Wal-Mart Store is the most known retailer in the world, which attracts more and more customers every year. Its popularity can be explained with the variety of Wal-Mart’s product range, approachability, and convenient location of the stores, competitive prices, good deals, discounts, and its outstanding marketing policy. However, it is impossible to deny the company’s negative impact on the society, economy, and business. Wal-Mart was involved in a significant number of legal cases of discrimination and racism, bribery, sweatshops, and children’s labor usage. The wages offered at Wal-Mart are extremely low, and the work conditions for employees are not attractive. Besides, Wal-Mart’s external business activity affects environment, has some social issues and contradictions with its corporate culture. Dishonesty of a Wal-Mart business practice is a key factor of its success in dominating the retail market. Therefore, the goal of this paper is to refute the most common myths about Wal-Mart providing additional evidence in a form of statistics, facts, and analytical information.
Wal-Mart Help in Fighting The Poverty
There is a well-known myth stating that Wal-Mart is one of the socially responsible organizations, which help poor countries and regions to alleviate poverty through developing businesses (Tierney 1). In fact, Wal-Mart placed most of its production facilities overseas in order to set lower prices for items. Outsourcing abroad brings Wal-Mart’s production cost to the minimum since the resources in the chosen countries are much cheaper. Workers, who produce items for Wal-Mart, are paid next to nothing, let alone the inappropriate work conditions, remuneration package, and other issues of their business practices.
Allocating its production facilities abroad, the company started closing its production lines in the USA, leaving a lot of people without jobs. Certainly, it did not contribute to the American employment market, although, it helped Wal-Mart to increase profits (Tierney).
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Wal-Mart provides competitive work conditions
Some researchers, who actively defend Wal-Mart, claim the company to be a decent place to work. Wal-Mart is said to provide a significant number of work places in the USA, as well as abroad (Tierney 1). However, the company makes use of its employees by paying extremely low wages. In average, a Wal-Mart’s employee earns about $9.68 per hour in the USA, which is incredibly low comparatively to the salaries offered by other companies in the same sector (Reich 1). There is a 26% difference between the earnings of Wal-Mart’s employees and employees of other retailing companies (Dube, Lester, and Eidlin 2). Additionally, the company simply exploits cheap foreign labor force at Wal-Mart’s factories abroad paying no more than two dollars per day (Tierney 1).
Moreover, Wal-Mart is not doing well with its health insurance policies cutting benefits heavily for its employees and their families. Health insurance coverage offered by Wal-Mart has been significantly rolled back, and premiums were raised for both part-time and full-time employees. Hence, most of Wal-Mart’s employees are not provided with health insurances by the company. It leads to employees’ dissatisfaction and their inability to afford their health insurance plans (Reich 1).
Health insurances sponsored by employers are also affected by Wal-Mart opening new stores. A single Wal-Mart store leads to 0.1 percent decrease in health insurances and benefits, which are provided by employers in retail business (Dube, Lester, and Eidlin 7).
As a result, by lowering wages and social benefits for its employees, Wal-Mart gets the possibility to bring its prices as low as possible. The rest of the companies become unable to compete with the prices offered at Wal-Mart. That is why the only possibility to stay in the market is for them to adapt Wal-Mart’s policy of reducing wages to the lowest levels (Dube, Lester, and Eidlin 1). Such tendencies are totally unacceptable for the national employment market.
How can Wal-Mart level up the employment market?
Wal-Mart claims to create a large amount of new work places providing more people with jobs and decreasing unemployment level. However, Wal-Mart pushes other companies out of the market, which would be able to provide the same amount of work places. Moreover, employees at Wal-Mart are paid about twenty five percent less in wages than they were paid at the companies, which were forced to close down because of Wal-Mart’s presence in the region (Dube, Lester, and Eidlin 1). Opening a new Wal-Mart store decreases an average wage in the local retailing sector by 0.5-0.9 percent and 1 percent in the merchandise sector in general. Opening a new Wal-Mart store had the biggest impact on grocery employees’ salaries; their wages reduce by 1.5 percent in average (Dube, Lester, and Eidlin 5). Likewise, implementing a new Wal-Mart store lowers total earnings in the retail sector approximately by 1.5 percent on the local, as well as on the national, level (Dube, Lester, and Eidlin 6). The effect of spreading Wal-Mart stores on the national level is sadly impressive. Total earnings in the retail sector on the national scale declined by 4.5 billion dollars in 2000 due to Wal-Mart’s business (Dube, Lester, and Eidlin 6).
Wal-Mart carefully chooses a region to place a new store. The main criterion of opting the right location is based on the average wages level. If the wages in the retail sector have been dropping down recently, it would be the right location for Wal-Mart since it will not be blamed for reducing wages even after more intensive decrease (Dube, Lester, and Eidlin 3).
Wal-Mart offers American products at the lowest prices
The prices at Wal-Mart are low indeed, although the way the company reached such results affects other businesses and suppliers. The company decreases the cost of products supply (Reich 1). Wal-Mart has a campaign called `Made in the USA`, which claims that all the company’s goods are produced in America. It is not actually right since the main part of workers on Wal-Mart factories in the USA are foreigners. Moreover, Wal-Mart sells products, which are mainly produced in China and other countries with less production expenses. Computer software and processing of data, used in Wal-Mart, are operated in India (Reich 1). Wal-Mart exploits foreign work force in order to produce its items ridiculously cheaply. No doubt, American customers have a great advantage of attractive prices, although the workers in the USA and abroad are being heavily exploited and underpaid by Wal-Mart.
Do people `Save money. Live better` with Wal-Mart?
This is what the company’s slogan says. Nevertheless, it is quite contradicting whether Wal-Mart truly changes everyone’s lives for better.
Wal-Mart is a strong and massive retail chain. Having about 50 stores at each state of the USA, it summed up to 2500 stores in 2000 in total. Every new 50 Wal-Mart stores result in 10%-average wages decrease (Dube, Lester, and Eidlin 6). Large size and strong economic power allow Wal-Mart to manipulate global and national economies.
Wal-Mart has different affect on customers, employees, suppliers, distributors, other businesses, and national economy. Obviously, shopping at Wal-Mart is a pleasant experience for the customers. They benefit from low prices and affordable variety of goods. Nevertheless, the situation is different for people who cooperate with Wal-Mart. The company aims at pushing smaller competitors’ businesses out of the market. They simply cannot compete with Wal-Mart because of the process level and the product range offered by Wal-Mart. As a result of Wal-Mart’s policy, small retailers suffer, lose their fortune, and leave the market. Wal-Mart is capable of eliminating the distributor link in their distribution channel, which means they are getting products directly from manufacturers and distributors have less work. Enormous scale of Wal-Mart’s business forces suppliers to work with the company on its rules, which tend to keep suppliers’ fees down. The employees at Wal-Mart are paid low wages and not provided with appropriate benefits package in order to offer low prices for products at the stores. The impact of Wal-Mart on national and global economies cannot be underestimated. The company has a strong negative effect on the employment market and on other businesses activities.
The case of Wal-Mart shows that people have to think about it not just from a consumer’s point of view, but also from a citizen’s and worker’s point of view (Reich 1).
Criticism of Wal-Mart
Probably everyone has been to Wal-Mart Store, which is the most known retailer in the world. All the amount of items to buy, an immense choice of products, approachability of stores, attractive prices, sales and discounts and things for free – that is all about the well-known department store chain Wal-Mart. The question arises if all that glitters is gold. Some people could not help but wonder about the integrity of Wal-Mart business practice, some social issues and the corporate culture of the large retailer, which has managed to dominate in the market, and about how it affects lives of many people. `Save money. Live better` is the company`s slogan. However, it is quite contradicting that it truly makes everyone’s lives better. Mass protests of Wal-Mart`s employees, legal cases of female employees’ discrimination and racism, of the usage of children`s labor, bribery, sweatshops, low wages paid to their workers, environmental pollution etc. Wal-Mart has been involved in, must prove the opposite.
First of all, the human resources policy of the company has some issues to discover. It is not a secret that Wal-Mart pays extremely low wages to its employees; however, the real figures can be notorious. According to Freeman, Ticknor, grocery workers at Wal-Mart earn about 23% less than people on similar positions at unionized stores. The most people who work for Wal-Mart live below the poverty line (Freeman, Ticknor). The corporate culture of Wal-Mart does not seem to be well established; there is a number of complaints from company`s employees, and especially, from those who were forced to quit or were fired for no reason, about not being treated accordingly by their managers (Murphy), not earning enough and having hard times working there (Ehrenreich). There are some statistics which light up cases of discrimination at Wal-Mart. Over one million of employees have been suing Wal-Mart in cases of sexual discrimination since 2000 (Ryan). Among managers at Wal-Mart, there are only from 14 to 32 percent of women, whilst the main part of women work at the lowest positions, such as cashiers, sales associates etc. (Ryan)
Placing production facilities overseas is another factor against Wal-Mart. Outsourcing allows setting lower prices for items produced abroad by workers who are paid next to nothing. Wal-Mart produces more than 85% of items abroad, especially in poor countries with a great access to cheap labor, where the company does not care much about working conditions, remuneration package and other issues of their business practices (Miller). In addition, Wal-Mart was reducing the amount of production in the USA, therefore, a lot of people were losing jobs because the company`s policy was to “close plants in the U.S. to favor the outsourcing of products from overseas” (Martínez). That was the matter of the expense, everything needed to be as cheap as possible for the company. However, clearly, it did not contribute to the American employment market.
There were a couple of cases with Wal-Mart’s using children’s labor. The Daewoosa Factory, a slave-labor camp based in American Samoa which was producing clothes for Wal-Mart, can be used as one of numerous examples (Freeman, Ticknor). Workers (mostly young women) were “cheated of their meager wages, beaten, starved, sexually harassed, and threatened with deportation” (Freeman, Ticknor).
Even in the USA, where Wal-Mart claims that all the company`s goods are produced in America by launching the `Made in the USA` campaign, it is not actually right, since the main part of workers on Wal-Mart factories in the USA are foreigners, some of them do not even have any legal work permitions. In addition, Wal-Mart was caught in paying bribes to local officials when setting another store in Mexico (Clifford, Greenhouse). All mentioned ideas show the Wal-Mart`s way of business, which seems not to have any boundaries.
Policy of pushing smaller competitors
Furthermore, the Wal-Mart policy is aimed for pushing smaller competitors` businesses out of the market (Murphy). Small companies simply cannot compete with Wal-Mart in the range of products they offer, in the availability of getting to stores, but the most important – in prices. That makes small retailers suffer, lose their fortune and, as a result, leave the market. Wal-Mart as an absolute leader, can set rules in the market which other companies cannot help following. The billions-dollars-worth yearly income and the enormous size of the company chain gives it the opportunity to eliminate the distributor link as their distribution channel, which means they are getting products directly from manufacturers. It made it possible for Wal-Mart to get all items at much lower prices; therefore, they are still making an enormous profit selling their goods quite cheaply. It was estimated in some researches that prices in Wal-Mart are 8-39% lower that prices of the rest of companies in the USA (Furman). It is evident that customers cannot complain about low prices, until they get to know about the way Wal-Mart uses to keep its prices down.
Similarly, suppliers also do not have much choice, and they are strongly convinced to work with Wal-Mart and to follow its rules. Fishman came to the following conclusion: “For many suppliers, the only thing worse than doing business with Wal-Mart may be not doing business with Wal-Mart” (p.68). Not only does it help suppliers to earn a reasonable amount of money, but also provides them with regular essential orders. They would not survive in the market, if they kept working with other retailers whose business was reducing when Wal-Mart came to the area. On the other hand, the policy of Wal-Mart foresees the drop in payments to suppliers with every following year (Fishman). The company keeps its suppliers under pressure, since there is always an alternative way to buy from cheaper suppliers (Fishman).
Influence of Wal-Mart on the ecology
Moreover, it is necessary to consider the Wal-Mart`s influence on the ecology and contribution to the greenhouse effect. For a gigantic company with such global mass production it is impossible not to leave a significant footprint on the environment. Transporting goods from the manufacturer to stores and exploiting facilities (water, energy and infrastructure) at the high rate cause harm to the biosphere, and pollute the environment with carbon dioxide emissions.
Additionally, ‘Walmartisation’ of American and other countries’ markets can lead to the overall standardization and increased globalization. Having a store in every city and attracting more customers each year means that products are represented and promoted by Wal-Mart will be the same everywhere. The future scenario is that the entire world will be consuming identical food, wearing similar clothes, playing games bought from the same store etc. This would lead to the bankruptcy of unique little shops with different products and family businesses with their peculiar ways of working, because they will not be able to compete in the market.
However, it is impossible to resist the factor of convenience, which people can experience when shopping in Wal-Mart. Customers can save some money and time when buying things there, since an enormous amount of products can be found on shelves of Wal-Mart, and the idea that people can get almost everything in one place without the need to spend hours going from one place to another is quite attractive for many people. Also, the company contributes to the society by offering employment for a large amount of people. CNN’s annual rating GLOBAL 500 reported that Wal-Mart is one of the most influential private employers in the whole world which has provided more than 2.1 million of work places. Overall, Wal-Mart has an enormous economic impact on the American and World economies. Moreover, Wal-Mart is one of the institutions because of which the inflation rate has been kept on the low level for many years (Martínez). It was estimated by some researchers that Wal-Mart`s part in raising the U.S. economy`s productivity is approximately 12% (Martínez).
Thereby, summarizing reasons for and against Wal-Mart, it is quite obvious that the popularity of Wal-Mart has risen because of the unawareness of customers. There are a lot of arguments against Wal-Mart, the largest American multinational retailer. Being customer-oriented, Wal-Mart can be quite different for its employees. Saving money on the price difference at Wal-Mart comparatively to other department stores is not that convincing anymore, when it comes to realizing the real problem. Some people were mistreated, underpaid and exploited when producing products for which one paid less. In addition, there are other parties suffering – small competitors, who cannot cope with the level of prices offered by Wal-Mart, because of getting items directly from foreign manufacturers. Also, the strong impact of Wal-Mart on the ecology of the planet cannot be underestimated, since the ecological system is getting worse every day with the help of such large businesses, as Wal-Mart.
People can fully understand the problem caused by Wal-Mart when one day their own job is at stake (Reich 1). One of the possible solutions is to use new laws and regulations forbidding lowering prices through not integral business activity, which is currently used by Wal-Mart. Large companies, such as Wal-Mart, have to be put in equal conditions with other companies. The laws need to restrict their monopolies in the markets by being obliged to provide health insurances, compatible remuneration package, and appropriate wages for their employees. Therefore, governments have the main role in regulating gigantic corporations’ activity. As a result of providing every employee with an appropriate salary and benefits, prices will increase. Consequently, Wal-Mart will offer similar prices to other retailing stores, which would provide fair competition in the market. Smaller retailers will have a chance not to be pushed out of the market; therefore, their employees will not get redundant, and their owners will have reasonable profits. In general, it is the way of making the global economy healthier and less impacted by large corporations.
In case the laws are implied, the popularity of Wal-Mart will strongly decrease. However, it would mean that employees and the employment market in general will benefit, and people will not be at risk of losing their jobs and businesses in retailing and connected spheres.
Simple Categorical Arguments, Evaluation Arguments, and Proposal Arguments were used in this paper.