Answered: Refer to Case 3: Wal-Mart Manages…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Refer to Case 3: Wal-Mart Manages Ethics and Compliance Challenges Investors in your company have been complaining because they feel that top executives are taking the company in a bad direction. Investors are calling for new board members. How would you answer these stakeholders? Be sure to address: How Wal-Mart is managing ethics and social responsibility Wal-Mart’s response to ethical issues Wal-Mart’s contribution to improving economic sustainability of society

Transcribed Image Text:4:37 PM Fri Jun 9 = QAA WHAT IS WALMART DOING TO IMPROVE ETHICS AND SOCIAL RESPONSIBILITY? Walmart is working to improve its ethical reputation along with its reputation for social responsibility and corporate governance. In 2004 Walmart formed its 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, Walmart has an Ethical Standards Team to monitor the compliance of supplier factories with the company's "Standards for Suppliers" and local laws. Walmart claims that in a period of several months the firm interviewed 1,000 market personnel in various countries, dedicated $35 million to new processes and procedures, and developed ethical training sessions for more than 19,000 associates. In response to the bribery scandal, Walmart has completely overhauled its global compliance program. In 2014 it released its first Global Compliance Program Report detailing the changes it has made. The report categorized the changes into three broad areas: people, policies and processes, and systems. The changes include a completely new corporate division that combines ethics, compliance, investigations, and legal matters into a unified organization all reporting to an Executive Vice President of Global Governance. The company has also hired "Subject Matter Leaders" and "Subject Matter Experts" to provide expertise and advice in 14 areas of concern, such as anti-corruption and responsible sourcing. Other highlights are a multi-year compliance training plan, improvements to reporting and collaboration communications channels, establishment of multiple compliance and ethics committees, and a commitment to being completely bribery-free, regardless of the culture Walmart is operating in. Analysts have stated that, at least on paper, Walmart's initiatives are extremely thorough and innovative and deserve close watch to see how they work in practice. Walmart will continue to release Global Compliance Program Reports annually to further detail its accomplishments and the compliance and governance steps it continues to take. Walmart has contributed significantly to disaster management projects and economic empowerment for women. The company donated over $1.5 million in aid for the victims of Hurricane Sandy, including money, food, and goods. In 2001 Walmart established The Associates in Critical Need Trust, which provides grants to associates who have experienced unexpected emergencies such as natural disasters or death of a spouse; the trust has given over $100 million in grants so far. In terms of increasing opportunities for women, Walmart made a commitment in partnering with 150 factories and 60,000 women to teach women valuable skills to help them escape poverty. It has also collaborated with the Women's Business Enterprise National Council to add a unique "Women Owned" logo to products from women-owned businesses so customers can easily identify and support them if desired. The company has recently embarked on a health initiative to address the growing problem of obesity in America. Walmart U.S. President Bill Simon met with First Lady Michelle Obama to discuss the issue. Walmart announced it would lower the prices of its fruits and vegetables and reduce the amounts of fats, sugars, and salts in the foods it sells. Specifically, the company formulated goals that included cutting sodium by 25 percent and sugars by 10 percent in food under its Great Value brand over a five-year period. By putting its weight behind solving the obesity epidemic, the world's largest retailer might be able to create significant change toward healthier eating habits. Walmart Today Sa Walmart remains the preferred shopping destination for many consumers, particularly after the financial meltdown of 2008-2009. Although Walmart prospered during the recession while other retailers suffered, the company's sales in many of its established markets have begun to stagnate or even decline. Walmart itself acknowledged that it strayed from Sam Walton's original vision of everyday low prices in order to court higher-income customers. Several initiatives, such as Walmart's adoption of organic food and trendy clothes, did not achieve much success with discount shoppers. Walmart also underwent a renovation effort that cut certain products, such as fishing tackle, from its stores. These actions alienated Walmart's original customer base. Households earning less than $70,000 annually defected to discounters like Dollar Tree and Family y to discount Dollar. Analysts believe Walmart's mistake was trying to be everything to everyone, along with copying its more "chic" rivals like Target. Because of these blunders, in addition to external pressures such as market saturation and strong competition from other retail giants, Walmart's sales in many markets are experiencing a slump. As a result, Walmart is returning to Sam Walton's original vision and its "everyday low prices" mantra. The company launched a campaign, "It's Back," to signal the return of the merchandise it removed, and Walmart executives are encouraging store managers to compare prices with competitors to ensure Walmart offers the lowest prices. Walmart is also investing significantly into e- commerce as an untapped area of growth in the hopes of competing more directly with Amazon and other e-commerce retailers that have drawn away some of its customer base. Although Walmart's stagnating domestic sales were counterbalanced for a period by continuing steady growth in international markets, even its growth in many foreign markets has slowed. The company continues to look for new opportunities to expand internationally to make up for lower growth in its established markets. This strategy requires Walmart to continually adapt to different social, cultural, regulatory, economic, and political factors. Walmart is known for its ability to adapt quickly to different environments, but even this large-scale retailer has experienced trouble. For instance, it was forced to withdraw completely from Germany and South Korea after failing to interest the local populations, and still has just a small number of wholesale-only stores in India, one of the world's largest markets, after failing to find a way to navigate the country's complex regulatory environment for foreign retailers to sell directly to the public. Walmart's Brazil branch has also failed to achieve profitability after over two decades in the country, which some attribute to the retailer's everyday low pricing strategy simply being incompatible with the Brazilian shopper culture of always checking multiple retailers for sales. The more Walmart expands internationally, the more the company must decide what concessions it is willing to make to enter certain markets. Despite the difficulties of operating globally, Walmart has achieved a number of successes. After years of struggling in the Japanese market, for example, Walmart began turning a profit in 2008 through its acquisition of Japanese retailer Seiyu Ltd. It has also recently turned its attention again to India, expressing a new commitment to expanding its operations in the market, and is continually focused on further developing its presence in China, with plans to open 115 new stores in the country by 2017. Though the company will likely experience several bumps in the road, many of its international markets appear to offer strong growth potential. 口 420/642 >> ...

4:37 PM Fri Jun 9
=
QAA
Walmart Today
Walmart remains the preferred shopping destination for many consumers, particularly after the financial meltdown of 2008-2009. Although
Walmart prospered during the recession while other retailers suffered, the company's sales in many of its established markets have begun to
stagnate even decline. Walmart itself acknowledged that it strayed from Sam Walton's original vision of everyday low prices in order to court
higher-income customers. Several initiatives, such as Walmart's adoption of organic food and trendy clothes, did not achieve much success with
discount shoppers. Walmart also underwent a renovation effort that cut certain products, such as fishing tackle, from its stores. These actions
alienated Walmart's original customer base. Households earning less than $70,000 annually defected to discounters like Dollar Tree and Family
Dollar. Analysts believe Walmart's mistake was trying to be everything to everyone, along with copying its more "chic" rivals like Target. Because
of these blunders, in addition to external pressures such as market saturation and strong competition from other retail giants, Walmart's sales in
many markets are experiencing a slump. As a result, Walmart is returning to Sam Walton's original vision and its "everyday low prices" mantra.
The company launched a campaign, "It's Back," to signal the return of the merchandise it removed, and Walmart executives are encouraging
store managers to compare prices with competitors to ensure Walmart offers the lowest prices. Walmart is also investing significantly into e-
commerce as an untapped area of growth in the hopes of competing more directly with Amazon and other e-commerce retailers that have
drawn away some of its customer base.
Although Walmart's stagnating domestic sales were counterbalanced for a period by continuing steady growth in international markets, even
its growth in many foreign markets has slowed. The company continues to look for new opportunities to expand internationally to make up for
lower growth in its established markets. This strategy requires Walmart to continually adapt to different social, cultural, regulatory, economic,
and political factors. Walmart is known for its ability to adapt quickly to different environments, but even this large-scale retailer has
experienced trouble. For instance, it was forced to withdraw completely from Germany and South Korea after failing to interest the local
populations, and still has just a small number of wholesale-only stores in India, one of the world's largest markets, after failing to find a way to
navigate the country's complex regulatory environment for foreign retailers to sell directly to the public. Walmart's Brazil branch has also failed
to achieve profitability after over two decades in the country, which some attribute to the retailer's everyday low pricing strategy simply being
incompatible with the Brazilian shopper culture of always checking multiple retailers for sales. The more Walmart expands internationally, the
more the company must decide what concessions it is willing to make to enter certain markets.
Despite the difficulties of operating globally, Walmart has achieved a number of successes. After years of struggling in the Japanese market, for
example, Walmart began turning a profit in 2008 through its acquisition of Japanese retailer Seiyu Ltd. It has also recently turned its attention
again to India, expressing a new commitment to expanding its operations in the market, and is continually focused on further developing its
presence in China, with plans to open 115 new stores in the country by 2017. Though the company will likely experience several bumps in the
road, many of its international markets appear to offer strong growth potential.
The Future of Walmart
Walmart can be viewed through two very different lenses. Some think the company represents all that is wrong with America, while 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 make efforts to demonstrate it is an ethically responsible company. Although it has faced controversy regarding competition,
suppliers, employees, and global corruption, among other things, it has also demonstrated concern for sustainability initiatives and social
responsibility. Its goals of decreasing its waste and carbon emissions and its new Sustainability Index extend to all facets of its operations,
including suppliers. These efforts demonstrate Walmart's desire (whether through genuine concern for the environment or for its own bottom-
line profits) to become a more sustainable company.
Similarly, Walmart's creation of a sophisticated global ethics and compliance program shows it has come a long way since its beginning, when
formal ethics programs were deemed unnecessary. However, without strong monitoring systems and a commitment from top management to
enforce the company's ethics policies such efforts will prove fruitless. Overseas bribery scandals and employee discontent have tarnished
Walmart's reputation. As a result, the company is working to improve internal control mechanisms and supplier auditing. Both critics and
supporters of Walmart alike are waiting to see whether Walmart's efforts will position the company as a large retailer truly dedicated to social
responsibility.
QUESTIONS FOR DISCUSSION
口
am
1.
Assess how Walmart is managing ethics and social responsibility as one of the largest corporations in the world.
2. Evaluate various ethical issues Walmart has faced and how the company responded to stakeholders.
3.
What are Walmart's contributions to improving the well-being of consumers and the economic sustainability of society?
SOURCES
$15 & Full Time website, http://15atwalmart.org/ (accessed May 18, 2015); James Arkin, "D.C. Council panel hears testimony on 'living wage'
bill targeting large retailers," The Washington Post, March 20, 2013, http://articles.washingtonpost.com/2013-03-
20/local/37864098_1_minimum-wage-retailers-outlets (accessed May 15, 2015); Associated Press, "Former Wal-Mart executive is
resentenced, avoids prison," Los Angeles Times, February 2, 2008, http://articles.latimes.com/2008/feb/02/business/fi-coughlin2
(accessed May 15, 2015); Vikas Bajaj, "India Unit of Wal-Mart Suspends Employees," The New York Times, November 23, 2012,
http://www.nytimes.com/2012/11/24/business/global/wal-marts-india-venture-suspends-executives-as-part-of-bribery-
inquiryhtml?_r=o (accessed May 15, 2015); James Bandler, "Former No. 2 at Wal-Mart Set to Plead Guilty," The Wall Street Journal, January 7,
2006, A1; James Bandler and Ann Zimmerman, "A Wal-Mart Legend's Trail of Deceit," The Wall Street Journal, April 8, 2005, A10; Shelly Banjo,
"Wal-Mart Ads Tout American Success Story," The Wall Street Journal, May 3, 2013,
http://online wei.com/article/S1000142412789722458200457846001
html (accessed May 15, 2015): Shollu Ronio "Wal
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