Is Wal-Mart Good for America - Case Study Example

Is Wal-Mart Good for America? Table of Contents I. Introduction ………………………………………………………………. 3 II. Statement of the Problem ………………………………………………. 3 III. Target Readers for this Study …………………………………………… 4 IV. Statement and Arguments with regards to Anti-Wal-Mart Campaign . 4 V. My Personal Stand on the Issue Whether the Existence of Wal-Mart is Good for America or Not ………………………………….. 6 VI. Recommendation on What Wal-Mart Should Do on Its Current Situation …………………………………………………………. 7 VII. Conclusion ………………………………………………………………... 8 References ………………………………………………………………………… 9 - 10 Introduction Sam Walton, the owner of Wal-Mart, started his business in retailing back in 1945 when he first acquired a retail store from Ben Franklin in Newport, Arkansas. (Walton and Huey, 1993) After managing the business well, Walton established a total of eleven Walton discount department store outlets. (Frank. 2006) As part of the business’ success, Walton’s management eventually decided to change the stores’ name as “Wal-Mart.” (Trimble, 1990: p. 102) As of 2005, the company employs roughly 1.3 million workers working in 6,200 retail store facilities and 3,800 department stores throughout the United States aside from 1.6 million employees employed in 5,000 international outlets. (Lydersen, 2006; Frank, 2006) Earning at least $288 billion revenue each year (Frank, 2006), Wal-Mart is considered as one of the largest international discount retail business that serving millions of people each day. This study will provide the readers a fair and comprehensive discussion with regards to the business strategy that contributes to Wal-Mart’s success in the U.S. retail industry. The researcher will discuss the statement and arguments with regards to the anti-Wal-Mart campaign followed by expressing the researcher’s personal stand with regards to whether or not the existence of Wal-Mart is good for the Americans or not. Prior to the conclusion, the researcher will provide a recommendation on what Wal-Mart should do with its current situation. Statement of the Problem The business growth and success of Wal-Mart is causing the local Americans to suffer in terms of low wages and benefits aside from the fact that the company has caused many local businesses throughout the United States to close down. Target Readers for this Study The target readers for this study will focus on the American population particularly the businessmen and students whether or not these individuals are pro- or anti-Wal-Mart’s success in the retail industry. Statement and Arguments with regards to Anti-Wal-Mart Campaign Dicker (2005: 5) broadly explains that many people are against the success of Wal-Mart because of its negative effect towards the U.S. economy and poor employment treatment in terms of low wages and negligible employee benefits aside from the fact that the huge size of the company enables Wal-Mart to take advantage of purchasing a wide-range of products at a very cheap price. As part of globalization, Wal-Mart is encouraging its suppliers to actively outsource their raw materials from other manufacturers based in other countries. Since Wal-Mart is able to purchase its product at relatively low prices, the company is capable of selling their products cheaper as compared to its competitors. As a result, many small-scale retailers in different state of the country are forced to close down. Back in January 2002, Wal-Mart plans to establish a 480,000 square foot distribution center in Lewiston, Maine. (Associate Press, 2001) As part of the project, Wal-Mart promises to offer as much as 350 jobs with wages for warehouse jobs at $12 per hour; administrative and clerical jobs at $13 per hour; and technical jobs at $15.50 per hour aside from the managerial positions which pay as much as $40,000 per year. (Portland Press Herald, 2002; Associate Press, 2001) However, these promises were broken when Wal-Mart started to offer low wages ranging from $8.50 to $9.50 per hour when the distribution center in Maine opened back in 2005. (Frank, 2006; Wal-Mart Watch, 2005c) Many of the anti-Wal-Mart activists think that Wal-Mart’s success is based on its bullying tactics which place Wal-Mart’s employees at a more disadvantaged side. (Wal-Mart Watch, 2005b) For instance, it is a common business practice that the health care expenses of the employees should be paid by the employer. (Employer Health Benefits 2005 Annual Survey, The Kaiser Family Foundation and Health Research and Educational Trust, New York Times, 2005) Despite Wal-Mart’s claim that the company is offering an affordable health care plans for its employees, it turned out that the health care coverage plan that the company is extending to its employees is very expensive for low-income families to purchase. (Chambers, 2005) Based on Wal-Mart Watch (2005) report, Wal-Mart employees are paying as high as 41% of the insurance premium costs because of the fact that Wal-Mart’s health plan contains a lot of hidden charges as compared to the average premium costs that national employees are paying at an average of 16% for single coverage and 26% for family coverage. Aside from the high premium costs, Wal-Mart’s employees are the ones who are paying for their own health care costs. (Herald, 2005) Since Wal-Mart offers health care options at a deductable price of $1,000 for each employee and additional $3,000 for the employees’ families (Wal-Mart Press Release, 2006), as much as 54% of Wal-Mart employees have not received a comprehensive health insurance from the company. In addition to the issues on health care plan, Wal-Mart employees who are employed as full-time employees have to wait for six months and part-time employees for one year before they can qualify for the health care plan. (Wal-Mart Press Release, 2006) In line with Wal-Mart’s business practices, John Dicker (2005) states that “as long as we remain blind to the consequences of Wal-Mart’s business practices, we will also remain blind to the costs we have to pay…” My Personal Stand on the Issue Whether the Existence of Wal-Mart is Good for America or Not I do not agree that the existence of Wal-Mart is totally bad for America since there is both a good and bad side in the way Wal-Mart runs its business. First, Wal-Mart just like any other businesses is expected to find strategic ways on how to maximize the profitability of the company. There is nothing wrong with developing an effective strategy that could enable the company to generate as much profit as possible so long as these set of business strategies are within the ethically accepted business norms. Although a lot of policy makers, scholars and activists perceived the concept of ‘globalization’ as a business strategy that could create a serious danger in the world’s economic system in the sense that small-scale businesses will have a hard time to cope with larger competitors in terms of having an economies of scale (Stiglitz, 2002; Sullivan, 2002; World Bank, 2002), some businesses such as Wal-Mart is able to benefit from globalization because of its large demand for wide-range of products. As part of globalization, it is expected that for bigger companies to take advantage of trading outside the country in order for them to be able to purchase products and services at a much cheaper costs. Therefore, it is not bad for Wal-Mart to encourage its suppliers to outsource some of their raw materials or finish products in order to cut down on the high cost of production that is present within a developed country such as the United States. As a result, Wal-Mart will be able to purchase a wide-range of good quality products at a much affordable price. Considering the business advantages of outsourcing, it would even sound more irrational to hear that a large company such as Wal-Mart to patronage only the products that are locally manufactured within the country considering that all other medium- and large-scale businesses are already outsourcing a wide-range of products and services from the different parts of the world. With regards to the wages, so long as Wal-Mart is paying its employees within the national minimum wage stipulated in the U.S. labor code1, there should not be any problem with Wal-Mart’s current $8.50 to 9.50 per hour. The problem with Wal-Mart is that the company fails to comply with the latest U.S. Department of Labor’s regulation on employee benefits. (News: United States Department of Labor, 2007) Recommendation on What Wal-Mart Should Do on Its Current Situation First, Wal-Mart should avoid promising high wages to the public which the company could not keep. Second, the HR Department of Wal-Mart should review its existing employee benefits and make sure that the company’s medical care benefits is in accordance to the U.S. Department of Labor requirements such that employers must pay 81% of the premium costs of single coverage and 71% of the premium costs of family coverage in order to avoid the existence of Anti-Wal-Mart campaign. Conclusion Wal-Mart has its good economic contribution to America in terms of offering good quality products and services to the local people. In terms of wages, Wal-Mart is paying its employees a little more than the minimum wage required by the latest U.S. code of labor. Even though Wal-Mart’s competitors are paying a little more than what Wal-Mart is paying its employees, there should not be any problem with wages so long as the company pays its employees within or higher than the national minimum requirement. However, there is a need for Wal-Mart to review the employee benefits the company is extending to its employees. By doing so, it will be easier for the company to change the perception of anti-Wal-Mart campaigners with regards to the business success of Wal-Mart. *** End *** References: AssociatePress. "Lewiston Offers Multimillion Dollar Package to Lure Wal-Mart." News. 2001b. —. "Local, State Officials Welcome Wal-Mart Distribution Center." News. 2001a. Chambers, Susan. "New York Times." 26 October 2005. Wal-Mart Watch: Reviewing and Revising Wal-Marts Benefits Strategy. 25 March 2008 . Dicker, John. The United States of Wal-Mart. New York: The Penguin Group, 2005. "Employer Health Benefits 2005 Annual Survey, The Kaiser Family Foundation and Health Research and Educational Trust, New York Times." 24 October 2005. Wal-Mart Health Insurance Coverage Lags Far Behind National Average. 25 March 2008 . Frank, T.A. "Washington Monthly." 1 April 2006. A Brief History of Wal-Mart. 24 March 2008 . Herald, Miami. "Wal-Mart Watch." 11 June 2005. Low Prices at a High Cost: Who Really Pays for Wal-Mart Workers Health Care? 24 March 2008 . Lydersen, Kari. "CorpWatch." 20 April 2006. Target: Wal-Mart Lite. 24 March 2008 . "News: United States Department of Labor." 22 August 2007. Employee Benefits in Private Industry - 2007. 25 March 2008 . PortlandPressHerald. How Lewiston Won Wal-Mart: Inspiration, Incentives Snagged $45 Million Plum. News. (Maine): Portland Press Herald, 2002. Stiglitz, Joseph E. Globalization and Its Discontents. New York: W.W. Norton, 2002. Sullivan, Jeremiah J. The Future of Corporate Globalization: From the Extended Order to the Global Village. Westport, Connecticut: Quirum Books, 2002. Trimble, Vance H. Sam Walton: The Inside Story of Americas Richest Man . Dutton Adult, 1990. "U.S. Department of Labor." July 2007. Employment Law Guide: Minimum Wage and Overtime Pay. 25 March 2008 . "Wal-Mart Press Release." 17 April 2006. Wal-Mart 2006 Associate Benefits Book. 25 March 2008 . "Wal-Mart Watch." 2005b. Shameless: How Wal-Mart Bullies Its Way Into Communities Across America. 25 March 2008 . "Wal-Mart Watch." 26 October 2005a. Employer Health Benefits 2005 Annual Survey, The Kaiser Family Foundation and Health Research and Educational Trust; Wal-Mart and Healthcare: Condition Critical, Center for a Changing Workforce. 25 March 2008 . Wal-MartWatch. "Wal-Mart Distribution Center Job Notice. In Shameless: How Wal-Mart Bullies Its Way Into Communities Across America." 2005c. Walton, Sam and John Huey. Sam Walton: Made in America: My Story. New York: Bantam Books, 1993. WorldBank. Globalization, Growth, and Poverty: Building an Inclusive World Economy. Washington, DC: World Bank and New York: Oxford University Press, 2002. Read More