Walmart Company Analysis
Introduction
The retail industry has undergone a tremendous dramatic transformation in the 21st Century. With technological advancement, huge strides towards globalization, and the rise in customer expectations, retail companies have been forced to revolutionize their strategies to remain competitive. Walmart is a leader in not only the U.S. but also the global retail sphere. It is a good case in point. The first Walmart store was opened in Rogers, Arkansas, on July 2, 1962, by Sam Walton (Krieg 41). By 1967, Walton had expanded to several rural towns, opening up a total of 24 stores, which brought in $12.67 million in sales. Currently, it has 4,756 stores in the U.S. and 11,501 stores worldwide (Statista n.p). It has grown to become the world’s largest retailer and has maintained this position for several years. Walmart has excellent potential for expansion into a broader global market and to maintain its status as a world leader. It can also widen the gap between itself and its competitors. This can only be achieved if it, among others, adopts an efficient and superior globalization strategy, upholds a high level of diversity, and maintains a high ethical standard. Corporate social responsibility is also fundamental in the achievement of this objective. This paper will analyze and critique the aspects of globalization, diversity, and ethics, and corporate social responsibility as they apply to Walmart.
- Globalization
The urge to enter the international business scene is an irresistible one. With several key players in the retail industry, expanding to international markets, the pressure to enter the global field is significantly high. One of the main reasons for globalization is the need for growth. When a retail company grows exponentially, it becomes too large for its local market. Therefore, it seeks to expand and, at the same time, attract more investors (Corstjens and Lal 2). This is the state of affairs for Walmart. Globalization can be viewed from two perspectives; global sourcing and global expansion. Walmart has achieved great success in terms of global sourcing. One of the reasons for its success is that it can supply inexpensive goods. Its strength, therefore, lies in its sourcing of goods cheaply. Most of the goods that it stocks are acquired from factories in all parts of the world, but 70% of its inventory is sourced from Chinese suppliers (Copeland and Labuski 96).
- Why Walmart’s Globalization Strategies have not been Successful
Although it has attempted to attain a global reach in terms of entry into new markets, Walmart has not reached its full potential. This can be attributed to three failures in its geostrategy. Firstly, Walmart does not substantially adapt to the local sphere when it enters a new market. The farthest extent that it has gone is to stock goods that are popular in the market that it enters. In most foreign markets that Walmart has entered, their entry elicits an uproar and resistance from locals. A case in point is Wal-mart de Mexico, which is the most fruitful international expansion done by the company. It entered the market as a joint venture, and later, with the support of the North America Free Trade Agency (NAFTA), it aggressively expanded, launching 2,088 stores and several restaurants under different names. On the face of it, the expansion strategy was successful, perhaps even the epitome of global expansion. However, it reveals a flawed system of globalization. One of the major protests against Walmart began when it opened a store in Teotihuacan, which is an area considered sacred. The store was opened in 2004 despite the demonstrations (Copeland and Labuski 108). In 2006, there was another uproar when Walmart opened a store at the site of a local market. This was viewed as a betrayal by the government and elicited the idea that the government was corrupt and “sold out to foreign corporations” (Copeland and Labuski 109). Secondly, the company simply purchases stores that are already popular. This strategy does not appeal to domestic retailers who go out of business upon Walmart’s entry into the local market. Locals may view this as an invasion by foreigners and attempt to resist the company. Further, Walmart has proven itself to be profit-oriented and does not focus on the needs of the local population. In India, for instance, Walmart has lobbied the government to shift its focus away from favorable policies for small farmers to incentives that support industrially cultivated and processed food primarily targeting the urban population. It has also encouraged cheap sourcing of food by industrial intermediaries from small farmers, who then supply Walmart at low prices. Therefore food is supplied to the urban middle class at competitive prices. This means that poor farmers are disregarded and left in their poor status. It has also led to a food crisis, especially among the poor population. Thirdly, Walmart’s background and work culture were developed in the Southern part of America, which is a largely unregulated space in terms of labor laws (Brunn 14). Under this backdrop, expansion into regions and countries that have stringent employment regulations in place and a strong unionization field has proven difficult.
- Proposals for Change
It is evident that Walmart’s globalization strategy is fundamentally flawed and needs to be revisited in three dimensions. Firstly, the company should change its focus from purely profit-making to incorporate social welfare as part of its geostrategy. This will encourage a more conducive environment as it enters new markets. Secondly, branding and marketing is a necessity. A workable approach would be to present itself to new markets as a local-friendly retail store that encourages local businesses to thrive while catering for the needs of consumers. Lastly, Walmart needs to change its corporate culture to be more adaptable to different regulatory atmospheres. It can do so by researching the different regulatory frameworks and formulating an approach that they can work with to ensure that it maximizes opportunities in different countries. This requires a strong and strategic Human Resource department.
- Diversity
- Workforce Diversity
Workplace diversity has been linked to business success. This success is evident in marketing, the recruitment of a multi-talented pool of workers, public appeal, and greater innovativeness. On a deeper level, diversity enables a business to understand different people groups and, in effect, address different consumers in a better way. It also enhances access to an assorted pool of knowledge and views. Further, it creates a sense of legitimacy and belonging in the eyes of consumers (Anderson and Metcalf 2). Diversity entails having a workforce that is sourced from different backgrounds and made up of several people groups. Walmart prides itself on having a diverse workforce. Its 2019 Environment and Social Governance Report (ESG) reveals that women make up 55% of its workforce and 43% of its management. Further, 44% of its workforce and 33% of management are people of color (Walmart 51). The report explains that Walmart has created a culture of diversity and inclusion (CDI) in its recruitment, workforce development, employee retention, and fair wages. Further, it has extended its commitment to diversity to include customers by introducing training on “unconscious bias.” It also developed a CDI scorecard that analyses progress in this area to ensure that it maintains a high level of diversity (Walmart 52). In terms of its workforce, it is clear that Walmart has diversity in mind, and this one of the reasons for its reputational success.
- Supply Chain Diversity
Diversity also extends to a company’s sourcing. The supply chain should be diverse and inclusive to ensure that a company gives equal opportunities to suppliers from different backgrounds. Walmart has a supplier inclusion statement from its CEO, Doug McMillon. The statement emphasizes its commitment to diversity across the supply chain (Walmart Corporate n.p). The ESG report explains that Walmart uses the standards proposed by the “National Minority Supplier Development Council and Women’s Business Enterprise National Council” as yardsticks to measure their diversity under the following groupings of suppliers; “Women, African Americans, Asian Americans, Hispanic Americans, Native Americans, Native Alaskans, members of the LGBT community, veterans, disabled veterans and other people with disabilities” (Walmart 60). Porter explains her experience with Walmart’s diversity in the supply chain. She was a small entrepreneur who appeared on a T.V. show selling syrup. After the show, the diversity coordinator of Walmart’s “Minority and Women-Owned Business Development Program” contacted her, and along with several other small business owners, she was invited to the Walmart headquarters (Porter 33). After that, her product was stocked by Walmart, and that was the beginning of her success story. This is just one example of the success of Walmart’s diversity programs.
Evidently, Walmart has made an effort to ensure that it has a high level of cultural diversity and inclusivity. It has made impressive steps that exhibit its commitment to creating an environment where people from different backgrounds, of different genders, ages, sexual orientation, abilities, and ethnic origins thrive. This is a successful facet of the Walmart enterprise that can be adopted or emulated by other companies in the retail industry.
- Ethics and Corporate Social Responsibility
- Walmart’s Ethical Foundations
Ethics and corporate social responsibility are an integral part of a business. A business can either thrive or fall on its face depending on how it addresses the community around it and the consumers of its products and services. Fernando posits that ethics and trust are interconnected (Fernando 15). A business that upholds ethics builds confidence and trust among its consumers, and this effectively enhances its reputation and efficiency. Walmart has a global ethics and compliance program headed by a Global Chief Ethics and Compliance Officer. It also has a global statement of ethics that expresses its commitment to the four pillars; respect for the individual, service to customers, striving for excellence, and acting with integrity (Walmart Global Ethics 4). It also explains that the statement and commitment to ethics covers all levels of the organization and the third parties that are associated with it. Further, it provides information on what to do in order to report an ethics violation. There is an Open-Door Helpline provided for individuals to report such ethical violations (Walmart Global Ethics 8). It also provides that bribery, fraud involving an associate and amounting to over $100,000, offer misconduct, incorrect records, and accounts, information system hacking, and serious criminal conduct must be reported immediately. Walmart’s approach to ethics is impressive, and if it is implemented at a practical level as expressed theoretically, then the ethical aspect of the company can be deemed a success.
- Corporate Social Responsibility and Community Engagement
In terms of corporate social responsibility, Walmart has an impressive portfolio. The 2019 ESG report explains that local grants given by the company in the U.S. amount to $42 million. Further, the company has a program called the “Volunteerism Always Pays” program under which over 47,000 Walmart associates volunteered over 776,500 hours, which resulted in over $7.6 million in donations (Walmart 67). Apart from philanthropic activities, Walmart also prides itself on conducting community engagement programs. The ESG report explains that when a new store is about to be opened, Walmart holds a meeting with stakeholders within the community, such as “community groups, chambers of commerce, elected officials and local chapters of national organizations to understand the needs of the neighborhood” (Walmart 67). This is an expression of the company’s commitment to the community and the fulfillment of its corporate social responsibility.
- A Practical Look into Walmart’s Ethics and CSR position
Although, in theory, Walmart presents a foolproof expression of its commitment to upholding ethics and integrity, several ethical issues have arisen over time. Firstly, Walmart’s global sourcing of products at the lowest costs raises an ethical question. It does not consider the welfare and conditions of workers in factories from which it sources its merchandise. Most of those factories are characterized by cheap labor. These abusive and deplorable conditions are created in a bid to lower production costs in order to compete with other suppliers for Walmart’s market (Copeland and Labuski 99). Walmart’s claims that its Ethical Standards Program prevents such situations are unproven since it only concerns itself with actions that are directly attributable to it and fails to go far enough down the supply chain to realize that a ripple effect of their actions causes the conditions of such workers.
Secondly, in terms of community engagement, most people, in fact, complain about the impact of Walmart stores on their local communities. An example is the building of stores away from small towns, which draws traffic away from the town centres and causes their decline. May gives the example of Wilmington, Ohio, which declined after a Walmart built a store (May 62). Further, several local businesses end up closing down due to Walmart’s “predatory pricing”. If Walmart prides itself in improving the lives of local communities and engaging them before they set up shop, why are there multiple complaints about their presence?
Thirdly, there have been claims of illegality in setting up foreign stores. A news report revealed that when setting up the Mexico stores, Walmart engaged in bribery and several illegal practices. An article in the New York Times revealed that the company made illegal payments to facilitate the generation of building permits. After conducting internal investigations, a paper trail was found, linking the company to approximately $24 million in illegal payments. The chief executive dismissed the investigators as being too aggressive in their investigations and shut down the investigations (Barstow n.p). This reveals a worrying situation of a quagmire of corrupt practices that are swept under the rug.
Lastly, despite the claims of diversity and inclusion, employees have raised complaints of gender discrimination. The first lawsuit was filed in 2001 involving 1.5 million female employees claiming discrimination. This was the largest class action suit by employees in the U.S. and could have formed a good precedent on the rights of female workers. However, the suit was dismissed by the Supreme Court in 2011 citing that the number was too big to constitute a class action suit. In 2019, several female employees once again filed a suit claiming that they were denied equal pay and certain managerial positions (Sainato n.p). This reveals a system of discrimination that cannot be willed away.
It is evident that Walmart’s commitment to ethics and corporate social responsibility is wanting. If the company expresses itself as committed to act with integrity and promote social welfare, then it is the expectation of the public that it will uphold these commitments to the highest degree. The sexual discrimination and employee dissatisfaction also make Walmart a target for public uproar which damages its reputation. The management should actively consider rethinking their strategy towards ethics and community engagement in order to regain public confidence.
Conclusion and Recommendations
Walmart is a leader in the retail industry. It has a potential that goes beyond what any other retail company has ever been able to achieve. However, it risks reputational damage and loss of public confidence due to the situations that it brings upon itself. Firstly, in its globalization strategy, Walmart has not focused on the people that it takes its business to. The retail industry is customer-based. If a company is not customer-focused, it risks failure. The fact that goods are provided at cheap prices is not sufficient. The welfare of the consumers and their local community is of paramount importance. Walmart should therefore revisit its geostrategy and make it more customer focused. Secondly, in terms of diversity, Walmart has presented itself as an inclusive employer and also sourcing with diversity in mind. However the sexual discrimination claims present a different picture. If the company applies its conception of diversity in totality, then it can truly make a mark in terms of diversity and inclusivity. Lastly, the ethical and corporate social responsibility aspects of Walmart raise huge concerns. This is a gap that should be addressed keenly. The level of community engagement with local groups is wanting. The company should refocus and strategize on how to truly implement its role in society. Its sourcing of merchandise is also a cause for concern. The company should take responsibility for its contribution to cases of workplace abuse and violation of rights in the labor force. Further, the ethics aspect should be revisited, and implementation done with utmost emphasis. This is because, in theory, Walmart presents a remarkable conceptualization of ethics, its violation and a compliance mechanism. However, it is not correctly applied in practice. If Walmart makes these changes, it will experience an unmatched exponential growth and continue to be a force to reckon with in its industry and beyond.
Works Cited
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