Group 4

Wal-Mart Case
June 27, 2008

1. Evaluate how Wal-Mart has ranked and responded to various stakeholders.

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 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 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. Why do you think Wal-Mart has had a recent number of ethical issues that have
been in the news almost constantly?

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 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 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. What do you think Wal-Mart could do to develop an improved ethical culture

and respond more positively to its diverse stakeholders?

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 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 insure that its suppliers are not allowing sweatshop conditions in
their offshore plants by instituting inspection programs and insuring 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 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.