Case Study - Wal Mart: The Main Street Merchant Of Doom (Corporate Social Responsibility Case Study)

Introduction

Since its establishment in 1962, Wal-Mart has grown to be one of the biggest conglomerates in the world. Inevitably, with the expansion of the company, the weight and number of social and ethical issues facing the company has increased.

The key issues discussed in this particular case are:

* Wal-Mart's and America community - Small merchants and the community's environment

* Barriers to domestic expansion - Wal-Mart and its Opponents

* Wal-Mart's Corporate Social Responsibility (CSR) programmes: Merely gimmicks?

* The company's responsibility to employees who lose their jobs and loyal customers when Wal-Mart pulls out of a community

* International expansion of the company - cultural sensitivity

Overview: Wal-Mart and CSR

Analyzing the company's CSR situation using the 4-part CSR model:

Economic Responsibilities: This has been amply fulfilled. The company is obviously profitable - net sales totalled $256.3 billion in 2004. Thus, the foundation for all other aspects of CSR has been set very well.

Legal Responsibilities: Wal-Mart has a rather poor showing in this area, being considered "the most sued company in America". It is embroiled in hundreds upon thousands of lawsuits, and has questionable labour practices. It is reputed for low wages and discrimination (based on gender etc). However, it must be noted that it is inevitable for such a large company to get sued by many parties, sometimes with no grounds at all.

Ethical Responsibilities: This responsibility has only been partially met. Wal-Mart's "Buy American" and "Environmental Awareness" plans are good examples of the company's attempt at ethical responsibility. Furthermore, Sam Walton offered his employees stock options and profit sharing to enable them to share in the company's wealth. However, it has neglected to fulfil its responsibility toward the small merchants it puts out of business when it enters a town. Moreover, the "Buy American" plan has been de-emphasized, and these programmes could be publicity stunts.

Philanthropic Responsibilities: In this area, Wal-Mart has fared well. The company has numerous corporate citizenship initiatives - college scholarships, fund-raisers and even a hefty $50 million donation to the business school at the University of Arkansas. They have even established the Walton Family Charitable Support Foundation to facilitate their corporate philanthropy.

Conclusion: Wal-Mart is an extremely profitable company and a noted philanthropist. However, there is significant room for improvement in the areas of legal and ethical responsibility if Wal-Mart is to work towards better CSR. In this case study, ethical responsibility is of particular importance. The lack of responsibility in this area has given rise to barriers to both domestic and international expansion. For example, places like Iowa City are blocking Wal-Mart's entry in fear of its negative impact on the city's small merchants. The abovementioned key issues primarily concern this area and need to be addressed if Wal-Mart is to continue thriving in America and beyond.

1. Wal-Mart & American Community

A Wal-Mart entry can be detrimental to a community's environment and people - causing sprawl, traffic congestion, unwelcome changes to the landscape and putting small merchants out of business.

Small Merchants

Some of the strongest opposition against Wal-Mart stems from the concern of what their presence would do to existing businesses. Before the advent of the superstore, small merchants served America. Due to their small size, it was impossible for them to buy goods as cheaply as a superstore, and this necessitated higher pricing. With the entry of Wal-Mart and their low prices into these underserved American communities, residents began to buy from Wal-Mart instead of these small merchants, forcing many of them to close.

Undoubtedly, this has been beneficial for consumers in that they can purchase their goods for more competitive prices. However, what many might not realize is that Wal-Mart's entry can be good for the small players as well. Having to compete with a giant like Wal-Mart, they would have to re-invent. Since they obviously cannot compete based on price, they would be forced to offer value-added services to gain an edge. For example, these small merchants could make an effort to remember the names of their customers, adding a more personal touch to their service.

Yet, there is a limit to what reinventing can do. Consumers are rather price sensitive and in this area, due to economies of scale, it is impossible for the small merchants to compete. As Wal-Mart purchases its goods in large quantities, it can enjoy bulk discounts unavailable to small merchants. Thus, by virtue of size, Wal-Mart can force these merchants to fold up. However, just like there is no glory in a large man beating a small child at arm wrestling, it is unethical for such a big player in the industry to come in and give the small fry no space carve a niche. Thus, the company has an ethical responsibility to help these small merchants survive alongside their store/s.

Moreover, if Wal-Mart were to commit itself to helping small businesses in the community, cities that are currently blocking its entry for fear of its impact on small businesses might be more willing to let Wal-Mart set up shop in their area. Such a stance would assuage their fears that Wal-Mart was there to take over the city and cast the company in a more positive light.

The stance Wal-Mart should take can be summed up in this phrase "Complement, not Compete". Wal-Mart should emphasize that it is not there to put small merchants out of business. One possible avenue to fulfil this is the company could acting as a supplier/distributor to the small merchants rather than a competitor. Wal-Mart has its own line of products for almost everything - from study tables to shampoo. Most of them are imported from countries such as China. Due to the bulk purchased, both the cost and selling prices of these products are low. Thus, Wal-Mart could sell them at a price above cost but below selling to small merchants to sell to consumers, thus making a profit. In this way, Wal-Mart can have a share of the community's market