Wal-Mart has been highly criticized concerning the low

benefits it provides to its employees. Despite an effort to increase benefits, Wal-

Mart still puts many families into precarious situations by excluding part-time

employees from the health care program and by underinsuring the others.

Wal-Mart also puts a lot of pressure on its suppliers. As for employees,

many suppliers do most of their business with the giant retailer and as a result,

they have no other choice but to accept Wal-Mart’s conditions. Wal-Mart has

created a very effective computerized supply chain management system. This

system allows Wal-Mart to reduce inventory and get the merchandise when it is

needed only. Of course, suppliers have had to bear the cost of this system if they

wanted to stay in Wal-Mart’s books. Wal-Mart also expects that its suppliers

lower their prices every year and indirectly forces them to outsource their

operations. Suppliers really seem to quietly suffer from Wal-Mart’s methods and

most of them have no other choice.

Wal-Mart has also made environmentalists mad by neglecting the law, but

the giant retailer has positively responded to critics and has made great

improvements. Wal-Mart has opened two environmentally friendly stores that

serve as laboratories to test new technologies. Wal-Mart has partnered with the

22
National Fish and Wildlife Foundation to preserve the wildlife habitat. Finally, the

retailer has implemented energy saving and recycling measures.

All these negative disputes involving Wal-Mart and its various

stakeholders have negatively impacted the giant retailer’s image among

customers. However, through communication campaigns, and with the Hurricane

Katrina’s episode, Wal-Mart more or less restored its image. Wal-Mart has

managed to fulfill its main goal which is to save money to people, but to the

expense of many things.

2. An increasing number of ethical issues.

I think that Wal-Mart has had a recent number of ethical issues that have

been in the news almost constantly due to a number of problems. In the scheme

of things, these issues have varnished the reputation of the organization as a

whole. Situations stemming from the corporation stating that they believe

everyone should have access to health care, but not taking the necessary steps

to ensure that their own employees have healthcare (through their organization),

contradicts their statement. There is also the issue with Wal-Mart declaring how

diversified their corporation is with 67% being women, yet only 10% of that

number held management position totally contradicts what Wal-Mart claims that

they stand for. When making public statements such as these, Wal-Mart needed

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to ensure that the policy and procedure being taken throughout the company

were indeed lining up with what was being portrayed to the public.

Another issue that is prevalent to Wal-Mart being cast in the media is the

closing of small businesses, mostly other grocery chains and smaller discount

stores, due to the opening of a Wal-Mart Supercenter. Many of the smaller

competing businesses laid claim that they had to reduce wages and cut pricing

when Wal-Mart opened a store. This cause cost to go above revenue leading to

the closing of the business. There is also the issue with the influence that Wal-

Mart has over its suppliers. Many suppliers of Wal-Mart have to curtail their

inventory processes to Wal-Mart’s standards in order to keep supplying to Wal-

Mart. This has caused suppliers to outsource jobs to foreign countries, taking

away employment in the Unites States. Because of the outsourcing and the lack

of employment various groups and agencies have gone over Wal-Mart

operations with a fine tooth comb, discovering many areas that have been

violated throughout the years the business has been a going concern. These

outsourcings have also piqued different organizations to believe that Wal-Mart is

hurting the local economies more than helping them. This led to lawsuits being

brought against the retail giant in rapid consecutive cases.

Through Wal-Mart’s unethical decisions regarding their employees’

benefits, working conditions, the outsourcing of jobs to foreign countries, and the

questionable ways Wal-Mart handled the environment has caused stakeholders

24
and the world to view Wal-Mart in a negative way. Through the many claims of

discrimination against the disabled and women, the covering up of underpaying,

and bullying of employees speaking out, Wal-Mart has made themselves the

center of ridicule and an organization of questionable ethics. The fact that Wal-

Mart has been found guilty or has settled on some of the accusations against

them throws them further into the line of fire for ethical scrutiny and the chance of

misconduct. The more cases that Wal-Mart has been found in violation of rights

or has been fined for, the more the media will continue to showcase the

corporation as unethical. As the Wal-Mart corporation continues to grow it will

remain under the microscope and a constant part of business news today.

3. Strategies to improve ethics and company culture:

Wal-Mart has a long road to go in order to improve its ethical culture. The

retail giant has had numerous class action law suits and was quick to pay in

many cases. That sends a message to all of its stakeholders that the allegations

are true. Wal-Mart is so focused on its EDLP that it forgets the little guy. Oh yes

it says it is reducing prices for the little guy but in fact it is passing the buck onto

its suppliers by forcing them to integrate RFID to reduce costs and indirectly

forces them to outsource manufacturing. The community has to bear the loss of

outsourced jobs and small businesses go bankrupt. Employees without

healthcare, poor working conditions, pay gap for females, and underpaid illegal

25
employees are also common practice for Wal-Mart. Finally, the environment

cannot go unnoticed with the continuous dumping of toxic waste that clearly has

short and long-term damaging effects.

Wal-Mart must recognize that its EDLP guarantee is not always the best

policy to live by, and that they must make exceptions to the rule. Forcing Wal-

Mart suppliers to institute RFID is a costly burden on any organization. The

sharing out of the costs does not seem fair because Wal-Mart only has to buy the

reader whereas the suppliers must also buy the tags for every piece of

equipment or article that they send out the door. The cost of fuel and energy has

increased drastically over that last couple of years and Wal-Mart continues to

expect costs to decrease. Perhaps the giant retailer can lend a helping hand to

some of its suppliers by purchasing the RFID tags for them and making

allocations for the drastic increase in energy and fuel costs of the last couple of

years. Wal-Mart must also ensure that its suppliers are not allowing sweatshop

conditions in their offshore plants by instituting inspection programs and ensuring

that American manufacturing standards are met.

Employees are key to the long-term success of every business and Wal-Mart

does not have a very good track record. With a gap of female employees from

67% workers to 10% in management positions, it appears to be a “Good ole Boy”

institution and when wages of those women in management positions are also

lower than their male counterparts it confirms that same suspicion. Wal-Mart

26
must close the gap by implementing training programs that allow women to excel

and rise through the ranks and adopt a standardized pay system. One of

Americas’ biggest issues today is the lack of health care. In 2005, 47 million

Americans lived without health care. Wal-Mart could become an industry leader

by providing all of its employees with healthcare benefits.

Wal-Mart has been charged numerous times for violating EPA regulations

and not implementing policies that are needed to protect the environment. The

states of Connecticut, Tennessee, Utah, Massachusetts, California and Puerto

Rico have all had charges against the firm. Even though Wal-Mart has instituted

several environmental improvement initiatives, such as the experimental stores in

Aurora Colorado, the McKinney Texas lighting efficiency program, the energy

conservation measures, and the Wal-Mart acres for America, it is not enough.

Wal-Mart must institute policies that reflect the concerns of the public. Perhaps

improving the local environment where the stores are by rallying their employees

to help clean up the neighborhoods where they live. The giant retailer could do

so by organizing local “save the environment drives”, allowing each employee to

participate and pay them as if they were at work that day. Wal-Mart could also

install recycling bins at all of its stores, plant more trees around Wal-Mart parking

lots or use biodegradable bags. The list is long but the giant retailer must

change its corporate culture and use its imagination, something “Good ole Boys”

are not known for.

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Conclusion:

Wal-Mart has become the number one retailer in the U.S by keeping

things simple and passing on all savings to customers. Technology was always

at the heart of Wal-Mart’s success and helped the giant build its world famous

supply chain processes. Wal-Mart was always one step ahead of its competitors

and even today, no other retailer even comes close to Wal-Mart’s sales figures.

Wal-Mart was very successful at facing threats and taking advantage of

opportunities. The company improved its image and its community involvement

to cope with law suits and a bad reputation. Wal-Mart’s biggest failure was in

Germany and South Korea where it had to pull out after years of struggle and

millions of dollars. With a retail market close to saturation in the U.S. though,

future growth is abroad so Wal-Mart has to give it a second shot. This time

though, the company has to take its time and be prepared. The American way

doesn’t work everywhere so careful market and consumer analysis should take

place. Wal-Mart surely learned from its mistakes and will one way or another

convince the rest of the world with its “Everyday Low Prices”.

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Summary

The purpose of this case study is to perform an external audit of America’s giant
retailer: Wal-Mart.
The external factors that affect Wal-Mart such as technology and social
influences are analyzed and are set against the retailer’s current strategies.
A discussion of Wal-Mart’s future possibilities also takes place in terms of future
possible competition.
Then, the third section analyzes how effective Wal-Mart’s strategies have been
and recommendations are made on what future strategies the giant retailer
should adopt and how these strategies will improve Wal-Mart’s competitive
advantage.
Finally, the giant’s ethics and culture is analyzed in order to understand why we
observe such an increasing number of ethical complaints from different
stakeholders.

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