Wal-Mart is the world’s largest retailer. The company has come a long way from its inception in 1962 with one store in Bentonville, Arkansas to over 10,000 stores spread over 15 countries. The retailer has earned a reputation as the third largest corporation in the world and the largest private employer in the world employing approximately two million people. The growth of Wal-Mart has come with its own challenges. The key one among these is the company’s bad publicity attributed to offering low wages, denying employees the right to join unions, below par health insurance coverage for employees, killing small businesses wherever it goes, and environmental degradation. This paper describes the main publicity challenges faced by Wal-Mart and makes recommendations to the Wal-Mart management on how to respond to the said challenges.
Wal-Mart has lower wages than other retailers do. The company’s employees and labor unions raise this issue. Employees have held demonstration requesting for better pay and improved working conditions. However, the company has been adamant insisting its model of business, low pricing for higher volumes, cannot support higher wages and that what it pays compares favorably with the industry average. Many studies, however, confirm that Wal-Mart pays its employees less compared to rivals such as Target. The question is to what extent Wal-Mart can increase its employees’ wages without deviating from its low pricing strategy and hurting its bottom line. Wal-Mart has also faced criticism over its employee health care coverage being less than what competitors offer to their employees (Clifford 2).
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Furthermore, Wal-Mart does not allow its employees to join unions. In contrast, all of Wal-Mart’s competitors are unionized. Refusal to unionize is seen as a way of maintaining a firm grip on employees and as a way of reducing their bargaining power. The company has fought many battles with unions on this ground but it is relentless; its employees will not unionize yet. The thinking in the company is that joining unions will lead to increase in staff expenses which will hit its bottom line negatively. This creates a bad image in the public eye as the company is seen as draconian. Wal-Mart is able to win these wars through its connections with the bureaucratic and political class in Washington.
Wal-Mart has also faced accusations of lowering wages among retail workers wherever it opens shop. Wal-Mart entry applies pressure on other retailers to lower their labor expenses in a bid to remain competitive. However, some studies have shown that this effect depends on the specific location of the store. In rural states, the entry of a Wal-Mart tends to increase the average employee wages while in urban areas, the reverse happens. The issue of Wal-Mart leading to lowering of wages in its location has received a lot of publicity in the past triggering some towns to protest any suggestion of a Wal-Mart opening in their neighborhoods. This has slowed down the company’s expansion.
Moreover, Wal-Mart has a bad reputation when it comes to environmental conservation. Some neighborhoods oppose the location of a Wal-Mart in their vicinity because they fear their neighborhoods will deteriorate in environmentally once the store opens. Some oppose it on the grounds of the sheer amount of traffic that will jam their neighborhood as shoppers come from everywhere to do shopping in the store (Anderson 3). Increased traffic flow means increased noise, carbon emissions and less safety for pedestrians. Issues have also been raised on how the company handles its waste and while this issue has been taken up with suppliers in a bid to reduce the amount of packaging waste and to use environment friendly packaging materials, it has nevertheless dented the company’s image. These factors may explain the absence of Wal-Mart store in many Northern cities where people are more enlightened about their rights and more demanding in their expectations on businesses opening up in their cities.
Internationally, Wal-Mart is accused of applying a monolithic strategy of low pricing without evaluating the culture and the needs of a market. This led to negative perception about its Japanese store, Seiyu, because Japanese traditionally associate higher price with higher quality and vice versa and to them high prices is not a problem. In Korea and in Germany, the company made the same mistakes of exporting the American culture to different people with a different culture altogether.
Recommendations
Wal-Mart should increase its investment in corporate social responsibility (CSR) to endear itself with people. The Wal-Mart Foundation should be more forceful and more capitalized to push the company’s agenda ahead. In areas the company wants to open new stores, the foundation should carry out activities in advance to prepare the ground for the store.
The company should hire a consultancy firm to do a cost-benefit analysis of increasing wages to be on par with the competition. Such a study will establish the real difference in wage levels and evaluate what increasing the wages and other employee benefits would mean to the company. It would establish whether the increase is something the company can absorb without passing the same to customers in form of price increases and if so to what extent would such a move eat into the company’s bottom line.
Wal-Mart should also position itself as a company that promotes the rights of the minorities and the marginalized. To this end, its CSR arm should work closely with organization representing such people to win their support. The company is doing that with homosexuals but the same should be extended to other minorities and vulnerable groups.
It would be in the interest of the company to engage in activities that support environmental conservation. This will portray the company as environment-friendly in the eyes of the public. For example the company can sponsor organizations involved in conservation of endangered species and at the same time consider greening all its activities.
Internationally, the company should conduct a thorough cultural study about the market it intends to venture with the aim of aligning its activities to the people’s way of life. The company needs to avoid exporting the American culture to others but tailor-make every subsidiary to suit the needs of the market it serves.
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