WalMart

1
Wal-Mart

• The Ethics of Squeezing Suppliers

2
Agenda

• Who are the Stakeholders?

2. Suppliers Stakeholders
3. Wal-Marts Stakeholder
4. What do you think?
3
Who are the stakeholders involved in the
Wal-Mart-Supplier Relationship?

• Suppliers
• Employees
• Shareholders
• Community
• Wal-Mart
• Employees
• Customers
• Shareholders
• Community

4
Suppliers Employees

• Squeezed suppliers have had to lay off employees
  close US plants in favor of outsourcing
  products from overseas.
• Its helping accelerate the loss of American jobs
• Source FastCompany The Wal-Mart You Dont Know
  Dec. 2003
• At the same time, the outsourcing of jobs
  overseas is benefiting people in other countries
  and providing them with jobs.

5
Suppliers Shareholders

• Although WM allows supplier to acquire great
  sales and market share, it comes at the expense
  of profit margins
• In the late 1990s, Wal-Mart sold Vlasic gallon
  pickle jars for 2.97, which allowed both Vlasic
  Wal-Mart to make only 1 or 2 pennies on the jar
• The result is reduced profits and possible losses
  for shareholders
• Source FastCompany The Wal-Mart You Dont Know
  Dec. 2003

6
Suppliers Community

• Outsourcing of jobs can devastate a community by
  leaving a large number of its population without
  jobs.
• The loss of jobs will decrease purchasing power
  thus leading to the deterioration of other
  businesses who will be unable to attract
  customers.

7
Wal-Marts Employees

• Although WM is rumored to underpay its employees,
  it actually makes 6000/employee as compared to
  GE making 54,000/employee and MS making
  143,000/employee (in relation to 2004 profits).
• WMs average full-time worker makes 9.68/hr
• WM is successful because of its low prices, which
  allows it to expand, thus bringing jobs to many
  otherwise impoverished areas.
• Source Macleans Why Wal-Mart is Good July 2005

8
Wal-Marts Employees

• 2004 statistics show that WM employs 44,000
  workers in CA
• Source Macleans Wal-Marts Mid-Life Crisis
• By providing savings to its customers, Wal-Mart
  creates a ripple effect in the economy.
• In the city of Los Angeles, redirected grocery
  savings will create 6500 additional jobs.
• However, if all union workers in Southern CA
  grocery industry earned the same wages as WM
  employees, the lost spending could cost LA County
  1500-2500 jobs
• Source LA County Economic Development
  Corporation Jan 2004

9
Wal-Marts Customers

• A 2002 study showed that WM saves US consumers
  100 B annually or 600/yr for the average
  American family
• Basic food items are 10-15 cheaper in areas
  where Wal-Mart competes
• Source LA County Economic Development
  Corporation Jan 2004
• These cost savings can be significant since most
  WM customers are low-income families.

10
Wal-Marts Shareholders

• In 2004, profits rose 13 to 10.3 B
• Clearly shareholders benefit from WMs profit
  making strategy of squeezing suppliers.

11
Wal-Marts Community

• WM drives up sales at nearby stores and attracts
  other retailers.
• In metropolitan areas, a new WM was generally
  followed by an increase of 56.8 M in local sales
  and an opening of 12.9 new stores
• In rural areas, the commercial boost was 74.1 M
  and 16.7 new stores
• A 2004 survey of 1800 small business owners
  across Canada found that 16 of respondents said
  they had been hurt by competition from big-box
  retailers like WM
• Source Macleans Why Wal-Wart is Good July 2005

12
Is Squeezing Suppliers Ethical?

• Depends on which stakeholders you think are most
  important.
• What do you guys think?