Is Wal-Mart Good for America?
This direct quote from Wal-Mart founder Sam Walton, was placed at the top of their website to nform its consumers of their general management philosophy. It is meant to instill a feeling of comfort that such an enormous multinational retailer still manages to hold on to its small town founder’s values. Provide people with the lowest possible prices on items that they need, whatever the cost. This slogan of always providing the lowest prices has made Wal-Mart the largest retailer on the planet and they generate billions of dollars in profit annually.
But is Wal-Mart good for America? On the surface it would seem that providing a customer with an item at the lowest possible revailing question, one must more closely examine the mechanisms by which Wal- Mart is able to provide merchandise at such bargain basement prices. Providing people the lowest possible prices, whatever the cost. In this case, these low prices are being provided at the cost of the environment, Wal-Mart vendors, Wal-Mart employees, and even the American taxpayer.
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As the “Wal-Martization” of America is forcing businesses to outsource their Jobs oversees Just to stay solvent, it creates a problem here back home of people not being able to pay their bills and maintain adequate living standards. Is Wal-Mart creating the greatest good for the greatest number? Or are they Just creating the greatest good for their executives and investors? This reflection paper will attempt to analyze and answer these questions as we dive deep into the culture of Wal-Mart and its effect on society domestically, as well as globally.
The two dominant points of view used to analyze corporations and their overall purpose could be summarized by the terms “stockholder” and “stakeholder” management. The former was championed by the well-known economist Milton Friedman. He believed that “a corporation’s primary and perhaps ole purpose is to maximize profits for stockholders… ” (Arnold, Beauchamp & Bowie, 2013) Friedman would view Wal-Mart as a corporation that acts solely in the best interest of their stockholders.
Wal-Mart is notorious for not paying their employees very high wages and not offering much to their employees in terms of retirement benefits and health care coverage. At least when compared to other successful competitors such as Costco, Wal-Mart clearly comes up short in this department. The latter point of view mentioned was made popular by Edward Freeman in his essay, “Managing for Stakeholders. In it he argues that “the primary responsibility of the executive is to create as much value for stakeholders as possible, and that no stakeholder interest is viable in isolation of the other stakeholders. (Freeman, 2007) When we speak of stakeholders, we are referring to the five basic groups that stand to gain or lose from corporations. These groups are customers, suppliers, employees, the local community and the stockholders. Freeman argues that no one stakeholder’s interest should be taken at the expense of the others and that all must be considered by a corporation when it comes to making the best decision.
While the “Friedmanite” view has been seen as the classical dominant view on corporations and their purpose, the stakeholder view on management has been gaining speed over the last thirty years and cannot be underestimated or undervalued these days as companies struggle to stay competitive in a massive global economy. In terms of all stakeholders involved, both Friedman and Freeman would agree that Wal-Mart is acting in the best interest of their stockholders primarily.
This benefit to the shareholders is at the expense of all the other stakeholders. The customers will suffer due to the lack of uality of items purchased. Wal-Mart outsources a great deal of their production to China to save on labor and production costs. As a result, the common saying “you get what you pay for” holds true. These items that Wal-Mart sells in their stores tend to be of inferior quality, and that “quality’ is passed on to the consumer. The employees suffer because they are not able to earn a decent wage to live on.
According to an article written by Wayne Cascio, Decency Means More Than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club, he indicates that “The age is hardly enough to live on these days with gas prices where they are and the average cost of living going up. I know I couldn’t live on 10 dollars per hour. These low wages actually end up costing the American tax payer in the forms government assistance programs such as Medicaid and food stamps. In a study conducted by the Institute for Labor and Employment at the University of California, Berkeley, “taxpayers subsidized $20. million for medical care for Wal-Mart employees in that state alone. ” (Cascio, 2006) Suppliers suffer because they are forced to accept the ontracts that Wal-Mart offers them to provide their products in their stores that essentially eat up their profits. The local community suffers because when a new Wal-Mart is built, smaller stores struggle to stay competitive due to the fact they cant keep up with the prices that Wal-Mart charges for their product. They do not have the ability to outsource production and so they eventually go out of business.
While Friedman and Freeman would believe that Wal-Mart is primarily serving the interests of their stockholders while disregarding all other stakeholders, John Boatright would ffer an alternative hypothesis on the issue. In his article, what’s wrong-and what’s right-with stakeholder management, he argues that “… a business organization in which managers act in the interest of the shareholders can also be one that, at the same time, benefits all stakeholder groups. ” (Boatright, 2013) He goes on to provide his definition of what a firm is and what their purpose should be. Boatright defines a firm “… s a nexus of contracts between a legal entity called a firm and its various constituencies, which include employees, customers, suppliers, investors, and other roups. ” (Boatright, 2013) It is believed that by each group providing their own services in a Joint effort with a firm, that the greatest financial return will be achieved. From Boatright’s point of view, he would view the business philosophy of Wal-Mart as one that does benefit all the stakeholders. Customers benefit by having more purchasing power. They can walk into a Wal-Mart and purchase more items than they could at any other retailer.