Wal-Mart - Research Paper Example

WALMART Walmart, one of the largest retail stores of the USA, boasts a very important role thatit plays in the expanding and growing economy of the country. As per recorded in the year 2007, Walmart added more than 3000 stores to its extensive operations. With the growing network of the operations, the need to employ more workers also emerges, and hence Walmart employs more than 1 million employees, which makes the store largest employer in the country. As per recorded , Wal-Mart attached around 6.5 percent sales that took place in the country to itself and since then the numbers have been growing and increasing exponentially (Schulz, 2006). In comparison to other retailers out there, such as Costco or Target, Wal-Mart has simply exceeded their revenues. Wal-Mart, which came in to being in the year 1962 opened one of the first stores in the state of Arkansas. Talking about the owner of the Wal-Mart stores, Mr. Sam Walton belonged to a very poor family and grew up in the farm community of the rural areas of Missouri. Since he grew up during the Great Depression hence he understood the importance and the value of money. What makes Wal-Mart the world’s largest retailer and its operations so unique is that it drives costs out of the supply chain which as a result helps the end user to save money; spend less without compromising on the living standards. With such large operations and over a billion dollar revenue generation, it has undoubtedly become the success story of America. However, the success story brings with itself a lot of challenges and the controversies as well, and hence the most controversial issue that Wal-Mart is exposed to is the benefits and costs of the expansion all over the United States. The critics have given their view point that Wal-Mart’s expansion has had an effect over the workers employed, they documented saying that it misuses the immense market power it has to weaken the workers and their compensations. With its dinosaurian expansion, the squeezed suppliers and the local economies have been badly affected. But on the other hand, there are a few who support and speak in favor of Wal-Mart saying that the retail store compensates the end consumers so much and they take advantage of the cost effective prices that the store offers. The two newspapers, New York Times and the Washington Post published articles saying that the retailer has benefited the low income consumers so much that it definitely counter-acts the harsh labor practices. There is ample empirical evidence which shows that the workers of Wal-Mart are earning below than the average and they are paid with lower wages. Apart from the monetary rewards, even the non monetary rewards that they are not sufficient. This shows that the average wages awarded to the workers of Wal-Mart are less than what many workers get awarded at different large retail stores. The controversy continued deep persisted that how the local pay scale affects Wal-Mart and its image. Research suggest that the openings of the Wal-Mart replaces the better and well paying jobs with the jobs that pay less or below than the average level. Looking at the entry of Wal-Mart and its mission of providing cost effective goods and services, the wages of the average workers have been driven down as a result. This trend is specifically noticed in the grocery stores industry. During the time period of between 1992 and 2000, it was noticed as soon as a Wal-Mart store would open up in a region; let’s say a county, the average wages will automatically push down between 0.5 and 0.9. If we take a look at the general view, the wages in the merchandise sector fell by 1% with the inauguration of a Wal-Mart store. These effects weren’t just noticed in the counties, but at the state level as well. The trend showed that with the opening of every 50 Wal-Mart stores opening, the average wages decreased 10 per cent. According to another research the health coverage offered to the workers decreased due to the entry made by Wal-Mart. At a national level, the retail wages also fell due to the presence of Wal-Mart. The size and growth of the Wal-Mart stores in America in the past two decades have been great and Wal-mart has played a very important role in the reshaping of the retailing in America. But the retail reshaping had significant effect on the wages of the workers. There is enough evidence that suggests that Wal-Mart pays way less than other large retailers out there. As per recorded in the year 2005 the company reported the hourly wage of $9.85 per hour. Now that the world wide employee base has reached to 2.2 million, Wal-mart continues to get subjected to various lawsuits and issues related to the mistreatment and undermining of rights by the labor. The low wage, improper and unsafe working conditions, non providence of health benefits and few of the many complaints registered by the workers of Wal-Mart. Wal-Mart also practices strong anti-union policies due to which the workers can’t be vocal about their opinions. Wal-Mart faces a high employee turnover rate and hence this shows and projects the unhappy work force of the largest retailer of the world. According to a research, in an approximation about 70% of the employees leave in the first year after joining Wal-mart. The Oklahoma State University research states: "Walmart is found to have substantially lowered the relative unemployment rates of blacks in those counties where it is present, but to have had only a limited impact on relative incomes after the influences of other socio-economic variables were taken into account” ( Keil & Spector, 2005). Criticisms have been raised several times against the labor union policies which have been adopted by Wal-Mart. Critics blame Wal-Mart for the reluctance that its workers show for joining the labor union. Some of the tactics use by Wal-Mart for this discouragement is through the managerial surveillance and the closure of those stores who unionize. Wal-Mart counter acts saying that the retail store is not against its workers joining the labor unions but they believe that their workers should communicate the issues directly with the management instead of paying the third parties for the problems that they face. Wal-Mart argues that it has an open door policy and this allows the employees to file any complaints that they might have along with the suggestions which can be reached to the highest level of hierarchy. The history of anti unionization of the Wal-Mart can be dated back to the 1970s where the founder of Wal-Mart, Sam Walton also hired union busters working at a professional level so that an anti union campaign could be conducted against Retail Clerks International Union. But at the same time , Sam Walton made numerous attempts in working closely with the workers so show them that the company has best interests for the workers and motivated them to voice their complaints and the suggestions with the managers so that the direct action approach could be implemented. At the same time, profits sharing program was introduced back then so that the profits generated could be shared with the employees in order to motivate them. Wal-Mart has also been blamed at several occasions for even locking the workers at night during the night shift, apart from paying the below average wages and then at the same time exposing the workers to the unhealthy working conditions and health hazards Full time workers working at Wal-mart earn about 10$ in an hour and the critics state that their starting wages can be potentially much lower than this. As per the calculations generated by LAANE (Los Angeles Alliance for a New Economy), it was stated that the full time associates getting paid $10.11 for an hour, and another fact states that the they are being $10,000 less than what the average family of two person needs ( Keil & Spector, 2005). The controversy puts immense pressure on the high paid managers who try their best to control the costs of payroll. On the other hand, Wal-Mart makes public statement that the wages it pays to the workers in line with the market rates of the retail stores, that is, what the other retail stores are paying to their workers. However, the comparison is a little complex too carries out because Wal-Mart workers are mostly working on part time basis. Moreover, it is also argued that extensive training and supervision provided to the workers, who have little experience covers up for the difference in the wages that they are paid. Wal-Mart only award full time grants to the workers who work as little as 34 hours in a week and this is one of the way that the company is using to de-motivate the overtime. Wal-Mart in line with the controversies related to the wages announced in the year 2006 that it will increase the wages of the new hires by 6%, but on the other hand Wal-Mart announced that it would introduce the pay caps. This raised another question by the critics who believe that the salary caps have been announced so that the higher paid workers can be primarily removed from the Wal-mart. Another approach used by Wal-Mart is to employ part time workers and low paid workers because with this approach these workers do not qualify for the state welfare programs. This got things worse for Wal-mart now since the burden of the funded services increased. In the year 2004, University of California conducted a research which stated that the low wages by Wal-Mart had an adverse affect and these wages were very insufficient and as a result of his the State of California has to pay the pay $86 million a year to Walmart employees (Arindrajit & Ken, 2004) Wal-Mart gets supplies from the producers which sell the products to Wal-Mart at low prices. The low prices are achieved through manufacturing at a mass level. Since the manufacturing of millions of products pushes down the prices hence the low prices are achieved. Moreover, Wal-Mart has a number of customer’s therefore one product selling for a certain price but bought by a large number of customers helps the retail store incur profit. The vendor controlled products also helps Wal-mart to achieve high levels of profits, and the prices are determined by the prices. Since these vendors only have to rent the shelf space therefore the overhead for the locations is not much. The buying power of Wal-Mart has influenced the relationship it has with the suppliers and the way communication takes place with the suppliers. Many of these suppliers have their locations near the headquarters of Wal-Mart in Bentonville in Arkansas. The close location of the supplier helps the facilitation of the relationships (Useem, 2003). The entrance of the Wal-Mart in to the Mexico has resulted in efficiency for the retailer as well, and caused the gains among (Mexican) upstream suppliers of soaps, detergents, and surfactants. Wal-Mart’s growth, and with it buying power, may have been originally motivated by a desire to obtain countervailing power against manufacturers and thereby lower costs (Chen, 2003). There is evidence that suggests that Wal-Mart is also using the bargaining power in order to gain advantage in the wholesale prices and pushes these prices down. Conclusively, Wal-Mart is the largest retail store of the world which has very successfully reached an enormous size, providing its consumers the high quality products throughout the United States, without compromising on the quality. Wal-Mart has introduced the strategies which help in increasing the employment rate and also focusing on the controlling of the laid off rates. They have taken notice of the critics pointing out on the labor and low wages controversies and hence have introduced strategies to control this. Wal-Mart Stores run the largest discount department stores all around the world and according to the Fortune Global 500 listed it as the world’s third largest corporation. Although it employs more than a two million workers under its name, but the critics state continuously that Wal-Mart tries to exploit its workers with low wages and less non monetary rewards. The Walton family still owns the majority share of the company, and there is no doubt in the fact that the low prices to the end consumers put a burden on the workers. According to a paper issued by Berkeley, in the State of California, the workers are paid less than the minimum wage level. There are many labor unions and organizations who have pointed fingers at Wal-Mart and some noticeable criticism is Wal-Mart has an anti union stance. However, any company which goes big become the eye of criticism but it is very important for Wal-Mart to deal with criticisms with an open platform and make sure that the workers are provided with their basic benefits. Even a genre discrimination lawsuit was filed against Walmart stating that the female workers were treated with discrimination especially in terms of salaries, non monetary benefits and the working conditions as well. Where there are certain criticisms related to the working conditions of the employees and how they are not treated well, there are discussions pertaining to the economic impacts of Wal-Mart on the other small retail stores, however I believe this is a part of the popularity and the market share that Wal-Mart has gotten hold of in a short period of time that such criticisms are being given. References: Basker, Emek. 2005. Selling a cheaper mousetrap: Wal-Mart’s e?ect on retail prices. Journal of Urban Economics. Vol. 58: 203-22. Dube, Arindrajit and Steve Wertheim. 2005. Wal-Mart and Job Quality: What Do We Know and Why Should We Care? Presentation at the Center for American Progress. Washington, D.C. Dube, Arindrajit, Barry Eidlin and Bill Lester. 2005. Impact of Wal-Mart Growth on Earnings throughout the Retail Sector in Urban and Rural Counties. Unpublished manuscript. Dube, Arindrajit, and Ken Jacobs. 2004. Hidden Cost of Wal-Mart Jobs: Use of Safety Net Programs by Wal-Mart Workers in California. Berkley, Calif.: University of California, Berkeley Center for Labor Research and Education. Furman, Jason. 2005. Wal-Mart: A Progressive Success Story. Working Paper. Washington, D.C.: Center for American Progress. http://www.americanprogress.org/atf/cf/%7BE9245FE4-9A2B-43C7-A521-5D6FF2E06E03%7D/WALMART_PROGRESSIVE.PDF Global Insight. 2005. h e Economic Impact of Wal-Mart. Report prepared for Global Insight conference on Wal-Mart. APPENDIX A APPENDIX B APPENDIX C Read More