The Woes of Walmart – America’s Retail Giant

Abstract

The retail giant Walmart has been making great strides in the last fifty years. However, with recent happenings, there are several issues that are hurting the corporation. Constant employee strikes and walkouts combined with the company’s reputation for harming quality within the marketplace itself are damaging Walmart’s credibility. It is imperative that Walmart address these issues as soon as possible and that it make changes to its operations, including increasing wages and improving working conditions for employees. Along with this, Walmart needs to recreate its image as a socially conscious company with a culture of respect for employees and reconsider its strategy in always selling the lowest priced products. To accomplish this, charismatic leadership will be crucial, along with the implementation of Kotter’s eight step change model.

Introduction

As one of the most successful retail chains in the world, Walmart has become one of the most dominant companies in America in the past fifty years. From its conception in 1962, founder Sam Walton took a gamble on a completely new approach to retail sales. In contrast to other retailers that would overcharge for their products, Walton decided to charge the lowest price possible. He theorized that instead of turning a profit through higher prices, he could instead make profit through quantity of sales. By always offering the lowest prices on the market, he would engender customer loyalty more easily would not need to utilize other gimmicks such as 50 percent discount sales (AP, 2012). In other words, the lower prices would be counter-balanced through the higher number of sales and size of the sales themselves.

This strategy would catapult Walton’s small Arkansas store to over 11,000 outlets worldwide by 2014. It also continued expanding what merchandise it offered, from clothing to groceries to electronics. By 1990, Walmart combined its different departments into Supercenters, where customers could conveniently purchase almost anything in one visit. The vastness of Walmart along with its principle of low prices raked in profits of $3.7 billion in the fiscal third quarter of 2013 (Shell, 2013). Under Walton’s leadership, Walmart was able to develop into the superpower that it is today. Unfortunately, with Walton’s death in 1992, the face of Walmart and its identity within the U.S. market drastically changed.

Although Walmart offered low wages to employees with few benefits, many were not initially troubled by this and continued to apply and become employees. Under the company’s new leadership, however, working conditions have become progressively worse throughout the years. Employees have increasingly begun to organize themselves and boycott their employers in protest of being overworked, paid poorly and forced to endure terrible working conditions. However, employees that have attempted or gone on strike have suffered severe repercussions from Walmart. In fact, the National Labor Relations Board (NLRB) has pressed charges against Walmart for violating the National Relations Labor Act of 1935. This law guarantees employees the right to go on strike. The NLRB alleges that Walmart not only threatened employees for the walk-outs but has fired sixty employees in fourteen different states (Burke, 2014).

In addition to infringing on its employees rights, Walmart has also been recently scrutinized for its effect on the marketplace itself. In a research paper conducted by multiple universities in the country, researchers concluded that when low-service retailers such as Walmart become dominant in the marketplace, they cause lower quality products themselves to become dominant in the marketplace. Since other retailers cannot compete with low-service retailers, manufacturers will thus tailor their products to the specifications of those low-service retailer. This means that even products that are not sold within Walmart are still of lower quality because of the overall competitiveness in the marketplace (Duke, 2013). In essence, Walmart is worsening the quality of life for millions of people throughout the world.

With the economic recession, no business is immune from suffering. Walmart is no exception. However, if Walmart’s leadership were to put in practice several structural changes to their business, there is a very good chance that the company could minimize such struggles. Note that Walmart has customer loyalty, millions of employees, billions of dollars in investments and profits, and thousands of locations worldwide. The problem is therefore internal, not external. It is only fitting that any solutions be implemented from within. A number of structural changes that Walmart can apply, especially to the problems mentioned beforehand, include instituting more charismatic leadership, negotiating with employee needs and wants, creating a campaign within Walmart to commit to better business practices, fostering a warmer culture for employees and customers, and reconsidering low prices as a permanent strategy for all sales.

The Importance of Good Leadership

It can be said that although Sam Walton was very frugal in his business and personal life, he was nonetheless a very intelligent and charismatic leader. As discussed in the initial paragraphs, Walton had a vision for Walmart that would quite literally revolutionize retail. In addition to this, he was always on the lookout for new opportunities to expand Walmart. Likewise, he also had a genuine interest in the well-being of his subordinates and loyal customers. It was very common for employees to be surprised from time to time with a visit from the CEO to their store (Frank, 2006). With these gestures, Walton was able to connect and establish loyalty with his employees. Walton also inspired his employees to do their best as he conveyed that Walmart was dedicated to helping customers save money. Walmart was much more than a store, it was an opportunity for better living.

In contrast, the current CEO of Walmart, Doug McMillon, does not evoke a sense of appreciation from his employees. Many may not even know of him, much less ever expect to meet him in person. It is also no surprise that the successors of Walton have become much harsher and drier in their business practices (Frank, 2006). With decreasing profits and sales and increasing negative publicity, Walmart is in desperate need of a strong-willed and charismatic leader. Walmart has proven to be extremely pertinent to the average consumer. The question is not whether or not there is a need for Walmart: it is obvious that there is. However, it is crucial that the current leadership realize the extent that their poor choices are affecting the company and consumers.

If, in fact, charismatic leadership were to be used within Walmart, it would be easier for the company to be transformed in other ways. Employees are already working to improve their work environment as much as possible. If the needs of the arms and feet of the business are not met, Walmart will not be able to succeed as a business. At some point, the low wages and poor working conditions of employees will need to be addressed. When individuals feel that they have little to lose (or nothing to lose), it is not all that difficult for them to take desperate actions in order to survive.

Remaking the Public Image

If Walmart is as opposed to unionization as it has been in the past, it will be crucial that workers’ rights be brought forth by the company itself (Burke, 2014). Their employees feel that their needs are not being met and are no longer tolerating what they are being denied. Whether Walmart increases wages, provides medical or unemployment benefits or whatnot, it will need to establish some sort of new way of treating and valuing its employees.

In an effort to maximize its investment in its employees, Walmart would probably benefit from a campaign to renovate its image. With better incentives for employees, there will quickly be an outpouring of publicity from such drastic changes. It is important for Walmart to maximize this influx of positive recognition. Commercials, press releases, new partnerships and other endeavors are all good ways to keep the company’s reputation in good terms with the public.

Along with these changes, Walmart will also need to renovate its image from within. This can be done by fostering a culture of teamwork, leadership, and people-centeredness inside the company. Such a commitment will help solidify the company’s well-being both in the short-term and the long-term. Although there will be two initiatives to improve the image of Walmart from inside and outside, these efforts have to be synchronized as one. The methodology may differ, but the goal is the same. Without the other, the effort will fail.

Raising the Quality of Merchandise

Along with a campaign to improve its image, Walmart should address how it affects the general marketplace. Of course, Walmart executives may or may not be concerned with how their size and growth is affecting the quality of retail in the market, but they themselves are undoubtedly affected by it. That is to say that if all retailers are now selling low-quality merchandise, those retailers will need to apply different tactics to compete with one another. Walmart already sells its merchandise at very low prices, and if it continues to lower those prices and cut employees’ salaries, it will contribute to a downward spiral of disaster.

From a different angle, Walmart may be losing by simply offering low-quality products. For example, there is a growing interest amongst consumers in eating healthier foods, a movement that is gaining momentum every day. Farmer’s markets and small local markets are beginning to establish themselves as rivals to retail stores. Walmart is not known for being a vendor of high quality produce. If Walmart hopes to continue selling produce, it will need to somehow revamp its image of selling low-quality products and merchandise. This can be an important feature to include in its campaign to improve its image.

Now, it may seem that such changes would be unrealistic, maybe even impossible, but it is important to remember that Sam Walton invested in multiple aspects of Walmart to ensure its prosperity. For example, in the eighties and nineties when Walmart was being criticized for its lack of women in leadership, Walton brought on board the then-First Lady of Arkansas, Hillary Clinton, as a consultant. Walton was also criticized for outsourcing jobs to other countries. In response, he started a campaign in which he promised to purchase only from American suppliers if they were fairly competitive in price to foreign suppliers (Frank, 2006).

A New Model of Leadership

Walmart’s previous leadership implemented various structural changes as they saw fit. It is only reasonable that current leadership follow suit. One such model that can be used to assist them is Kotter’s eight-step model for change. The eight steps call leaders to create urgency, form a powerful coalition, create a vision for change, communicate the vision, remove obstacles, create short-term wins, build on the change and anchor the changes in corporate life.

Excellent leadership will be very important in leading Walmart to transition in beginning to create urgency. Employees that have gone on strike the last couple of years have already started to create a sense of urgency within Walmart. Now it is important that leadership also create a sense of urgency from the top to the bottom. Ultimately, it will be those in power that decide the fate of the employees and the business itself. It is necessary that leaders within Walmart inform and demonstrate to the entire company why it is so important that the business adapt to its growing needs and changes.

Hopefully, if the individuals at the top of Walmart are able to create urgency, they will inspire individuals to become involved in improving the company. It will require that many people form a coalition to enact these changes. If people are excited and willing to be involved in transforming Walmart then it will be up to the leaders (and the followers) to create a cohesive and pragmatic vision for the future. That means that they need to construct a specific idea of what Walmart ought to become during its transformation. It will be very difficult for anyone to stay committed and engaged in helping to improve Walmart if there is no goal in mind.

Even though a vision is very important in accomplishing a goal, it is useless if not everyone has access to it or understands it. Walmart’s vision must be shared with everyone from top executives to humble employees in every store. Everyone must understand in what direction Walmart is heading to be able to work towards that very goal.

Conclusion and Recapitulation

As Walmart’s leadership and employees implement these changes, it will not take very long for obstacles to become a menace to progress. Removing these obstacles before they become too big is a smart move. There is no need to let the difficult journey of transition be any more challenging. Removing obstacles will also be easier if creating and sharing a vision is done properly. When looking to the future, one can predict what difficulties may become burdensome. In this case, there may be financial losses, there may be an unwavering belief that change just can’t happen within Walmart, or that a transformation will stagger profits. That is why as mentioned before, having a strong leader is extremely important. If the coalition has faith and trust in what the leaders have set out for the organization, they will continue to pursue the goal despite all the obstacles in their path.

Furthermore, it is important that there be alternative plans should worst case scenarios become a reality. Are there other investments that Walmart can make to ensure steady profits during this phase of transition? Is there any way that outreach efforts can make headway with employees that are striking against Walmart before such drastic changes are necessary? What are other resources that Walmart can utilize to help itself during this transitory period? All of these questions and many other need to be considered and answered in the early stages of this process. Planning and patience will ensure that this process unfolds as easily as possible.

As everyone is hard at work fulfilling their role in the plan to change Walmart, it is important to celebrate short-term wins. The spirits of all of those involved will need to be revitalized from time to time. If this does not happen, any change that happens will die. And as people celebrate small successes, building on these changes can also occur. If projects succeed, it will be beneficial to test those changes by repeating them. If new ideas, strategies or new solutions are found to be effective, they need to be considered. Trying as many things as reasonably possible will help expedite change.

Finally, to perpetuate the benefits from all this work, these changes must be anchored in Walmart’s corporate culture. No matter what great campaigns Walmart’s finance to improve its image, how much they increase salaries, or how conscious they become of their mpact in the marketplace, if Walmart does not commit itself to permanent change, all of this will be futile. If such changes have proven to be beneficial to Walmart, there is no reason not to make them core attributes of its operations. It will guarantee that all these changes stay in place and that history does not repeat itself.

References

Collins, J. C. (2009). How the Mighty Fall: And Why Some Companies Never Give In. New York: Jim Collins.

Duke, A., Geylani, T., & Liu, Y. (2013, J). Dominant retailers’ incentives for product quality in asymmetric distribution channels. Springer Science Business Media, 25: pp. 93-107. doi:  10.1007/s11002-013- 9245-2

Fishman, C. (2007). The Walmart Effect: How the World’s Most Powerful Company Really Works – And How it’s Transforming the American Economy. New York, NY: Penguin Books.

Frank, T. A. (2006, April). A brief history of Walmart. Washington Monthly.

Lindsey, B. (2004, October 7). Is Wal-Mart Good for America? Cato Institute.

Shell, A. (2013, November 04). Walmart profit beats estimates, outlook weak. USA Today.

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