Utilitarian and Instrumental Business Approach of Walmart Stores Inc - Case Study Example

Utilitarian and Instrumental Business Approach of Walmart Stores Inc. Personal Identification: Word Count: Table of Contents Table of Contents 2 Introduction 3 Theoretical / conceptual approaches 3 Utilitarianism approach of business ethics 3 Instrumental approach of CSR 5 Reasons behind selecting these theories 6 Analysis 6 Analysis of utilitarianism approach of the business ethics of Walmart 6 Analysis of instrumental approach of CSR of Walmart 8 Discussion and Conclusion 9 Appendices 11 Reference List 13 Introduction The report is based on the critical evaluation about different contrasting theoretical approaches of business ethics and corporate social responsibility and sustainability of Walmart Stores, Inc. The discussion will provide details about the utilitarianism theory of business ethics and instrumental theory of corporate social responsibility. Both of these theories generally provide contradicting approaches. Utilitarianism approach is mainly focused on maximizing the overall gain of the stakeholders of any organisation through different activities (Broad, 2014). On the other hand, the instrumental approach of CSR influences various activities of any business entity to enhance their wealth and economical gains (Brammer, Jackson and Matten, 2012). The main motive of this report is to analyse the contradicting approach of the business ethics and CSR of Walmart Stores, Inc. Wal-Mart Stores, Inc., is a multinational retail chain headquartered in Arkansas, USA. The organisation was incorporated by Sam Walton in 1962. Currently the organisation has distributed its operation over 27 countries across the world (Environmental Leader, 2012). They are operating through 11,000 stores which include chain of supermarket, warehouse stores and discount department stores (Reference for business, 2015). The Walmart stores are indulged in the business of six major merchandise units such as grocery, wellness and health, entertainment, home appliances, apparel and hardware (Walmart, 2015a). The next section of the report will illustrate different approaches of utilitarianism theory and instrumental theory. This section will also elaborate various debate, criticism and weaknesses of these approaches. This illustration will be followed by the analysis of the organisational activities of Walmart. The theoretical approaches will be related with the ethical and CSR activities of the organisation. The final section of the study will provide a compare and contrast analysis of the contradicting approach of the business ethics and CSR of Walmart. Theoretical / conceptual approaches Utilitarianism approach of business ethics Utilitarianism can be considered as the modern day approach of the business ethics. This approach defines a particular ethical tradition which directs an organisation to take decisions based on the overall outcome of their previous acts (De George, 2011). According to this theory, the moral actions of any organisation assist them to maximize the utility. In this context, the economical and mental satisfaction of the stakeholders has been considered as the utility. Utilitarianism activities influence the management to involve in different activities which assist them to bring ultimate gains to the employees and other stakeholder of the organisation (De George, 2011). A number of critics have contradicted the approach of this theory. Few critics have argued that the theory of utilitarianism is only focused towards the consequences of the actions. They have also mentioned that the theory has not provided adequate considerations to the other factors such as motives of the organisation and right of the stakeholders (Hinman, 2012). They have discussed that the theory has mentioned all the stakeholders in general rather than focusing on each section of them individually. Therefore, the general activity to improve the overall pleasure of the stakeholder may hamper the rights of few individual stakeholders (Hinman, 2012). The critics have also argued that the organisational approach of this theory is too complex to calculate. They have emphasised on the impracticality and impossibility of this theory. According to them, it is almost impossible to calculate the satisfaction ratio of all the stakeholders. The critics have also described that the happiness or pleasure of any individual cannot be measured accurately (DesJardins and McCall, 2014). The researchers of this theory have introduced a number of debates to contradict these criticisms. They have discussed that the theory of utilitarianism is mainly focused on the morality of different activities of any organisation. Morality generally emphasises on the right or wrong activities of any community. It does not consider the particular interests of any individual but emphasises on the effect of the different organisational activities on a group of stakeholders (Hoffman, Frederick and Schwartz, 2014). Various weaknesses of the utilitarian theory have been discussed by the researchers over a period of time. They have mentioned that the theory is mainly based on the prediction of the outcomes of a certain activity while it is very hard to predict the exact consequences of any action. The debaters have also discussed that the morality cannot be judged only by the results of any activity. Sometimes the wrong motives can also provide positive results to a certain section of the stakeholders (Groves and LaRocca, 2011). The theory of utilitarianism can also promote injustice within the organisational environment. Researchers have mentioned that the activities of maximizing the utilities of the major portion of stakeholders may harm the reputation of different individual (Hoffman, Frederick and Schwartz, 2014). Instrumental approach of CSR The instrumental theory of corporate social responsibility provides a contradicting view to the utilitarianism theory of the business ethics (McWilliams and Siegel, 2001). According to the instrumental theory, the CSR activities of any organisation are only focused on generating wealth. The theory has illustrated that all the social activities of any organisation is targeted to improve the economical condition of the business (Brown and Forster, 2013). This approach of CSR has been well-accepted by a wide ranges of businesses as it allow them to maximize their economical gains (Garriga and Melé, 2004). The critics have evaluated various weaknesses of the instrumental theory of CSR. They have argued that the theory is contradicting the main motive of the corporate social responsibility of any organisation. The CSR activities of any businesses are attentive towards generating customer loyalty by providing a number of social and environmental supports. It helps the company to enhance their global market reputation (Windsor, 2006). On the other hand, the instrumental approach forces organisations to only focus on the profit generation through different CSR campaigns. This approach does not pay due attention towards building a strong relationship with the society thorough the CSR activities (Lee, 2008). The critics have also mentioned that this theory debars the organisation from integrating with the social demands. It has been mentioned in different debates that the instrumental approach of CSR strategies eliminates the ethical values of the organisation (Orlitzky, Siegel and Waldman, 2011). They have also mentioned that this kind of activities can weaken the bond between organisations and the society. Critics of the theory have described that the increased concern towards the wealth generation has minimized the importance of the stakeholders. According to them, the instrumental approach is forcing them to ignore the requirements and demands of the stakeholders (Orlitzky, Siegel and Waldman, 2011). To contradict this criticism, the researchers have debated that in certain scenario this theory assisted the organisations to maximize the stakeholder’s value. Various organisations provide donation to a number of social and environmental campaigns. These activities will further enable them to maximize their profit ratio by improving their market image (Garriga and Melé, 2004). Various debaters have also stated that the instrumental theory of CSR provide limitation in the regulation of organisational behaviour in the international economy. During the globalization of any business, the organisations need to shift their focus from profit generation towards the relationship building with the consumers. If the organisational activities only focus on the maximization of their profit, it may lose their customer database in the new market. This situation will also hamper their overall market reputation (Gond, Palazzo and Basu, 2009). Reasons behind selecting these theories The utilitarianism and instrumentalism theory provide a contradicting view in terms of their organisational approaches. The utilitarian theory mostly focuses on the benefits of the stakeholders of the organisation. This theory considers the interests of the employees of the organisations (De George, 2011). On the other hand, the instrumental theory only concentrates on the economical advantages of the organisation. The major motive of this theory is to maximize the profit of the organisation Garriga and Melé, 2004). The Utilitarian approach covers the emotional and economical aspects of the employees and the external shareholders of the organisations while the instrumental approach is only targeted towards the wealth generation of the organisation. These contradicting views of the two theoretical approaches will be helpful for comparing and contrasting the ethical approach and corporate social responsibility of the organisation. Analysis Analysis of utilitarianism approach of the business ethics of Walmart To analyse the approach of utilitarianism theory of business ethics, the report has discussed the employee pay rise decision of Wall-Mart Stores Inc. The discussion will highlight the ethical effects of the payroll decisions of the organisation (Byron, 2010). It has also elaborated the worker safety and well-being policies of the organisation. The further discussion will illustrate the policies of the organisation from an ethical point of view. Walmart has announced that the organisation is raising the pay structure of its employees by $9 per hour. This statement has been made by the organisation on their fourth quarter report of 2014. Till date, the management of Walmart was well-known for paying very less wages to their employees. Due to their poor pay structure, the organisation had experienced huge turnover rate within the last couple of years. By the end of 2012, the management of the organisation is continuously working on the restructuring of the pay structure of workers as per the government regulation of minimum wages. Various organisational researchers have commented that, the decisions regarding the increase of the payment structure of the employees has certainly provided positive effect on the ethical approaches of the organisation. The wage restructuring will assist the management to enhance the employee loyalty (Byron, 2010). This decision of the organisation is supporting the utilitarian theory of the ethical approach. The main motive of the utilitarian theory is to maximize the utility of the organisation and its stakeholders through its activities. This pay rising decision of the organisation is influencing the financial benefits of the employees as well as the organisation. The increase in the wage structure is providing economical gain to the employees of the organisation. It is also allowing the organisation to provide job satisfaction to the workers (Byron, 2010). Though this decision will require a huge amount of initial investment of the organisation, it will certainly provide a long term gain to the economical condition of the business. The pay structure will assist the management to reduce the employee turnover rate of the organisation. It will also allow them to motivate the employees to provide their best performances (Tabuchi, 2015). This situation will result in the ultimate gain of the organisation. Therefore, it can be said that, the organisation’s decision to improve the pay and benefit structure is morally right as it is maximising the gains of both the parties (O’Connor, 2015). The organisational ethics of Wal-Mart Stores, Inc., focuses on various worker safety and empowerment programs. The management conducts a number of training and capability building programs for the workers of different departments. These programs assist the employees to strengthen their skills and competencies (Sethi, 2013). It also allows them to improve their interpersonal relationship with other employees of the organisation. The management also organises frequent safety and social audits to review the safety parameters of the employees. This audit programs also assist them to thoroughly verify the standard of their compliance procedure. All these activities of the organisation are concentrated towards increasing the loyalty and satisfaction of the workers. It also enables the organisation to provide a healthy work environment for their employees (Sethi, 2013). Through this training program, the management helps the employees to develop their working skills. Therefore, it influences them to improve their productivity. The safety and wellness programs also allow the company to improve the living and health condition of the employees. Through these activities the organisation is adopting the utilitarian approach of ethics by increasing the emotional as well as economical utility of the employees (Sethi, 2013). Analysis of instrumental approach of CSR of Walmart Wal-Mart Stores, Inc., is well-known for their involvement in a range of CSR activities. The analysis of the CSR programs of Walmart has indicated that most of their activities are attempted towards maximizing their profit ratio. The organisation denotes its CSR activities as a form of investment to improve their market reputation and customer database. Therefore, it can be considered that most of the sustainability approaches of the organisation are following instrumental theory of CSR (Winston, 2015). The sustainability programmes of the organisation include waste reduction, renewing energy, recycling packaging material and selling of sustainable products. They are also involved in various corporate philanthropic activities. Through this sustainability approaches, the organisation is targeted towards capturing the higher market share (Kaye, 2015). The main motive of the organisation is to maximize their profit ratio in the local as well as global market. International customers are getting more attracted towards the environmentally sustained products. 21% of the population prefers the natural household cleaning product while near about 15% of the consumers is purchasing organic personal care product (Appendix 2). To target and attract the major portion of this global market, the organisation has recognised the requirement to be identified as a sustainable company. They have introduced a wide range of eco-friendly substitute for daily used products such as environmental friendly kitchen cleaner, earth friendly laundry detergents, fabric cleaner and stain removers. These products are attracting more consumers towards their stores. This step to increase environmental awareness is also enabling them to increase their sales growth (Kaye, 2015). The estimated annual sales of “earth-friendly” kitchen and house hold cleaning material has increased from $170 million to $650 million during the period of 2005 to 2010 (Appendix 1). Various activities of the organisation are supporting the food wastage within the stores. They are pushing the food items with lower shelf life and avoiding the stock pile up of easily degradable products. This is also helping them to reduce their overall cost of product wastage. The management of Walmart has started recycling procedure of their waste materials to regenerate new eco-friendly packaging material. These recycling activities have awarded them a strong position in the mind of environment friendly consumers. On the other hand, it also encourages them to increase their revenue by minimizing the wastage of packaging materials (Mauthe, 2011). The Walmart stores have recently developed an innovative energy efficient facility. This facility enables the organisation to reduce the excess energy consumption. It has allowed them to create a unique market reputation. This step has assisted the organisation to maximize their revenue by reducing $4.8 million energy consumption. They are also investing a good amount on the hydrogen power vehicle and solar energy (Walmart. 2015). These energy efficient initiatives are saving a huge amount of operating cost while generating various marketable public relationships with the organisation (Walmart. 2015). The organisation is also involved in a number of philanthropic activities. Most of these activities are directed towards the foreign recipients. The organisation has donated millions of dollars for disaster relief in various parts of South Asia and the United States. They have donated approximately $15 million to the hurricane Katrina affected areas of Arkansas. According to the records of last year, the organisation had supported over 40,000 charities worldwide. These activities allow the organisation to expand their international ventures. This assists them to strengthen their bond with the global market. These initial investments are very essential for strengthening their financial growth and global market reputation (Featherstone, 2005). Discussion and Conclusion The analysis of the ethical approaches and corporate social activities of Wal-Mart Stores, Inc., has provided a contradicting view about the motives of the organisation. The utilitarian approach on their business ethics has influenced the organisation to concentrate on different activities to improve the utility of their stakeholders. This approach is mainly based on the improvement of the emotional and economical standard of the stakeholders. It provides less concentration on the profit making procedure of the organisation. The pay rising initiative of the organisation is improving the financial status of the employees of different departments. Similarly, the safety audit and training procedure is enhancing the skills and interpersonal capability of the workforce. Therefore, this investment and activities are maximizing the benefits of the employees of the organisation. On the contrary, the instrumental approach of the CSR activities of Walmart Stores, Inc., has influenced them to increase their revenue through a number of social and environmental commitments. This approach is contradicting the motive of utilitarian theory as it is solely focused on revenue generation of the organisation. All the activities of the organisation are directed towards strengthening their global business venture and improving their sales growth. The instrumental CSR approach of the organisation considers sustainability and social responsibilities as a tool to improve their local and international market shares. The analysis has also highlighted various similarities within the utilitarian and instrumental approaches of the organisation. Though the approaches of both the theories are very different from each other, they are serving few common goals such as improving the market share and enhancing the customer loyalty. The business ethics strategy of the organisation is mainly focused on improving the condition of the workforce. Therefore, it will enable them to maximize their market share by enhancing the productivity and profit ratio. The CSR activity of the organisation is majorly inclined towards improving the financial condition of the organisation. Through the innovative and environmental products they are also improving the lifestyle of their consumers. Their strategy to reduce the energy consumption is also benefiting the external stakeholders of the organisation. Therefore, it can be said that the ethical decisions and sustainability activities of Walmart are following two contrasting theoretical approaches. Despite of their contradicting nature, both of these approaches are assisting the organisation to achieve their desired goal in terms of employee satisfaction and profit generation. Appendices Appendix 1: Sales growth of earth friendly household and laundry products. (Source: Byron, 2010) Appendix 2: Green purchasing behaviour of US consumers (Source:Ottman,2011) Reference List Brammer, S., Jackson, G. and Matten, D., 2012. Corporate social responsibility and institutional theory: New perspectives on private governance. Socio-Economic Review, 10(1), pp. 3-28. Broad, C. D., 2014. Five types of ethical theory. London: Routledge. Brown, J. A. and Forster, W. R., 2013. CSR and stakeholder theory: a tale of Adam Smith. Journal of business ethics, 112(2), pp. 301-312. Byron, E., 2010. Adversarys clean start with Walmart. [online] Available at: [Accessed 9 March 2015]. De George, R. T., 2011. Business ethics. New Delhi: Pearson Education India. DesJardins, J. R. and McCall, J. J., 2014. 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