Tuesday, 10 July 2012
Wal-Mart: The Future is Sustainability
The Wal-Mart case was written to give students another perspective on one of the largest employers in the world. Over the years Wal-Mart has faced a large number of lawsuits and allegations of unethical behavior. Students will likely have heard stories of unethical and illegal activities involving Wal-Mart, and should be encouraged to share them in class. However, Wal-Mart has gained significant ground in recent years in regaining its reputation. The company has been a leader of adopting energy-efficient and renewable energy technology, offers a broad selection of organic items, and has improved its employee rights record. Nevertheless, it is still Wal-Mart, the largest corporation in the world, and many people remain hesitant to accept that Wal-Mart has fundamentally changed its ways. After having students read this case, instructors may want to ask whether they believe Wal-Mart is inherently unethical, or whether they are convinced the giant has changed its ways.
As Wal-Mart has grown, its strategy has changed. Could its new push into sustainability and social responsibility be driven by profits, not by a real desire to clean up its act? In the 1970s, Wal-Mart’s strategy was to go into secondary markets, meaning communities with fewer than 10,000 residents. The company’s logistical strategy was to grow out from Bentonville, Arkansas in order to gain channel economies of scale. By attacking secondary towns, the competition, normally small independents, could not compete on price and closed down. This, combined with the throw-away culture of the times (low quality-low price), helped Wal-Mart grow rapidly which enabled it to enter primary markets (communities over 10,000). During the 1980s outsourcing to lesser developed countries became the norm. In the 1980s, Wal-Mart took the hyper-market store concept and tailored it to the United States by introducing products and services that challenged the competition. Now, after ruthlessly expanding into every market possible, driving down prices, Wal-Mart has embraced a new, supposedly enlightened approach to doing business. Instructors should ask students what they think Wal-Mart’s motivation is.
Vertically integrated channel structures and their impact on competition is another issue that instructors could address in conjunction with this case. In the twenty-first century, one sees more training in eliminating conflict within the channel structure, so that companies can deliver the right products at the right time and place at the lowest costs. Implicit in this concept is collusion, not with competitors across an industry, but collusion within the channel. It becomes imperative to have a free flow of information to be able to implement TQM and the JIT inventory systems that reduce safety stock while increasing profitability. Many countries adhere to a managed competition model, but within the United States any form of collusion that substantially reduces competition can be considered illegal under many different laws. Students may wish to discuss whether Wal-Mart’s form of negotiating the best prices for products, and their sales strength, crosses the boundary from ethical and legal to unethical and illegal.
1. Do you think Wal-Mart is doing enough to become more sustainable?
2. What are the problems that Wal-Mart has faced, and what has the company done to address them?
3. Why has Wal-Mart tended to improve performance when other retail outlets have been suffering financially?