On July 2, 1962, Sam Walton opened the first Wal-Mart store in Rogers, Arkansas. At the time, the discount industry was fairy young and nobody wanted to take the risk and invest in the first Wal-Mart. However, Sam Walton was convinced that consumers would flock to a discount store with a wide variety of merchandise and friendly customer service. (1a) Therefore, Sam Walton invested about 95 percent of the money needed to start the company and placed everything he owned on the line.
By 1969 Wal-Mart became incorporated and expanded to 18 stores in four states, Arkansas, Missouri, Kansas, and Oklahoma. Ten years later, Sam Walton had established 276 Wal-Mart stores in 11 states. A key to Wal-Mart s success with consumers is its hometown identity. An example is shoppers who are personally welcomed at the entrance by People Greeters. (1b) Because of this, despite being a huge retailer, many Wal-Mart stores are located in small towns with a population count of less than 25,000.
Prices start at $12
Prices start at $11
Prices start at $14
Prices start at $12
By the 1980 s, Wal-Mart was on top of the retail market growing at a rapid pace. In 1988 Wal-Mart expanded its product line with the opening of its first Supercenter, which incorporated a full-line grocery store into Wal-Mart s regular merchandise. Towards the end of that year, David Glass was appointed to succeed Sam Walton as Chief Executive Officer. (1c) In 1991 Wal-Mart entered the international market for the first time through a joint venture partnership.
In March of 1992, Wal-Mart received its highest recognition when President George Bush presented the Medal of Freedom to Sam Walton at a special ceremony. In 1994 Wal-Mart created 85,000 new jobs and now employs more than 600,000 workers in the United States. During the last four years, Wal-Mart has expanded into South America and Canada.
Today Wal-Mart is still the world s number one retailer because of the strategies that Sam Walton implemented. Wal-Mart is a store that emphasizes low prices and great customer service. To maintain low prices one of the things Wal-Mart does is carefully control its expenses.
The company also works hard to find great deals which it can pass on to the customer. Because of these tactics, customers can expect every day low prices and never have to wait for a sale to get their money’s worth.
Example #2 – Wal-Mart: Copyright and Trademark Lawsuit
CITE: March 23, 2000 Wall Street Journal
FACTS: Wal-Mart Stores Inc. won by a children-clothing designer, Samara Brother Inc., after it sued the Bentonville, Ark., retail giant and five other retailers in 1996 for copyright and trademark violations.
Wal-Mart had a manufactured contract with a supplier in 1995 for a line of children s clothing based on photographs of Samara who has sued Wal-Mart in the past for copyright and trademark violation. Samara presented that their products have a distinctive look and style that customers can associate with them, thus still meeting the standard for trademark protection for design, known as trade-dress protection. Samara also argued that their distinctive design of its children’s wear gave a unique look that identified it in consumers’ minds as coming from Samara.
Unfortunately, Justice Antonon Scalia, said that Samara s line wasn’t protected by trademark law because Samara s products seem not inherently distinctive by its design, like color. It results that Wal-Mart wins the case by its merchandise-buying process. Now, under the high court s decision, the case will turn to the U. S. Court of Appeals for the Second Circuit to be judged based on the guideline set by the Supreme Court.
1. Under Trade Dress Guideline
h You can t duplicate a highly distinctive style to the point where consumers would be confused.
2. Under Copyright Protection
h The holder of copyright owns the particular tangible expression of an idea, but not the underlying idea or method of operation.
h Under Supreme Court ruling, a company or designer would have the additional burden of providing that people associate the design with the maker.
3. Under Counterfeiting Laws
h You can t use the logo and label of a designer to impersonate a product.
4. Under Trademark Laws
h A trademark is any combination of words and symbols that a business uses to identify its products or services.
h Trademark must be distinctive.
COMMENT: According to the article, Wal-Mart wins reversal in Lawsuit over Trademarks, is a copyright and trademark lawsuit and Wal-Mart won the case versus Samara Brother Inc. The decision of the Justice seems relevant if it is judged over Laws words by words. From my understanding, U.S. Trademark Law does not protect certain distinctive styles, but most companies don t bother with registering them. Brett Meyer, a copyright and trademark lawyer, said general run-of-mill basic designs, there is nothing that the manufacturer can do to stop knockoffs.
I think that the Laws of Copyright and Trademark lifts a potential cloud and unclear spots. It results that some companies can easily take advantage of the spots. Undoubtedly, Copyright is to protect people s innovative ideas. Copyright should be guild under-enforcement in order to motivate innovation and avoid Me Too products or services.
RED SOX: PUBLIC LAND-TAKING
– Judge s decision is bad news for Red Sox.
CITE: Tuesday, April 18th, 2000 BOSTON GLOBE
FACTS: William Weld, the governor of Massachusetts promised the city $10 million for the project of the ballpark. The governor never said where he would get the money, but Springfield officials decided to pin the city s economic dream on a baseball field of dreams. When Red Sox came to collect on the Weld promise, Beacon Hill turned them down.
Superior Court Judge of Massachusetts ruled against Public Land-Taking for a ballpark proposed in Springfield. The decision of Judge Constance Sweeney is appalling in
1. the stubborn arrogance of some public officials to force their definition of public good on the public
2. intriguing the legal limits of Land-Taking by eminent domain
The judge’s ruling is relevant that Springfield s attempt to take a downtown shopping mall and machine shop to create a ballpark did not serve a public purpose. Judge Sweeney s decision hinged on opinions issued by the Massachusetts Supreme Judicial Court.
Red Sox argued that SJC has ruled that government acquisition of land and the financing and construction of a sports stadium may be considered a valid public purpose.
The Boston City Council will also have to approve any eminent domain taking. Herbert Gleason, a former city corporation counsel in Boston, said The Springfield case deals not just with the process in Springfield, which is obviously offended Judge Sweeney, but with public purpose in an eminent domain taking.
LAWS: A Sport Stadium may be considered as a valid public purpose:
1. if the expenditure of public funds
2. if an extension of public privileges, power, and exemptions and the use, rental, and operation of the projects
are adequately governed by appropriate standards and principles set out in the legislation.
It is also a fundamental principle of law that the government can only exercise its eminent domain power for a public purpose.
COMMENT: The decision of Judge Sweeney is quite fair, but there is space left which is needed to be discussed. Obviously, Taxpayer dollars should not be used to build stadiums for the purpose of benefiting privately-owned baseball franchises. The Red Sox must show a public purpose beyond that of giving baseball fans a better ballpark. On the other hand, if Red Sox can show a public purpose of proving a better sports environment, the government must show how that public purpose will be enforced.
AIR-RAGE DISRUPTION-New Law for increases the penalties
CITE: April 8th, 2000 Boston Globe
FACTS: The number of passengers who attack flight crew members of disrupt service through violence or abusive behavior happens in the past years. Although infrequent, the disruptions threaten the safe operation of airplanes. President Clinton signed the Bill of Federal Aviation Administration, which is increasing the fine of Air-Rage Disruption. Officials at the Association of Flight Attendants, the union representing more than 47,000 flight attendants at most of the nation s airlines, are praising the bill.
In addition, the union is also trying to work with carriers to control the amount of alcohol served on flights, because most air-rage disturbances involves drunk passengers. While the flight attendants union does not favor banning alcohol on flights, the union is asking airlines to serve only one drink at a time and no longer reward passengers with free alcoholic beverages as compensation for airline errors. Cynthia Kain, a spokeswoman for the association, said, That simply furthers the belief that drinks will be free-flowing on the plane,
LAWS: Federal Aviation Administration reauthorization bill is signed off the measure increased fines from $1,100 to $25,000 for passengers who found guilty of interfering with an airline crew member.
Carriers should control the amount of Alcohol served on Flight.
h It is unlawful to serve an intoxicated person alcohol beverage
COMMENT: This case should be evaluated not only with the safe plane operation but also with the alcoholic beverage served. The decision is just and fair as increasing the fine for interfering with an airline crew member. The disruption can dangerous threatens the safe operation of the flight and it also causes serious consequences for the safety of other onboard passengers.
However, the airline crew member should take some responsibility if the disruption is caused by an intoxicated passenger. They should only serve one alcoholic beverage at one time and ID check for under-age. Thus, onboard alcohol beverages served should also be considered in order to avoid the disruption caused by an intoxicated passenger.
Bidder s Edge vs. eBay – Injunction Online Auctioneer
CITE: April 17th, 2000 Wall Street Journal
FACTS: eBay, a victory for the big online auctioneer with wide implications for Internet Commerce, alleged in a suit filed that Bidder s Edge violates the Federal Computer Fraud and Abuse Act by using information from eBay auction. Bidder s Edge, of Burlington Mass., is one of several aggregators that combine and compare information listed on the sites of eBay, Yahoo!Inc., Amazon.com. and other auction operators.
A federal judge plans to issue a preliminary injunction against Bidder s Edge Inc. in a suit brought by Ebay Inc. eBay argues that it is unlawful to take the information from a Web site and use them in your own commercial purposes. U.S. District Court Judge Ronald Whyte is expected to order Bidder s Edge to stop drawing information from eBay s Web site.
Legal Scholars and intellectual-property Lawyers said such a ruling could set new standards in the debate between what is considered publicly available information on the Internet and what is the Copyright data that companies can charge others to use.
The final decision is expected within two weeks and eBay agrees to post a bond payment of about $50,000 to cover any loss to Bidder s Edge if the court concludes the injunction was wrongfully issued.
LAWS: Fraud refers that the deception of another person for the purpose of obtaining money or property from him. Computer Fraud is that one obtains money or property from another by using computer technology or the Internet. This action is also considered as Crime and involves in Copyright Law under Intellectual-Property. Copyright infringement is easy on the Internet. Current Copyright law is uncertain and does not specifically protect copyrighted material on-line.
1. Digital Transmission,
2. Grant the copyright holder ownership of all on-line distribution rights,
3. Eliminate the fair use exception for the electronic transmission,
4. Make it a crime to disable anti-copying techniques on-line.
Preliminary Injunction: A court orders a person to either do or stop doing something.
COMMENT: In the 21st century, the Internet becomes common for individual households, but there is not a specified law to guild the e-world. Legislation should come out with a clear rule to restrict the violation of copyright issues and computer fraud over the Internet.
If Bidder s Edge is proved for violation of Computer fraud and Copyright, they should be found enforced. By doing so, it can also warn other people and companies to respect intellectual-property and stop them by steal/copy information from other Web Site for commercial uses.
HATE-CRIME: who has the right to decide the Sentencing? Judge? Jury?
CITE: March 28th, 2000 New York Times
FACTS: A Supreme Court argument on March 28th, 2000 on the constitutionality of New Jersey s unusual sentencing procedure for hate crimes, the justices appeared troubled by the state s law as well as the broader implications of overturning it.
New Jersey and North Carolina are the only two states specify that the finding need not be beyond a reasonable doubt, and by a preponderance of the evidence in which judges are authorized rather than Juries to make the finding that bias was the motive certainly.
A recent case of unlawful possession of a firearm has been challenging New Jersey s Ethnic Intimidation Act. In the case, Mr. Apprendi received a sentence of 12 years instead of the maximum of 10 he could otherwise have received.
On the other hand, Justice O Connor asked Mr. O’neill who is the defendant s lawyer to note that in some states it is the judge who decides, after a jury s finding of guilt. Justice Stephen G. Breyer, an author of the federal sentencing guidelines told Mr. O’niell: if I agree with you, I guess I m holding the Sentencing Commission unconstitutional because judges, not juries, apply the various factors that determine a defendant s sentence.
The court has struggled in several recent cases over where to draw the constitutional line between the respective roles of judge and jury in-laws that provide for longer sentences when, for example, the defendant has used a gun in the commission of a crime or has a criminal record. In this decision last June upholding Mr. Apprendi s sentence, the New Jersey Supreme Court acknowledged the ferment in this area of criminal law and said, the final word on this subject will have to come from the United States Supreme Court.
Lisa S. Gochman, a deputy attorney general from New Jersey, who argued in defense of the law, emphasized the difference between intent and motive in criminal law. Whether a defendant had the requisite intent to commit the crime, essential to the finding of guilt, remained as it always has been, a question of motive, or why the defendant committed the crime, was traditionally treated as a sentencing factor, she said.
A pointed response to this argument offered by Justice Thomas, You argue that if its an element of the offense it goes to the jury, and if its a sentence enhancement it goes to the judge, and the difficulty I have is that you nowhere define what the distinction is.
Under the Sixth Amendment s right to trial by jury, there was an unbroken tradition that it was the jury that had to find the facts that could increase the sentence.
No matter what the outcome of the argument would be, there a FAIR JUDGEMENT that must be made. In my point of view, it is not fair to leave the power of sentencing the crime on a person, Judge. The jury should have the power to find and to sentence the crimes, not judge, in order to avoid bias judgment and discrimination.
However, judges can have the power to extend the length of the sentence up to the maximum based on the law. For example, in the case of Mr. Apprendi, he received a sentence of 12 years instead of the maximum of 10 he could otherwise have received. If the jury found him guilty and the jury only sentenced him 8 years, then the judge can extend the length of the sentence up to 10 years maximum based on the law. Vice versa, if the jury already found him 10 years sentence which is the maximum, Judge would not be able to extend the sentence anymore since the sentence is the maximum already.
Philip Morris: the case of order to pay big money to Ex-Smoker.
CITE: March 21st, 2000 Wall Street Journal
FACTS: A State-Court Jury found that Philip Morris Cos. and R.J. Reynolds Tobacco Holding Inc. misrepresented the health danger of cigarettes, and it ordered the companies to pay $1.7 million in compensatory damages to a former smoker dying of lung cancer and to her husband. The jury team also found the 2 largest tobacco companies had also acted malice and therefore could be found for punitive damage.
The plaintiff, 40-year-old Leslie Whiteley, began smoking in 1972, three years after government-mandated warning label appearing on cigarette packs. Ms. Whiteley was for years a heavy smoker and didn t even quit smoking while pregnant. Finally, she die of lung cancer after years of smoking.
The San Francisco jury found Philip Morris and R.J. Reynold were negligent in the design of their cigarettes and committed fraud in misleading people about the health hazards of smoking.
LAWS: Regulating Tobacco:
1. August 1996: FDA unveil landmark rule to regulate tobacco for the first time
2. April 1997: Federal judge rules government can regulate tobacco as a Drug, but limits on industry advertising are rejected.
3. November 1998: Forty-six stated embrace a $206 billion settlement with cigarette makers over health costs for treating sick smokers.
4. September 1999: Justice Department sues the tobacco industry to recover billions of government dollars spent on smoking-related health care.
5. March 21, 2000: Supreme Court rules, 5-4, the government lacks authority to regulate tobacco as an addictive Drug.
Damage means MONEY. There are two types of damages:
1. Compensatory damage: the court awards certain amount of money to plaintiff to compensate for what he or she has suffered.
2. Punitive damage: the punishment of the defendant to avoid doing it again. It is also used to be a precedent to tell others not to do it.
Malice: Intention of a person does something and harms others on purposely.
Negligent: Negligence is hurting someone not purposely and unintentionally. In order to win a negligence case, the plaintiff has to prove the following five elements:
- Duty: the defendant has the duty of due care to the plaintiff.
- Factual Case: the defendant caused and led to the injury
- Foreseeable type of harm: the harm is predictable for the defendant.
- Injury: a plaintiff can show physical and psychological injury.
Fraud: Fraud is a tort that always happened in a negotiation or contract. Fraud is to deceive other people purposely and the deception would injure others.
COMMENT: Compensatory damage is decided to compensate for the harms of the plaintiff. Thus the decision of the jury is correct. In the Tobacco makers cases, tobacco companies are negligent no doubtfully in misrepresenting the hazel of human body health. Punitive damage is also fair in this case since it can also warn other tobacco companies to be more aware of designing the warning label on the cigarette pack.
Overall the decision of the jury is just and fair. The outcome of this case also warns the tobacco manufacturers and companies to aware of the hazel of their products. However, it sounds sort of unfair to punish only tobacco companies but not heavy smokers’ responsibility. My question: if tobacco companies try their best to warn the public about the hazel of the tobacco products, should the smokers be responsible for their own health and behaviors to the addictive drug, cigarettes?
Sam Walton, a leader with an innovative vision, started his own company and made it into the leader in discount retailing that it is today.
Through his savvy, and sometimes unusual, business practices, he and his associates led the company forward for thirty years. Today, four years after his death, the company is still growing steadily. Wal-Mart executives continue to rely on many of the traditional goals and philosophies that Sam’s legacy left behind, while simultaneously keeping one step ahead of the ever-changing technology and methods of today’s fast-paced business environment.
The organization has faced, and is still facing, a significant amount of controversy over several different issues; however, none of these have done much more than scrape the exterior of this gigantic operation. The future also looks bright for Wal-Mart, especially if it is able to strike a comfortable balance between increasing its profits and recognizing its social and ethical responsibilities.
Why is Wal-Mart so Successful? Is it Good Strategy or Good Strategy Implementation? — In 1962, when Sam Walton opened the first Wal-Mart store in Rogers, Arkansas, no one could have ever predicted the enormous success this small-town merchant would have.
Sam Walton’s talent for discount retailing not only made Wal-Mart the world’s largest retailer, but also the world’s number one retailer in sales. Indeed, Wal-Mart was named “Retailer of the Decade” by Discount Store News in 1989, and on several occasions has been included in Fortune’s list of the “10 most admired corporations.” Even with Walton’s death (after a two-year battle with bone cancer) in 1992, Wal-Mart’s sales continue to grow significantly.
The Wal-Mart Philosophy — Wal-Mart is successful not only because it makes sound strategic management decisions, but also for its innovative implementation of those strategic decisions.
Regarded by many as the entrepreneur of the century, Walton had a reputation for caring about his customers, his employees (or “associates” as he referred to them), and the community. In order to maintain its market position in the discount retail business, Wal-Mart executives continue to adhere to the management guidelines Sam developed. Walton was a man of simple tastes and took a keen interest in people. He believed in three guiding principles:
1. Customer value and service;
2. Partnership with its associates;
3. Community involvement (The Story of Wal-Mart, 1995).
The Customer — The word “always” can be seen in virtually all of Wal-Mart’s literature. One of Walton’s deepest beliefs was that the customer is always right, and his stores are still driven by this philosophy. When questioned about Wal-Mart’s secrets of success, Walton has been quoted as saying, “It has to do with our desire to exceed our customers’ expectations every hour of every day” (Wal-Mart Annual Report, 1994, p. 5).
The Associates — Walton’s greatest accomplishment was his ability to empower, enrich, and train his employees (Longo, 1994). He believed in listening to employees and challenging them to come up with ideas and suggestions to make the company better. At each of the Wal-Mart stores, signs are displayed which read, “Our People Make the Difference.” Associates regularly make suggestions for cutting costs through their “Yes We Can Sam” program.
The sum of the savings generated by the associates actually paid for the construction of a new store in Texas (The story of Wal-Mart, 1995). One of Wal-Mart’s goals was to provide its employees with the appropriate tools to do their jobs efficiently. The technology was not used as a means of replacing existing employees, but to provide them with a means to succeed in the retail market (Thompson & Strickland, 1995).
The Community — Wal-Mart’s popularity can be linked to its hometown identity. Walton believed that every customer should be greeted upon entering a store and that each store should be a reflection of the values of its customers and its community. Wal-Mart is involved in many community outreach programs and has launched several national efforts through industrial development grants.
What are the Key Features of Wal-Mart’s Approach to Implementing the Strategy Put Together by Sam Walton — The key features of Wal-Mart’s approach to implementing the strategy put together by Sam Walton emphasizes building solid working relationships with both suppliers and employees, being aware and taking notice of the most intricate details in-store layouts and merchandising techniques, capitalizing on every cost-saving opportunity, and creating a high-performance spirit.
This strategic formula is used to provide customers access to quality goods, to make these goods available when and where customers want them, to develop a cost structure that enables competitive pricing, and to build and maintain a reputation for absolute trustworthiness (Stalk, Evan, & Shulman, 1992).
Wal-Mart stores operate according to their “Everyday Low Price” philosophy. Wal-Mart has emerged as the industry leader because it has been better at containing its costs which have allowed it to pass on the savings to its customers. Wal-Mart has become a capabilities competitor. It continues to improve upon its key business processes, managing them centrally and investing in them heavily for the long term payback.
Wal-Mart has been regarded as an industry leader in “testing, adapting, and applying a wide range of cutting-edge merchandising approaches” (Thompson & Strickland, 1995, p. 860). Walton proved to be a visionary leader and was known for his ability to quickly learn from his competitors’ successes and failures. In fact, the founder of Kmart once claimed that Walton “not only copied our concepts, he strengthened them. Sam just took the ball and ran with it” (Thompson & Strickland, 1995, p. 859).
Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross-docking has enabled Wal-Mart to achieve economies of scale which reduces its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Cross-docking gives the individual managers more control at the store level.
A company-owned transportation system also assists Wal-Mart in shipping goods from warehouses to store in less than 48 hours. This allows Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart owns the largest and most sophisticated computer system in the private sector. It uses an MPP (massively parallel processor) computer system to track stock and movement which keeps it abreast of fast changes in the market (Daugherty, 1993). Information related to sales and inventory is disseminated via its advanced satellite communications system.
Wal-Mart has leveraged its volume buying power with its suppliers. It negotiates the best prices from its vendors and expects commitments of quality merchandise (Thompson & Strickland, 1995).
The purchasing agents of Wal-Mart are very focused people. “Their highest priority is making sure everybody at all times in all cases knows who’s in charge, and it’s Wal-Mart” (Vance & Scott, 1995, p. 32). “Even though Wal-Mart was tough in negotiating for absolute rock-bottom prices, the company worked closely with suppliers to develop mutual respect and to forge long-term partnerships that benefited both parties” (Thompson & Strickland, 1995, p. 866). Wal-Mart built an automated reordering system linking computers between Procter & Gamble (”P&G”) and its stores and distribution centers.
The computer system sends a signal from a store to P&G identifying an item low in stock. It then sends a resupply order, via satellite, to the nearest P&G factory, which then ships the item to a Wal-Mart distribution center or directly to the store. This interaction between Wal-Mart and P&G is a win-win proposition because with better coordination, P&G can lower its costs and pass some of the savings on to Wal-Mart.
Sam Walton received national attention through his “Buy America” policy. Through this plan, Wal-Mart encourages its buyers and merchandise managers to stock stores with American-made products. In a 1993 annual report management stated the “program demonstrates a long-standing Wal-Mart commitment to our customers that we will buy American-made products whenever we can if those products deliver the same quality and affordability as their foreign-made counterparts” (Thompson & Strickland, 1995, p. 868).
Environmental concerns are important to Wal-Mart. A prototype store was opened in Lawrence, Kansas, which was designed to be environmentally friendly. The store contains environmental education and recycling centers (Slezak, 1993). Wal-Mart has also adopted a low-cost theme for its facilities. All offices, including the corporate headquarters, are built economically and furnished simply. To conserve energy, temperature controls are connected via computer to headquarters. Through these programs, Wal-Mart shows its concern for the community.
Wal-Mart has been led from the top but runs from the bottom, a strategy developed by Sam Walton and carried on by a small group of senior executives led by CEO David Glass. Although recent growth has led Wal-Mart to add more management layers, senior executives strive to maintain its unique culture. This culture, described as “one part Southern Baptist evangelism, one part University of Arkansas Razorback teamwork, and one part IBM hardware” has worked to Wal-Mart’s advantage (Saporito, 1994, p. 62).
Just how Successful is Wal-Mart? — A forecast (see Appendix A) of Wal-Mart’s income for the period 1995-2000, considering increases of 30.6% in Net Sales, 27.7% in Operating Expenses, and 52.3% in Interest Debt (a level which is below Wal-Mart’s historically compounded growth rate of 55.6%) indicates that the company should continue to report gains each year until 2000.
Growth on Sales — According to most analysts and company projections, sales should approximate $115 billion by 1996, representing an increase of 30.6% as compared to 1995. If the company continues at this pace, sales should reach $334 billion by the year 2000. The growth in sales that Wal-Mart reported during the 1980s and the beginning of the 1990s will be difficult to repeat, especially considering the ever-changing marketplace in which it competes.
In an interview, Bill Fields, President of the Stores Division, said “Wal-Mart is now seeing price pressure from companies that once assiduously avoided taking it on. These include specialty retailers such as Limited, category killers like Home Depot and Circuit City, and catalog companies like Spiegel. I think everybody prices off of Wal-Mart. You’ve got Limited reaching levels we’d thought they’d never get to. The result is that everyday low prices are getting lower” (Saporito, 1994, p. 66).
In addition, the baby-boomers are reaching their peak earnings years, when financial and personal priorities change. Thus, savings, not spending, will likely take precedence because most baby-boomers are approaching retirement.
Debt Position — Based on Wal-Mart’s position in 1994, which was considered a year of expansion for the company, (Wal-Mart added 103 new discount stores, 38 “Supercenters”, 163 warehouse clubs, and 94,000 new associates) interest debt increased 52.3%.
The cost paid by Wal-Mart to finance property plants and equipment forced the company to increase long term debt by 4.6 times during the period 1991-1995. Long term debt for 1995 is $7.9 billion. If Wal-Mart continues its expansion plans based on more debt acquisition at 1994 levels, the company may not attain forecasted gains by as early as 1998.
Operating Expenses — Operating expenses will be a key strategic issue for Wal-Mart in order to maintain its position in the market. The challenge is how to run more stores with less operating expenses. According to Bill Fields, “. . . the goal is to increase sales per square foot and drive operating costs down yet another notch” (Saporito, 1994, p. 66).
Trends indicate that operating expenses have been growing at a rate of 27.7% in recent years. However, Wal-Mart should reap the benefits of its investments in high technology, and be able to operate more stores without increasing its expenses.
Cost of Sales — The cost of sales historically has been equal to the level of sales. If the company continues to take advantage of its buying power, Wal-Mart can expect to lower its cost of sales.
Wal-Mart’s future will depend on how well the company manages its expansion plans. For the coming years, the company will need to justify its expansion plans with consistent growth in sales, in order to offset the increases in debt interest and operating expenses.
What Problems are Ahead for Wal-Mart? What Risks? — Throughout the 1980s, Wal-Mart’s strategic intent was to unseat industry leaders Sears and Kmart, and become the largest retailer in the U.S. Wal-Mart accomplished this goal in 1991.
But Wal-Mart’s current strong competitive position and it’s past rapid growth performance can’t guarantee that the company will remain as the industry leader or maintain its strong business position in the future. Carol Farmer, a retail consultant, told the Wall Street Journal, “One little bad thing can wipe out lots of good things” (Trimble, 1990, p. 267). Every move in its business operation ought to be well-thought-out and executed.
Wal-Mart needs to address two major areas in order to maintain or to capture an even stronger long term business position: 1) Single-business strategy — Wal-Mart’s success is mainly based on its concentration of a single-business strategy. This strategy has achieved enviable success over the last three decades without relying upon diversification to sustain its growth and competitive advantages.
Given its current position in the industry, Wal-Mart may want to continue its single-business strategy and to push hard to maintain and increase market share. However, there is risk in this strategy, because concentration on a single-business strategy is similar to “putting all of a firm’s eggs in one industry basket” (Thompson & Strickland, 1995, p. 187). In other words, if the retail industry stagnates due to an economic downturn, Wal-Mart might have difficulty achieving past profit performance.
Also, if Wal-Mart continues to follow Sam Walton’s vision of expansion, Wal-Mart will reach its peak in the very near future. When it does, its growth will start to slow down and the company will need to turn its strategic attention to diversification for future growth.
2) Social responsibility — Retail stores can compete on several bases: service, price, exclusivity, quality, and fashion. Wal-Mart has been extremely successful in competing in the retail industry by combining service, price, and quality. However, other merchants may object to Wal-Mart’s entry into their community.
Because of its ability to out-price smaller competitors, Wal-Mart’s stores threaten smaller neighborhood stores which can only survive if they offer merchandise or services unavailable anywhere else. This makes it very hard for small businesses, such as “mom-and-pop” enterprises, to survive.
They, therefore, fight to keep Wal-Mart from entering their locales. Numerous studies conducted in different states both support and criticize Wal-Mart (Verdisco, 1994). Nevertheless, Wal-Mart did drive local merchants out of business when it opened up stores in the same neighborhood. As a result, more and more rural communities are waging war against Wal-Mart’s entrance into their market. Besides protesting and signing petitions to attempt to stop Wal-Mart’s entry into their community, the opposition’s efforts can even be found on The Internet. Gig Harbor, a small town in Washington, recently started a World Wide Web page entitled “Us Against the Wal.” The town’s neighborhood association promised that they “will fight them [Wal-Mart] tooth and nail” (PNA/Island Aerie Internet Productions, 1995/1996).
The increasing opposition indicates that the road ahead for Wal-Mart may not be as smooth as Wal-Mart’s annual report would entail. This requires Wal-Mart to rethink its expansion strategy since it would not be profitable to operate in an unfriendly community.
How Big Will Wal-Mart be in Five Years if all Continues to go Well? — Before he died, Sam Walton expressed his belief that by the year 2000 Wal-Mart should be able to double the number of stores to about 3,000 and to reach sales of $125 billion annually. Walton predicted that the four biggest sources of growth potential would be the following:
1. expanding into states where it had no stores;
2. continuing to saturate its current markets with new stores;
3. perfecting the Supercenter format to expand Wal-Mart’s retailing reach into the grocery and supermarket arena — a market with annual sales of about $375 billion;
4. moving into international markets (Thompson & Strickland, 1995).
Wal-Mart Supercenters represent leveraging on customer loyalty and procurement muscle in order to create a new domestic growth vehicle for the company. With few locations left in the U.S. to put a new Sam’s Club or traditional Wal-Mart, the Supercenter division has emerged as the domestic vehicle for taking Wal-Mart to $100 billion in sales.
Before the Supercenter, Walton experimented with a massive “Hypermart”, encompassing more than 230,000 square feet in size. The idea failed. Customers complained that the produce was not fresh or well-presented and that it was difficult to find things in a store so big that inventory clerks had to wear roller skates. One of Walton’s philosophies was that traveling on the road to success required failing at times.
As a result of the unsuccessful experiment, Walton launched a revised concept: the Supercenter, a combination discount and grocery store that was smaller than the Hypermart. The Supercenter was intended to give Wal-Mart improved drawing power in its existing markets by providing a one-stop shopping destination.
Supercenters would have the full array of general merchandise found in traditional Wal-Mart stores, as well as a full-scale supermarket, delicatessen, fresh bakery, and other specialty shops like hair salons, portrait studios, dry cleaners, and optical wear departments. Supercenters would measure 125,000 to 150,000 square feet, and target locations where sales per store of $30 to $50 million annually were feasible.
Walton’s prediction was right on target. The Supercenter division more than doubled in size during 1993, then doubled again in 1994. Supercenters, once thought of as risky because of slim profit margins on the food side, will most likely make Wal-Mart the nation’s largest grocery retailer within the next five to seven years (Longo, 1994).
Expanding overseas, Wal-Mart moved into the international market in 1991 through a joint-venture partnership with CIFRA S.A. de C.V., Mexico’s leading retailer. Since then the company has entered Canada, Hong Kong, mainland China, Puerto Rico, Argentina, and Brazil. The Wal-Mart International Division was officially formed in 1994 to manage the company’s international growth. By the year 2000, analysts expect Wal-Mart to be a huge international retailer, with numerous locations in South America, Europe, and Asia.
Conclusion — The ever-changing market presents continuing challenges to retailers. First and foremost, retailers must recognize the strong implications of a “buyers’ market” (Lewison, 1994). Customers are being offered a wide choice of shopping experiences, but no one operation can capture them all. Therefore, it is incumbent upon management to define their target market and direct their energies toward solving that specific market’s problems.
Technology, demographics, consumer attitudes, and the advent of a global economy are all conspiring to rewrite the rules for success. Success in the next decade will depend upon the level of understanding retailers have about the new values, expectations, and needs of the customer. If Wal-Mart continues its customer-driven culture, it should remain a retail industry leader well into the next century.
Example #4 – Wal-Mart: Not A Villain
I live in Mentor, Ohio, a suburb about thirty-five miles east of Cleveland. It used to be all greenhouses, until a few decades ago when it began the process of commercialization, along with other neighboring cities. Big-name stores moved into town, slowly at first. After a while, along came a shopping mall and stores such as K-Mart. These businesses really began to change the community for the better.
As the area became more developed, more people moved there. Eventually, Wal-Mart made its way into town. The onset of competition forced K-mart to relocate (less than a mile down the road from the original site, across the street from where the Wal-Mart was being built) and upgrade to a Super K-Mart Center. The difference between K-Mart and Super K-Mart is that Super K-Mart has everything that regular K-Mart has, but it is now also equipped with a complete grocery section. This enables customers to do all of their shopping in one location.It all started in 1962.
The first Wal-Mart Discount City opened that year in Rogers, Arkansas, and the franchise has been growing exponentially ever since. In 1980 there were 276 stores, and in the year 2000, there are more than 3,400 Wal-Marts in every state of the USA and a handful of foreign countries. These countries include Germany, Mexico, Canada, Brazil, and Korea, to name a few. Wal-Mart has aspirations to be globally recognized like McDonald’s and Coca-Cola.
For five years, the state of Vermont waged a war against Wal-Mart, refusing to let any of these superstores inside state boundaries. Eventually, Wal-Mart won the battle and the first store opened in Bennington, Vermont. Instead of expected protests, Wal-Mart’s business was booming. During the first week, the store had almost 1.5 times as many transactions as people live in the town.
According to “Shopping With the Enemy”, town life will never be the same because “people crave the low prices, large selection, and convenient parking,” offered by discount stores (146).In the article “Wal-Mart’s War on Main Street,” by Sarah Anderson, it is correctly stated that “rural life is changing and there’s no use denying it.” (Anderson 139) Even without imposing businesses, the technological advances of today make the world smaller and smaller.
It used to be that in rural places there would be one farm and then nothing for miles. There wasn’t much contact with people outside of one’s family. Today anyone on a farm can have all the necessities and luxuries of life, and the use of the Internet can easily contact anyone anywhere in the world.
These simple facts alone provide evidence that rural life is changing. The major argument made by Albert Norman and other anti-Wal-Mart activists is that Wal-Mart and other discount stores drive the “Ma & Pa” stores out of business. This statement has some validity in that discount stores charge less and have a significantly larger quantity available, thus making them the top choice.
They can charge less because they buy their products in bulk (3,400 stores is definitely bulk). Also, unlike some neighborhood stores, they have an efficient system to keep track of their inventory. This enables them to know what consumers are buying and what they are not buying. Rarely are shelves empty of desirable items.
The store can tell when a product is running low and order more before they run out. “Ma & Pa” stores usually do not know what products are popular and overstock on unpopular items and under stock on the popular ones, possibly leaving the shelves bare for any length of time. Oftentimes they wait until they are completely out of an item before reordering. The delivery process takes up to two weeks. Meanwhile, what are customers to do if they are in dire need of a product? They have no choice but to suffer the consequences of being without it.
Privately owned businesses must adapt to the changing times. They will not automatically go out of business just because Wal-Mart is moving in. It is true that large stores like Wal-Mart give discount prices, but do they always give the best quality and service? A lot of big businesses are too impersonal, not giving customers the same quality treatment they would receive on Main Street.
However, Wal-Mart is an exception in this area; Wal-Mart has a reputation for excellent customer service. They have a greeter, who welcomes you upon entering the store, and there are plenty of workers roaming around to help you out as desired.
The Internet is also to blame for putting Main Streets out of business. If people do not live near a discount store they can still purchase their products by means of shopping on-line. Online purchases are much easier to make than to drive out to the discount store, and delivery only takes a few days at most (and the best prices are available on-line). Wal-Mart has its own site, complete with a greeter and its best sales posted on the front page. Most stores on-line advertise their low prices, much like Wal-Mart does on their online site.Even so, for those consumers without Internet access, discount stores are only a short trip away.
A lot of people will drive a great distance just for items that are on sale. Residents of small towns that don’t have any big discount stores, still like to shop at discount stores, so they usually go shopping at the discount stores in neighboring towns. Until now, I had no idea that Wal-Mart was thought of as villainous. My neighborhood did not change because of the new Wal-Mart as much as it did from the rest of the new stores sprouting up in the area.
Communities are learning to adapt to these new conditions. Rural life is changing, and people have to deal with it. Not all of Main Street’s stores will stay in business and those who have to quit may be able to find better jobs once their community is developed. In conclusion, Wal-Mart is not a villain and does not move into small towns with the sole intent of “killing” “Ma & Pa” stores!
I am happy to join with you today in what will go down in history as the greatest persuasive essay regarding the prominence of Wal-Mart, in the history of our nation.
One score and twelve years ago there was a great American named Sam Walton. He was a small town merchant who had operated variety stores in Arkansas and Missouri, and he had a dream. His dream was to be the creator of what was to become the cornerstone of American society for generations to come. He was convinced that consumers would flock to a discount store with a wide array of merchandise and friendly service, and thus he decided to create Wal-Mart the super store.
I too have a dream! And that dream is that one-day all Americans will see the light and appreciate the importance of this wonderful store.
Thanks to these colossal convenience stores, we Americans can go to one place and take care of all of our needs, no matter what time of day it is. From flashlights to sticky-notes, you can get anything you need right when you need it! Let s look at Mr. Walton s personal promise of excellence as a sticky-note on the desk of every American, pledging that all men and women would be guaranteed the inalienable rights of having prompt service, friendly helpers, and the availability of every item they have ever longed for.
Wal-Mart was made by a real person, for the real people. Let s look at the facts here. Unlike some corporations whose financial expansions do not create more jobs, Wal-Mart s exceptional growth has been an engine for making jobs. In 1995,the company created 85,000 new Wal-Mart jobs and supported thousands of U.S. manufacturing jobs. More than 600,000 Americans work at Wal-Mart.
Still, what built this dream into a reality, started out with simple courtesy and respect for the community. A major key to Wal-Mart s popularity with consumers is its hometown identity. Shoppers are personally welcomed at the door by People Greeters.
That s not all! Each store honors a graduating high school senior with a college scholarship. They frequently hold bake sales to benefit local charities. Wal-Mart is for the people. In fact, locally made products are frequently and proudly displayed. There are so many more models of humble, homelike, hospitality from this company in regards to it regulars.
Sam Walton believed that each Wal-Mart store should reflect the values of its customers and supports the vision they hold for their community. As a result, Wal-Mart s community outreach programs are steered by local associates who grew up in the area and understand its needs. In addition, Wal-Mart stores have launched several national efforts to help the larger, U.S. community.
Despite all of Wal-Mart s good aspects there are still some people who are skeptical about shopping there. They want quality in their products. They want consistency in their sales. They want the best merchandise for their money. They must be looking in all the wrong places because Wal-Mart is right around their corner. These poor unfortunate souls must open their eyes and come to understand that this is no K-Mart. This is no Target or Value City. This is Wal-Mart! This is the place where every one is free to enjoy great prices, great merchandise, and great service all under one roof.
Wal-Marts accomplishments since 1962 will be exceeded by not only today s associates, but also the associates of the future. That was the prediction of Sam Walton as he accepted the Medal of Freedom from President George Bush in March 1992.
I have a dream today. A dream that this will be the day when all of God s children will be able to sing with a new meaning, My Wal-Mart, tis of thee, one motto: hospitality, for thee I sing. Store where my father’s shop, store of the Zippy-Mop, located at every stop, let freedom ring.
This is my hope. I hope that this essay has proven to everyone that Wal-Mart is not just any old store. It is a Clothing Store; it is a Jewelry Boutique. It is a Floral Shop and it is a Gardening Center. It is a Hardware Store; it is a Furniture Showcase. It is a PhotoShop and it is a Supermarket.
It is all of these things and more! And if America is to be a great nation we all must know this. So let Wal-Mart s catchy jingles be heard from the hilltops of York Pennsylvania. Let Wal-Mart s low prices be advertised through the mountainous ranges of the Rockies. Let Wal-Mart show all of America that it is the best place to go for all of your daily needs and let freedom ring!
Wal-Mart is one of the world’s largest retailers. The company is incorporated in the United States of America and operates international outlets in a number of countries worldwide. Wal-Mart offers employment opportunities to many people around the world. In fact, the company has an employee base of over two million people throughout its numerous facilities in the United States and other nations.
The history of Wal-Mart stretches way back to the early 1960s. In 1962, Sam Walton risked all his property to secure finances to start-up a new venture in the discounts retail industry. In the same year, three other discounts retail stores commenced their operation. These stores included Kmart, Target, and F.W. Woolworth.
The store has had its ups and downs but still thrives in the retail business to extend its growth to other regions across the world. The company has strategically established itself in the United Kingdom, Canada, Brazil, Mexico, Germany, Japan, and South Korea. The retail store does not deal with specific goods. However, it deals with various goods and services through its many retail shops worldwide (Palepu & Healy, 2008).
The analysis of the external environment presents the Wal-Mart retail stores with a number of opportunities. Firstly, due to its stature in the industry, Wal-Mart is presented with an opportunity to seek strategic alliances and mergers with other leading local and global retailers focusing on a given market niche. Additionally, analysis of the external environment suggests unmet targets in the supercenters business.
Therefore, this presents Wal-Mart with an opportunity to continue with its current supercenters strategy. The emergence of new locations and store types present Wal-Mart with an opportunity to exploit market development through diversification to mall-based sites. Finally, there is an opportunity for the company to increase its investment in foreign countries especially the emerging markets such as China and other European nations.
On the other hand, the biggest threat is the increasing competition from local and international competitors. Additionally, the political and media attention directed towards the company threatens the company in terms of its image and operation. The declining manufacturing prices present a threat to the company since it may result in intense price competition (Wal-Mart, 2012).
Wal-Mart strategies are categorized as either domestic or international strategies. Its strategies are tightly focused on low-cost leadership in the industry. The aim of this strategy is to achieve a cost advantage in the industry that is characterized by intense competition from the other large retail chains in the industry. Wal-Mart achieves this through vast economies of scale and hard bargaining with its suppliers.
Additionally, the company ensures low-cost through aggressive deployment of technology and inventory control. At the same time, Wal-Mart effectively achieves this strategy through shrinkage reduction to avoid losses resulting from product handling.
The company also encourages bulk buying and cutting edge distribution network as a means of gaining cost advantage. This explains why the company has been able to maintain low product prices for over a very long period (Ferrell & Hartline, 2011).
Over the years, Wal-Mart organization has nurtured an excellent culture that ranges from the top managers to lower-level managers. The culture was engineered by the founder of the company, Sam Walton. According to Forbes Global 2000, the company is the largest public corporation in the world in terms of revenue. The company is governed by a board of directors who are elected yearly by the shareholders.
The managers of the organization also work as members of the board. The executive members of the board should not multitask as managers of the retail store. This is geared towards safeguarding the interest of the shareholders. This means that the shareholders’ interests have to be separated from the interest of the managers.
Corporate governance is crucial in separating the powers of the board and the managers. The function of the board is to protect the interest of the shareholders by checking the function of the managers. The managers are thus responsible for the running of the organization and how the operations of the organization are affected.
The board has the task of appointing the managers in the organization. Thus, managers should not act as members of the board as they may not exercise their powers well when it comes to hiring and appraising managers (Wal-Mart, 2012).
Wal-Mart has a strong governance framework, which is rooted in strong values and principles that were taught by Sam Walton, the founder. The company maintains a separate chairman of the board and Chief Executive Officer to enhance oversight leadership and facilitate management development.
Currently, Wal-Mart has sixteen members serving as the Board of Directors. The Board has independent directors, as well as inside directors. The board has five committees that are appointed annually. These committees include compensation, nominating, and governance, executive, global compensation, strategic planning and finance, and technology and e-commerce. Robson S. Walton is the current chairperson of the board. The current CEO is Michael Terry Duke.
The managers are responsible for implementing the strategic plans instituted by the board of directors and thus should be professional in their duties. The managers are responsible for preparing the financial reports, which are approved by the board of directors.
Some of the management team that should act as members of the board may include the chief executive officer. Therefore, the already prepared reports should be reported to the shareholders during the annual general meetings (Hill & Jones, 2010).
Wal-Mart, “Always Low Prices, Always.” It is well known that one of the great keys to Wal-Mart’s formidable success is its lower-than-low cost of doing business. Wages in particular are as low as can be. Minimum wages and minimum benefits: that’s the way Wal-Mart stays ultra-competitive.
This report examines the state of Wal-Mart’s business practices and its effect on the economy. It will describe Wal-Mart as a non-union employer, paying lower wages to their employees than other retail and grocery stores. They do not offer benefits to all employees and most are unable to afford them.
Between Wal-Mart’s business practices in increasing their profits and the need to recognize their social and ethical responsibilities, Wal-Mart needs to find a comfortable balance of profitability and responsibility in order to improve its reputation.
During the process of writing this report, we found that there was much more information to be discussed about Wal-Mart’s unethical business practice than what was reported. We also wanted to point out that although all companies do everything possible to lower their costs and maintain high production rates, Wal-Mart has crossed the line over the years by managing their profits in unethical ways compared to other large corporations who have been ethically and successfully managing their business practices. Information that can be found on Wal-Mart is changing every day and it was sometimes difficult to keep up.
Wal-Mart has been recognized as the leader in its industry and the largest company in the nation. With its powerful profit-making abilities, Wal-Mart has grown from a local corner store to the money-making “monster” it is today. The company has damaged its reputation over the years due to unethical choices made by its top executives. As a result, its anti-union stance has been singled out on issues concerning benefits, wages, and overall business practices.
When reviewing Wal-Mart’s financial statements, one would be overwhelmed to see such high performances; but when you are a Wal-Mart employee, it is no surprise why that is true. Employees have been denied opportunities of advancement and pay raises. Lawsuits have been pending against the company with employees claiming they have been denied promotion opportunities in the company due to their gender, and some employees have sued for being over-worked and underpaid.
Wal-Mart has become so big in its industry, that it has lowered the wages throughout the country and has influenced economic change. Since most of Wal-Mart’s employees live below the poverty line, it is difficult for them to afford health insurance when deductions out of their paychecks are sometimes as high as 33%. A Wal-Mart employee who obtains health insurance would have a very difficult time raising a family with this kind of premium. Wal-Mart employees are unable to receive healthcare benefits because the cost is too high and their wages are low.
As a result, employees face a difficult time deciding whether to sacrifice such a large portion of their pay to obtain health insurance; in most cases, Wal-Mart employees persist without health coverage.
Deductions for health insurance are higher for Wal-Mart employees than other national retail employees. A Wal-Mart employee pays about 25% more for health insurance than the average retail worker. Wal-Mart has also been opposed by its female employees, who make up two-thirds of its workforce.
Women have been discriminated in wage and have been denied any advancement to upper managerial positions – dominated my men. Men make approximately 5%-15% more than women and have a higher chance of advancing to a better position.
Dukes vs. Wal-Mart, filed in 2001, was the largest lawsuit against a private employer in the nation and represented 1. 6 million female employees who were discriminated based on their sex. From lawsuits to employee complaints, Wal-Mart has been faced with a lot of difficulties that have developed through their own unethical business practices.
Although every company’s goal is to lower costs and produce large numbers, Wal-Mart has made sky-rocketing profits by unethically hurting its employees and cutting down their wages. Many questions why Wal-Mart, the richest retailer in the world, chooses not to provide adequate wages or health benefits for its employees. If Wal-Mart were to reform its health benefits program, raise its product prices by as little as a penny, and create a bias-free working environment for women, Wal-Mart would be in better terms with its employees and improve the reputation it sacrificed from the start.
“SAVE MONEY, LIVE BETTER”,
NOT ON WAL-MART WAGES
Wal-Mart, the large international discount chain was founded by Sam Walton. On May 5, 1950, Walton purchased a store in Bentonville, Arkansas, and opened Walton’s 5 & 10. Little did the small town residents know that they would later become the headquarters for the world’s largest retailer store in the U. S. Through his savvy, and sometimes unusual, business practices, he and his associates led the company forward for thirty years.
As Wal-Mart grew into the global corporation it is today, it has dealt with a great deal of criticism by outsiders. Wal-Mart’s ethical citizenship has been questioned numerous times and researched by many. There have been many doubts about Wal-Mart’s business integrity and questions whether their practices are ethical or not. Wal-Mart has faced and is still facing, a significant amount of controversy over several different issues.
Wal-Mart has been caught bribing its employees, discriminating against women, denying its employees of training or promotions, paying low wages, and providing high deductibles for health insurance. Wal-Mart is now paying the consequences and needs to become socially responsible in order to maintain a better reputation with society. Although consumers are reeled in with the low prices Wal-Mart has to offer, others feel their ethical beliefs are more important than saving a quick buck.
Statement of Purpose The purpose of this report is to examine Wal-Mart’s unethical business practices with a focus on employee wages and high health care deductibles. The report will question Wal-Mart’s aptitude to sell products cheaper than any of its leading competitors and yet maintain making a substantial amount of profit. The report will analyze the unethical practices that have developed through Wal-Mart’s history as a result of focusing on high productivity and profit-making strategies.
The report will describe Wal-Mart’s unethical business practices that affect its employees. It will examine Wal-Mart’s unethical behavior in conducting business with an overall focus on employee wages.
Time constraints have limited the extent of the research. There is a vast amount of information regarding this issue and we are unable to report it all. In addition, no funds are available to conduct primary research.
Methods of Research
The method of research for this paper was secondary research through databases, internet websites, and books. The research databases of California State University, Los Angeles, will be used to locate articles in the current and past publications. The databases used are Lexis/Nexis and Business Source Premier. Also libraries, such as the John F. Kennedy Memorial Library at California State University, Los Angeles and Los Angeles Public Library in Porter Ranch, California.
The major findings of this study indicate that Wal-Mart is the world’s largest and richest retail chain is setting the standard on wages for retail workers and beyond. Because Wal-Mart has become so big, it has dragged down wages throughout the country. Wal-Mart has become what it is today by selling products at low prices and paying their “associates” even lower wages. Unhappy Wal-Mart workers complain as much about being over-worked as underpaid. Wal-Mart has its own stated policies at its employees’ expense. Wal-Mart says it’s “associates” below basic living wage standards and even below poverty lines.
Overworked and Underpaid Employees
H. Lee Scott Jr. is the chief executive of the powerful corporation we call Wal-Mart. According to Mr. Scott, by selling vast quantities of goods at its trademark “Everyday Low Prices,” Wal-Mart has single-handedly raised America’s standard of living, saving consumers about $100 billion a year (Bianco 2). They feel that selling vast quantities of low price merchandise gives them the right to act as if they represent the American people. Scott states, “Wal-Mart also provides good jobs for hundreds of thousands of equally deserving employees, offers even part-time workers generous health insurance and other benefits” (Bianco 2).
He accuses greedy labor unions, inefficient supermarket chains, and other Wal-Mart opponents of distorting “the facts” to suit their own purposes. Wal-Mart insists on describing themselves as “pro-associate, not anti-union,” but is quick to suppress any and all attempts to have unions organize in its stores. In his book The Bully of Bentonville, Anthony Bianco describes how Wal-Mart has affected wages beyond their own company: Because Wal-Mart is so big, it has dragged down wages throughout the country.
Economists at the University of California at Berkeley found that Wal-Mart’s expansion during the 1990s cut the income of America’s retail employees by 1. 3 percent-or by $4. 7 billion in 2000 alone. What is more, the depressing effect of Wal-Mart’s expansion on payrolls extended well beyond retail. According to a 2005 analysis by economists at the Public Policy Institute of California, take-home pay per person fell by 5 percent across the board following Wal-Mart’s entry into a country.
The evidence “strongly suggest(s) that Wal-Mart stores lead to wage declines, shifts to lower-paying jobs (or less skilled workers), or increased use of part-time workers. (4) Today, Wal-Mart is surrounded by controversy, but the greatest is from within. Unhappy employees are quitting and dozens of class-action lawsuits are pending against the company.
Managers have been known to force employees to work extra hours without pay; either by eliminating breaks or by having them clock out and keep working “off the clock”. This is Wal-Mart’s way of saving on costs at the price of its employees. Store managers earn bonuses based on earnings.
Since the corporation dictates the inventory and operating expenses, managers’ only control is labor costs. Joyce Moody, a former manager in Alabama and Mississippi, told the New York Times that Wal-Mart “threatened to write up managers if they didn’t bring the payroll in low enough”.
Depositions in wage and hour lawsuits reveal that company headquarters leaned on management to keep their labor costs at 8 percent of sales or less, and managers in turn leaned on assistant managers to work their employee’s off-the-clock or simply delete time from employee timesheet (ufcw.org).
In the late 1990’s Wal-Mart’s annual turnover rate was a remarkably high 70 percent, 40 percent higher than in previous years (Slater 120). Wal-Mart does not see this as being a problem. The constant turnover reduces employees eligible for raises, promotions, benefits, and holds the average wage down. Just another way to keep payroll costs at a minimum.
Wal-Mart employs 1. 3 million workers in just the U. S. and operates more than 3,400 stores throughout the United States. A full-time employee working 28- 40 hours a week at Wal-Mart is paid on an average of $250 a week. Besides having low wages, those workers who are interested or eligible in obtaining health insurance for themselves or for their family pay high premiums and frequently don’t get the coverage they expect. The majority of Wal-Mart employees live below the poverty line and after making deductions in taxes and insurance coverage, a Wal-Mart employee’s salary is not enough to provide them a standard way of living.
“The 2003 poverty guideline for a family of four is $18,400, $4,256 more than the $14,144 in earnings a full-time Wal-Mart worker earns at $8 per hour… A household of four with a gross income of $23,920 or less could be eligible for food stamps -$9,776 more than a full-time, $8-an-hour Wal-Mart worker would earn in a year. ” (www. aflcio. org) These numbers are even worst for part-time workers. Today, one-third of Wal-Mart’s employees are part-time workers. They are limited to less than 34 hours of work per week and are not eligible for benefits and must wait 1 year before they can enroll.
Sex Discrimination in the Work Place
In addition to Wal-Mart’s low wages, its female workers are more disadvantaged and discriminated against in wage than its male workers. More than two-thirds of Wal-Mart’s hourly employees are women and make up most of the lower wage positions which include: working the cash registers, stocking shelves and working the sales floor. Although men take responsibilities in these positions as well, the majority of men who work at Wal-Mart have positions as Management Associates or much higher-ranked positions. Seventy-two percent of Wal-Mart employees are female and less than one-third of those women have management positions in the company.
With that in mind, the average male employee was paid about $5,000 more in 2001 per year than the average female full-time employee. As Wal-Mart’s own workforce data reveals, women in every major job category at Wal-Mart have been paid less than men with the same seniority, in every year since 1997 even though the female employees on average have higher performance ratings and less turnover than men. (http://www. walmartclass. com).
Dukes vs. Wal-Mart is said to be the largest and most famous gender discrimination lawsuit against a private employer and is the largest class-action suit in U. S. history, representing 1.6 million current and former female employees. Betty Dukes was the leading plaintiff in the case and sued Wal-Mart for sex discrimination; she was a fifty-four-year-old African-American woman who worked as a greeter for Wal-Mart.
Factors such as seniority and performance were Wal-Mart’s main excuses and reasons that women earned from 5% to 15% less than men. It is disappointing to see that even the cashier positions, that are dominated by women, have men earning more than women. Wal-Mart not only overworks, underpays, and discriminates against women, but it also provides neither childcare for workers or affordable family health benefits.
Unaffordable Healthcare Deductibles
Wal-Mart employees are incapable of receiving healthcare benefits available for them because of their high cost and low wages. Since most of Wal-Mart’s employees are unable to afford these health benefits, most of these individuals either turn to government-aided insurance such as Medicaid, depend on their spouse’s plans, or expect to see a doctor in rare and emergency cases with no insurance. It is argued that uncovered Wal-Mart employees are not signing up for medical insurance and benefits because most of them exceed the income ceiling and are not eligible.
Wal-Mart provides insurance for over 900,000 employees that are with and without dependents. Employee premiums range between $143. 54 to $249. 71 per month for family coverage and $33. 04 to $72. 04 per month for single coverage. The National Average of workers covered by employer health insurance is 67 percent, and only 47 percent of Wal-Mart’s employees are covered by the company’s health care plan. That is a huge gap when considering that each percent represents thousands of people.
Most Wal-Mart employees have a difficult time deciding whether to attain health insurance or stay uninsured for the sake of saving money. ‘Cynthia Murray, who has worked at a Wal-Mart store in Laurel, Md. , for six years, suffers from asthma, but goes to see a doctor only when she suffers a bad attack. Murray is 50 years old, makes $9. 47 an hour, and says that the Wal-Mart plan that costs $23 a month has a $1,000 deductible, which makes it too expensive for her to use. Another plan subtracts $100 from her paycheck every two weeks.
“I don’t think anybody working at Wal-Mart has that kind of money,” says Murray. “All I’m asking from Wal-Mart is a fair share. ”’ (Gogoi). Many Americans question why Wal-Mart, one of the richest companies in the United States, can’t offer affordable health insurance and pay a living wage.
Comparing Wal-Mart’s employee health benefits and wages to Costco’s employee health benefits and wages, one will notice that Costco not only pays its employees higher than Wal-Mart but their deductions are far less. “The average wage at Costco is $17 an hour…. a full-time worker at Wal-Mart makes $7.50 an hour on average.
Costco workers pay just 8% of their health premiums, whereas Wal-Mart workers pay 33% of theirs. Ninety-one percent of Costco’s employees are covered by retirement plans, with the company contributing an annual average of $1,330 per employee” (Cascio). Based on these facts, it is easy to say that Wal-Mart employees are giving up a large portion of their paychecks to obtain health care. Wal-Mart employees who do have health insurance and receive coverage are paying more in premiums but receive less for their money; in large corporations, this has become a trend.
New laws have been passed intended to force large corporations to control employee wages and reduce insurance deductibles. From lawsuits to employee complaints, Wal-Mart has recently thought of ways to reduce the cost of health benefits. The new plan would charge monthly premiums ranging from $25. 00 for individuals to $65. 00 for a family, making that 45-65% less than what employees contributed in the company’s existing plan. But it is not enough to reform the reputation Wal-Mart has lost or the vulnerable employees they let down.
High productivity and lowering costs is one of the tops and most important objectives in business. Wal-Mart is the World’s largest retailer can afford to pay its “associates” more than what the minimum wage offers. They are in fact, the richest retailer in the world and yet neglect to provide their employees with affordable health care with a livable wage. Even if Wal-Mart was to pass 100 percent of the wage increase on to consumers, the average impact on a Wal-Mart shopper would be quite small.
Wal-Mart’s choice of action toward employee wages, health benefits, and bias work environment have not only brought an enormous shadow over its employees’ lives but also over its own big business reputation. The injustice decisions made throughout the history of Wal-Mart has changed many lives and has forever changed the American economy. In the business world, there is big, and then there is Wal-Mart. Recommendations Based on the conclusions presented above, the following actions are recommended:
- Retaining “associates” already on staff would be more cost-effective than high employee turnover.
- Train employees. Give the opportunity to advance and have the freedom to associate and organize.
- Our analysis reveals that establishing a higher minimum wage for large retailers like Wal-Mart would have a significant impact on workers living in poverty or near-poverty.
- In order to increase employee satisfaction, reforming the cost of health insurance would help keep Wal-Mart on good terms with their employees.
- If Wal-Mart was to raise its prices by as little as a penny to the dollar it would afford them to pay the higher wages. Higher wages provide the employee’s opportunity to afford health coverage.
- Implementing fair employment and labor practices. In other words, “Obey the Law”.
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