business ethics case in walmart

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List of tables Table 1: The 13-code of ethics in Walmart (Source: Walmart Global Ethics, 2014) 8 Table 2: Global audit result (%) (Source: http://corporate.walmart.com, 2013). .11 i

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Analyzing how Walmart create and behavior depend on its code of conduct, also the solution for all parties: the suppliers, Walmart, labor and consumer.

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Page 1: Business ethics case in Walmart

List of tables

Table 1: The 13-code of ethics in Walmart (Source: Walmart Global Ethics, 2014)...................................8Table 2: Global audit result (%) (Source: http://corporate.walmart.com, 2013)........................................11

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Page 2: Business ethics case in Walmart

Contents1. INTRODUCTION...................................................................................................................1

1.1. General information about Walmart.............................................................................1

1.2. Reasons of choosing Walmart case study......................................................................3

2. LITERATURE REVIEW.......................................................................................................5

2.1. Framework.......................................................................................................................5

2.2. Codes of ethics in practice...............................................................................................6

3. CASE STUDY ANALYSIS....................................................................................................8

3.1. The Walmart effect..........................................................................................................8

3.1.1. Community satisfaction.............................................................................................9

3.1.2. A helping hand...........................................................................................................9

3.1.3. Wal-Mart contracts with Chinese workers and treats them only as a means......10

3.1.4. Walmart caught using child labor in Bangladesh.................................................12

3.2. Assessment......................................................................................................................12

3.2.1. Squeezing prices......................................................................................................12

3.2.2. Consequences...........................................................................................................13

a. Offshoring and unemployment in home country..........................................................13

b. Violating employment practices...................................................................................14

c. Sweeps and takeovers...................................................................................................16

d. Low cost and irreparable damages..............................................................................17

4. RECOMMENDATIONS......................................................................................................18

4.1. Wal-Mart should change their business strategy........................................................18

4.2. Wal-Mart as a multinational enterprise (MNEs)........................................................19

4.3. The role of law and regulatory agencies......................................................................20

4.4. Victims and communities: what should they do?.......................................................21

4.5. Ethnic leadership, Work goals, and Performance appraisals...................................23

4.6. Empower ethical employees..........................................................................................23

Reference.......................................................................................................................................25

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1. INTRODUCTION

1.1. General information about Walmart

Wal-Mart Stores, Inc. (Walmart) is an American multinational retail corporation that

operates chains of large discount department stores and warehouse stores. Headquartered in

Bentonville, Arkansas, the company was founded by Sam Walton in 1962 and incorporated on

October 31, 1969. Bigger than Europe's Carrefour, Metro AG, and Tesco combined, it's the

world's #1 retailer with some 2.2 million employees1. Walmart operates over 11,000 retail units

under 71 banners in 27 countries and e-commerce websites in 10 countries. They employ 1.3

million in the U.S. alone2.

There are 2 particular milestones that we take into account which are in 1962 and 1991. In

1962, Sam Walton founded the company and established the motto: “The Lowest Prices

Anytime, Anywhere”. The emphasis on low prices has continued throughout Walmart’s growth.

In 1991, through a joint venture with Cifra, a Mexican retail company, Walmart went global,

opening a Sam’s Club in Mexico City3. “Low price” strategy and Walmart’s international scale

are directly relating to ethical issues of this company that we will dig deep in this report.

The Company operates in three segments: the Walmart U.S., the Walmart International

and the Sam’s Club:

Walmart U.S. Segment

Walmart U.S. does business in six merchandise units across several store formats,

including supercenters, discount stores, Neighborhood Markets and other small store formats, as

well as walmart.com.

1 Vault.com, (2014). WAL-MART STORES, INC.|Company Profile|Vault.com. [online] Available at: http://www.vault.com/company-profiles/retail/wal-mart-stores,-inc/company-overview.aspx [Accessed 23 Nov. 2014].2 Corporate.walmart.com, (2014). Walmart Corporate: Our Business. [online] Available at: http://corporate.walmart.com/our-story/our-business/ [Accessed 23 Nov. 2014].3 Corporate.walmart.com, (2014). Experience Walmart's History. [online] Available at: http://corporate.walmart.com/our-story/history/history-timeline [Accessed 23 Nov. 2014].

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Walmart began building Supercenters in 1988;

each store is about 182,000 square feet and

employs about 300 associates. Most

Supercenters are open 24 hours, and may also

include specialty shops such as pharmacies,

banks, hair and nail salons, name-brand

restaurants, vision centers or health clinics.

Image 2: Image 2: Walmart Discount Store(Source: Internet, 2014)

Smaller than a Supercenter, discount stores

employ about 200 associates and offer

electronics, apparel, toys, home furnishings,

health and beauty aids, hardware and more in

about 106,000 square feet of open, brightly lit

space.

Image 3: Walmart Neighborhood Market (Source: Corporate.walmart.com, 2014)

Walmart Neighborhood Markets were designed

in 1998 as a smaller-footprint option for

communities in need of a pharmacy, affordable

groceries and merchandise. Each one is

approximately 38,000 square feet and employs

up to 95 associates. Walmart Neighborhood

Markets offer fresh produce, meat and dairy

products, bakery and deli items, household

supplies, health and beauty aids and a

pharmacy.4

4 Corporate.walmart.com, (2014). Our Business: Walmart U.S.. [online] Available at: http://corporate.walmart.com/our-story/our-business/walmart-us [Accessed 23 Nov. 2014].

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Image 1: Walmart Supercenter (Source: Corporate. walmart.com, 2014)

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Walmart International Segment

Walmart became an international company in 1991, and they operate in 26 countries

outside the United States with more than 6,100 stores internationally5. Walmart International is

currently the fastest growing part of their business. Walmart International operates units in three

categories: retail, wholesale and other. These categories consist of numerous formats, including

discount stores, supermarkets, supercenters, hypermarkets, retail websites, warehouse clubs,

restaurants and apparel stores. Generally, retail centers range in size from 5,000 square feet to

250,000 square feet. Its wholesale stores generally range in size from 35,000 square feet to

70,000 square feet. Other, which includes restaurants in Chile, Japan and Mexico, range in size

up to 4,200 square feet. Also, on a limited basis, Walmart International segment operates banks

that provide consumer financing programs.6

Sam’s Club Segment

Sam Walton opened the first Sam's Club in 1983 to meet a growing need among

customers who wanted to buy merchandise in bulk. Since then, Sam's Club has grown rapidly,

opening more than 600 clubs in the U.S. and 100 clubs internationally. By offering affordable,

wholesale merchandise to members, Sam's Club helps make saving simple for families and small

business owners. Sam's Club employs about 110,000 associates in the U.S. The average club is

134,000 square feet and offers bulk groceries and general merchandise7.

5 Corporate.walmart.com, (2014). Walmart International. [online] Available at: http://corporate.walmart.com/our-story/our-business/international [Accessed 23 Nov. 2014].6 Reuters.com, (2014). Wal-Mart Stores Inc (WMT.N) Company Profile | Reuters.com. [online] Available at: http://www.reuters.com/finance/stocks/companyProfile?symbol=WMT.N [Accessed 23 Nov. 2014].7 Corporate.walmart.com, (2014). Walmart Corporate: Sam's Club. [online] Available at: http://corporate.walmart.com/our-story/our-business/sams-club [Accessed 23 Nov. 2014].

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Image 4: Sam’s Club (Source: Corporate.walmart.com, 2014)

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1.2. Reasons of choosing Walmart case study

Business ethics is the study and evaluation of decision-making by businesses according to

moral concepts and judgments. Ethical questions range from practical, narrowly defined issues,

such as a company's obligation to be honest with its customers, to broader social and

philosophical questions, such as a company's responsibility to preserve the environment and

protect employee rights. Many ethical conflicts develop from conflicts between the differing

interests of company owners and their workers, customers, and surrounding community. Ethical

issues in business have become more complicated because of the global and diversified nature of

many large corporations. Ethical issues in international business involve employment practices,

human rights, environment regulations, corruption, and the moral obligation of multinational

corporations…We choose Walmart as the case study of those ethical issues because of the

following reasons:

Walmart is an multinational company and the world biggest retailer in the world.

The motto: “The Lowest Prices Anytime, Anywhere” has continued throughout

Walmart’s growth. However, Walmart has been criticized by many groups and

individuals that low prices are not the result of efficiency but other factors such as wage

law violations, inadequate health care, exploitation of workers, and the retailer’s anti-

union stance. Altogether, some 5,000 lawsuits are filed against Wal-Mart each year, or

roughly 17 suits per working day8.

The biggest ethical issue of Walmart is squeezing prices. Because of squeezing prices,

Wal-Mart was accused for violating workers’ rights in foreign countries, alleging that

Wal-Mart denied minimum wage, required overtime, and punished union activity.

Walmart also involved in failing to provide adequate safety equipment child labor

violations, hirings of illegal immigrants. In some cases, workers alleged they were beaten

by supervisors. Regarding treatment of product suppliers, Walmart has a clear policy for

suppliers: On basic products that don't change, the price Wal-Mart will pay, and will

charge shoppers, must drop year after year. The retailer pressured suppliers to sell goods

below cost or at prices significantly less than those available to other stores. Even when a

supplier meets Wal-Mart's prices, the prices are so low, and the supplier loses so much

8 Workplacefairness.org, (2014). The Good, the Bad, and Wal-Mart - Wal-Mart. [online] Available at: http://www.workplacefairness.org/reports/good-bad-wal-mart/wal-mart.php [Accessed 23 Nov. 2014].

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money, then go bankrupt. Also, suppliers have to resort to ethical wrongdoings such as

pay and overtimes violations to reduce cost.

2. LITERATURE REVIEW

2.1. Framework

The term of “ethics” refer to accepted principles of right or worng that govern the conduct

of person, the members of as profession, or the actions of an organisation. Business ethics are the

accepted principles of right or wrong, governing the conduct of businesspeople, and an ethical

strategy is one that does not violate these accepted principles. Among political systems, laws,

econmic development, and culture from nation to nation, ethical issues and dilemmas in

international bussiness are rooted in the variations. The most common ethical issues in

international business involve employment practices, human rights, enviromental regulations,

corruption, and the moral obligation of multinational corporations.

In a worldwide with limited resources, the economic development faces many social and

enviromental issues. That requires businesses to concern themselves about every aspect in the

business enviroment such as worker treatment, product safety, and enviromental protection. The

theoretical framework can be considered as the important foundation for case study’s analysis

and resolutions for the issues. There are two theories that will be mentioned in this paper. The

first theory is legitimacy theory, the second one is stakeholder theory. According to the

legitimacy theory, the companies are required to take responsibility for not only economic but

also social, ecological problems by the authorities. However, ethics in business is a concept

which is not easy to define as a term in law. Because, a large number in defining the ethical

criteria may lead to a complex code to cover every aspect. In diferent countries, we found the the

differences among many cultures of each country. If there is a question that is it legally to require

ethics by law of business? We can not refuse the answer that “yes”. However, in the international

business enviroment nowadays the business entities are expected to fulfil their mission with

efforts from themselves first. That is the reason for the presence of stakeholder theory. The

stakeholder theory says that the companies afford to make market premium and contribute to the

positive social and enviromental perspectives. There are two groups of stakeholders in the

business enviroment. The first group are the internal stakeholders consist of employee, owner and

manager of the coporation, the other group contains external factors of business enviroment that

are economic, political entities, demographic, and social association... Therefore, if the company

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just only focus on the profit economic target and neglect to preserve other commitment to the

benefit of these group they can not carry out sucessfully the content of ethics as well as

sustainable development in three dimensions of economic, social and enviromental element.

2.2. Codes of ethics in practice

Nowadays, the safety and well being of workers across the supply chain is the

Responsible Sourcing group’s top priority in market.  which is why Walmart suppliers or P&G,

uniliver are contractually required to sign our Standards for Suppliers before they’re approved to

produce merchandise for sale . These Standards for Suppliers make clear our fundamental

expectations for suppliers and factories regarding the treatment of workers and impact on the

environment. Suppliers are also required to display our Standards for Suppliers in the local

language in all factories where products are made for us, so workers know our expectations of

suppliers and factory management.

The Standards for Suppliers (“Standards”) are Walmart Stores, Inc.’s fundamental

expectations of its suppliers related to social and environmental conditions in all our markets. The

Standards are utilized to evaluate employment practices and environmental compliance in

facilities producing merchandise for sale by Walmart. Suppliers must also comply with

Walmart’s Gift and Gratuity and Conflicts of Interest policies and conduct their business in an

ethical manner that is consistent with accepted auditing principles. The Standards must be visibly

posted in English and in the local language(s) in a common area at all facilities that manufacture

products for Walmart and its affiliates.

All Suppliers and their manufacturing facilities, including all subcontracting and

packaging facilities, will be held to these standards. As a guide to help suppliers understand the

expectations and obligations of the Standards for Suppliers, Walmart has prepared the Standards

for Suppliers Manual (“Manual”)

Complian with laws Suppliers and their designated manufacturing facilities must fully

comply with all applicable national and/or local laws and regulations,

including, but not limited to, those related to labor, immigration,

health and safety, and the environment.

Voluntary Labor All labor must be voluntary. Slave, child, underage, forced, bonded, 6

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or indentured labor will not be tolerated. Suppliers shall not engage in

or support trafficking in human beings

Suppliers shall certify that they have implemented procedures to

manage the materials, including all labor-related processes,

incorporated into their products to ensure they comply with laws on

slavery and human trafficking. Workers must be allowed to maintain

control over their identity documents.

Labor Hours Suppliers must provide workers with rest days and must ensure that

working hours are consistent with the law and not excessive.

Hiring and

Employment Practices

Suppliers must implement hiring practices that accurately verify

workers’ age and legal right to work in the country prior to

employment. All terms and conditions of employment including, but

not limited to, hiring, pay, training, promotion, termination, and

retirement must be based on an individual’s ability and willingness to

do the job.

Compensation Suppliers must compensate all workers with wages, overtime

premiums, and benefits that meet or exceed legal standards or

collective agreements, whichever are higher.

Suppliers are encouraged to provide wages that meet local industry

standards. Suppliers are encouraged to provide wages and benefits

that are sufficient to meet workers’ basic needs and provide some

discretionary income for workers and their families

Freedom of

Association and

Collective Bargaining

Suppliers must respect the right of workers to choose whether to

lawfully and peacefully form or join trade unions of their choosing

and to bargain collectively.

Health and Safety Suppliers must provide workers with a safe and healthy work

environment. Suppliers must take proactive measures to prevent

workplace hazards.

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Dormitories and C Suppliers who provide residential and dining facilities for their

workers must provide safe, healthy and sanitary facilities.

Environment Suppliers should ensure that every manufacturing facility complies

with environmental laws, including all laws related to waste disposal,

air emissions, discharges, toxic substances and hazardous waste

disposal. Suppliers must validate that all input materials and

components were obtained from permissible harvests consistent with

international treaties and protocols in addition to local laws and

regulations.

Gifts and

Entertainment

Suppliers must not offer gifts or entertainment to Walmart associates

or those working on behalf of Walmart.

Conflicts of Interest Suppliers must not enter into transactions with Walmart associates

that create a conflict of interest.

Anti-Corruption Suppliers must not tolerate, permit, or engage in bribery, corruption,

or unethical practices whether in dealings with public officials or

individuals in the private sector.

Financial Integrity Suppliers must keep accurate records of all matters related to their

business with Walmart in accordance with standard accounting

practices such as Generally Accepted Accounting Principles (GAAP)

or International Financial Reporting Standards (IFRS).

Table 1: The 13-code of ethics in Walmart

(Source: Walmart Global Ethics, 2014)

3. CASE STUDY ANALYSIS

3.1. The Walmart effect

One of the challenges the huge retailer has faced is to have a positive impact upon

the communities it enters. Whether Walmart has acted ethically may be a matter of perspective.

Certainly, Walmart does much for the communities in which it operates, but it has also faced

criticism that its economic impact limits the ability of local businesses.

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3.1.1. Community satisfaction

It is hard pressed to find some- one who has not purchased from a Walmart store. The

other side of the argument is that Walmart does indeed help communities and give them

exactly what they desire – low price and convenience. It saves the customer time because he or

she can consolidate shopping needs. Why go to four or five different stores when you can get

everything you need at Walmart? Often, you will be able to purchase the same brand for less

money as well.

3.1.2. A helping hand

Walmart claims to contribute to the well-being of communities. Between January

1996, the year Walmart began posting pictures of missing children in the lobbies of Walmart

facilities, and January 2010, nearly 7,000 children have been featured on Wal-Mart bulletin

boards – 5,300 of whom have been recovered. It is clear that Walmart does much in the way of

scholarships and philanthropy in addition to offering convenience and low prices. Walmart’s

rhetoric centers on the three basic beliefs that Sam Walton established in 1962:

Respect for the Individual

Service to Our Customers

Strive for Excellence9

If you are in a Walmart store at the right time, you can hear raucous sounds from

the back of the store as the “associates” perform the Walmart cheer:

“Give me a W! Give

me an A! Give me an

L!

Give me a Squiggly! Give

me an M!

Give me an A! Give me

an R! Give me a T!

What’s that spell?

Walmart!

9 News.walmart.com, (2014). Wal-Mart Increasing Resources to Help Find Missing Children. [online] Available at: http://news.walmart.com/news-archive/2005/08/17/wal-mart-increasing-resources-to-help-find-missing-children [Accessed 30 Nov. 2014].

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Whose Walmart is it? My

Walmart!

Who’s number one?

The Customer! Always!”

Clearly Walmart has participated in helping to make communities better, but there

is another side to the story as well. Walmart has faced many obstacles over the years. It seems

that legal and social challenges have acted as important reasons for the development of its code

of conduct and annual reporting. This statement can be illustrated in two relevant cases:

3.1.3. Wal-Mart contracts with Chinese workers and treats them only as a means

That is, these workers are like slaves, or literally tools to get the work done; they are not

valued and respected as human beings with their own lives to live. They are basically being that

is, these workers are like slaves, or literally tools to get the work done; they are not valued forced

(with rewards and punishments)

to work 7 days a week and possibly to work overtime

WalMart classifies as “full-time” any employee who works a minimum of twenty-eight

hours per week. Moreover, WalMart makes no commitment to provide associates with a

guaranteed minimum hourly workweek. If a store’s profits decline, management may simply cut

associates’ hours, possibly resulting in the loss of benefits held by “full-time” employees. A

shorter workweek may partially explain why half of Walmart associates, including some full-

time, qualify for food stamps and even cash income assistance in states with higher social

insurance benefit levels

to lie to inspectors and auditors in order to keep their jobs, while the whole point of the

inspections and audits are to ensure that they have good working conditions, etc.

If we buy goods from Walmart, we’re taking part or essentially being an accessory to

slavery. Moreover, Walmart pays 18 cents for a product that they charge $14.96 for in America.

In addition, a Walmart supplier factory was reported by the National Labor Committee as

having employed minor employees as young as 12, worked them for excessive overtime hours at

less than the legal minimum wage there of 55 cents/hour Also, they worked 7 days/week and

worked with paint and chemicals without protective gear.

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Lastly, Walmart’s factories abroad have also abused children: In Bangladesh (2006), it

was estimated that 200-300 were discovered sewing pants for Walmart. They were routinely

beaten, forced to work overtime, cheated out of their wages, given phony time cards, and told to

lie about their age.10

Of course, if we do not buy these goods or boycott them, these Chinese workers might

lose their job, and where does that leave them? One can still, however, argue that they should be

treated with respect, and that Walmart should improve working conditions immediately.

Color

Year

Green Yellow Orange Red denled Red

disapproved

Red

unauthorize

d

Low risk Medium-

risk

Higher-risk Higher-risk Egregious Egregious

Reaudited

after two

years

Reaudited

after one

years

Reaudited

after 180

days

Reaudited

as soon as

possible

Barried

from

business

with

Walmart for

one year

Indefinitely

barred from

business

with

Walmart

2011 12.9 51.7 22.1 0.8 0.9 1.0

2012 7.3 56.17 24.01 1.25 1.12 0.37

2013 7.1 29.2 57 0.8 0.5 0.4

Table 2: Global audit result (%)(Source: http://corporate.walmart.com, 2013)

Wal-Mart uses a “traffic light” system to rate factories as Green, Yellow, Orange, Red,

or Disapproved, based on the number and type of violations. Clear information on

10 Makingchangeatwalmart.org, (2014). Making Change at Walmart » Walmart Watch Fact Sheets. [online] Available at: http://makingchangeatwalmart.org/factsheet/walmart-watch-fact-sheets/ [Accessed 30 Nov. 2014].

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qualifications for each system is not publicly disclosed, and this lack of transparency to

stakeholders is itself a serious issue. (see Table 1)

While Wal-Mart’s rating system provides auditors a starting point for monitoring

factories, it is a vague and subjective list and open to interpretation. There is no definition of

low, medium, and high risk. For example, auditors are able to decide the severity of work

hours violations and rate the factory accordingly (as Red for severe, and Orange or Yellow for

minor). Such vague descriptions of the rating system, as well as the changes in the system over

the past three years, make it difficult not only for stakeholders who want to be involved in this

process, but also for the factory owners and suppliers themselves to keep track of violations

classification

3.1.4. Walmart caught using child labor in Bangladesh

At the end of 2005, the Radio Canada program Zone Libre made public the news that

Walmart was using child labor at two factories in Bangladesh.89 Children aged 10-14 years old

were found to be working in the factories for less than $50 a month making products of the

Walmart brand for export to Canada.

Referring to Walmart’s policy at that time consisting of cutting ties with suppliers when

violations occurred, the NGO Maquila Solidarity Network11 said that ‘cutting and running is the

worst possible response to reports of child labor or other sweatshop abuses’. Critiques said that it

only discourages workers from telling the truth to factory auditors for fear of losing their jobs and

encourages suppliers to hide abuses or to subcontract work to other factories that will escape

inspection.12

Nevertheless, Walmart ceased business with the two factories immediately. Walmart

alleges that despite its effort to inspect all factories, it is difficult to enforce its own corporate

code of conduct with thousands of subcontractors around the world.

3.2. Assessment

11 Wikipedia, (2014). Maquila Solidarity Network. [online] Available at: http://en.wikipedia.org/wiki/Maquila_Solidarity_Network [Accessed 30 Nov. 2014].

12 Marketwire, (2014). Caught Using Child Labour, Wal-Mart Cannot Run Away From its Responsibilities, Say Anti-Sweatshop Groups. [online] Available at: http://www.marketwired.com/press-release/caught-using-child-labour-wal-mart-cannot-run-away-from-its-responsibilities-say-anti-570656.htm [Accessed 30 Nov. 2014].

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3.2.1. Squeezing prices

Low price has become the key point of Wal-Mart to compete with other retail

corporations. Evidence is in Wal-Mart’s supermarkets, prices are always about 15% lower than

the price of the same type or the same item sold in elsewhere. Thus in order to maintain this

strategy, squeezing prices is used drastically. With the position as a retail giant, Wal-Mart has

enough power to force suppliers to deliver their products with the cheapest prices. Firms who are

suppliers for Wal-Mart have only two choices: either accepts Wal-Mart's prices even though they

are only making a few cents profit on each product, or Wal-Mart will not order any more. If the

vendors intend to reinforce this criterion of Wal-Mart, these companies will be threatened to

cancel contracts and encounter for the very high possibility of bankrupt.

The suppliers are required to give their lowest prices if they want to sign in contract with

Wal-Mart. In this sense, Wal-Mart forces providers to compete against each other and choose the

one donating the lowest price. The "squeezing prices" of Wal-Mart is particularly effective with

foreign manufacturers, especially in developing countries producing cheap goods such as China,

India. Each year, Wal-Mart buys about $ 1.5 billion of goods from China - half of commodities

purchased directly and the rest purchased from intermediate manufacturers. That is why, Wal-

Mart always been criticized for "monopsony", squeezing suppliers until they went bankrupt.

3.2.2. Consequences

a. Offshoring and unemployment in home country

To survive with the cost reduction requires from Wal-Mart, many suppliers were forced to

lay off their employees and closed their firms in US to outsource products in outside. Of course

many American companies have offshored their production for decades before and Wal-Mart is

not the only firm making cost pressures on providers. But the chain of supply and demand from

Wal-Mart was in some degree accelerating the transfer of jobs from US to low-wage countries

like China.

LR Nelson - an irrigation equipment manufacture located in Peoria, Illinois State, US

since 1911 is one of Wal-Mart’s longtime suppliers. The company produces annually more than

1,000 types of different plants devices. On 5th May 2005, Nelson declared fired 80 full-time

workers and cut down the number of permanent employees to 120 people. Currently, although

Nelson has a large modern factory of 30,000 square meters near Peoria, the company no longer

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makes form of irrigation equipment devices anymore, except the high-technology production of

commercial irrigation.

Mr. Dave Eglinton –the president of LR Nelson explained for the last round of layoffs to

Peoria press: "Wal-Mart said they prefer to buy from us because many products are made in

America but as the disparity of price is too large, they said that if we cannot supply the goods

from China, they deny doing cooperating with us. "According to Mr. Eglinton, Wal-Mart and

Home Depot are "the two largest customers of us. Both began buying directly from other

factories located in China. If we do not fulfill their requirement, we will lose all of our business.”

b. Violating employment practices

Pursuing “low cost” strategy lead Wal-Mart to unethical behaviors with not only

employees of Wal-Mart’s suppliers but their own workers. “Wal-Mart expects its suppliers,

consultants, law firms, public relations firms, contractors and other service providers to act

ethically and in a manner consistent with this Statement of Ethics. If you hire a service provider,

you should take reasonable steps to make sure the service provider is aware of our Statement of

Ethics, has a reputation for integrity, and acts in a responsible manner consistent with our

standards.”13

Besides forcing LR Nelson into dismissing their workers to cut down cost in

manufacturing, Wal-Mart found itself at the center of a storm of protest when reports in July

2013 on Business insider website revealed Wal-Mart cooperates with factories in Bangladesh

who violate seriously employment practices. The report says that Wal-Mart in June 2013

“released a list of more than 200 factories it said it had barred from producing its merchandise

because of serious or repeated safety problems, labor violations or unauthorized subcontracting.”

13 Google Books, (2014). Wal-Mart World. [online] Available at: http://books.google.com.vn/books?id=Lt6Zr_C6FooC&pg=PA228&lpg=PA228&dq=walmart+forces+suppliers+to+lower+prices+consequent&source=bl&ots=3_8o1NhAwe&sig=Gy9k1KfTNqU-EUnvpcVFA6nXiJw&hl=en&sa=X&ei=3mNvVJrGBoWW8QW8xoHICg&ved=0CCEQ6AEwAQ#v=onepage&q&f=false [Accessed 30 Nov. 2014]. p/6.

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Image 5: Women work at a garment factory in Savar(Source: BusinessInsider, 2012)

Women work at a garment factory in Savar July 27, 2012 (see Image 5). Women work for

ten hours a day and earn about 3,000 taka ($37.5) per month. Bangladesh's $19 billion garments

industry attracts some of the world's biggest clothing brands because of low costs, but many

retailers say unrest over pay and delayed shipping schedules are eroding that advantage (picture

taken on July 27, 2012).14

But one month later, at least two of the factories on the list have continued to send

massive shipments of sports bras and girls' dresses to Wal-Mart stores in recent months,

according to interviews and U.S. customs records.

In June 2011, Walmart said, it banned the Bangladeshi garment factory Mars Apparels

from producing goods for the retail giant. But over the last year, Mars has repeatedly shipped

tons of sports bras to Walmart, according to U.S. customs records and Mars owners. The most

recent shipment in late May, almost two years after Wal-Mart claims it stopped doing business

with the Bangladesh firm. A second Bangladesh clothing maker, Simco Dresses, was blacklisted

in January but continued shipping Wal-Mart Canada in March.

International labor groups have been pressing retailers to sign an accord to pay for fire

and building safety upgrades to Bangladesh factories. So far, several large retailers including

H&M, Inditex and PVH Corp., which includes Tommy Hilfiger and Calvin Klein, have signed

onto the agreement. But many of the biggest retailers in the United States, including Walmart and

14 Factories, W. (2013). Walmart Accepted Clothing from Banned Bangladesh Factories. [online] Business Insider. Available at: http://www.businessinsider.com/walmart-clothing-from-banned-factories-2013-6 [Accessed 30 Nov. 2014].

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Gap, have not. Instead, they are working on an alternative plan that they say will improve safety

faster — but that is not legally binding.

Moreover, Wal-Mart workers are under strict working conditions with a poor wage.

Workers are paid 14.5% less than workers in the retail sector ", and “several recent studies

showed that Wal-Mart cut down both average wages and overtime wages of employees in

branches, reduced the rate of job insurance premiums and health insurance for workers.”

On 19th October 2014, Protesters who is working in Wal-Mart in New York carried the

slogan "The Walton is destroying America. What we want is respect, the respect today." The

workers marched to the Walton’s house for the purpose requested Wal-Mart pay them a

minimum wage is $ 15 per hour15.

Mrs. Cantare Davunt (see Image 6) earns only $10 per hour after 5 years working at Wal-

Mart stores in Minnesota. "The money is not enough to cover my life." She said. "The staff of

customer service even earns less than I did."16

Image 6: Wal-mart stole my American dream(Source: Vietq.vn, 2014)

c. Sweeps and takeovers

Wal-Mart has been accused of using monopoly power to force its suppliers into self-

defeating practices. For example, Barry C. Lynn, a senior fellow at the New America Foundation

says that Wal-Mart's constant demand for lower prices caused Kraft Foods to "shut down thirty-

nine plants, fire 13,500 workers and eliminate a quarter of its products”. Kraft was unable to

15 Google Books, (2014). Wal-Mart World. [online] Available at: http://books.google.com.vn/books?id=Lt6Zr_C6FooC&pg=PA228&lpg=PA228&dq=walmart+forces+suppliers+to+lower+prices+consequent&source=bl&ots=3_8o1NhAwe&sig=Gy9k1KfTNqU-EUnvpcVFA6nXiJw&hl=en&sa=X&ei=3mNvVJrGBoWW8QW8xoHICg&ved=0CCEQ6AEwAQ#v=onepage&q&f=false [Accessed 30 Nov. 2014].16 Vietq.vn, (2014). Nhân viên Walmart biểu tình yêu cầu tăng lương. [online] Available at: http://vietq.vn/nhan-vien-walmart-bieu-tinh-yeu-cau-tang-luong-d43580.html [Accessed 30 Nov. 2014].

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compete with other suppliers as the cost of production had gone up due to higher energy and raw

material costs. Lynn says that in a free market, Kraft could have passed those costs on to its

distributors and ultimately consumers.17

That lowering cost to maximum level to eliminate other competitors of Wal-Mart

contributes to unfair competition market. Sears and Kmart –a multinational corporation and a

chain of discount department stores headquartered in Hoffman Estates, Illinois, US perished

because of Wal-Mart’s competition. The merger of the two corporations is only a desperate

connection to survive in front of the devastating power of Wal-Mart. However, Sears and Kmart

now only equal to the size of Wal-Mart in 1993 - one fifth the size of the current Wal-Mart. Toys

"R" Us - the company invented the style shop "exclusive control" (category killer) in 1950 and

completely transformed the way of trading toys in the US - also in the race with Wal-Mart. Since

1998, Wal-Mart in the US has sold more toys than Toys "R" Us did. Winn-Dixie - grocery store

chain worth $ 11 billion was forced to bankruptcy in 2005 because they were incapable to

compete with Wal-Mart. The company had to close one-third of its 920 stores and fired 22,000

employees. In the same decade, Wal-Mart gradually prevailed in the food business in the US that

leads to the bankruptcies of 21 supermarket chains.18

d. Low cost and irreparable damages

The Wal mart consumption has leaded to the huge increase in salmon farming industry in

Chile which is the main contribution to the environmental pollution here. Tens of thousands of

farmed salmon confined to net pens produce a huge amount of waste: chemical, biological,

organic, and inorganic. For more than 25 years, researchers around the world have recognized the

harm from salmon farm waste and its long-term impacts on water quality, fisheries resources, and

sea-bed ecology.

Salmon net pens discharge untreated sewage, including contaminated feed laced with

chemicals, toxic residues, nitrogen, phosphorus, and copper and zinc—not to mention diseases

and parasites—directly into coastal waters throughout the world. In addition, tons of

contaminated salmon, together with processing wastes—bones, entrails, and even the carcasses of

17 Lynn, Barry C. (July 2006). "Breaking the Chain: The antitrust case against Walmart". Harper's Magazine. Retrieved on September 5, 2006.18 Anon, (2014). [online] Available at: http://mvopat.people.ysu.edu/courses/business_ethics/business_ethics_readings/Wal-Mart_Effect-Fishman.pdf [Accessed 30 Nov. 2014].

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seals, sea lions, and other predators—are dumped in landfills or processed for fertilizer or animal

feed.19

Sewer Systems in the Sea

Experts have calculated that factory salmon farms, each extending over several acres of

coastal water, discharge extremely high concentrations of untreated sewage. In 2000 and 2001,

nutrient discharges from aquaculture in the Northeast Atlantic, including Scot-land, Denmark,

Norway, and Ireland, were estimated at almost 40,000 tons of nitrogen and 6,600 tons of

phosphorus.20

Pollution from Nutrients

Sewage and other wastes from salmon farming causes far-reaching environmental harm

by contaminating the sea-bed and its shellfish species, contributing to the antibiotic resistance of

shellfish and wild fish, and causing eutrophication that triggers toxic algal blooms.

The accumulation of sewage on the seafloor under and around salmon farms directly

harms marine biodiversity. Scientists in Scotland, Norway, Ireland, and Canada have all shown

that some of these effects may last several years and extend for several hundred meters away

from salmon farm. Divers have also found biological “dead zones” under salmon farms—areas

on the sea-bed devoid of marine life. This problem is so prevalent that every few years salmon

farmers relocate their net pens to prevent the sea-bed from completely dying. As a result, salmon

farms are gradually moving further offshore and contaminating a larger area of once healthy

water.21

Pollution from Chemicals

Salmon farm sewage often contains chemicals and contaminants that easily enter the food

chain and accumulate as they move up it, ultimately reaching humans. Among these chemicals

are copper, zinc, tributyltin, a fungicide, oxytetracycline and oxolinic acid, both antibiotics,

polychlorinated biphenyls (PCBs).

19 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].20 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].21 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].

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The abuse of antibiotics by large salmon farming operations has not only led to chemical

resistance in wild fish species but also raised health concerns for humans whose diets already

include milk, eggs, and meat products containing unknown amounts of similar drugs.22

4. RECOMMENDATIONS

4.1. Wal-Mart should change their business strategy

Wal-Mart itself needs to change its orientation of development to suit with business ethics

principles. Wal-Mart should get a business model that will stop harming communities and

employees, because it would be worth the higher prices. Wal-Mart's business model is strictly

about charging less. But when it charges less, someone has to pay. Usually, the local employees

pay, as they have to work for less money and no benefits, while watching local businesses close

because they can't compete. In addition, suppliers suffered, as they have to offshore and save

money in every possible way to meet Wal-Mart's prices. And foreign communities, as their

people work for slave prices in unsafe factories to meet the Wal-Mart demands.

An alternative strategy to Wal-Mart is to adopt friendlier cooperation by changing the

way they treat their employees, suppliers and the communities. By that, they might obtain the

sustainable development and morality.

Firstly, Wal-Mart needs to stop squeezing their suppliers. They should create more

opportunities for their partners to get profits. If Wal-Mart attempt to do that, it might make a huge

influence on the market. That will create more competiveness in the game and help decrease the

rate of unemployment because of offshoring process. Even though, this action could lower the

profits of Wal-Mart, it will definitely improve the value of Wal-Mart in the market as a role of

fair trader. Emphasizing the part of local supplies could be an invaluable move of Wal-Mart,

reduce either offshoring or outsourcing will make more chance for suppliers and labor in

America. It also indirectly improves the serious sweatshop problem in other countries.

4.2. Wal-Mart as a multinational enterprise (MNEs)

Wal-Mart as an employer need to take their responsibilities for their employees. They

need to enforce their Code of conduct, provide a dispute resolution system, provide restitution to

Wal-Mart sweatshop workers, commit to sourcing from Union shops and worker co-ops

22 Puresalmon.org, (2014). Pure Salmon Campaign - Raising the Standards for Farm-Raised Fish. [online] Available at: http://www.puresalmon.org/waste.html [Accessed 30 Nov. 2014].

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Worldwide, and pay a living wage. To oblige that, Wal-Mart as MNEs must follow international

guidelines and laws in their host countries about:

Employment Practices and Policies: respect the right of employees to join trade unions

and to bargain collectively; develop nondiscriminatory employment policies and promote equal

job opportunities; provide equal pay for equal work, provide favorable work conditions; limited

working hours; respect local host-country job standards and upgrade the local labor force through

training; adequate health and safety standards for employees; pay basic living wages to

employees; balance job opportunities, work conditions, job training, and living conditions among

migrant workers and host-country nationals.

Consumer Protection: respect host-country laws and policies regarding the protection of

consumers; safeguard the health and safety of consumers by various disclosures, safe packaging,

proper labeling, and accurate advertising.

Environmental Protection: respect host-country laws, goals, and priorities concerning

protection of the environment, preserve ecological balance, protect the environment, adopt

preventive measures to avoid environmental harm, and rehabilitate environments damaged by

operations; disclose likely environmental harms and minimize the risks of accidents that could

cause environ- mental damage; promote the development of international environmental

standards; control specific operations that contribute to the pollution of air, water, and soils;

develop and use technology that can monitor, protect, and enhance the environment.

Political Payments and Involvement: not taking, giving, or being involved in any way

with bribes and illegal payments and related politics with host country representatives.

Basic Human Rights and Fundamental Freedoms: respect the rights of all persons to life,

liberty, security of person, and privacy, equal protection of the law, to work, to choice of job, to

just and favorable work conditions, and to protection against unemployment and discrimination;

respect each person’s freedom of thought, conscience, religion, opinion and expression,

communication, peaceful assembly and association, and movement and residence within each

state.23

23 This guidelines is originated from: the 1948 UN Universal Declaration of Human Rights, the 1975 Helsinki Final Act, the 1976

OECD Guidelines for Multinational Enterprises, the 1977 ILO Tripartite Declaration of Principles Concerning Multinational

Enterprises and Social Policy, and the 1972 UN Code of Conduct on Transnational Corporations. (Excerpt From: "Business

Ethics: A Stakeholder and Issues Management Approach" by Joseph W. Weiss)20

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4.3. The role of law and regulatory agencies

One thing we have to admit, Wal-Mart may not be that easy to change its business model.

For that situation, government regulations play an important role to balance the interests of

corporation, consumers, suppliers, and other groups.

About situation of Wal-Mart about being monopsony and setting price predation to push

other companies out of competition, there are some laws and regulations of America that

restrict those action.

Sherman Antitrust Act, 1890: Prohibits monopolies.

Clayton Act, 1914: Prohibits price discrimination, exclusivity, activities restricting

competition.

Federal Trade Commission (FTC) Act, 1914: Enforces antitrust laws and activities.

Consumer Good Pricing Act, 1975: Prohibits price agreements in interstate commerce

between manufacturers and resellers.

Antitrust Improvements Act, 1976: Supports existing antitrust laws and empowers

Department of Justice investigative authority.

Trademark Counterfeiting Act, 1980: Gives penalties for persons violating counterfeit

laws and regulations.

Nonetheless, lack of evidence and existent limitation of laws and regulations is a serious

concern that lead to Wal-Mart violation haven’t been punished as it is deserved. Therefore, the

improvement in legislation systems will change the way Wal-Mart run business properly.

Government needs to set up more policies to subsidize supplier who are the victims of Wal-

Mart’s squeezing prices strategy such as creating favorable treats to help them recover and setting

lower taxes. Authorities should restrict legislation about monopoly and set higher penalties for

violation. For example, government ought to impose higher taxes to Wal-Mart to compensate the

welfare for unemployment.

4.4. Victims and communities: what should they do?

Suppliers or other firms that are bullied could not be against Walmart individually in the

competition. For that being said, founding groups or association will help gathering all the firms

together and make power voice to protest the aggressive violation of Walmart. By being together,

firms will win their rights back and obtain higher profits.

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The social community should demand large corporation as Walmart to contribute its well-

being. Developing outreach activities that enhance community well-being connects the

organization with its geographical location and the life of its employees outside of work.

Companies can give nonprofit and community organizations money, products or services, and

skills, and provide job opportunities for nontraditional employee populations. A systematic

giving program would integrate all four areas.

Money can be directly donated to community organizations or linked to the sales of

particular products. Products or services can be given to community organizations for use

by its employees and clients, or to leverage as fundraising auction items. Companies can

provide employees with paid time to volunteer their services for community

organizations, or offer employees community service sabbaticals. Companies can serve

the community by offering job opportunities to nontraditional employees, such as people

with disabilities or ex-convicts.

Managers can reactively give to community organizations on a first-come first-serve

basis, outsource giving to the United Way and other mediating organizations, or

proactively given by developing a few key strategic partnerships with nonprofit

organizations aligned with the company’s mission. Cause-related marketing and

organizational sponsorships help build brand loyalty. Businesses should pursue an

integrative approach that involves all three types of recipients.

An ideal strategic partnership is one where both the company and the community

organization benefit from the arrangement. Determine which community organization

benefits the most from the company’s products, services, and employee skill set, and also

has a similar customer, labor, and supplier profile. This provides the foundation for a win-

win opportunity, one that benefits both the community organization and the company.

Strategic partnership objectives must be transparent, fair, and realistic, and

communication between the partners must be two-way.

Employees should be involved in the company’s outreach decision-making process. The

community involvement process should be carefully monitored, and the outcomes

measured, assessed, and shared with the community.

In addition, the media also plays an important role in revealing the truth behind

sweatshops and reclaim the right back to the victims. All the violations of Walmart we know are

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all from the media. It is a global communications network that can provide information

accurately. Therefore, utilizing the function of newspaper and broadcasting to protest Walmart’s

action is truly effective by making pressure and criticizing to change Walmart’s methods.

The public as consumers is the most powerful party in the situation. Once they leave

Walmart, the company could not be powerful anymore. They can be against Walmart by

boycotting goods that violating business ethics, accepting higher price to promote competitive

market, being aware of some pricing discrimination tricks that Walmart make. Consumer is the

demand side of a company, once Walmart lose that, it will not be in the competition and end up

kicking out of the market.

4.5. Ethnic leadership, Work goals, and Performance appraisals

The most important ethics reference point is an employee’s direct supervisor or manager.

How a manager acts in response to an ethical issue has more influence on employee ethics than

any stated policy or words of encouragement. Managers have already been promoted, so their

daily workplace actions indicate to subordinates what it takes to be promoted.

Employees want their managers to be honest, credible, respectful, and fair. When

managers exhibit these admirable characteristics, employees do likewise. If managers behave

unethically, their subordinates are tempted to do likewise as well. It is difficult for subordinates to

take orders from, and support, someone they consider dishonest, untrustworthy, or unethical.

Managers are also responsible for developing work goals and performance appraisals,

both of which impact ethical performance. Hypocrisy and moral confusion develops when

unethical behaviors are ignored, encouraged, or rewarded.

Work goals should be specific, measurable, aligned, time-bound, and challenging, yet

attainable. The individual work goals are jointly determined by the manager and employee, and

aligned with departmental and organizational goals. Avoid stretch goals that may tempt

employees to stretch the truth.

Performance appraisals should document employee accomplishments and benchmark the

distance an employee still needs to travel to become an ideal employee. Measure whether the

employee lives up to the Code of Ethics, embodies the attitudes and behaviors of an ideal

employee, and constructively contributes to ethics-based initiatives. Use 360-degree performance

appraisals to develop a holistic perspective of the employee, and to let all employees know that

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their opinions do matter. Moreover, document any allegations of unethical behaviors and provide

the employee an opportunity to clarify the situation. Punishments must reflect the magnitude of

the violations.

4.6. Empower ethical employees

An ethical organization is a community of people where every employee is treated with

dignity and has a sense of organizational ownership and accountability. A complementary set of

management systems reinforces a sense of community within the organization and with external

stakeholders.

Managers should create a fully empowered workforce where employees effectively

participate on decision-making teams, develop plans for superior customer service and

continuous improvement, and share in the financial benefits generated by their efforts.

Develop effective teams based on trust. Trust is the foundation for constructive conflict,

goal commitment, personal accountability, and achieving collective goals. Train teams to

collectively solve problems and give them the authority to, within reason, make changes as

needed. Use Appreciative Inquiry techniques to design and implement systems for achieving

superior customer satisfaction, and Scanlon-type gain sharing plans and Open Book Management

to provide employees the information and decision-making authority necessary to improve

organizational operations. Conclude each day with team-based reflections. Each team member

should praise a major accomplishment, share a work-related problem, and brainstorm problem

solutions to implement the following day.

Team-based participatory management, where employees provide meaningful input in the

organization’s decision-making process, and share the financial gains associated with improved

performance, creates a sense of ownership, communal experience, and accountability among

employees.

Last but not least, employees themselves need to be awareness of their value and the

danger of working environment. They can unite against the unfairness at work under labor

unions. Going on a strike could be the next step. It will draw attention of public and

communications network to appeal the help from outside.

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