Analysis of Issues Facing Wal-Mart Stores, Inc.

5-1 Final Project Milestone Two: Wal-Mart Jasmine Strader Southern New Hampshire University OL-690 December 27, 2023

5-1 Final Project: Milestone Two 2 Introduction In 1962 Wal-Mart was brought to life by Sam Walton, and became an instant success, with 24 store within five years. This success lead to Wal-Mart becoming incorporated in 1969 (Wal-Mart, 2022). Wal-Mart operates as a grocery store as well as a department store in one location, which assisted in Wal-Marts success, recording 12.7 million dollars in sales with just 24 stores showed the need and profitability for incorporating. The Walton family received such success they expanded globally. In 1983 Wal-Mart Inc expanded even more by creating Sam’s club. In 2024 Wal-Mart Inc. logged 10, 500 stores over the world. Wal-Mart reported revenue of $164.00 billion in 2023 end of year, which is an increase 7.3% from previous year (Walmart Release Q4 and FY23 Earnings, 2023). As a corporate giant, Wal-Mart Stores Inc. boasted a workforce of 2.3 million employees. When the world was facing a pandemic Wal-Mart sustained its momentum experiencing notable 56% increase for profits in that quarter. Strategically prioritizing cost efficiency and environmental responsibility, Wal-Mart implemented initiatives to reduce its environmental footprint, with a specific focus on energy efficiency. The company set ambitious goals, aiming to slash greenhouse gas emissions by a minimum of 20% by the year 2013. To achieve this objective, Wal- Mart embarked on constructing stores equipped with renewable energy sources, including solar power, wind turbines, and biofuel-capable boilers to meet its energy needs. In its pursuit of corporate success, Wal-Mart underwent store rebranding and renovations, strategically designed to appeal to a broader customer base both domestically, within the United States, and internationally. Despite these commendable efforts, Wal-Mart faced challenges in certain aspects of global business, notably experiencing a governance failure. This was underscored by a significant leadership crisis when the company became entangled in a bribery scandal in Mexico in 2012 (Field, 2012).

5-1 Final Project: Milestone Two A. Personnel (People) Walmart is a big box retailer with many stakeholders, both internally and externally. Meyer (2017), defines stakeholders as people or groups that the business affects, whether it be directly or indirectly. In reviewing Walmart’s stakeholders, they may be categorized in to four groups and those are as follows: 1.) Investors, 2.) Employees, 3.) Suppliers and 4.) Customers. The investors, or shareholders, at Walmart are made up of those individuals who hold special interests in profits of the organization. This means that they are looking to keep their cost and low and profits high in order to obtain the greatest return on their investment through the organization. Investors provide financing of the daily operations in exchange for financial returns at the end of every financial year. Through its irresponsible corporate social responsibility practices, Walmart has caused their investors to be adversely affected due to their decisions and a drop in their stock is proof of that. According to Rivas (2021), Walmart stock fell 5% after the retail giant’s fiscal fourth- quarter earnings came up short and it warned of slowing earnings growth. The employees are the next group of stakeholders are the employees at Walmart, who I believe have the most significant impact on the organization. Walmart has made headlines in the prior year’s regarding the low wages being paid to their employees, which placed the organization in very negative light and led to several lawsuit claims. In

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5-1 Final Project: Milestone Two 2014, The Pennsylvania Supreme Court upheld a $151 million judgement against Walmart in a class-action lawsuit alleging that Walmart employees were forced to work through their breaks, mealtimes, and even while off the clock (Shelly, 2014). Under a more recent lawsuit claim in California, it was mentioned that the big box retailer “systematically underpaid its California employees and forced them to work through unpaid breaks” (Dailey, 2020). In a more recent article, Walmart stated that it planned on raising wages for approximately 425,000 employees to $15 an hour, however, their starting pay would remain at $11 an hour (Rivas, 2021). In addition to the low wages, Walmart has also faced scrutiny from its female employees as they alleged sexual discrimination against them. Approximately 57 percent of Walmart’s workforce is women. One of Walmart’s most public discrimination lawsuits came in 2000, Dukes v. Walmart, where a group of women alleged, they were discriminated against in promotions, pay, and job duties. In 2011, the U.S. Supreme Court dismissed the lawsuit for technical reasons without a deciding decision, which lead the plaintiffs to file smaller civil suits (Floyd, 2016). The third set of stakeholders at Walmart is their suppliers. Bragg (2021), defines a supplier as an entity that supplies goods and services to another organization. Walmart is best known for their low prices on the goods they provide to the consumers. The suppliers depend on Walmart to sell their products at the highest profit margin possible for them to earn a decent profit. Walmart is a household name and offers thousands of locations around the world. They can leverage themselves with these suppliers, therefore they are able to get their products at extremely low prices, lowering the profits suppliers can make. Being that Walmart is one of the largest retain giant, they can flex their weight

5-1 Final Project: Milestone Two in the industry, which increases their bargaining power. Many brands depend on Walmart sales to stay in business. Walmart can demand lower wholesale rates than just about any other retailer on earth, and it passes these savings on to customers. Profits allow for the suppliers to be paid. Suppliers hence have confidence in the company and can even supply goods on credit. The fourth stakeholder associated with the Walmart brand is its customers. Without customers, no organization would be able to grow or even become profitable for that matter. Customers receive the quality and value of products and services provided by Wal-Mart in exchange for their money. The Walmart brand was created as a customer- focused brand, that targeted to provide low-priced and quality products to people throughout the community, for them to live a good lifestyle at a lower price than their competitors. Unfortunately, for the big box retailer, the many allegations of the unfair treatment via low wages to their employees, discrimination allegations and other poor corporate social responsibility choses have caused consumers to lose interest in the advertised “everyday low prices.” B. Environmental (Planet) In 2005, Walmart made a sustainability goal, called “Sustainability 360” commitment that would incorporate the three followings actions: 1.) to be supplied 100% by renewable energy, 2.) to create zero waste and 3.) to sell products that sustains their

5-1 Final Project: Milestone Two resources and the environment (Walmart.com, n.d.). With such an ambitious commitment, Walmart had great work to do in order to achieve their goal and have come a long way from when they first launched their sustainability campaign. Some of their early areas of opportunity included: • In 2011 less than 4% of Walmart’s electricity was utilized from its renewable power purchases and solar power projects (Walmart, 2012). Based on this number, it would have taken decades to reach the goal of 100% of renewable energy. Not to mention, their competitors such as Kohl’s and Whole Foods fully converted to renewable power. • Walmart promised to cut greenhouse gas emissions by 20% by the end of 2012. However, Walmart was only able to cut them by less than 13% (Walmart, 2012). • Walmart continues to build supercenters on land that has never been developed before. The Institute for Local Self-Reliance (2012) states, “Walmart’s development practices have a major impact on the environment, causing problems such as habitat loss, water pollution from parking lot runoff, sprawl, increased driving, and air pollution”

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5-1 Final Project: Milestone Two Walmart has made some notable achievements along the way, however. Some include: • Eliminated 20 million metric tons of Green House Gas emissions from its global supply chain. Walmart was able to partner with the Environmental Defense Fund (EDF), to eliminate 20 million metric tons of GHG emissions by implementing innovative measures across global operations, such as enhanced energy efficiency and working closely with suppliers on the Sustainability Index to track progress toward reducing carbon emissions (Walmart, 2015). • • In 2016 Walmart was able obtain 25% of its operations powered by renewable energy. Lindsey (2016) states, “paired with Wal-Mart’s goal to cut energy consumption in stores by 20%, the retailer estimates it will save $1 billion a year thanks to these initiatives. • Reduced its plastic bag waste by greater than 38%, compared to 2006 and diverted 81% of materials from its U.S. stores and distribution centers from landfills (Lindsey, 2016). • Walmart double the efficiency of its fulfillment operations, which allowed it to reduce its CO2 emissions by 650,000 metric tons (Lindsey, 2016).

5-1 Final Project: Milestone Two The short-term effects on Walmart’s goal to increase its sustainability and have a reduction of environmental impacts has very little short-term effects on the environment. This, however, is a positive thing because the initiatives set forth should have a long- term effect to ensure these changes are just for a short period of time. Long-term, Walmart’s sustainability and environmental projects could certainly have an extremely significant positive impact. Once Walmart is able to reach the sustainability goals they have set forth, from farming and sourcing to product packaging, and energy use in stores in factories, they will be able to reduce waste and emissions and the negative impact they have on the environment would reduce significantly. C. Sound Business Practices (Profit) Walmart’s profitably has a significant impact on its stakeholder, which include their Owners, Executives, Investors and Board of Directors. By Walmart increasing their profitability would be increased return on the investments to those stakeholders who have interest in the company. The Walmart executives are incentivized with stock, which they hope will do well and rise during their time at the company. For Walmart to achieve increased profitability, they will need to continue to demonstrate responsible corporate behavior in order to achieve those results. Demonstrating responsible corporate behavior could potentially lead to increased sales, attract and retain more quality talent. When they pair that with their sustainability efforts, this could potentially lower their overall costs

5-1 Final Project: Milestone Two can lower costs and improve company efficiency. Although it may be costly to implement the sustainability projects in the short-term, it would help set Walmart up for long-term future success. In addition to this, Wal-Mart’s business processes aim at ensuring that the customer derives the highest quality and the most affordable price and at the best possible time. Within this process, it also prioritizes generating profits for the company. Profits make the company research and deliver high-quality products and efficient ways of service delivery to customers. Profits also supplement the income earned by employees through bonuses and incentives. Walmart will need to ensure that the remain in a good light as it relates to the treatment of their employees, however. Those customers who are morally conscious and stay abreast of the company and its internal practices and treatment of its employees may have a hard time supporting a store with a poor history and reputation of its overworking and underpaying their employees.

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5-1 Final Project: Milestone Two III. Recommendations A. People • Create more positive relationships with the employees

5-1 Final Project: Milestone Two • Make it a priority to have employee engagement as part of their overall culture • Prioritize creating a more diverse staff i.e. placing women in leadership positions • Incentivize employees to show appreciation • Build relationships within their local communities and give back whenever possible B. Planet • Stick to sustainability goals and produce results • Invest in renewable energy to help attain the sustainability goals • Partner with suppliers who also has sustainability at top of their priorities C. Profits • Continue to provide quality products at lowest cost to their consumers • Reduce the number of complaints/lawsuits as this can become costly and could potentially cause Walmart to lose customers. IV. Implementation A. People • Implement incentive program for employees • Create a program geared towards women and creating a path to leadership • Allocate paid volunteer hours each year for employees B. Planet • Invest in renewable energy • Offer customers incentives for recycling and utilizing reusable bags C. Profits

5-1 Final Project: Milestone Two • Implementing programs to recognize their employees and show appreciation • Making a commitment to having sustainability at the top of their priority list to ensure the goals are met. This could help reduce cost and translate to additional profits for Walmart.

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5-1 Final Project: Milestone Two References : Bragg, S. (2021, February 20). Supplier definition. AccountingTools. https://www.accountingtools.com/articles/2017/5/16/supplier. Dailey, K. (2020, April 8). Walmart Accused of Underpaying, Overworking California Employees. Bloomberg Law. https://news.bloomberglaw.com/class-action/walmart- accused-of-underpaying- overworking-california-employees. Floyd, J. (2016). Women Accuse Wal-Mart of Bias. Retrieved March 24, 2021, from http://abcnews.go.com/Business/story?id=88057 Institute for Local Self-Reliance. 2012. Top Ten Ways Walmart Fails on Sustainability. Retrieved from https://ilsr.org/wp-content/uploads/2012/04/topten- walmartsustainability.pdf Lindsey, K. (2016, August 9). Why Wal-Mart is a retail sustainability leader (but doesn't really want to talk about it). Retail Dive. https://www.retaildive.com/news/why-wal-mart-is-a- retail- sustainability-leader-but-doesnt-really-want-to/423713/. Meyer, P. (2017, March 25). Walmart's Stakeholders: Analysis & Recommendations. Retrieved from http://panmore.com/walmart-stakeholders-analysis-recommendations Rivas, T. (2021, February 18). Walmart Stock Is Falling on Earnings Miss, Muted Outlook. https://www.barrons.com/articles/walmart-stock-is-falling-on-earnings- miss-muted- outlook-51613657909.

5-1 Final Project: Milestone Two Shelly, J. (2014). Philadelphia Business Journal. Retrieved April 10, 2016, from http://www.bizjournals.com/philadelphia/morning_roundup/2014/12/pa-supreme-courtaffirms- 151-ruling-against.html Walmart, 2012 Global Responsibility Report. Wal-Mart Releases Sustainability Update . Corporate. (n.d.). https://corporate.walmart.com/newsroom/2007/11/18/wal-mart-releases-sustainability- update#:~:text=In%20an%20October%202005%20speech,our%20resources%20and %20the%20environment.

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