Research Korner: Power Merchandising

Case Study on Wal-Mart Stores Inc.

Case Study on Wal-Mart Stores Inc.     Answers to Discussion Questions:   1)         One unforgettable situation that happened in the Wal-Mart Co. is the incident wherein they have been raided due to charges of hiring illegal immigrants. There are particular lessons we can learn from this past experience. One is to avoid the exploitation of people in exchange for the sole purpose of making money. As we all know, due to their current status as an illegal alien, these undocumented workers are being offered with low wages and fewer, or worse, no benefits at all. They also have no right to demand for higher wages since their stay in that country is illegal. In this way, the employers are saving a lot from their costs of hiring, therefore taking advantage of the situation. That is why hiring of aliens is very rampant and seems to be unresolved up to now. In Wal-Mart’s case, in exchange for their savings on the costs of hiring, they even paid a lot of money for the consequences of their illegal act. According to an article, this case against Wal-Mart ended in a civil settlement worth $11 million and other conditions wherein they are strictly monitored in their hiring processes. Even though this settlement does not involve any admission on Wal-Mart’s part, it seems that it is already an admission paying a huge amount of money to settle the dispute.                This situation does not only cost them a lot, it also threatens the company’s image. They could have the reputation of not being a great place to work, because of this bad image to the media. If left unchecked, it could have a major impact in its total image. Even if their purpose is to give employment to those jobless people, they should also not take advantage of the people’s weaknesses and use them in illegal ways. They should always stick to the laws, especially labor laws, to avoid situations like the case of Wal-Mart, which has greater consequences for a smaller advantage on the company’s part. 2)         Overall, Wal-Mart has been successful being the largest general merchandise retailer owning and operating a national chain of discount department stores in the US, Mexico, and Canada. They have accomplished a lot of achievements, received many awards, and have established a good reputation being the top company in merchandise and retail industry. Their expansion in the grocery sections are even predicted to surpass its main competitor, as they will become the country’s largest grocer by the year 1997.             The secret to their success are their variety of effective strategies, which composes the company’s main strengths. One is the “power merchandising”, which means offering a wide range of products at low prices. This helps the matching of the products and services offered, to the customers’ needs and wants. It also pays way to improved customer service and checkout speed, simplified inventory control, as well as customized opportunities in local merchandising. This system is only a part of the company’s innovative marketing strategy.             Another strength that gave way for their success is their everyday low-price strategy. This was made possible thru their huge stores, offering a wide range of name-brand goods at big discounts, for the customers’ delight. Their prices are being kept low due to the sales volume and the hard negotiations done directly to the vendors.             Another successful strategy is the company’s aggressive store opening policy. They used the “backwards expansion” strategy, saturating the target’s rural market first, before expanding to the area’s districts characterized by large population. Another marketing strategy is their fast and responsive transportation system due to the owned distribution network, with 2,000 company-owned trucks. Last is their information technology, which provides data access to their suppliers. All of these together gave way for the company to extend quality service and excellent value to its customers.       3)         First and foremost is their problem regarding the ethical issues. Among them are the accusations on unfair pricing, the issue on the commitment to the “Made in the USA” policy, the hiring of illegal immigrants, and the unequal pay to the female gender.             Regarding the issue of the “Made in the USA” campaign, the scandal seems to affect customer loyalty a bit. Besides, the company has taken actions to solve this issue, including their participation on a buy-American program. Regarding the wage gap, it has not been published in its company’s sources. Regarding the issue on low pricing, some minor problems happened, which cause them to change some of their plans, including their slogan from “Always the low price, Always” to “Always low prices, Always.” This is due to the accusations that they are forcing the smaller stores out of business thru their strategy of below cost pricing of goods.                The issue on illegal immigrants is what really hurts the company the most. Their image is being threatened because of the scandal, especially after the $11 million civil statement, which implies their guilty plea upon the said act of settlement. It already cause a little damage in their reputation, which if left unsolved, will further cause the company’s overall failure. 4)         With their recent expansion in the western part of US, it seems to be not that hard since they have already established their name in the industry. Their main target customer is the person wanting best product for the best price. In order for them to serve their target market with quality service, they have produced a wide variety of products and services to be offered to their customers. The Wal-Mart’s “Sam’s Clubs” is therefore, created for this specific goal and purpose. They offer products ranging from cosmetics, clothing, toys, pet supplies, electronics, housewares, to pharmacies, vision care centers, and even items like tires. They also have full-service grocery markets, provides deli’s, bakeries, photo services and hair salons.             While they are making their present expansions in the US, Wal-Mart is also considering expansions in the international arena. At present, they already have a definite presence in eight major markets. They are in Canada, Mexico, Argentina, Germany, Brazil, South Korea, United Kingdom, and Puerto Rico. While their presence in the China and Japan market are in the form of joint ventures, which does not necessarily expressed or used their name brand.             While the US market can no longer accumulate the growing number of retailers and manufactures due to strict competition in catching consumers’ attention, Wal-Mart is already doing ways to enter the growing Mexican market. Only recently, Wal-Mart began a joint venture with CIFRA (Mexico’s largest retailer) in order for them to enter the Mexican marketplace. Wal-Mart is the first retailer in its industry, to establish a foreign trade zone. This zone is planned to provide the Wal-Mart’s international trade, the support service they will be needing in the future, This in turn, will reduce their costs dramatically. As a result of the acquisitions, the goal of Wal-Mart now is to derive the thirty percent of its sales and one-third of its earnings’ growth from the operations in the international market, within the next five years.             For the mean time, Wal-Mart currently owns the 37.8% of The Seiyu, Ltd. The Seiyu, Ltd. is a leading retailer in Japan with over 400 stores. By the end of 2007, it is expected that its ownership would be 69%. 5.1)     Unequal Pay for Women             As the Bible says, we are all created equal in the eyes of God. Therefore, women should receive equal pay as the men. As we all know, equal pay has been mandated by law as early as 1963. However, up to now, little improvement could be measured as women are being paid about 76 cents for every dollar men earned. Which means, that women needs to stretch her budget a little bit more to cover up all of her family expenses. Due to this, working families lose about $4,000 annually, according to a research performed by an institute for women. In addition to this, an average woman loses over $455,000 of her income over her lifetime, only because of this wage gap.             Lower income therefore, means lesser pensions and Social Security benefits paid to the retiring women. According to the record, the median income from pension benefits for a retired woman in 2002 was about fifty-four percent compared to the male counterpart. Considering the issue on racism, it even got worse, as African American women are paid only 71 cents while the Latinas received 59 cents on every dollar earned by men.             This issue on pay inequality really hurts the working families the most. According to a survey by the AFL-CIO, 62 percent of the working women earn half or more than half of their family’s income. Thus, due to the wage gap, the economic stability of their families, as well as their children’s health, is now being threatened. Only if they were being paid equally will their financial situation improved.             Nevertheless, unequal pay does not just hurt women. It also pushes the wages throughout the economy down, as women are becoming a bigger part of the workforce nowadays. In addition, there are a lot of “female occupations” in which the females are the only one capable of doing.             Therefore, equal pay is a basic democratic question on how the society values and treats the importance of the women and her contribution in her country. Equal pay is about equality for women. It is also a broad issue about the economic justice for working families and the basic freedom from want or poverty. Therefore, this is a serious issue, which needs to be properly addressed.         5.2)       Hiring of Illegal Immigrants             The cheapest labor force can be the costliest on the employer’s part if it involves the hiring of illegal workers, underage workers or child laborers for hazardous activities and other low-paying jobs. It is considered as illegal and morally wrong if you hire these employees. In addition, heavy penalties are imposed on employers violating the labor laws.             Failure to document a worker's eligibility is considered a civil offense. On the other hand, repeated infractions could lead to criminal charges. A typical fine for a first offense involving one employee ranges from $750 to $1,000. While harboring aliens to keep the authorities from finding them is also a crime. In addition, failure to pay employment taxes could result into penalties and interest, should the omission be discovered. These are only few among the penalties in hiring illegal immigrants. Others include fines and even imprisonment.             Labor laws exist to protect the rights of the workers, especially the children. It also avoids them from being abused by their employers. Most employers prefer hiring illegal immigrants due to its lower costs. Moreover, most of these positions are low-paying jobs in nature. Which means it does not necessarily needs expertise and experience.  Therefore, their status as an illegal immigrant, gives the employers the courage on abusing them, since they are afraid of reporting the situation to the police due to their alien status. That is why this issue, like the first one, also needs to be solved immediately.

Case Study on Wal-Mart Stores Inc.

Case Study on Wal-Mart Stores Inc. Answers to Discussion Questions: 1) One unforgettable situation that happened in...