JoAnn Hrabousky
Wal-Mart Stores, Inc. (WMT)
BA 301 Research and Analysis of Business Problems
Spring 2014
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Executive Summary
Wal-Mart’s market share of 64.4% ranks the company as the number one retailer in the
world (Wal-Mart, 2013). The company operates over 10,000 stores and employs 2.2 million
people worldwide with a projected revenue in 2014 exceeding $476 billion (Wal-Mart, 2013).
Many issues have plagued the massive company in recent years and their public image has
steadily declined as a result. Corporate business practices have come under public criticism in
regards to employee labor relations, environmental sustainability issues, and poor customer
service (Wal-Mart, 2014).
Numerous legal proceedings are well documented on the company Form 10-K ranging
from sexual discrimination to unfair labor conditions resulting in sixty-three paid settlements
totaling $640 million (Johnson, 2008). Wal-Mart has also been named 2014 greenwasher of the
year for misleading claims regarding environmental sustainability practices (Hudson, 2014).
Wal-Mart’s main problem is its unfavorable public image. Two solutions to improve
their image are based on improvements in management training and corporate support of the
employee instituted non-profit organization OURWalmart. Innovative management training
focusing on communication and leadership skills will improve employee relationships and job
satisfaction. Transparent corporate support of the employee organization and glocalization will
show goodwill with workers and communities alike. Ultimately, these solutions will garner
toward the values first envisioned by founder Sam Walton, to treat people with integrity and
respect; and resounding the founder’s three values of, “ respect for the individual, service to our
customers, and striving for excellence " (Wal-Mart, 2014).
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Company Background Information
Wal-Mart Stores, Inc. (WMT) is a publicly traded company on the New York Stock
Exchange and is ranked number one retailer in the world according to Fortune 500. In 1962,
Sam and J.L. (Bud) Walton founded the mammoth company in Rogers, Arkansas (Walmart,
2013). Five years after opening the first brick and mortar store, the Walton family legacy grew
to twenty-four stores and earned $12.7 million in sales revenue (Walmart, 2013). Today the
company operates 10,130 stores in 27 countries including 4,400 retail outlets in the U.S. and
employs over 2,200,000 people worldwide, including more than 1.3 million associates in the
U.S. (Wal-Mart, 2013). Projected total revenue for the 2014 fiscal year exceeds $476 billion
(Wal-Mart, 2013).
Wal-Mart’s U.S. segment offers numerous low cost items through discount stores,
supercenters, warehouse membership clubs, neighborhood markets, and e-commerce sales
through walmart.com (Wal-Mart, 2013). Global business accounts for approximately twentyeight percent of the company’s annual revenue with more than ninety percent of stores operating
under a banner other than Wal-Mart, including names such as Walmex, Asda, Seiyu, and Best
Price (Wal-Mart, 2013).
The company’s mission statement and advertising slogan are the same: “We save people
money so they can live better.” Sam Walton also added a ‘purpose’ to the company, “If we work
together, we’ll lower the cost of living for everyone…we’ll give the world an opportunity to see
what it’s like to save and have a better life” (Wal-Mart, 2014). Wal-Mart Stores, Inc. has
instituted standardized policies and procedures that correlate to the overall corporate culture
including “3 Basic Beliefs & Values” which include “respect for the individual, service to our
customers, and striving for excellence” (Wal-Mart, 2014). The company homepage also
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documents another quote originated from founder Sam Walton: “Our people make the
difference. We’ve worked hard to build an environment that emphasizes integrity, respect, open
communication and innovation. Whether it’s a part-time job or the career of a lifetime, working
at Wal-Mart means opportunity” (Wal-Mart, 2014).
Soon after the death of founder Sam Walton in 1992 and S. Robson Walton became
reigning chairman of the board of directors, legal issues began to surface and public criticism of
company practices entered the media spotlight (Wal-Mart, 2014). Waterford Wedgewood sued
the company for allegedly selling counterfeit crystal, and in 1993 television media revealed the
utilization of child labor in Bangladesh for merchandise soon to be sold under the “Made in
USA” label (Wal-Mart, 2013). In 2005 film director Robert Greenwald and Brave New Films
introduced a negative documentary highlighting Wal-Mart’s business practices through
interviews with former employees, small business owners, and footage of company executives.
The film uses statistics interspersed between interview footage to provide an objective analysis
of the effects Wal-Mart has on individuals and surrounding communities. Such criticism has
increased the negativity of Wal-Mart’s public image. The following paragraphs highlight the
variables that have contributed to the overall view of the company’s image.
Social Responsibility
Company practices for attaining property for new store locations has also come under
scrutiny in the public eye. Community activists claim supercenter saturation has damaged the
profitability of local retail districts, independent retailers, and grocers, as well as contributed to
increased traffic congestion and suburban sprawling (Wal-Mart, 2014). Opposition from
communities has steadily risen to approximately one hundred cases per year (Bianco and Zellner,
2003). The small community retail businesses located in the surrounding areas of large Wal-
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Mart stores eventually file for bankruptcy because the merchants cannot compete with the low
prices offered at Wal-Mart. (Bianco and Zellner, 2003).
Regarding Wal-Mart’s carbon footprint, environmental watchdog, The Green Life, has
named the company 2014 Greenwasher of the Year for marketing misleading claims of
environmental sustainability (Hudson, 2014). In 2005, corporate Wal-Mart pledged a one
hundred percent transition into renewable energy, but as of today only four percent of the
electricity consumed by the company comes from renewable sources (Hudson, 2014). In fact,
the company’s carbon footprint has climbed more than 13 percent since claiming eco-friendly
practices for nine years (Hudson, 2014). Major sources of their greenhouse gas emissions occur
as a result of international shipping and other distribution processes and logistics. Last year
Wal-Mart imported two-and-a-half times the volume of goods imported from a decade earlier,
which accounts for one of every twenty-five containers imported to the country as a whole
(Mitchell, 2013).
Poor Customer Service
Consumers throughout the US are complaining about poor customer service experiences
received at Wal-Mart. Desired products have been difficult to find and long checkout lines with
only a few cashiers on duty have become an issue (Lutz, 2014). The decline in service (and
product availability) is due to employee turnover and insufficient staffing; the existing
employees cannot keep up with demand (Lutz, 2014). Since 2008, the company’s workforce has
steadily declined by 120,000 (Lutz, 2014).
Disgruntled Associates
Wal-Mart’s labor practices have been at the center of criticism. The company’s 10-K
report lists numerous legal actions that have occurred over the years including allegations
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pertaining to business practices that violate state labor laws such as employees being required to
work through mandated meal breaks and working off the clock (Wal-Mart, 2014). There are
numerous class action suits that illustrate a pattern of discrimination against women in
promotional advancement, inadequate pay, training, and job assignments as well as forcing
employees to work through break times (Wal-Mart, 2014). Wal-Mart Stores, Inc. settled sixtythree lawsuits across the United States over wage and hour violations in the sum of $640 million
(Johnson, 2008).
Wal-Mart Corporate Attempts To Improve Public Image
In 2005, Wal-Mart executives organized a communication center known as the “war
room” inside their Bentonville company headquarters and hired the Edelman Public Relations
firm to address negative criticism (Barbaro, 2005). The center is staffed with personnel that scan
current events on a daily basis looking for negative press surrounding the company. If a negative
story is uncovered staff releases a counter story to discredit the media source (Barbaro, 2005).
The firm receives $10 million annually for reputation management (Goldberg, 2007).
Wal-Mart corporate launched a $3 million ad campaign entitled ‘The Real Wal-Mart’ in
2013 to combat press surrounding negative allegations toward labor practices, bribery
accusations in Mexico, and working conditions in factories such as Bangladesh (Ross, 2013).
The campaign has been critiqued as being ineffective because no initiative for change is ever
proposed or implemented (Ross, 2013).
The Competition’s Business Model
The solution to Wal-Mart’s unfavorable image begins with the appropriate treatment of
employees. Competitors such as Costco have proven a better business model to adhere by. The
company delivers low prices to consumers differently than Wal-Mart. Costco’s model is based
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on the following: keep costs down; rely on high volume; pay workers well and aim for upscale
shoppers (Cascio, 2006). Costco’s wages and treatment of employees deter yearly turnover rates
down to 17 percent whereas Wal-Mart is higher at 44 percent (Cascio, 2006).
One of Costco’s core beliefs is to “take care of our employees” (Cascio, 2006). Coscto’s
human resources department sets wages and benefits to be considerably better than that of
competitors (Cascio, 2006). Their approach shows that when it comes to wages and benefits, a
cost-leadership strategy is most effective (Cascio, 2006). Costco records show that treating
employees justly and humanly turns out to be an effective and efficient business model. In
addition, 85% of Costco employees have health-insurance coverage, whereas Wal-Mart and
Target have less than half (Cascio, 2006). Costco is also unionized (13 percent of employees
belong to union) and the company promotes internally for 98 percent of its top positions whereas
Wal-Mart is at 76 percent (Cascio, 2006).
To Improve Wal-Mart’s Unfavorable Public Image:
Solution (#1): Incorporate Innovative Managerial Training
Wal-Mart’s current managerial training program is designed to cultivate managers as
quickly as possible to satisfy demand (Donlon, 2013). The leadership-training program is
modeled after the Royal Military Academy and was originated by former British commando
Damian McKinney (Donlon, 2013). Thirty percent of training time focuses on incorporating
interpersonal skills in unexpected situational settings and seventy percent is geared toward
improving cross-functional career advancement (Donlon, 2014).
The company’s authoritarian style of management training is a product of the corporate
culture and business model (Lichtenstein, 2011). The culture insists on a high degree of
company loyalty despite complaints of poor wage and working conditions from front line
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workers (Lichtenstein, 2011). Store management career opportunities exist from internal
promotions of substandard candidates who, when promoted, are moved to another store location
which may be hundreds of miles away (Lichtenstein, 2011). The fixed policy of corporate
reassignment has contributed to numerous sexual discrimination allegations from the company’s
female employees, which constitute seventy percent of Wal-Mart’s work force (Lichtenstein,
2011).
Wal-Mart needs to energize their workforce with innovative managerial training
programs that focus on Sam Walton’s original beliefs and values. Mr. Walton knew the value of
creating an effective employee partnership, treating employees with dignity and respect.
Training policies focusing on new communication and leadership skill sets involving human
resource management are crucial in reinventing company branding while subsequently
improving their public image.
Solution (#2): Transparent Associate Support Coupled With Fair Labor Policies
Wal-Mart is well known for their opposition to union organization. Union attempts have
been aggressively thwarted and the company has allegedly fired workers who are proactive in
unionization (Dickinson, 2013). In 2000, butchers at a Texas Wal-Mart voted to join the United
Food and Commercial Workers Union, two weeks later Wal-Mart stated that it was closing all
180 of its meat counters; and in 2004, the company closed an entire store after employees voted
to unionize (Dickinson, 2013). Employee unionization undoubtedly will never prevail given
Wal-Mart’s determination against it.
In 2010, Wal-Mart associates created a non-traditional alternative to unionizing called the
Organization United for Respect at Wal-Mart; a not-for-profit, independent organization that
focuses on hourly associates (“OUR Wal-Mart,” 2014). Their vision being, “ We envision a
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future in which our company treats us, the Associates of Wal-Mart, with respect and dignity”
(“OUR Wal-Mart,” 2014).
Transparent corporate support of the organization combined with fair labor policies will
improve the company’s overall public image. Informal groups can be liaisons between
employees and management where labor (or other) issues can be discussed and rectified.
Workers won’t feel the need to unionize if pay and working conditions are comparable to
industry standards.
To hinder opposition from communities when lands for new store locations are sought,
store managers need to glocalize local communities by adapting to local culture (Matusitz,
2013). Individual stores need to sell products and services geared to local tastes and preferences
as well as recruiting bilingual associates (Matusitz, 2013). Glocalization will garner customer
loyalty and add a sense of community within the store itself (Matusitz, 2013).
Cost vs. Benefit Analysis
Wal-Mart Stores, Inc. and the Walton family receive more than $7.8 billion in annual
subsidies and tax breaks (“Report,” 2014). The family also utilizes specialized tax trusts to avoid
estate taxes saving approximately $3 billion annually (“Report,” 2014). Investigative reports
indicate employees earn below minimum range, yet the company’s projected net profit for 2014
exceeds $16 billion which is more wealth than the combined income of approximately forty-two
percent of Americans (see Figure 1) (“Report,” 2014).
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More than half of
Wal-Mart employees earn
less than $22,400 a year,
putting them below the
federal poverty line (Ross,
2013). According to
Derrick Plummer,
Figure 1: Low Income Standards of Poverty (WMT, 2007)
spokesperson for the
organization Making Change at
Walmart, “If Walmart paid its associates $25,000 a year on average, it’d still be making more
than [its chief competitors] combined” (Ross, 2013).
Innovative management training costs combined with improving employee salaries and
corporate support of OURWalmart will provide substantial benefits to Wal-Mart, therefore
boosting public image. The costs incurred will be substantiated by increased employee
productivity, increased revenue, and improved customer service. The return on investment will
outweigh the costs and will ultimately provide greater profitability. Offering a competitive
salary to associates will not only attract a more talented workforce it will keep employees
motivated. Shareholders will benefit from increased productivity and investment returns will
rise (Cardenal, 2014).
Recommended Solution
The most plausible solution in positively changing Wal-Mart’s unfavorable image is
implementation of corporate associate support coupled with fair labor policies. Since the
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management-training module is centered on a fast moving military structure, upper management
would presumably classify any additional training as being time consuming and contradictive to
training efficacy. Transparent company efforts in attempting to effectively build proactive
communication between management and associates help to build positive relationships and also
conditions future internal management candidates.
The most valuable asset in a business is its human capital. Skilled employees working
under the right incentives can generate enormous benefits for investors and positively influence
overall company culture (Marks, 2013). With a 64.4% market share, Wal-Mart has the resources
to positively impact the lives of their associates along with reestablishing the founder’s original
idea of workplace unity.
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Appendix
SWOT Analysis
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Strengths
World’s largest retailer with 64.4%
market share ($477.2 billion
revenue)
~ 2.2 million employees
Competitive low prices
Monopolizing power
Innovative Management Training
Opportunities
Brand company image
Improve employee relations and
labor practices
Credible social responsibility
practices
Promote community and employee
goodwill
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Weaknesses
Poor customer service
Disgruntled associates with high
employee turnover rate
Numerous litigations
Unfavorable public image
Large carbon footprint and
inadequate environmental
sustainability practices
Threats
Lower class reputation
Competitive retailers such as Target
Increase price of raw goods
High legal liability costs incurred
from litigation
Expansion resistance
Strengths:
Wal-Mart’s major strength is their monopolizing power attained from its sheer size and
marketing strategy by offering competitive low prices on products. They are listed as the
world’s largest retailer with a 64.4% market share in the retail industry and totaling $477.2
billion in revenue for fiscal year 2013 (Wal-Mart, 2013). The company and its subsidiaries
employ ~ 2.2 million worldwide, with more than 1.3 million in the U.S. (Wal-Mart, 2014).
Strengthen communication and leadership skills with innovative managerial training.
Weaknesses:
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Unfavorable public image has resulted from a variety of sources. Numerous lawsuits
ranging from inadequate labor policies to sexual discrimination from disgruntled employees has
tarnished company reputation. Social responsibility commitments have been skewed by
allegations claiming inadequate environmental sustainability practices resulting in high carbon
footprints (Hudson, 2014). Poor customer service complaints such as long checkout lines reflect
understaffing perpetuated by high employee turnover (Lutz, 2014).
Opportunities:
Elevate the company brand from its lower class reputation by improving the quality of
products as well as store aesthetics. Improve employee relations by implementing fair labor
practices and policies. Improve overall public image with completion of environmental
sustainability programs and community involvement. Promote community and employee
goodwill by offering corporate support with the non-profit employee organization OURWalmart.
Threats:
Competition by other large retailer companies can reduce revenue, specifically Target.
The lower class reputation has a negative effect on consumers. High costs affiliated with
increased pricing for raw goods as well as high litigation fees will also have a detrimental effects
on keeping prices low. Also, expansion of other large warehouse stores has met with resistance
from smaller communities.
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SWOT References
Hudson, Drew. Walmart Wins Greenwasher of the Year. The Green Life Online. April 2014.
Lutz, Ashley. Wal-Mart Could Be In Big Trouble If It Doesn’t Fix Customer Service Fast.
Business Insider. April 12, 2014.
Wal-Mart Stores Inc. US Industry Reports (NAICS). Major Companies. IBISWorld. 2013
Wal-Mart Stores, Inc. Form 10-K. U.S. Securities and Exchange Commission | Homepage.
N.p., n.d. Web. 11 Apr. 2014.
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Works Cited
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Web Access 14 May 2014.
Bianco, Anthony, and Wendy Zellner. Bloomberg Businessweek Magazine. Bloomberg
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Cardenal, Andres. Costco vs. Wal-Mart: Higher Wages Mean Superior Returns for Investors.
The Motley Fool. N.p., 12 Mar. 2014. Web. 3 June 2014.
Cascio, W. F. (2006). Decency Means More than "Always Low Prices": A Comparison of
Costco to Wal-Mart's Sam's Club. Academy Of Management Perspectives, 20(3), 26-37.
Dickinson, Julie G. Walmart's War Against Unions-and the U.S. Laws That Make It Possible.
Www.huffingtonpost.com. Huffington Post Business, 5 June 2013. Web. 25 May 2014.
Donlon, JP. How Walmart Trains Better Leaders. ChiefExecutivenet Chief Executive Magazine
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Goldberg, Jeffrey. Selling Wal-Mart: Can the company co-opt liberals? The New Yorker. April
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Hudson, Drew. Walmart Wins Greenwasher of the Year. The Green Life Online. April 2014.
Johnson, Gene. Wal-Mart Settles Lawsuit by Washington Workers for $35M. ABC News. 2008.
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Lichtenstein, Nelson. Wal-Mart's Authoritarian Culture. The New York Times. 21 June 2011.
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Lutz, Ashley. Wal-Mart Could Be In Big Trouble If It Doesn’t Fix Customer Service Fast.
Business Insider. April 12, 2014.
Marks, J. (2013). Dinner (Isn't) Served. Home Textiles Today, 34(27), 4.
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Matusitz, J., & Lord, L. (2013). Glocalization or Grobalization of Wal-Mart in the US? A
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Wal-Mart Stores, Inc. Form 10-K. U.S. Securities and Exchange Commission | Homepage.
N.p., n.d. Web. 11 Apr. 2014.
Wal-Mart Stores, Inc. International Directory of Company Histories. Ed. Jay P. Pederson. Vol.
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Accessed May 2014.
Wal-Mart Stores Inc in Retailing (USA). Passport Database. Local company profile. 10 Apr
2013