Operational Challenges and Ethical Issues Faced by Walmart Inc - Case Study Example

Operational Challenges and Ethical Issues Faced by Walmart IncBackground Information Wal-Mart Stores Inc. also known as the Wal-Mart is one of the largest American Multi-National retail companies that operates an array of retail stores within the United States of America. Moreover, it runs various discount stores as well as warehouse stores in the United States of America (Fishman 2013). A recent research that was published by the Fortune Magazine indicated that the Company is currently among the largest public cooperation that have been successful over the last ten years. The Company is owned on Family-based Mode of ownership, with an approximate share of 50%. It was founded in 1962, by Sam Walton, an American Entrepreneur. However, its official incorporation was undertaken in 1962, where its headquarters was set Bentonville, Arkansas. The Company has also been rated as one of the largest world employers, with over two million employees strategically distributed among its warehouses, discount shops as well as within 11,000 shops distributed in the United States (Fishman 2013). Another recent research published by the Fortune Global 500 indicated that the company has undergone rapid expansion over the last three decades 11,000 stores distributed in the United States and in other countries. Moreover, it has expanded its warehouses to 27 in 55 different countries where it operates with different business names for instance. In Mexico the Company operates under the name of Mexico y Centroamerica, while in Japan it is referred as the Seiyu. This research shall focus on various challenges that have been faced by the company in relation to its ethical issues, operational issues and how the company has managed to overcome these challenges. Operational Challenges Faced by Wal-Mart Inc. Competition in the Retail Industry Competition in the business industry is among the most prevalent challenges that most entrepreneurs are subjected to. Wal-Mart Inc. Stores has been facing stiff completion from other retail stores that provide relatively similar goods and services at lower of equal prices. The company has been continuously facing completion from low price retail stores such as the Walgreen, Costco, Kroger, Home Depot and the Target (http://blog.8thandwalton.com n.d). Research has shown that a large number of customers driven by a desire to quality of services and products have shifted their loyalty towards other retail shops mentioned herein. In addition, the Company has not lonely faced Competition within the United States only, but also in other countries such as in Mexico and Japan, where it is facing stiff competition from other Multi-National Low Price Retail Stores that basically offer similar products and services (http://blog.8thandwalton.com n.d). Poor Retail Execution This is one of the challenges that have been cited to affect the Company over the last six years. It has also affected the Company’s suppliers to a great extent in the sense that: A lot of time has been spent to undertake data analysis in regard to preparation of Retail Link Data for analysis. On the other hand, a recent survey indicated that the company’s employees usually spend a lot of time to discuss issues of promotional compliance as well as how to keep products of shelves rather than provision of quality services to its clients. This has been attributed to the recent sagged sales that affected the company’s overall annual revenue. Sagging Sales In a recent article published by the NBC News.com indicated that the Wal-Mart is one of the Companies that have experienced low sales in the economic year 2013. This has been attributed to the fact that the demands of the Company have been changing overtime with most clients opting to purchase goods or services in relation to their quality rather than the low prices at, which they are offered. This problem has not only affected Wal-Mart, but also other retail Companies like the Kmart. The article pointed out the growth sales of the Company has continuously sagged over the last three years owing to the fact that most clients do not find the specific goods and services they need from the shelves of the stores. This has compelled some of its clients to shift their focus towards other companies that offer goods and services of preferred quality and standards (http://www.nbcnews.com n.d). Ethical Issues Faced by the Wal-Mart Company Legal Issues A recent publication indicated that the DC Council is making plans to formulate and implement laws that would affect Retail Companies within the DC State. This laws shall not only affect Wal-Mart, but also other Large Retail Companies located within the Washington DC like the Kmart, Walgreen et cetera. However, owing to the fact that Wal-Mart is the largest Multi-National Retail Company in the United States, the regulations are expected to have a large impact on it by compelling it to operate under new rules and regulations of operations (http://www.nbcnews.com n.d). Specifically, the new rules proposed by the DC Council government requires large Companies accrue sales of over 1 million US dollars with retails operating in at least 75,000 sq. feet to increase the remuneration allocated to their employees to 12.50 US dollars per hour. This is approximately 52% more than the district average minimum salary of 8.25 US dollars per hour. This new regulation is expected to subject Wal-Mart to three main challenges: The first challenge posed by the new proposed employee remuneration regulation is that the Company will have to reconsider its efforts towards setting up its new shops in the Washington DC region. The other challenge posed by this new regulation emanates from the fact that the company may be subjected to conflict or tension with Workers Unions and other Labor Unions that will compel the Company to comply with the new regulations thus subjecting the company to high remuneration expenditure. Risks Posed by Employee Benefits There are some human rights advocates and Labor Unions in the United States that have constantly argued that some Multi-National Retail Companies in the United States have been paying their employees averagely low wages and in most cases do not provide employee benefits such as health insurance among other benefits. In this regard, the Labor Union Activist has asserted that these Companies subject their employees to low living standards by denying them the associated benefits. On the other hand, economists have argued that in future cases, the company may be faced by a scenario whereby its employees rebel against the management team in relation to their benefits and remuneration. Allegations of Fraud and Discrimination In the year 2011, some four employees of the company raised complains that they were wrongfully fired from their job positions after undergoing a terrorizing encounter with one of the shoppers, who had taken hostage one of the employees in order to escape from the Company’s office. The employees claimed that the Company’s management team was characterized by incidences of fraud that did not analyze their issues into great perspective thus leading to the wrongful termination of employment contract. In addition, some Labor Union Activists gave raised concerns in regard to incidences of racial and gender discrimination that they feel has been exhibited by the Company over a period of ten years. Conflict with Local Communities In some cases, when the Company plans to expand its operations through construction of new Retail Shops in new regions, it receives resistance from local communities as well as human rights activist. This is usually due to the fact that these opposing quarters argue that the Company’s new development projects that involve construction of new shops may lead to environmental degradation, while in some cases its new shops are perceived to be a cause of traffic congestions et cetera for instance in the year 2004, when the Company made plans to construct new shops in Mexico, specifically near the Pyramid of the Mood, a historic Site, it received resistance from the United Nations that complained that these efforts would jeopardize the quality of the surrounding environment. Ways through which the Company has managed the Challenges Curbing Competition In order to increase the company’s competitive advantage, the management team of the Company has implemented various operational strategies. To begin with, the Company has applied the use of a company logo which creates a sense of identity among its clients. Moreover, the company has also focused on provision of low price commodities and services as a means to attract a large number of clientele. On the other hand, research has shown that the Company, through its sub-ordinate staff, managerial team and various sources of media channels has been working together through proper marketing in the various facets of media channel. Dealing with Risks posed by Challenges of Employee Benefits and Conflict with Stakeholders In order to prevent or eliminate the challenges associated with conflicts that may arise between the company and Labor Unions as well as employees in relation to employee benefits, Wal-Mart Management team made a decision in 2010 that led to setting up a Corporate Relations Department. This department has undertaken various initiatives geared towards creating a harmonious relationship between the Company and other associated stakeholders. In addition, the Company has focused on cooperate social responsibility activities as a mean to improve its relations with stakeholders i.e. Law makers, clients and Activists. Recently, the Company dedicated 5 million US dollars to assist in fighting hunger among various disadvantaged sections of the United States Communities. Moreover, the Company dedicated another 5 million US dollars in Japan to facilitate the assistance provided to victims of earthquake (http://www.csrwire.com n.d). Solving Risks posed by Legal Issues In relation to the case of the DC state, the Company through its management team arrived at a decision that would see the Company withdraw its expansion projects that were supposed to be implemented in the region. However, after undertaking a careful market analysis, the company noted that their actions in relation to withdrawing their development project in the state, would create a negative image on their company, thus they opted for a negotiations of the terms of operation with the DC Council members as well as Labor unions within the region in order to ensure that they reach a mutual agreement that would benefit all the stakeholders (http://www.usanfranonline.com n.d). References Biggest Challenge for Walmart Suppliers?. (n.d.). 8th Walton Blog. Retrieved April 21, 2014, from http://blog.8thandwalton.com/2013/05/biggest-challenge-for-walmart-suppliers/ CSR Press Release. (n.d.). RSS. Retrieved April 21, 2014, from http://www.csrwire.com/press_releases/31795-Walmart-Commits-5-Million-in-Response-to-Japan-Earthquake CSR Profile of Wal-Mart Stores, Inc.. (n.d.). RSS. Retrieved April 21, 2014, from http://www.csrwire.com/members/12774-Wal-Mart-Stores-Inc- Fishman, C. (2013). The Wal-Mart effect: how the world's most powerful company really works-- and how it's transforming the American economy. New York: Penguin Press. Walmart Corporate Social Responsibilty. (n.d.). Walmart Corporate Social Responsibilty. Retrieved April 21, 2014, from http://www.usanfranonline.com/news/supply-chain-management/walmart-reports-on-global-responsibility-efforts/#.U1UJlleMdXU Wal-Mart struggles with deeper problems. (n.d.). msnbc.com. Retrieved April 21, 2014, from http://www.nbcnews.com/id/7901047/ns/business-us_business/t/wal-mart-struggles-deeper-problems/ Read More