To what Extent are Supermarkets Acting in The Publics Best Interest - Essay Example

TO WHAT EXTENT ARE SUPERMARKETS ACTING IN THE PUBLIC’S BEST INTEREST? Businesses, by virtue of the product or service they offer the general public and irrespective of nature and size, fall under the authority of regulation. It is in this sense that commercial establishments are said to be affected by what is popularly called “public interest” (Lehman, Phelps and Claps, 2006). Universally taken to mean common well-being or welfare of society-at-large, Methot (2003) argued that in today’s liberal and pluralist setting, one can not simply define public interest grounded on natural law, religion or abstract principles, and as such is dependent on a “meeting of the minds” of all the stakeholders involved. To the question, therefore, regarding the extent in which supermarkets operate in the best interest of the public, considerable thought and an in-depth analysis of the issues surrounding the query is in order. Hence, this essay. In the course of my readings for this paper, I came across two interesting quotations on public interest from different generations. The first one was from a former Justice of the US Supreme Court, which reads : “The notion that a business is clothed with a public interest and has been devoted to the public use is little more than a fiction intended to beautify what is disagreeable to the sufferer” (Holmes, 1927, cited in Vitullo-Martin, et. al., 1994); and the second one is a statement from a British government executive declaring that “The public interest is not defined as what is interesting to the public” (Morgan, 1991 in Vitullo-Martin & Moskin, 1994). Together these passages seem to direct the discussion towards the idea that utter disregard for public interest has relegated it to a mere hypothetical theory that does not exist in the real world. I am hoping that at the conclusion of this exposition, I can prove otherwise. I am, however, wont to support the argument that if ever supermarkets do, indeed, act in the interest of the public, the extent would be minimal. And I would be very glad if I will succeed in gathering evidence to the contrary. The emerging dominance of large supermarkets A few chains of supermarkets have established a foothold on the retail business across the European Union. In the UK alone, 15 per cent of total household expenditures are allotted to food and non-alcoholic beverages (National Statistics, 2008), part of which outlay is spent on the biggest supermarkets, who hold 77.9 per cent share of the food market (Dibb, 2005). Other than food and related products, supermarkets have diversified to include banking, clothes, home entertainment and medicines, turning themselves practically into one-stop-shops (“EU Retail”, 2007). This is not, however, surprising because the biggest supermarket chains tend to offer numerous advantages to the consumers. Among these advantages include cheaper prices, convenience (Roberts, 2007), variety of items on sale other than food (“EU Retail”, 2007), availability of different brands to choose from, and quality of the products on sale (Roberts, 2007). These advantages that supermarkets offer are points which may be considered as cognizant of the public welfare in their operations. The other side of the coin What do supermarkets gain by selling goods cheaper? The obvious reasons are patronage, customer goodwill and increased sales – one side of the coin. But a coin has two sides. It is always interesting to scrutinize how and why supermarkets sell some items below reasonable selling price, specially if there are concealed motives. One of the foremost issues which merits reflection is the supply chain aspect of economics. Trade experts believe that as supermarket chains grow in size, the balance of power tips on their side, thereby disturbing the equilibrium of free competition (Finch & Walsh, 2007) and resulting in negative outcomes in the supply chain for the rest of the other stakeholders in the domain, from the laborers to the consumers. This buyer power gives supermarkets more than enough leverage to design business deals on their own terms to the detriment of the other actors like suppliers, producers (the farmers), the laborers and the consumers. The same buyer power, when abused by supermarkets, creates a “domino effect” where the suppliers and other producers, laborers and the consumers appear like dominoes waiting to fall, as graphically depicted in Figure 11 next page. As supermarkets dictate the prices, they deliver the force that triggers an economic chain reaction : the first to fall will be suppliers, who in turn, need to cut costs on production through cheaper labor and longer working hours. At times, labor from the local population are displaced (precipitating unemployment or underemployment) by migrant labor, which is usually offered less than the prevailing rate for local laborers. Farm hands, suffer similar fate as mechanized agricultural equipment take their place in large farms to put up with the demands of supermarkets for quality and productivity. Other actors, which include smaller supermarkets and corner grocery stores, are also adversely affected by unfair practices of supermarkets and are usually forced to close down due to bankruptcy. The consumers are also negatively affected and this will be discussed in the next section. Other Notable disadvantages Some of the most observable negative points against supermarkets is wasteful packaging (Brown, Anstead & Crofton, 2007), in spite of public announcements in 2005 from top executives of the biggest supermarkets regarding their commitment for sustainable environmental and ethical programs in their respective companies (Berry, 2007). Wasteful packaging may be translated to increased solid waste and an insensitivity to the global call for a renewed concern for the environment. On the other hand, the big supermarkets’ determined efforts towards carbon labeling are promising (White, Boardman & Bright, 2007), but issues pertaining to the selling of food products with trans fat in the supermarkets have not been satisfactory from the perspective of health scholars (Lewin, Lindstrom & Nestle, 2006). Another emerging problem among consumers regarding the closing down or nearby corner grocery stores and smaller supermarkets is accessibility specially so that some 27 percent of UK households who do not usually shop driving in a car. As more and more smaller supermarkets, groceries and specialty shops close down because of pressures from the big supermarket chains, the convenience of accessibility suffers (Noble, 2008). Fig. 1: The “domino effect” created by supermarkets (Masterson, n. d.) A question of public interest The irony of the events presented in the foregoing discussion, however, is the revelation that lower prices from the suppliers do not necessarily translate into cheaper goods for the consumer (“EU Retail”, 2007). A report from the Competition Commission (2007) disclosed that although consumers stand to benefit from low prices, there may be hidden schemes behind below-cost selling that should merit attention from concerned government authorities, consumer groups and the general public. Among these schemes include : (1) selling below-cost, for the meantime, just to close-down smaller rival groceries (Finch and Walsh, 2007) who can not compete using the same strategy. As the competition is excluded, the public is left with fewer choices (Finch & Walsh, 2007). This is clearly a move not in the interest of the general public; (2) below-cost selling strategy is applied only on highly visible products and deceives the public to believe that all products they are selling are cheaper than all the other stores. Supermarkets also put a cheaper price tag on the more visible goods in order to hide the exorbitantly high prices of less visible items. When deception steps into the picture, any marketing strategy ceases to be fair and prejudices the general interest of the public. Meanwhile, Reynolds (2007) maintained that as suppliers and producers are pressured by big supermarkets to deliver more goods at lower prices (Finch & Walsh, 2007), the burden is passed on to the laborers and farmhands in terms of low salaries, curtailment of basic human rights and insecurity of tenure. This happens when supermarkets enforce the strategy called transfer of costs, where suppliers and farmers or producers were required to enhance the quality of their products and produce, respectively, and to improve their productivity in general. Another strategy used by big supermarkets is termed as transfer of risks, where risks are passed on to suppliers specially during demand fluctuations where suppliers and producers are required to come up with the goods at very short notice or to absorb the result of excess inventory. Either way, it is a loss-loss situation for the suppliers and producers. If one sector of an industry flourishes at the expense of one or more sectors either within or outside a particular industry, this does not constitute public interest. Are Supermarkets Really Serving Public Interest? Based on the research evidence gathered, supermarkets serve the public interest superficially. After all, private corporations are businesses established for profit – to make money. As Donaldson (1982) maintained, “… The tendency toward goal preoccupation overlaps the tendency to pursue profits at the expense of morality. Criticism of the latter identifies a conflict between one specific goal of the corporate organization, namely profit, and the need to adhere to norms. . .” (Donaldson, 1982, p. 170). The mere fact that these big supermarket chains employ concealed schemes to outdo competition and to sell anything and everything to earn patronage is an attempt in desperation to make profits and at the same time, serve the public interest, superficially. Supermarkets would like to project an image to consumers that regardless of demand, they can be depended on to put products on their shelves. To do this, they push producers and farmers beyond their reasonable limits. Let us not forget that the laborers and farm hands who toil hard to replenish the shelves of supermarkets make up a sector of the general public, who usually bear the brunt of supermarkets’ demands for productivity and quality sans the encouragement of a good price. On the pretext of expansion, the Goliath-like supermarket chains clashed head on with little David-like corner groceries and specialty shops. Only this time the Davids fell in a no-contest fight. The big supermarkets got rid of their rivals, but deprived the general public of variety of choice. In the guise of variety, supermarkets indiscriminately sell products without regard to trans fat content, to the ethical standards of manufacture, to the havoc wrought to environment. Unfortunately, therefore, I failed in my little quest to compile evidence to the contrary that supermarkets value public interest very little. There is much to be desired of supermarkets for them to prove that they do act in the interest of the public. References BERRY, T. 2007. Can retailers save the world? The Business Pages. 2(2), p.20. BROWN, M., ANSTEAD, J. & CROFTON, A. 2007. The Good Shopping Trip. London, UK: Citi Investment Research. COMPETITION COMMISSION. 2007. Groceries Market Investigation. Southampton Row, London. DIBB, S. 2005. Healthy Competition: How Supermarkets Can Affect Your Chances of a Healthy Diet. London, UK: National Consumer Council. DONALDSON, T. 1982. Corporations and Morality. 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