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Is Wal-Mart Too Powerful?

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BPS 6201 7/13/04 Is Wal-Mart Too Powerful? Wal-Mart has quickly become a business in which many people and groups depend, including stockholders, consumers, employees, and suppliers. The issue is whether or not Wal-Mart has created a dependency that is a crutch on society and the economy, or has Wal-Mart demonstrated a fine application of capitalistic principles in business. The issue can be explained by examining the impacts of Wal-Mart on its stakeholders. STAKEHOLDERS WAL-MART'S IMPACT REASON Stockholder Positive * Wal-Mart's profits have increased 13% from last year to $9.1 billion.1 Over the last 5 years, EPS has increased by 15.45% and dividends by 18.36%2 Consumers Positive Negative * By offering discount prices (at times 14% lower than the competitors), the consumer has more purchasing power. * Consumers have a product selection limited by Wal-Mart as other retailers go out of business Suppliers Positive Negative Negative (Potential) * Wal-Mart is the largest retailer/customer for consumer product manufacturers. * Product integrity/design is compromised by the Wal-Mart influence * Have to maintain production schedules dictated by Wal-Mart * Forced to outsource production overseas to reduce production ...read more.


At the same time Wal-Mart is offering the consumer market drastically lower prices, which affords them more purchasing power. When viewing the core of Wal-Mart's business, it has created this empire within the boundaries of the law. Rights Theory As a law-abiding corporation, Wal-Mart has the right to operate freely within this country. There are no laws forbidding them from selling products at lower prices than their competitors, and as long as the employees are paid at least the government mandated minimum wage, Wal-Mart can continue to optimize stock growth and value. That doesn't mean that this corporate giant has not infringed upon the rights of others. As part of their cost efficient strategies, Wal-Mart has continued to pay their employees lower wages than the competitors. When the competitors can no longer afford to stay in business next door to "everyday low prices" employees are forced to work at Wal-Mart for a much lower wage. By Wal-Mart shutting down many local businesses, employees have lost their freedom to choose their employment. ...read more.


However, a slump for Wal-Mart would put control back in the hands of suppliers and create equity amongst competitors. On the other hand, a wage increase may benefit Wal-Mart by putting the money into the pockets of 1.4 million people who will turn around and be able to spend more on products in their stores. This would give a benefit to the employees, while maintaining the status of consumers and shareholders. Social Contract Wal-Mart has a responsibility to view their overall impact on society. So far Wal-Mart has upheld customer and shareholder expectations, but they have failed to look beyond that point. From a group perspective using the stakeholder chart above, the overall impact of Wal-Mart has a negative effect on society. Wal-Mart currently faces many hardships in the form of lawsuits, opposition and injunctions to prevent new construction, and bad publicity. Adopting new strategies that provide a more equitable distribution of profits and wealth between all stakeholders could eliminate these hardships. 1http://news.yahoo.com/news?tmpl=story&u=/afp/20040712/bs_afp/us_companies_fortune_040712171227 2 http://yahoo.investor.reuters.com/MG.aspx?target=/stocks/financialinfo/growth/rate&ticker=WMT 3 BW Online. "Is Wal-Mart Too Powerful?" October 6, 2003. 4 http://media.corporate-ir.net/media_files/IROL/11/112761/corpgov/ethics1.pdf 5 http://zmag.org/content/showarticle.cfm?SectionID=47&ItemID=4987 ?? ?? ?? ?? ...read more.

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