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Introduction :
Introduction This case discusses: Introduction to Wal-Mart History of Wal-Mart The Road to Success - Corporate Strategy The Criticism and the Challenges Wal-Marts PR strategy The Road ahead
Wal-Mart An Introduction :
Wal-Mart An Introduction American public corporation that runs a chain of large, discount department stores World's largest public corporation by revenue Largest private employer in the world Fourth largest utility or commercial employer Largest grocery retailer in the United States ( 20% ) Largest toy seller in the United States ( 22% )
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Founded - Arkansas, USA(1962) by Sam Walton Headquarters - Bentonville, Arkansas, U.S.A. Products - Discount Stores, Super centers, Neighborhood Markets Revenue - US$ 351.1 billion (2007) (Ranked # 1 on Fortune 500 list) Net income - US$ 11.3 billion (2007) Total assets - US$ 151.193 billion (2007) Total equity - US$ 61.573 billion (2007) Employees - 1.9 million (2007) Slogans - The Lowest Prices. Guaranteed! - Save Money, Live Better (U.S.) WE SELL FOR LESS every day! (Canada) Wal-Mart at a Glance
History of Wal-Mart :
History of Wal-Mart Sam Walton - The man behind it all Born in a farmers family in Kingfisher, Oklahoma on March 29, 1918 Graduated from the University of Missouri in 1940. First job at JC Penney at $ 75 a month Gave up job and opened his first store in Arkansas in 1950- Waltons 5 & dime 11 stores by 1962. Opened 1st Wal-Mart At the opening, Walton stated, "Each Wal-Mart store should reflect the values of its customers and support the vision they hold for their community."
Criticism of Wal-Mart :
Criticism of Wal-Mart Local communities Store openings- At sites of archaeological relevance in Mexico At American Indian burial grounds and a Civil War battle site in Tennessee Economic Impact- In a paper published in Farm Foundation in 1997, Kenneth Stone, Professor of Economics at Iowa State University found that some small towns can lose almost half of their retail trade within ten years of a Wal-Mart store opening Traditional Moms & Pops forced out of business
Criticism of Wal-Mart :
Pricing and Competition Issues Sued by many competitors for predatory pricing (intentionally selling a product at low cost in order to drive competitors out of the market) Investigated by the Federal Competition Commission for monopolistic practices Retailer pressured suppliers to sell goods below cost or at prices significantly less than those available to other stores in 2003, the German High Court ruled that Wal-Mart's low cost pricing strategy "undermined competition" and ordered Wal-Mart to raise its prices Wal-Mart sells all its stores in Germany Accused of using monopsony power to force its suppliers into self-defeating practices Criticism of Wal-Mart
Criticism of Wal-Mart :
Employee and labor relations Wages A Substantial Number of Wal-Mart Associates earn far below the poverty line # In 2001, sales associates, the most common job in Wal-Mart, earned on average $8.23 an hour for annual wages of $13,861. The 2001 poverty line for a family of three was $14,630 #A 2003 wage analysis reported that cashiers, the second most common job, earn approximately $7.92 per hour and work 29 hours a week. This brings in annual wages of only $11,948 Criticism of Wal-Mart
Criticism of Wal-Mart :
Wal-Mart Associates don't earn enough to support a family # For basic needs, the average 2-person family needed $27,948 in 2005.Wal-Mart claimed that its average associate earned $9.68/hr in 2005($17,114 annually) Sam Walton - "I pay low wages. I can take advantage of that. We're going to be successful, but the basis is a very low-wage, lowbenefit model of employment. Wal-Mart managers are judged, in part, based on their ability to control payroll costs Wal-Mart's 2006 Annual Report reported that the company faced 57 wage and hour lawsuits 1.6 million women workers filed a lawsuit of gender discrimination in 2004 - the largest nationwide civil lawsuit against a private company ever. Criticism of Wal-Mart
Criticism of Wal-Mart :
Working conditions In 2000, Wal-Mart paid $50 million to settle a class-action suit that asserted that 69,000 current and former Wal-Mart employees in Colorado had been forced to work off-the-clock In December 2005, a California court ordered Wal-Mart to pay $172 million in damages for failing to provide meal breaks to nearly 116,000 hourly workers On October 16, 2006, 200 workers at Wal-Mart Super Center, Florida, walked out in protest against new store policies and rallied outside the store, shouting "We want justice", criticizing the company's recent policies as "inhuman. A report by Congressman Miller alleged that in ten percent of Wal-Mart's stores, night-time employees were locked inside, holding them prisoner. Criticism of Wal-Mart
Criticism of Wal-Mart :
Criticism of Wal-Mart
Criticism of Wal-Mart :
Child labor violations and Illegal workers Internal Wal-Mart audit conducted in July 2000- # 1,371 instances of minors working too late, during school hours, or for too many hours in a day #60,767 missed breaks and 15,705 lost meal times Wal-Mart agreed to pay $135,540 to settle child labor violation charges in January 2005 Wal-Mart has also been fined $205,650 for 1,436 violations of child labor laws in Maine for the period 1995 to 1998 On October 23, 2003, federal agents raided 61 Wal-Mart stores in 21 states of The United States, in a crackdown known as, "Operation Rollback," resulting in the arrests of 250 nightshift janitors who were undocumented. Wal-Mart pays $11million to settle this lawsuit. Criticism of Wal-Mart
Criticism of Wal-Mart :
Health Insurance Wal-Mart reported in January 2006 that its health insurance only covers 43% of their employees. Wal-Mart had approximately 1.39 million US employees that time Wal-Mart increased advertising more than health care According to Wal-Marts website, "In January 2006, ...Coverage will be available for as little as $22 per month for individuals What the website leaves out- Coverage is affordable, but using it will bankrupt many employees. Includes a $1,000 deductible for single coverage and a $3,000 deductible for family coverage President and CEO Lee Scott in 2005- "In some of our states, the public program may actually be a better value - with relatively high income limits to qualify, and low premiums." Criticism of Wal-Mart
Criticism of Wal-Mart :
Labor union opposition Efforts of UFCW (United Food and Commercial Workers Union) to interact with workers, foiled each time Wal-Mart closed its store in Quebec in April 2005 after its employees received union certification Wal-Mart has issued "A Manager's Toolbox to Remaining Union Free In 2000, a small meat cutting department successfully organized a union at a Wal-Mart store in Texas. Wal-Mart responded a week later by announcing the phase-out of its in-store meat cutting company-wide. Criticism of Wal-Mart
Criticism of Wal-Mart :
Taxes The estimated total amount of federal assistance for which Wal-Mart employees were eligible in 2004 was $2.5 billion One 200-employee Wal-Mart store may cost federal taxpayers $420,750 per year. This cost comes from the following, on average: Criticism of Wal-Mart
Wal-Mart recruited former presidential advisers, including Michael K. Deaver (Ronald Reagan's image-maker), and Leslie Dach (Bill Clinton's media consultant) to set up a rapid-response PR team in Arkansas. Result- On January 13, 2005, millions of Americans opened their morning papers to find a full-page ad declaring, "Wal-Mart is working for everyone," and signed by Lee Scott. Same morning, Lee Scott appeared on Good Morning America, Fox News, and CNBC Scott called the company's carefully orchestrated PR campaign "an outreach. BUT, Scott didn't pull it off. Onscreen he was reserved and careful. His gaze was flat, his smile thin and forced. His low-key manner in the face of critical allegations came off as dispassionate. The Wal-Mart Reaction
PR bloopers :
Wal-Mart's ads trumpet its workers' average pay: nearly twice the federal minimum! Specifically, it's $9.68 an hour. Given Wal-Mart's 34-hour workweek, and deducting the health premiums and federal taxes, it comes out to about $1,200 per month Analysts criticized this and asked Scott to try living off this income before bragging about it WalMart hires heavy-hitting public relations firm Edelman Wal-Mart and Edelmen come up with an advocacy group Working Families for Wal-Mart According to the organization's official website, "Working Families for Wal-Mart is committed to fostering open and honest dialogue with elected officials, opinion makers and community leaders that conveys the positive contributions of Wal-Mart to working families. PR bloopers
PR bloopers :
Former U.N. ambassador Andrew Young chosen to chair the company-funded Working Families for Wal-Mart. In an interview with an African American newspaper in LA, Young says the mega retailer "should" displace its urban corner-store competition. "You see, those are the people who have been overcharging us.... I think they've ripped off our communities enough. First it was Jews, then it was Koreans, and now it's Arabs. This comment attracted a lot of criticism and as a result Young had to leave. Wal-Mart VC, Thomas Coughlin cooked up fraudulent expense invoices in a scam to siphon off $500,000 over the course of seven years, at the expense of using the money for an antiunion initiative. Exposed by media PR bloopers
PR bloopers :
In September 2005, Edelman comes up with a new blog called Wal-Marting Across America on the internet. The blog documents the spontaneous discoveries of RV-traveling mega store fans Jim and Laura as they pull over to chat with happy Wal-Mart employees. It neglects to mention that Wal-Mart arranged Jim and Laura's itinerary, paid for the
RV, and compensated them for the blog entries. Exposed by BusinessWeek.com, the stunt was especially bad news for Edelman, since it violated ethical guidelines, something Edelman had been known to comply with. Walmart.com offers DVD shoppers helpful recommendations for films they might be interested in purchasing. However it didnt turn out to be that helpful when the results of searches for some DVDs were made public. PR bloopers
PR bloopers :
Customers searched for : Charlie and the Chocolate Factory Planet of the Apes They were steered toward "similar items" such as : Martin Luther King: I Have a Dream Assassination of Martin Luther King Unforgivable Blackness: The Rise and Fall of Jack Johnson Wal-Mart spokeswoman Mona Williams says the company is "heartsick" over the incident but has "absolutely no evidence" that the connections were made intentionally. An innocent error or an intended poke at people of African American origin?? Whatever the truth may be, Wal-Mart instead of dowsing the fire, kept on fanning the flames. PR bloopers
Anti-Wal-Mart groups :
Over the years, several groups had come up, to bring to light the facts the public didnt know about Wal-Mart Wake Up Wal-Mart - a union-backed campaign group affiliated with the UFCW, founded in April, 2005 The centerpiece of the organization is its website -WakeupWalMart.com Exposes all the facts and problems which the website walmartfacts.com doesnt. Wal-Mart Watch, formed in the spring of 2005, is a joint project of The Center for Community and Corporate Ethics, a non-profit organization studying the impact of large corporations on society AntiWal-Mart groups
Anti-Wal-Mart groups :
Wal-Mart: The High Cost of Low Price, a documentary film released in 2005, presents an unfavorable picture of WalMart's business practices through interviews with former employees, small business owners, and Wal-Mart executives. The movie has been seen by millions and has been highly acclaimed critically as well. New York Times had this to say - BREATHTAKING Wal-Mart came up with its own DVD film, defending its practices entitled Why Wal-Mart Works, and Why That Drives Some People C-R-A-Z-Y. But couldnt undo the magnitude of damage already done. Anti-Wal-Mart groups
stores in Canada; opens three value clubs in Hong Kong; now has 123 stores in Canada and 96 in Mexico The WalMart Timeline
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