Always Low Prices, Always: Marketing Origins Of Wal-Mart's Dubious Csr Performance.

ABSTRACT

Wal-Mart, the world largest and most successful corporation, also has the unflattering reputation of being so uncaring that it now symbolizes corporate social irresponsibility in the eyes of many Americans. How did the most powerful company become admired as well as feared and despised? Using the company's marketing strategy as a basis for analysis, the current study argues that Wal-Mart's problems with its own employees are not just perceptual but fundamentally due to the company's targeting and positioning choice: the delivery of always low prices to customers has meant that such stakeholder groups as employees have had to be squeezed.

1. INTRODUCTION

From its humble beginnings in the 1960's Wal-Mart has emerged as not just the most powerful global retailer of all times, but also the world largest company, with annual sales of more than 250 billion. In a short time Wal-Mart has become the largest and the most successful retailer, by a fanatical pursuit of the lowest prices for its customers. Along the way, however, the company has acquired the unsavory reputation of ruthlessness with its supply chain, competitors and employees alike. Few companies have achieved the mixed reputation of being admired, beloved, for their business success and yet despised and feared at the same time for their labor and competitive practices as Wal-Mart. Wal-Mart is the company people love to hate; with intense emotion. More "anti" websites are devoted to Wal-Mart than to any other company. The company is dissected and studied for its marketing triumphs as much as it is for its labor relations failures.

Many studies document Wal-Mart success and ascend to global power (cite). An even larger number discuss its rise from folk hero to corporate monster (cite). The current article examines the origins of Wal-Mart's CSR performance shortcomings, from a marketing perspective. How did a company heralded as a hero as recently as in 2000 become a corporate monster only a few years later? Is the company's current predicament an aberration to be blamed on rapid growth, or was it predictable? The article argues that the company's current predicament was not only foreseeable, but a logical consequence of its strategic choices, through its unbalanced approach to stakeholder commitment.

2. STAKEHOLDER THEORY

Stakeholder theory (1984) may be offered as a contrarian proposition to generally accepted neoclassical dogmas on the role of the firm as essentially economic. The theory posits that businesses must balance the interests of all parties with a stake (stakeholders) in the firm. Stakeholder theorists (Freeman, 1984) identify a number of groups that have a "stake" in the corporation either because they are directly (or indirectly) affected by corporate decisions & actions, or because they have an explicit contractual relationship with the firm. Such groups (stakeholders) typically include: shareholders, employees, customers, suppliers, the environment, and communities.

Within this tradition, stakeholder mapping appears as a tool to unmask potential disfunctions (especially from a communication standpoint) between an organizations and its stakeholders. In essence, stakeholder maps are visual representations of a company's stakeholders properly categorized along a power/interest grid. The Map is a strategic planning tool that displays stakeholder inter-relationships, and suggests paths the company can follow to achieve its business objectives while avoiding alienation of its stakeholders.

Based on the company's 2003 social report, a stakeholder Map was constructed (see Figure 1). From this document on company policies and actions, it is clear that Wal-Mart views its shareholders, consumers, and the community as their most important group of stakeholders, while employees are its second most important one. In this representation, suppliers and the environment rank the lowest in the company's power/interest grid.

[FIGURE 1 OMITTED]

The current research does not purport to investigate whether Wal-Mart communicates effectively with all its stakeholders, or whether its stakeholder engagement efforts are congruent with the above stakeholder categorization (a common diagnostic use of stakeholder maps). Rather, it focuses on providing an explanation related to the company's poor performance with its self-declared second most important stakeholder group: its employees.

Wal-Mart's labor related problems are well documented and the list of accusations against it, impressive. A recent congressional report (George Miller, 2004) gives a scope and the extent of Wal-Mart's poor labor practices:

Wal-Mart faces suit for underpayment of employees

Maria Gamble, a former employee of Wal-Mart, is bring a suit to accuse the company of underpaying its hourly employees by forcing them to work extra hours unpaid through intimidation and threats. The suit seeks unspecified damages, and seeks class action status.

Wal-Mart denied the allegations, and suggested that the company complies with all state and federal requirements. Supervisors who broke such regulations had been disciplined in the past, it said.

Source: NY Times as reported in Business Respect, Issue Number 10, dated 11 Aug 2001 US: Wal-Mart target for Off-the-Clock suits

Wal-Mart is being sued for what some workers say is widespread bad practice in forcing workers to do extra work "off the clock"--ie. unpaid.

The practice involves catching employees either before they have clocked in at the beginning of the day--or just after they have clocked out at the end--and requiring them to carry out further duties. Wal-Mart's policies forbid the practice, but managers under intense pressure to cut costs have allegedly resorted to it in order to cope. The lawsuits contend that the company has cheated Wal-Mart employees and workers at its warehouse-store division, Sam's Club, out of hundreds of millions of dollars a year. The company argues that the off-the-clock phenomenon is an infrequent and isolated problem considering that the company has 3,250 stores and a million employees in the United States.

Source: NY Times, as reported in Business Respect, Issue Number 10, dated 11 Aug 2001

Workers organizing rights: Wal-Mart has aggressively sought to discourage--even intimidate--workers from unionizing. A hotline is provided to managers to call when they suspect union-organizing activities. Specialists trained to head off organizing efforts are hired by the company. The rare unionizing activities that

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