CASE 2 Wal-Mart: The Future Is Sustainability

Daryl Benson

Wal-Mart Stores, Inc., is an icon of American business. From small-town business to multinational, from hugely controversial to a leader in renewable energy, Wal-Mart has long been a lightning rod for news and criticism. With 2008 sales of over $405.6 billion and more than two million employees worldwide, the worlds largest public corporation must carefully manage many different stakeholder relationships. It is a challenge that has sparked significant debate. Although Wal-Mart reportedly can save the average family $3,200 annually, the company has historically received plenty of criticism regarding its treatment of employees, suppliers, and economic impacts on communities. Feminists, activists, and labor union leaders have all voiced their beliefs that Wal-Mart has engaged in misconduct in order to provide low prices. However, Wal-Mart has been turning over a new leaf. New emphases on diversity, charitable giving, and sustainability have contributed to Wal-Marts revitalized image. The story of Wal-Mart and its low prices includes both positive and negative impacts on society. Positively, Wal-Mart reportedly saves consumers over $287 billion annually, equating to about $950 per person. On the flip side, research shows that communities can be negatively impacted by Wal-Marts arrival in their areas. This analysis attempts to show both sides of the controversy. It begins by briefly examining the growth of Wal-Mart, and then discusses Wal-Marts various relationships with its stakeholders, including competitors, suppliers, and employees. Some of the ethical issues concerning these stakeholders include accusations of discrimination, illegal immigration issues, and leadership misconduct as demonstrated by Wal-Mart former vice chair Thomas Coughlin. Yet, in an effort to show Wal-Marts attempts to position itself as a socially responsible company, this case also examines Wal-Marts sustainability plans,
This case was prepared by O.C. Ferrell, with the editorial assistance of Jennifer Jackson and Jennifer Sawayda. Melanie Drever, Lisa Heldt, Tabitha Payton, and Rob Boostrom made significant contributions to previous editions of this case, which was prepared for classroom discussion, rather than to illustrate either effective or ineffective handling of an administrative, ethical, or legal decision by management. All sources used for this case were obtained through publicly available material and the Wal-Mart website.

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its ethical initiatives, and former CEO Lee Scotts impressive leadership qualities. The analysis concludes by highlighting Wal-Marts strategy during the most recent recession and recovery.

HISTORY: THE GROWTH OF WAL-MART

The story of Wal-Mart began in 1962, when founder Sam Walton opened the first WalMart Discount Store in Rogers, Arkansas. Although it had a slow start due to lack of funds, Wal-Mart grew at an accelerated rate during the next forty years. The company grew from a small chain to more than 7,000 facilities in thirteen countries. In 2008 Wal-Mart opened its 3,000th international store. Only Exxon Mobil had more revenue than Wal-Mart did in 2008. The company now serves more than 176 million customers per year. Much of the success that Wal-Mart has experienced can be attributed to its founder. A shrewd businessman, Walton believed in customer satisfaction and hard work. He convinced many of his associates to abide by the ten-foot rule, where employees pledged that whenever they got within ten feet of a customer, they would look the customer in the eye, greet him or her, and ask if he or she needed help with anything. Waltons famous mantra, known as the sundown rule, was: Why put off until tomorrow what you can do today? Due to this staunch work ethic and dedication to customer care, Wal-Mart claimed early on that a formal ethics program was unnecessary because the company had Mr. Sams ethics to follow. In 2002 Wal-Mart officially became the largest grocery chain, topping the Fortune 500 (a position it held seven times between 2002 and 2009). The company also has become known for its efforts toward sustainability growth. Former Wal-Mart CEO Lee Scott was even ranked seventh in the Ethisphere list of 100 top contributors to business ethics, based on his support of sustainability. Additionally, Fortune named Wal-Mart the most admired company in America in 2003 and 2004. Although it has slipped since then, it remained high on the list in 2009, when it was ranked eleventh most admired.

EFFECTS ON COMPETITOR STAKEHOLDERS

Possibly the greatest complaint against Wal-Mart is that it puts other companies out of business. With its low prices, Wal-Mart makes it harder for local stores to compete. WalMart is often accused of being responsible for the downward pressure on wages and benefits in towns in which the company is located. Some businesses have tried to file lawsuits against Wal-Mart with mixed success, claiming that the company uses predatory pricing to put competing stores out of business. Wal-Mart counters by defending its pricing, asserting that its purpose is to provide quality, low-cost products to the average consumer. Yet, although Wal-Mart has saved consumers millions of dollars and is a popular shopping spot for many, there is no denying that many competing stores go out of business once Wal-Mart comes to town. In order to compete against the retail giant, other stores must reduce wages. Studies have shown that overall payroll wages, including Wal-Mart wages, are reduced by 5 percent after Wal-Mart enters a new market. As a result, some activist groups and citizens have refused to allow Wal-Mart to take up residence in their towns.

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RELATIONSHIPS WITH SUPPLIER STAKEHOLDERS

Wal-Mart focuses on keeping costs low to achieve its everyday low prices (EDLPs) by streamlining its company. Well-known for operational excellence in its ability to handle, move, and track merchandise, Wal-Mart expects its suppliers to continually improve their systems as well. Wal-Mart often works closely with suppliers to cut prices in order to save the consumer money. For instance, Wal-Mart typically works with suppliers to reduce costs of packaging and shipping, which lessens costs for consumers. In 2006, Wal-Mart launched a plan to reduce packaging by 5 percent, an initiative reflecting Wal-Marts desire to improve sustainability. In 2008, Wal-Mart introduced its Global Responsible Sourcing Initiative, which contains the following policies and requirements that will be included in new supplier agreements: Manufacturers facilities must certify compliance with laws and regulations where they operate as well as rigorous social and environmental standards, set by government agencies, beginning with suppliers in China in January 2009 and for all other Wal-Mart suppliers in 2011. By 2012, suppliers must work with Wal-Mart to make a 20 percent improvement in the energy efficiency inside the top 200 factories in China that Wal-Mart directly sources from. Suppliers must create a plan to eliminate, by 2012, defective merchandise reaching the Wal-Mart supply chain. And by 2012, all suppliers Wal-Mart buys from must source 95 percent of their production from factories that receive the highest ratings on environmental and social practices.

Many companies depend on Wal-Mart for the bulk of their business.

If achieved, these goals will increase the sustainability of Wal-Mart suppliers significantly. Some critics, however, believe that pressures to achieve these standards will shift more of a cost burden onto suppliers. Since Wal-Mart is specifically targeting its largest supplier network in China, many believe these lofty goals will be hard to implement in the allotted time period and will be hard to enforce and track due to the intricate maze of suppliers in China and other countries. When suppliers do not meet its demands, Wal-Mart ceases to carry the suppliers product or, often, will find another supplier for the product at the desired price. Wal-Marts power centers around its size and the volume of products needed. Many companies depend on Wal-Mart for the bulk of their business. Examples are Clorox, which does 23 percent of its business with Wal-Mart, Revlon (22 percent), and Kelloggs (12 percent). This type of relationship allows Wal-Mart to influence terms with its vendors. Indeed, there are benefits to suppliers; as they become more efficient and streamlined for Wal-Mart, they help their other customers as well. Numerous companies believe that supplying Wal-Mart has been the best thing for their businesses. However, many have found the amount of power that Wal-Mart wields to be disconcerting.

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The constant drive by Wal-Mart for lower prices can have a negative effect on suppliers. Many have been forced to move production from the United States to less expensive locations in Asia. Wal-Mart imports around $20 billion in products from China and encourages its suppliers to move production there in order to lower costs. Chinas annual exports amount to $583 billion, and Wal-Mart ranks as Chinas eighthlargest trading partner. Companies such as Master Lock, Fruit of the Loom, and Levis, as well as many other Wal-Mart suppliers, have moved production overseas at the expense of U.S. jobs. This was not founder Sam Waltons original intention. In the 1980s, after learning that his stores were putting other American companies out of business, founder Sam Walton started his Buy American campaign in which much of Wal-Marts merchandise would come from American stores. However, the quest to maintain low prices has pushed many Wal-Mart suppliers overseas, and some experts now estimate that as much as 80 percent of Wal-Marts global suppliers are stationed in China.

ETHICAL ISSUES INVOLVING EMPLOYEE STAKEHOLDERS

Employee Benefits
Much of the Wal-Mart controversy over the years has focused on the way the company treats its employees, or associates as Wal-Mart refers to them. Although Wal-Mart is the largest retail employer in the world, it also has been highly criticized for its low wages and benefits. Wal-Mart has been accused of failing to provide health insurance to more than 60 percent of its employees. Many part-timers are not eligible, although efforts have been made to increase the coverage of part-time workers. In a Wal-Mart memo sent to the board of directors by Susan Chambers, Wal-Marts executive vice-president for benefits, Chambers encouraged the hiring of more part-time workers while also encouraging the hiring of healthier, more productive employees. After this bad publicity, Wal-Marts stock decreased 27 percent between 2000 and 2005. Because of the deluge of bad press, Wal-Mart has taken action to improve relations with its employee stakeholders. In 2006, Wal-Mart raised pay tied to performance in about one-third of its stores. The company also improved its health benefits package for 2008 by offering lower deductibles and implementing a generic prescription plan estimated to save employees $25 million. A Wal-Mart spokesperson claims that more than 90 percent of employees are currently insured and that the company is taking steps to increase that number.

Wal-Marts Stance on Unions

Some critics believe that workers benefits could be improved if workers could become unionized. However, unions have been discouraged since Wal-Marts foundation. Sam Walton believed that unions were a divisive force and might render the company uncompetitive. WalMart maintains that it is not against unions in general, but that it sees no need for unions to come between workers and managers. The company says that it supports an open-door policy in which associates can bring problems to managers without having to resort to third parties. Wal-Mart associates have voted against unions in the past.

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Although the company officially states that it is not opposed to unions, Wal-Mart often seems to fight against them. Critics claim that when the word union surfaces at a Wal-Mart location, the top dogs in Bentonville are called in to instantly thwart union movement. In 2000, seven of ten Wal-Mart butchers in Jacksonville, Texas, voted to join the United Food Workers Union. Wal-Mart responded by announcing it would only sell precut meat in its Supercenters, getting rid of its meat-cutting department. Although WalMart offers justifiable claims for actions such as this, many see the company as aggressively working to prevent unionization in its stores. However, Wal-Marts stance against unions has not always held up in foreign countries. In China, Wal-Mart faced a similar decision regarding unions. To grow in China, it appeared necessary to accept a union. Poor working conditions and low wages were generating social unrest and the government was attempting to craft a new set of labor laws giving employees greater protection and giving Wal-Marts the All-China Federation of Trade Unions (ACFTU) more power. In 2004, stance against the Chinese Labor Federation pushed Wal-Mart to allow the formation of As a result, Wal-Mart technically allowed this, but critics claim that unions has not unions. Wal-Mart made it increasingly difficult for the workers to form new unions. In 2006, employees announced the first formation of a Wal-Mart union, always held and within a week, four more branches had announced their formations up in foreign of unions. Wal-Mart initially reacted to these announcements by stating it would not renew the contracts of unionized workers. However, the pressure countries. mounted, and later that year Wal-Mart signed a memorandum with the ACFTU allowing unions in stores. Chinese Wal-Marts are now some of the few worldwide Wal-Marts that have unionized workers.

Workplace Conditions and Discrimination

Despite accusations of low employee benefits and a strong stance against unions, Wal-Mart remains the largest nongovernment employer in the United States, Mexico, and Canada. It provides jobs to millions of people and has been a mainstay of Fortunes Most Admired Companies list since the start of the twenty-first century. However, in December 2005, Wal-Mart was ordered to pay $172 million to more than 100,000 California employees in a class-action lawsuit claiming that Wal-Mart routinely denied meal breaks. The California employees also alleged that they were denied rest breaks and that Wal-Mart managers deliberately altered time cards to prevent overtime. Similar accusations began to pop up in other states as well. Wal-Mart denied the allegations and filed an appeal in 2007. In 2008, Wal-Mart agreed to pay up to $640 million to settle sixty-three such lawsuits. Wal-Mart also has received accusations of discrimination from its female employees. Although women account for more than two-thirds of all Wal-Mart employees, they make up less than 10 percent of store management. Wal-Mart insists it trains and promotes women fairly, but in 2001 an internal study showed that the company paid female store managers less than males in the same positions. In 2004, a federal judge in San Francisco granted class-action status to a sex-discrimination lawsuit against Wal-Mart involving 1.6 million current and former female Wal-Mart employees. The plaintiffs claimed that Wal-Mart discriminated against them in regard to promotions, pay, training, and job assignments. Wal-Mart argued against the class-action suit, claiming that promotions were made on an individual basis by each store. So far, the company has not been able to appeal the case. Yet, interestingly enough, Wal-Mart also has received recognition for its good treatment of female workers. Between 2007 and 2009, the National Association for Female

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Executives recognized the company three years in a row as a Top Company for Executive Women. It makes one wonder if Wal-Mart truly is trying to turn over a new leaf in how it treats its female employees.

Illegal Immigrants
In October 2003, a series of raids by U.S. Immigration and Customs Enforcement officials revealed that 250 illegal immigrants were working on cleaning crews at 61 Wal-Mart stores in 21 states. Several Wal-Mart contractors had hired the undocumented workers from Mexico, Eastern Europe, and other countries. In March 2005, this investigation ended in a landmark $11 million civil settlement. According to a Wall Street Journal article, three top Wal-Mart executives knew the companys cleaning contractors used illegal immigrants yet did nothing to stop the practice. The immigrants worked as many as seven days a week for less than minimum wage. Wal-Mart answered these charges with an unusual response. It admitted that it knew about the illegal immigrants because it had been cooperating with the federal government for three years prior to the raids. Wal-Mart officials also remarked that the reason why they did not end ties with the contractors was because the federal government asked them not to do so. Additionally, Wal-Mart pointed to a prior lawsuit against Wal-Mart by the Immigration and Naturalization Service (INS) because the company required immigrants to show more verification than required by law. Accordingly, our company was very hesitant to ask for more assurances about the status of our contractors employees, stated Wal-Mart spokeswoman Mona Williams.

Sweatshop Workers
Wal-Mart has taken measures to show that it is against sweatshop labor. In 2003, it hired an anti-sweatshop expert to expand its global inspection program. The following year, Wal-Mart teamed up with the nonprofit Business for Social Responsibility to reinforce its global monitoring programs. However, in December 2007, Wal-Mart fell prey to criticism after Senator Byron Dorgan accused the company of selling Christmas decorations made in Chinese sweatshops. The information came from a National Labor Committee study indicating that workers as young as 12 were working 15-hour days for as little as 26 cents an hour. In response, Wal-Mart stated that it was investigating the allegations and emphasized its code against such practices.

ETHICAL LEADERSHIP ISSUES

Aside from Sam Walton, many other distinguished people have been associated with WalMart. One of them is Hillary Clinton, who served on Wal-Marts board six years before her husband took the presidency. Another is former board vice chair Thomas Coughlin, although Coughlin achieved his fame for the corporate scandal he caused. In March 2005, Coughlin was forced to resign from the board of directors for stealing as much as $500,000 from Wal-Mart in the form of bogus expenses, reimbursements, and the unauthorized use of gift cards. Coughlin, a protg and hunting buddy of Sam Walton, was a legend at Wal-Mart. He often spent time on the road with Sam Walton expanding SAMs CLUB locations. At one time he was the second highest-ranking WalMart executive and was a candidate for CEO.

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In January 2006, Coughlin agreed to plead guilty to federal wire-fraud and tax-evasion charges. Although he took home millions of dollars in compensation, Coughlin secretly had been using Wal-Mart funds to pay for a range of his personal expenses, including hunting vacations, a $2,590 dog enclosure at his home, and a pair of handmade alligator boots. Coughlins deceit was discovered when he asked a subordinate to approve $2,000 in expense payments without receipts. Wal-Mart rescinded Coughlins retirement agreement worth more than $10 million; and for his crimes, he was sentenced to 27 months of home confinement, $440,000 in fines, and 1,500 hours of community service. Wal-Mart spokesperson Mona Williams said the experience was embarrassing and painful. Someone we expected to operate with the highest integrity let us down in a very public way. The case created concerns about leadership, corporate governance, and the ethical culture of Wal-Mart.

PROBLEMS WITH ENVIRONMENTAL STAKEHOLDERS

Like many large corporations, Wal-Mart has been targeted as a violator of safe environmental practices. The Environmental Protection Agency (EPA) has The greatest cited Wal-Mart for violating storm water regulations and air quality restrictions. In 2005, Wal-Mart received a grand jury subpoena from the U.S. Attorneys environmental Office in Los Angeles, California, seeking documents and information relating to the companys receipt, transportation, handling, identification, recycling, concern treatment, storage, and disposal of certain merchandise constituting hazardous associated with material or hazardous waste. However, probably the greatest environmental concern associated with Wal-Mart has Wal-Mart has been urban sprawl. The construction of a Wal-Mart can stress a citys infrastructure of roads, parking, and traffic flow. There have been been urban concerns about the number of acres of city green space devoured by Wal-Mart sprawl. construction (Wal-Mart Supercenters occupy about twenty to thirty acres of land). Another issue is the number of abandoned stores (between 350 and 400 annually), deserted when the company outgrows locations. Currently, over 26 million square feet of empty Wal-Mart space existsenough to fill 534 football fields. Allegedly, Wal-Mart goes out of its way to prevent other retail companies from buying its abandoned stores, contributing to the empty spaces.

Sustainability 360
Wal-Mart has attempted to address its environmental stakeholders by becoming a greener company. Some of the company goals include the following: Reducing greenhouse gases at existing store, club, and distribution center bases around the world by 20 percent by 2012 Designing new prototypes to be 25 to 30 percent more efficient by the end of 2009 Developing and implementing innovative energy-efficient technology into existing and new stores

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Reducing the amount of packaging in the supply chain by 5 percent by 2013 (which the company has promoted through annual packaging expos)

Currently Wal-Mart is working on four main green areas: waste improvement and recycling, natural resources, energy, and social/community impact. Wal-Marts long-term goals are to be supplied 100 percent by renewable energy, create zero waste, and carry products that sustain the environment and its resources.

Sustainability Leadership
Wal-Mart has already taken strides to obtain its sustainability objectives. It has opened two environmentally friendly stores in McKinney, Texas, and Aurora, Coloradolocations chosen for their different weather and climate considerations. The stores get electricity from solar panels and wind turbines. The company hopes these experiments will provide examples of the ways building owners, scientists, engineers, architects, contractors, and landscape designers can work together to create stores designed to save energy, conserve natural resources, and reduce pollution. According to Wal-Mart vice president Kim Saylors-Laster, this is one step in Wal-Marts plan of being supplied by 100 percent renewable energy. Wal-Mart intends to take information gained at these stores and apply it to new stores. To reduce energy consumption, Wal-Mart facilities are conserving energy in two major ways. First, most new stores include a daylighting feature enabling stores to dim or turn off lights as daylight increases and enters through skylights, thereby reducing the demand for electricity during peak hours. Second, Wal-Mart manages energy consumption by centrally controlling the heating and cooling of U.S. Wal-Mart stores. Wal-Mart is also attempting to reduce fossil fuel use and to sell more green products. Throughout 2009 Wal-Mart tested new technologies, including two types of hybrid trucks and two alternatively fueled heavy-duty trucks, in order to achieve its goals of creating a more environmentally friendly trucking fleet. Wal-Mart is proud to point out that between 2005 and 2008 the company increased its fleet efficiency by 25 percent through its use of new technologies, routes, and loading procedures. Wal-Marts new goal is to double its fleet efficiency by 2015. Additionally, Wal-Mart has announced a goal to reduce phosphates, a water pollutant that encourages the growth of oxygen-depleting algae and can kill fish and other wildlife, in laundry and dish detergents by 70 percent by 2011. The company hopes to use its worldwide influence to make a global difference in sustainability initiatives. Our reach around the world puts us in a unique position to drive sustainable change across national boundaries and into the global supply chain, said Craig Herkert, Wal-Mart President and CEO of the Americas. Wal-Mart is also trying to get its associates personally involved with sustainability. Approximately 500,000 Wal-Mart associates throughout the United States have participated in the Personal Sustainability Project (PSP), a voluntary program encouraged by former CEO Lee Scott. Associates at Wal-Mart stores would select sustainability goals and make commitments to monitor their progress for several weeks. The PSP counts successes, such as recycling over 3 million pounds of plastic, and encouraging people to winterize their homes and switch to low-energy fluorescent light bulbs, but also includes health goals. Healthier employees are better for the environment, for the health-care system, and for the business. Participants have lost a collective 184,000 pounds and 20,000 have quit smoking. The PSP has also been launched in Brazil, Canada, and Japan.

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To measure how its eco-friendly products are faring with consumers, Wal-Mart launched the Wal-Mart Sustainability Live Better Index in 2007. This index allows Wal-Mart to track, on a state-by-state basis, consumers demand for low-cost products, health and welfare products, and green products. In the sustainability category, consumers can track adoption rates at Wal-Mart in the following categories: compact florescent light bulbs, organic milk, extended-life paper products, organic baby food, organic cleaning products, and organic coffee. Wal-Mart believes that consumers can make a conscious decision to purchase them for their environmentally friendly and cost-saving benefits versus conventional versions. So far results have been good, with a 66 percent increase in average adoption rates. Even during the 20082009 economic recession, Wal-Mart tried to portray itself as a firm that cares about green initiatives. It continued to partner with other large companies to promote green jobs. In 2009, Wal-Mart announced its intention to contribute $5.7 million in grants to the U.S. Conference of Mayors and Veterans Green Jobs to support the creation of green jobs in the United States. Wal-Mart expects the money to be used to train the workforce in the growing sector of the green industry. The company believes it is making a profitable investment, as 10 percent of job growth in the United States is expected to be in the green-collar sector by 2032. With this investment, WalMart hopes to encourage mayors to promote jobs in their cities green industries and provide veterans with training in green skills. It is clear that Wal-Mart is trying to improve its relationship with environmental activists and stakeholders.

Savings: Is Going Green Cost-Effective?

Wal-Marts green initiatives have secured it the goodwill of many environmentally conscious consumers, but does going green save the company costs in other ways? So far Wal-Marts initiatives have racked up the following savings: $25 million/year in savings from auxiliary power systems on trucks to run the air conditioning when trucks are stopped. The store further plans to double the fuel efficiency of its new heavy-duty trucks by 2015. $7 million/year in savings from replacing all incandescent bulbs in store display ceiling fans with compact fluorescent bulbs.

WHAT IS WAL-MART DOING TO IMPROVE ETHICS AND SOCIAL RESPONSIBILITY?

Although it has received much criticism in the past years, Wal-Mart has been working to improve its ethical reputation along with its reputation for sustainability and corporate governance. In 2004, Wal-Mart formed the Global Ethics Office and released a revised Global Statement of Ethics. The intent of the Global Ethics Office is to spread an ethical corporate culture among its global stakeholders. The Global Ethics Office provides guidance on ethical decision making based on the Global Statement of Ethics and an ethics helpline. The helpline is an anonymous and confidential way for associates to contact the company regarding ethical issues. Additionally, Wal-Mart has an Ethical Standards Team that consists of 200 associates. The intent of the team is to monitor the compliance of supplier factories with the companys Standards for Suppliers and local laws.

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In 2005, Wal-Mart introduced a full-page newspaper ad that promoted the companys concern with ethics and its stakeholders. Its newspaper ad was a direct letter from Wal-Mart CEO Lee Scott. The ad stated that it was time for the public to read the unfiltered truth about Wal-Mart and time for it to stand up on behalf of a workforce that included 1.2 million Americans. Scott called for Congress to increase the minimum wage and noted that WalMart had increased spending on employee health insurance. Wal-Mart also has contributed significantly to disaster management projects. The company donated millions to relief efforts for Hurricane Katrina, $300,000 to support flood relief efforts in Southern Brazil, and $3 million for earthquake relief in China. Wal-Mart attempts to help its associates who are caught in disasters, allocating $2 million in grants for associates whose homes have been damaged and creating a toll-free number for associates who need help. Despite its efforts, Wal-Marts reputation was significantly tarnished again with the Coughlin scandal. It was therefore eager to reestablish its credibility with stakeholders. It found its solution in the person of Lee Scott, CEO of Wal-Mart from January 2002 to January 2009. Lee Scott was recognized as a leader in investing in clean energy. Due to him, many California facilities are now powered by solar energy, and the energy needs of 15 percent of Texas stores can now be met with wind power. Scotts leadership had such a positive effect on the company that he was given one of the top spots in the 100 Most Influential People in Business Ethics in 2008. Wal-Mart has taken great strides to portray itself as an ethically responsible Wal-Mart claims a commitment business with good leadership. The companys reputation for low prices helped to improving the standard of Wal-Mart to remain a healthy business even during the 20082009 recession. Wal-Mart claims a commitment living for customers worldwide to improving the standard of living for customers worldwide, and has backed that claim with large charitable donations, amounting to $423 million globally in fiscal year 2009. Its key retailing strategy is offering a broad assortment of merchandise and services at everyday low prices (EDLP) while fostering a culture claiming to reward and embrace mutual respect, integrity, and diversity. Wal-Mart has always targeted lowerincome customers, a strategy that paid dividends during the 20082009 recession. While many companies struggled to re-brand themselves as affordable, Wal-Mart had an early advantage. Wal-Mart is known for excellent market orientationfocusing on consumers, defeating competitors, and increasing shareholder value.

WAL-MARTS RESPONSE TO THE FINANCIAL CRISIS

Interestingly enough, the financial meltdown of 20082009 may have enhanced Wal-Marts reputation. Unlike many stores, Wal-Marts sales increased by 2 percent in 2008 as shoppers sought good deals. An influx of new shoppers forced Wal-Mart to create better crowdcontrol measures in its New York stores after an employee was trampled to death and others were injured on Black Friday 2008 by a mob of shoppers. Although refusing to admit any wrongdoing in the incident, Wal-Mart agreed to have its crowd-control measures approved

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by safety consultants (in addition to providing $400,000 to victims of the incident). WalMart is also donating $1.5 million to a Nassau County social service program. In addition to creating better safety measures, Wal-Mart has launched new initiatives targeting families facing financial dilemmas. For example, the company formed the Wal-Mart MoneyCard, a reloadable Visa debit card to help lower-income consumers who do not use traditional checking accounts. Because of the economic crisis, Wal-Mart has decreased the fees for this card; consumers can now purchase it for $3, rather than the $9 it cost originally. The card has no overdraft fees, and the fees for maintenance and reloading are low. With this move, Wal-Mart hopes to save consumers $500 million in money service fees each year. The Wal-Mart Foundation has partnered with United Way and One Economy Corporation to provide free filing and tax services for low-income consumers. The Wal-Mart Foundation is donating a $3.6 million grant to this endeavor in an attempt to demonstrate social responsibility while increasing the popularity of its stores.

THE FUTURE OF WAL-MART

Wal-Mart can be viewed through two very different lenses. Some think that the company represents all that is wrong with America, and others love it. In response to criticism and in an attempt to initiate goodwill with consumers, the company has continued to improve stakeholder relationships and made efforts to exhibit itself as an ethically responsible company. Although it has faced controversy regarding competition, suppliers, employees, and workplace discrimination, it has increasingly demonstrated concern for its stakeholders. Wal-Marts endeavors that have sparked consumer attention deal with sustainability initiatives and social responsibility. Its goals to decrease its waste and carbon emissions extend to all facets of its operations, including suppliers. Though some consider these objectives to be unrealistic, the effort demonstrates Wal-Marts desire (whether through genuine concern for the environment or for its own bottom-line profits) to become a more sustainable company. Similarly, Wal-Marts creation of an ethics and compliance program shows it has come a long way since its beginning when formal ethics programs were deemed unnecessary. Likewise, its initiatives to help families during the recession helped to reinforce its image as a caring company. Both critics and supporters of Wal-Mart alike are waiting to see whether Wal-Marts efforts will position the company as a large retail company dedicated to social responsibility.

QUESTIONS
1. 2. 3. Do you think Wal-Mart is doing enough to become more sustainable? What are the problems that Wal-Mart has faced, and what has the company done to address them? Why has Wal-Mart tended to improve performance when other retail outlets have been suffering financially?

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SOURCES
Associated Press, Ex-Wal-Mart Vice Chairman Pleads Guilty in Fraud Case, Wall Street Journal, January 31,

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