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Course of Study: (3006IBA) Business Ethics and Corporate Governance

Title of work: Business & society; ethics, sustainability, and stakeholder management, 8th Ed. (2012)

Section: Case 1 Walmart the main street merchant of doom pp. 599--607

Author/editor of work: Carroll, Archie B.; Buchholtz, Ann K.

Author of section: Archie B. Carroll, Ann K. Buchholtz

Name of Publisher: South-Western, Cengage Learning

Case 1 Walmart: The Ma in Street Merchant of Doom 599

Walmart: The Main Street Merchant of Doom*

The small town was in need of a hired gun. The people were tired of dealing with the local price-fixing mer chant scum who ran the town like a company store. This low-life bunch of merchants held the people of the town in a death grip and were perceived by the townspeople to overcharge on every purchase. In spite of what appeared to be a case of collusion, the law was powerless to do anything. What competition there was had been effectively eliminated.

Suddenly, coming over the rise and wearing white, their hired man came riding. The women and children buzzed with excitement. The men were happy. Although his methods of getting the job done turned some people's stomachs, the local watering hole buzzed with tales of how this hired gun would change their world for the better, how someday soon they would have the benefits long afforded the big city. But, others asked, at what price?

THE MODERN VERSION OF THE "'HIRED GUN"'

In his final days, the man appeared to be somewhat too frail to handle the enormous job. Y et the courage and self-confidence that he instilled in his associates radi ated a belief in low prices and good value for all to see. As his associates rode into town, that radiance put to rest the people's fears that things had changed. Sam's spirit, the Walmart Way, had come to town.

Sam Walton, founder, owner, and mastermind of Wal-Mart,1 now spelled Walmart in some advertise ments, passed away on April 5, 1992, leaving behind his spirit to ride herd on the colossal Walmart organi zation. To the consumer in the small community, his store, W almart, was seen as a friend. On the flip side, many a small-town merchant had been the victim of Sam's blazing merchandising tactics. So what is Wal mart to the communities it serves? Is Walmart the con sumer's best friend, the purveyor of the free-enterprise system, the "Mother of All Discount Stores," or, con versely, is it really "The Main Street Merchant of Doom"?

• This case, originally prepared by William T. Rupp, University of Montevallo, was

revised and updated by Archie B. Carroll, University of Georgia, in 2010.

THE MAN NAMED SAM

Samuel Moore Walton was born on March 29, 1918, near Kingfisher, Kansas. He was a strong, lean boy who learned to work hard in order to help the family. He attended the University of Missouri starting in the fall of 1936 and graduated with a degree in business administration. During his time there, he was a mem ber of the Beta Theta Phi fraternity, was president of the senior class, played various sports, and taught what was believed to be the largest Sunday school class in the world, numbering over 1,200 Missouri students.2

At age 22, Sam joined JCPenney. One of his first tasks was to memorize and practice the "Penney Idea." Adopted in 1913, this credo exhorted the associ ate to serve the public; not to demand all the profit the traffic will bear; to pack the customer's dollar full of value, quality, and satisfaction; to continue to be trained; to reward men and women in the organization through participation in what the business produces; and to test every policy, method, and act against the question, "Does it square with what is right and just?"3

SAM's FIRST STORE

In 1962, at age 44, Sam Walton opened his first W almart store in Rogers, Arkansas. He took all the money and expertise he could gather and applied the JCPenney idea to Middle America. Sam first targeted small, underserved rural towns with populations of no more than 10,000 people. The people responded, and Walmart soon developed a core of loyal customers who loved the fast, friendly service coupled with consis tently low prices. Later, Sam expanded his company into the large cities, often with numerous W almarts spread throughout every part of the city.

THE STORE THAT SAM BUILT

By 1981, Walmart's rapid growth was evident to all and especially disturbing to Sears, JCPenney, Target, and Kmart, because Walmart had become America's largest retailer. The most telling figures were those of overhead expenses and sales per employee. The over head expenses of Sears and Kmart ran 29 and 23 per cent of sales, respectively, whereas Walmart's overhead expenses ran 16 percent of sales. At this time, the aver age Sears employee generated $85,000 in sales per year,

600 Case 1 Walmart: The Main Street Merchant of Doom

whereas the average W almart employee generated $95,000.4

By 2001, Walmart Stores, Inc., had become the world's largest retailer with $191 billion in sales. The company employed one million associates worldwide through nearly 3,500 facilities in the United States and more than 1,000 stores throughout nine other countries. Walmart claimed that more than 100 mil lion customers per week visited W almart stores. The company had four major retail divisions-Walmart Supercenters, Discount Stores, Neighborhood Markets, and Sam's Club warehouses. As it entered the 2000s, Walmart had been named "Retailer of the Century" by Discount Store News, made Fortune magazine's lists of the "Most Admired Companies in America" and the "100 Best Companies to Work For," and was ranked on Financial Times's "Most Respected in the World" list.5 By 2010, Walmart's sales had grown to $408 billion.6

SAM THE MOTIVATIONAL GENIUS

Sam promoted the associate-the hourly employee-to a new level of participation within the organization. He offered profit sharing, incentive bonuses, and stock options in an effort to have his W almart associates share in the wealth. Sam, as the head cheerleader, saw his job as the chief proponent of the "Walmart Way." The Walmart Way reflected Sam's idea of the essential Walmart culture that was needed for success. Sam felt that when a customer entered Walmart in any part of the country, he or she should feel at home. Examples of the culture included "exceeding customer expectations" and "helping people make a difference." He was a proponent of the "Ten-Foot Rule," which meant that if a customer came within ten feet of an associate, the associate would look the customer in the eye, greet him or her, and ask if the customer needed help?

As he was growing the business, Sam, the coura geous, borrowed and borrowed, sometimes just to pay other creditors. Arkansas banks that at one time had turned him down later competed with banks that Sam himself owned. Sam, the CEO, hired the best managers he could find. He let them talk him into buying an extensive computer network system. This network cor porate satellite system enabled Sam to use round the-dock inventory control and credit card sales con trol and provided him with information on total sales of which products where and when. This computer control center was about the size of a football field

and used a Hughes satellite for uplinking and down linking to each store.

SAM THE MoRTAL

In 1992, Sam, the mortal, died of incurable bone can cer. At age 73, Sam Walton said that if he had to do it over again, he would not change a thing. He said, "This is still the most important thing I do, going around to the stores, and I'd rather do it than anything I know of. I know I'm helping our folks when I get out to the stores. I learn a lot about who's doing good things in the office, and I also see things that need fixing, and I help fix them. Any good management person in retail has got to do what I do in order to keep his finger on what's going on. Y ou've got to have the right chemistry and the right attitude on the part of the folks who deal with the customers."8

Sam, the innovator, was responsible for two early social responsibility innovations: Walmart's "Buy American" plan and its "Environmental Awareness" campaign.

SAM AND SOCIAL AWARENESS: THE "BUY

AMERICAN" PLAN

Walmart's "Buy American" plan was a result of a 1984 telephone conversation with then-Arkansas Governor Bill Clinton. The program was a response to Sam's own enlightenment: He learned that Walmart was adding to the loss of American jobs by buying cheaper foreign goods. Everything Sam stood for came out of his heart felt obligation to supply the customer with low-cost quality goods, but running counter to this inner driv ing force was the realization that he was responsible for the loss of American jobs. This contradiction and dilemma drove him to find a solution. His conversa tion with Governor Clinton inspired Sam to do some thing about the problem.

The goal of the Buy American plan was to support American-based manufacturers by doing business with them so that they would not go out of business. His primary method for doing this was to give the manu facturers large orders or contracts so that they could stay in business.9

Sam wanted other manufacturers to join him in the Buy American plan. He wrote to 3,000 American man ufacturers and solicited them to sell to W almart items that Walmart was currently buying from overseas sup pliers. Walmart's competitors did not meet the chal lenge to "Buy American." Kmart stated that it would rather buy American-made goods but that it was

looking for the best deal for the customer. Target said it was for free trade and that as the customer's repre sentative it just wanted the best deal for the customer. Wall Street analysts responded positively, saying that Walmart's plan was possibly the beginning of a change of direction for American retailers.10

In February 1986, about 12 months after the Buy American plan had begun, Sam held a press confer ence. He showed off all the merchandise Walmart was now buying domestically. He estimated that Walmart's Buy American plan had restored 4,538 jobs to the American economy and its people.11 The Buy American plan was one of W almart' s early efforts at corporate social responsibility.

The Buy American plan morphed over the years into the well-publicized "Made in the USA" campaign in which W almart called customers' attention to these local products with special labels. Ironically, at some point in time, Walmart eventually abandoned this pro gram and became one of the largest purchasers of prod ucts made overseas. In fact, the company in time became the country's largest purchaser of Chinese goods in any industry. Some say that by taking its orders abroad, Walmart forced many U.S. manufac turers out of business.12

SAM AND SOCIAL CONCERNS: THE

"ENVIRONMENTAL AWARENESS" CAMPAIGN

As awareness of the environment was on the rise, Sam looked for a way to involve Walmart in the environ mental movement. In August 1989, an ad in The Wall Street Journal proclaimed Walmart's "commitment to our land, air and water." Sam envisioned Walmart as a leader among American companies in the struggle to clean up the environment. John Lowne, corporate vice president and division manager for Reynolds Metals Company, stated, "Walmart's move will indeed set a precedent for the entire retail industry. I'm surprised it has taken other retailers this long to follow suit."13

Walmart wanted to use its tremendous buying power to aid in the implementation of the campaign. W almart sent a booklet to manufacturers stating the following:

At Wal-Mart we're committed to help improve our environment. Our customers are concerned about the quality of our land, air and water, and want the opportunity to do something positive. We believe it is our responsibility to step up to their challenge. 14

Case 1 Walmart: The Main Street Merchant of Doom 601

In the stores, shelf tags made from 100 percent recycled paper informed customers as to the environ mental friendliness of the highlighted product. As a result of these shelf tags and Walmart's advertising, customer awareness had increased, and some environ mentally safe product manufacturers were reaping the rewards of increased Walmart orders. Linda Downs, administrative manager of Duraflame, California, said that Duraflame logs had been proven to burn cleaner than wood and that Walmart's campaign had helped Duraflame to deliver this message. She went on to say, "W almart has helped drive home the message we have been trying to promote for years. They have really given us great publicity."15

In the Wal-Mart Associates Handbook, new associ ates were indoctrinated with the "Walmart spirit." The section on the environment said:

As a responsible member of the community, W al Mart's commitments go beyond simply selling mer chandise. With environmental concerns mounting world-wide, Wal-Mart has taken action. Home office and store associates are taking decisive steps to help the environment by making community recy cling bins available on our facility parking lots. Other action plans include "Adopt-a-Highway" and "Adopt-a-Beach" programs, tree planting and com munity clean up and beautification. By forming a partnership with our associates, our manufacturers and our customers, we're convinced we can make the world a better place to live.16'17

SAM AND THE MERCHANTS OF MAIN STREET

Not everyone was excited to see Sam and his mecha nized Walmart army arrive and succeed. Small mer chants across America shuddered when the winds of the "Walmart Way" began to blow. Kennedy Smith of the National Main Street Center in Washington, DC, said, "The first thing towns usually do is panic." Once Walmart comes to town, Smith says, "Down towns will never again be the providers of basic con sumer goods and services they once were."18

STEAMBOAT SPRINGS

Some towns learned to "just say 'no"' to Walmart's overtures. Steamboat Springs, Colorado, is one such city. Colorado newspapers called it the "Shootout at Steamboat Springs." Walmart was denied permission to build on a nine-acre parcel along U.S. Route 40. Owners of upscale shops and condos were very

602 Case 1 Walmart: The Main Street Merchant of Doom

concerned with the image of their resort community, and Walmart, with its low-cost reputation, just did not fit. The shootout lasted for two years, and finally Wal mart filed a damage suit against the city. Countersuits followed. A petition was circulated to hold a referen dum on the matter. This was the shot that made Wal mart blink and back down. Just before the vote, Don Shinkle, corporate affairs vice president, said, "A vote would not be good for Steamboat Springs, and it would not be good for W almart. I truly believe W almart is a kinder, gentler company, and, while we have the votes to win, an election would only split the town more."19

IOWA CITY

In Iowa City, Iowa (population more than 50,000), Walmart was planning an 87,000-square-foot store on the outskirts of the town. A group of citizens gathered enough signatures during a petition drive to put a ref erendum on the ballot to block W almart and the city council from building the new store (the city council had approved the rezoning of the land Walmart wanted). Jim Clayton, a downtown merchant, said, "Walmart is a freight train going full steam in the opposite direction of this town's philosophy." If busi nesses wind up going down, Clayton says, "you lose their involvement in the community, involvement I promise you won't get with some assistant manager over at Walmart."20 Walmart spokesperson Brenda Lockhart commented that downtown merchants can benefit from the increase in customer traffic provided "they offer superior service and aren't gouging their customers."21 Efforts to stop Walmart and the Iowa City Council were not successful. W almart opened its Iowa City store on November 5, 1991.

PAWHUSKA, OKLAHOMA

Meanwhile, in Pawhuska, Oklahoma, as a result of Walmart's entry in 1983 and other local factors, the local "five-and-dime," JCPenney, Western Auto, and a whole block of other stores closed their doors. Four years later, Dave Story, general manager of the local Pawhuska Daily Journal Capital, wrote that Walmart was a "billion-dollar parasite" and a "national retail ogre."22

W almart managers have become very active in Pawhuska and surrounding communities since that time. A conversation with the editor of the Pawhuska paper, Jody Smith, and her advertising editor, Suzy Burns, revealed that Walmart sponsored the local rodeo, gave gloves to the local coat drive, and was

involved with the local cerebral palsy and multiple scle rosis fund-raisers. On the other hand, Fred Wright, former owner of a TV and record store, said, "W almart really craters a little town's downtown."23

KINDER, LOUISIANA

Consider the small town of Kinder, Louisiana (popula tion 2,608), in 1981. On December 31, 1990, the store was closed. During the time Walmart operated in Kin der, one-third of the downtown stores closed. The downtown became three blocks of mostly run-down, red-brick buildings. The closest place to buy shoes or sewing thread was 30 miles away in Oakdale, Louisiana-at another Walmart. Moreover, Kinder lost $5,500 in annual tax revenues, which represented 10 percent of the total revenues for the city.

The tactics Walmart employed during its ten years in Kinder left a bad taste in the mouths of some small retailers. Soon after Walmart's arrival, a price war broke out between W almart and the downtown re tailers. The retailers told The Atlanta Journal Constitution in November 1990, "Walmart sent employees, wearing name tags and smocks, into their stores to scribble down prices and list merchandise." Lou Pearl, owner of Kinder Jewelry and Gifts, stated that W almart associates came to her store and noted the type of art supplies she was carrying. Shortly there after, Walmart began carrying the same merchandise at discount prices. Sales at Kinder Jewelry and Gifts dropped drastically, and Pearl dropped the merchan dise line. Within several weeks, so did Walmart.24 Troy Marcantel, a 29-year-old downtown clothing mer chant, said it best: "What really rankled me was that they used people we have known all our lives. I still don't understand how our own people could do that to us."25

O PPOSITION TO WALMART GETS ORGANIZED

By the 1990s, there were dozens of organized groups actively opposing Walmart's expansion.26 Some of these groups were and still are run by social activists dating back to the 1960s and 1970s. Instead of protest ing the Vietnam War, nuclear proliferation, or the destruction of the environment, they turned their efforts to Walmart specifically and capitalism in gen eral. One of these activists, Paul Glover, who was an antiwar organizer, defined W almart as the epitome of capitalism, which he despises. For Glover and others, Walmart stands for "everything they dislike about American society-mindless consumerism, paved

landscapes, and homogenization of community identity."27

BOULDER, COLORADO

In Boulder, Colorado, Walmart tried to counter these allegations by proposing a "green" store. Steven Lane, Walmart's real estate manager, said that a "green store" would be built that would be environmentally friendly, with a solar-powered sign out front and everything. His efforts were trumped by Spencer Havlick, an orga nizer of the first Earth Day in 1970, suggesting that the entire store be powered by solar energy. Mr. Lane did not respond.28

Protest organizers united against the spread of the "W almart Way" differ from the downtown merchants in that these protesters have no financial stake. Hence, these activists are attacking on a higher plane, a philo sophical plane. The accusations ring with a tone of argument that was made by other activists protesting polluting industries (e.g., the coal, nuclear, and chemi cal industries). These activists accuse Walmart of "strip-mining" towns and communities of their culture and values.

One possible root of this culture clash may be attributed to the unique facets of the internal corporate culture at Walmart's headquarters. This is a place where competition for the reputation as the "cheapest" is practiced. An example is the competition among employees in procuring the cheapest haircut, shoes, or necktie. W almart is a place where playacting as a backwoods "hick" has been an acceptable behavior within the organization. Consequently, as a result of the internal culture of Walmart and the external envi ronment, some analysts believe that a clash of priorities was inevitable as Walmart moved into larger, more urban settings.

NEW ENGLAND OPPOSITION

Some of the greatest opposition to Walmart's growth came from the New England area. This area holds great promise for Walmart because of the large popu lation and the many underserved towns. These towns are typically underserved in three ways: in variety of product choices, in value, and in convenience. The opposition to Walmart entering these New England markets includes some high-profile names, such as Jerry Greenfield, cofounder of Ben & Jerry's Home made ice cream, and Arthur Frommer, a well-known travel writer.29 In addition to New England, other areas, such as resort areas, opposed Walmarts because they wanted to insulate their unique cultures from

Case 1 Walmart: The Main Street Merchant of Doom 603

what they considered to be the offensive consumerism that is usually generated by Walmart's presence.

SPRAWL-BUSTERS

AI Norman, a lobbyist and media consultant, turned opposition to Walmart into a cottage industry. Nor man publishes a monthly newsletter called Sprawl Busters Alert. He has also developed a Web site (http://www.sprawl-busters.com/) that has vast infor mation for citizens who are fighting to prevent Wal mart or other "big box" stores from locating in their cities or neighborhoods. Norman achieved national attention in 1993, when he stopped Walmart from locating in his hometown of Greenfield, Massachusetts. Since then, he has appeared on 60 Minutes, which called him "the guru of the anti-W almart movement," and has gained widespread media attention. Today Norman continues to serve as a consultant and travels throughout the United States, helping dozens of coali tions fight Walmart. Norman has published two books: Slam-Dunking Wal-Mart: How You Can Stop Super store Sprawl in Your Hometown and The Case Against Wal-Mart. In his books, he lays out the arguments against urban "sprawl."

On the Sprawl-Busters Web page, consumers around the country are given the opportunity to write in the details of their fights with Walmart. Examples in 2009-2010 included conflicts in Tuscon, Arizona; Monroeville, Pennsylvania; Ogden, Utah; and Galt, California.30 In actuality, conflicts between Walmart and cities are taking place every day all over the coun try now.

Sprawl-Busters is not alone in its focused criticism of Walmart's presence in communities. Another orga nization, Wal-Mart Watch, has an active Web page (http:/ /W a!-Martwatch.com/) that details what it believes to be Walmart's threat to America. Wal-Mart Watch is a joint project of The Center for Community & Corporate Ethics, a 501c3 organization devoted to studying the impact of large corporations on society.31

AGGRESSIVE GROWTH. A NEW CEO.

AND CONTINUING CHALLENGES

For its part, Walmart has continued its aggressive diversification and growth pattern. At a retail industry convention, Lee Scott, Walmart's then CEO, was asked whether W almart was trying to take over the world. Scott replied, "I don't think so. All we want to do is grow." But as The Economist magazine has asked, "How big can it grow?"32 In the fall of 2008, Lee Scott announced his retirement and that beginning

604 Case I Walmart: The Main Street Merchant of Doom

FIGURE 1 Recent Statistics about Walmart

General Facts

• Walmart is the world's largest retailer with

$405 billion in sales for the fiscal year ending

January 31, 2010.

• In the United States, Walmart Stores, Inc., oper

ates more than 4,300 facilities including Walmart

supercenters, discount stores, neighborhood

markets, and Sam's Club warehouses.

• Internationally, Walmart operates more than

4,000 additional stores in 15 markets worldwide,

including Argentina, Brazil, Canada, Chile, China,

Costa Rica, El Salvador, Guatemala, Honduras,

India, Japan, Mexico, Nicaragua, the United

Kingdom, and the United States.

• Walmart employs more than 2.1 million associ

ates worldwide, including more than 1.4 million

in the United States. Walmart is not only one of

the largest private employers in the United

States, but also the largest in Mexico and one of

the largest in Canada as well.

• Walmart employs more than 257,000 African

American associates, more than 41,000 Asian

and 5,900 Pacific Islander associates, more than

171,000 Hispanic associates, more than 16,000

American Indian and Alaskan Native associates,

more than 869,000 women, and more than

430,000 mature associates who are 50 and older.

• In 2010, Fortune magazine's ranking of the world's most admired companies ranked

Walmart Stores in the top ten of its 50 All Stars.

Community

• Walmart strives to be a good neighbor and to

benefit the communities where it operates. In the

United States, the company and the Walmart

Foundation gave more than $378 million in cash

and in-kind gifts in the fiscal year ending 2009.

• Walmart makes the majority of its charitable

donations at the local level, where it can have the

greatest and most positive impact. Walmart

and its foundations gave $423 million globally in

fiscal year ending 2009.

• Walmart takes pride in being a part of every

community it serves.

Recent Accolades for Walmart*

2010

• 40 Best Companies for Diversity-Black Enter

prise magazine

• 2010 Most Valuable Employers (MVE) for Military

by CivilianJobs.com

• 2010 World Environment Center Gold Medal for

International Corporate Achievement in Sustain

able Development

• 20 Best Companies for Multicultural Women

Working Mother.com

• Ranked #1 for Retail and #9 Overall as Fast

Company's "Most Innovative Companies 2010"

• Donor of the Year by Feeding America, for

providing funds, vehicles, and more than

1 00-million pounds of food

2009

• 2009 Waste Reduction Awards Program Win

ner-California Integrated Waste Management

Board

• President's Trophy-American Trucking Associ

ation (ATA)

• Ranked #3 out of 35 other retailers in the 03 2009

Covalence ethical reputation index

• Ranked #1 Consumer Staples Company-Carbon

Disclosure Project (COP) 2008 report (see page 8)

and scored 89 out of a possible 100

• Green Power Leadership Award for on-site gen

eration at our California and Texas facilities

Environment Protection Agency (EPA)

• Corporate Energy Conservation, Energy and

Environment Award-Aspen Institute

*Wai-Mart Stores, Awards and Recognitions, http://walmartstores.com/AboutUs/336.aspx. Accessed July 4, 2010. Sources. Walmart Fact Sheets, http://walmartstores.com/pressroom/FactSheets/. Accessed June 10, 2010; "The World's Most Admired Companies," Fortune (March 22, 2010). 121-126; "First," Fortune (May 3, 2010). 27-28.

on February 1, 2009, Scott's groomed successor for the position, Mike Duke, would become the new CEO. Duke took over a company that had grown signifi cantly under Scott. In Scott's final years as CEO, he had worked hard to improve the image of the company and, in spite of ongoing criticisms of the retail

behemoth, had succeeded in making the company more likable. According to The Wall Street Journal, by 2009, Walmart's image had moved from demon to darling as a result of the strategies the company had employed. 33 Figure 1 provides some revealing current statistics about W almart.

NEw FoRMs oF CLANDESTINE OPPOSITION EMERGE

In the summer of 20 1 0, The Wall Street Journal reported that there was a new form of opposition to Walmart's growth-rival chains that had secretly funded opposition to Walmart's entrance into commu nities. By 2009, grocery sales had reached 51 percent of Walmart's total revenues.- What The Wall Street Jour nal learned through investigative research was that in Mundelein, Illinois, a town about 20 miles northwest of Chicago with a population of about 35,000, a grocery chain with about nine stores in the area had hired Saint Consulting Group to secretly operate an anti-W almart campaign. It was revealed that Saint had developed a specialty in fighting proposed Walmarts in communi ties and were using techniques it described as "black arts."34

Large supermarket chains such as Supervalue, Inc., Safeway, Inc., and Ahold NV retained Saint Consulting to block Walmart's entrance into communities, accord ing to pages of Saint's documents and interviews with employees that the newspaper was able to obtain. It was reported that Saint had jokingly dubbed its staff the "Walmart killers." Supervalue's goal in retaining Saint in the Mundelein, Illinois, case was to block Wal mart from competing with its nine Jewel-Osco super markets located within the area. City officials claimed that the efforts stalled the development of a major shopping center for three years and cost the commu nity millions in lost sales and sales taxes.35 It turns out that other grocery chains have employed Saint to block Walmarts in other states. Safeway hired Saint to thwart Walmart superstores in more than 30 towns in Cali fornia. Earlier, in Pennsylvania, Saint had 53 projects on its books, with most of them targeted toward stop ping W almarts. These were on behalf of Giant Food Stores. According to Saint's records for the year 2007, it had lost one battle in Pennsylvania, defeated 13 proj ects, and delayed the remaining ones for four months to four years.36

The techniques used by Saint Consulting were usu ally clandestine. In a typical anti-W almart project, a Saint executive would drop into the town under an assumed name and take charge of the local opposition to the store. They would flood local politicians with calls, using multiple phone lines to make it look like they were coming from different people. They would hire lawyers and traffic experts to derail the project or stall it. They would flood neighborhoods with flyers outlining the purported evils of a W almart entering their area and the subsequent traffic and increased

Case 1 Walmart: The Main Street Merchant of Doom 605

police calls that would follow. They would hope that the developer would back off, slow down, or drop the project altogether. They operated in secret. They deployed their strategies under assumed names and never revealed their clients' names because clients didn't want their names publicly known for fear it would draw adverse publicity or lawsuits should they be known. P. Michael Saint, founder of the consulting group, was quoted by The Wall Street Journal as saying that there was nothing illegal in what his company was doing and that they were protected by the First Amendment for using such secret processes to thwart the competition.37

PLANET W ALMART

The New York Times has argued that Walmart has become a nation unto itself. In fact, the newspaper stated that if Walmart were an independent nation, it would be China's eighth-largest trading partner. In terms of its low prices and impact, some economists say that the com pany has single-handedly cut inflation by 1 percent in some years as it has saved customers billions of dollars annually.38 It is little wonder the newspaper calls it "The Walmartization of America."39 Because of its number one ranking in the 20 10 Fortune 500 listing, based on size, the magazine referred to the company as "Planet Walmart."40

GLOBAL GROWTH

In addition to domestic growth, W almart continues its aggressive growth internationally. Today, Walmart International is a fast-growing part of Walmart's over all operations, with 4, 1 1 2 stores and more than 680,000 associates in 14 countries outside the continental United States. Today, at its 20 1 0 annual meeting, CEO Michael Duke made it clear that the company's future growth trajectory would be in distant lands. In 2009, the company's international sales exceeded $ 1 00 billion, accounting for one-fourth of the com pany's $405 billion in revenue. Duke made it clear that domestic growth would continue, but that the chain was committed to being "truly global." CEO Duke also made it clear that W almart planned to emphasize mobile shopping and that it was upgrading its technology to make this happen.41

PoLITICAL AcTIVISM

It was Walmart's desire to grow globally that caused the company to ramp up its efforts at lobbying in Washington, DC. The precipitating event was

606 Case 1 Walmart: The Main Street Merchant of Doom

Walmart's realization that U.S. negotiators had agreed upon a 30-store limit on retailers operating in China when it agreed to support China's entry into the World Trade Organization in the late 1990s. As a result of this realization, the company decided it had to get into lob bying even though it went against founder Sam Wal ton's policy of staying out of politics. Today, Walmart has a large number of lobbyists on its payroll and a number of other hired political consultants to help it. The company's political action committee grew to become the biggest corporate donor to federal parties and candidates, with more than $1 million in contributions. 42

MILLIONS OF SUPPORTERS

In spite of its challenges, W almart has millions of sup porters. Over 100 million of W almart' s customers visit them weekly. Many consider the company to be socially responsible in addition to being a provider of thousands of jobs, low prices, and high value and ser vice. At the end of the first decade of the new millen nium, W almart has numerous corporate citizenship initiatives at the local and national levels. Locally, Wal mart stores underwrite college scholarships for high school seniors, raise funds for children's hospitals through the Children's Miracle Network Telethon, provide local fund-raisers money and workforce, and educate the public about recycling and other environ mental topics with the help of "Green Coordinators."43 In 1998, the Walton Family Charitable Support Foun dation, the charitable program created by Sam Wal ton's family, announced what at the time was the largest ever single gift made to an American business school: $50 million to the College of Business Admin istration of the University of Arkansas. Helen R. Wal ton, the "first lady" of Walmart, said that she and her husband established the Foundation to support specific charities, including the University.44

ACHIEVEMENTS

On its own Web site, W almart touts in detail its achievements. It says the American public appreciates Walmart's community-involvement efforts and it has received many recognitions. Below are some recent honors:45

2010

• 2010 Most Valuable Employers (MVE) for Military by CivilianJobs.com

• Donor of the Y ear by Feeding America, for provid ing funds, vehicles, and more than 100-million pounds of food

2009

• The National Urban League honored Walmart with the 2009 Corporate Leadership A ward during the organization's 53rd annual Equal Opportunity Day Awards Dinner.

• Diversity MBA magazine has ranked Walmart No. 2 on their 2009 "50 Out Front Companies for Diver sity Leadership: Best Places for Diverse Manger to Work" list.

Today, Walmart reports on its corporate citizenship in a highly visible way. Through its W almart Foundation, it promotes its support of education, military, hunger relief, disaster relief, and giving programs.

W ALMART's POWER AND IMPACT

In spite of its achievements, article titles from recent newspapers and magazines raise questions about Wal mart's power and impact. Some of these include the following:

"The Wal-Martization of America"46

"Is Wal-Mart Too Powerful?"47

"Is Wal-Mart Good for America?"48

"One Nation under Wal-Mart"49

"Wal-Mart Gives Globalization a Bad Name"50

"Attack of the Wal-Martyrs"51

"Wal-Mart's Midlife Crisis"52

"Planet Wal-Mart"53

EPILOGUE

Sam, the hired gun, learned his lessons well. The peo ple who bought at his stores were well satisfied. The downtown merchants who survived learned to coexist with the hired gun's associates. But things would never be the same. The changes had come rapidly. The social fabric of the small town was changed forever. The larger cities continued to fight, but had only limited success.

The hired gun rode on, searching for that next town that needed to be liberated from the downtown price fixing bad guys. The search has become more compli cated as the opposition has risen, but the spirit of Sam rides on.

AN EMBATILED WALMART: A CONTINUING

STREAM OF ISSUES

Walmart's size, power, and impact on local communi ties is where criticism of the company began. This included the threat of putting other merchants out of business, the creation of urban sprawl, and the traffic congestion created when the company decides to locate in a particular area.

In the past few years, W almart has begun to face other important issues. In addition to antisprawl activ ists and merchants, W almart is now facing new oppo sition from competitors, labor unions, other activist organizations, and lawsuits. Its labor practices have been increasingly questioned. The company has been accused of paying wages so low that workers cannot live off them, making employees work "off the clock" without overtime pay, paying few or low benefits, and taking advantage of illegal immigrants. In 2004, the company was hit with a class-action lawsuit on gender discrimination against women. This class action law suit covers 1.6 million current and former employees, making it the largest private civil rights case in U.S. history. This case is still ongoing almost a decade later. In late 2008, Walmart agreed to pay up to $640 million to settle 63 state class-action lawsuits regarding overtime. 54

Because these issues are so expansive and impor tant, they are not addressed in the present case. Another case, focusing primarily on Walmart's labor practices and some of the issues outlined above, has been prepared for separate discussion. Case 32, titled "W almart and Its Associates," may be discussed imme diately following this case or deferred until a more in depth consideration of employee stakeholders is undertaken.

QUESTIONS FOR DISCUSSION

Case 1 Walmart: The Main Street Merchant of Doom 607

What is the "Walmart Way"? Explain its impact on the associate and on the community. What has happened now that Sam is no longer the motiva tional leader?

3. W almart was an early leader in the area of corpo rate social responsibility. How do the "Buy Amer ican" program and the "Environmental Awareness" campaign illustrate this? Were these programs really early examples of corporate social responsibility or were they gimmicks to entice customers into the stores? Are the benefits of its more recent corporate citizenship programs offset by the company's detrimental impact on merchants?

4. W almart has closed five stores in its short history. What responsibility, if any, does W almart have to the employees who are let go? What about its loyal customers and the community?

5. Walmart continues to find severe resistance to its expansion into New England and California. From Walmart's perspective, draw the stakeholder map. Define the true goals of the opponents of Walmart. Include a consideration of the following: (a) stop ping Walmart's expansion, (b) preserving the sta tus quo (e.g., downtown community and social fabric), (c) developing a cause that will pay their bills, (d) fighting for an ideology, or (e) something else. What should Walmart do?

6. What is your assessment of competitors secretly hiring consulting firms to block Walmart's entry into new communities? Is this an ethical practice? Is this a fair trade practice with respect to com petitor stakeholders?

7. As Walmart continues its expansion into the international arena, what problems or issues do you anticipate it will face? In general, what should Walmart's approach be in these other countries? Is it unethical to change another country's culture? 1. What are the major issues in this case? Assess

Walmart's corporate social responsibility using the four-part CSR model. Is Walmart socially respon- ENDNOTES

sible while it has a devastating impact on small 1. Wal-Mart Stores, Inc. (NY SE: WMT) is the legal merchants? What about its impact on communities name of the corporation. The name "Walmart," in terms of sprawl, traffic congestion, and impact expressed as one word and without punctuation, is on the appearance of the environment? What a trademark of the company and is used analo- responsibility, if any, does the company have to gously to describe the company and its stores. these merchants or to the communities it enters? 2. Vance H. Trimble, Sam Walton: The Inside Story

2. Sam Walton has been called a motivational genius. of America's Richest Man (New Y ork: Penguin After reading this case, and with what you have Books, 1990), 30. Also see Bob Ortega, In Sam We

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