business ethics individual assignment case 3 walmart manages ethics and compliance challanges

NATIONAL ECONOMICS UNIVERSITY

SCHOOL OF ADVANCED EDUCATION PROGRAMS

Ne! BUSINESS ETHICS INDIVIDUAL ASSIGNMENT

ABSTRACT

Walmart is one of the world's largest retailers, with a presence in 27 countries and over 11,000 stores worldwide The company's origins date back to 1962, when Sam Walton opened the first Walmart store in Rogers, Arkansas Since then, Walmart has grown into a retail giant, with a diverse range of retail formats, including supercenters, discount stores, and e-commerce platforms

One of Walmart's key strengths is its commitment to providing value to customers The company is known for its low prices, which it achieves through a combination of factors, including economies of scale, efficient supply chain management, and a focus on cost-cutting Walmart's pricing strategy has helped it attract a broad customer base, including budget-conscious shoppers and those looking for convenience and variety

However, Walmart has also faced criticism over a range of issues, including labor practices, environmental impact, and supply chain transparency The company has been accused of paying low wages to its employees, offering limited benefits, and engaging in anti-union tactics Walmart has responded to these criticisms by implementing various initiatives, such as raising its minimum wage and investing in employee training and development

Walmart's size and influence make it an important player in the retail industry and a subject of ongoing scrutiny and debate While the company has faced criticism over various issues, it has also taken steps to address these concerns and improve its practices As Walmart continues to adapt to changing consumer preferences and technological advancements, its role in shaping the future of retail will remain significant

The case 3, Walmart Manages Ethics and Compliance Challenges, will discusses the company’s various relationships with stakeholders, including competitors, suppliers, and employees The ethical issues concerning these stakeholders include accusations of discrimination, leadership misconduct, bribery, and safety The case study also discuss how Walmart deals with these concerns, as well as recent endeavors in sustainability and social responsibility

Table of Contents

ABSTRACT 1 1 WALMART INTRODUCTION 3 1.1 History of Walmart: 3 1.2 What Does Wal-Mart Do? 3 1.3 Walmart’s Strengths: 4 1.4 Walmart’s Weaknesses: 4 2 QUESTIONS AND ANSWERS 5 2.1 Do you think Walmart is doing enough to become more sustainable ? 5 2.1.1 Sustainability efforts at Walrmarf 5+5 <5 << se 1k, 5 2.1.2 Criticism of Wal-Mart's sustainability efforts eee 6 2.2 What are the cthical issucs Walmart has face€dl? o< «<5 s<<<s+2 7 VI Đ | vin ion 7 J2 o9 io na ae.- 8 V2 CN sh(0(00)00 cìri 099i na e 9 2.2.4 Bribery ScandaÌL - +- se x4 1S 113111 11H HH He 9 2.3 How Walmart Is Addressing Concerns Regarding Misconduct? 10 2.3.1 Introduction of New Policies and Procedures -<<<<<<<s2 11 2.3.2 Increased Training and Education - +5 se Sky 11 2.3.3 Improved Transparency and ReporfIng - +s<<s++csssees 12 3 CONCLUSION 13 REFERENCES 15

1 WALMART INTRODUCTION

Wal-Mart was launched in 1962 by retailer Sam Walton, who then owned asmall franchised variety store The company was based on a simple vision; pass onthe savings from buying in bulk on to the customer and earn profits throughvolume This was in sharp contrast to other retailers, who did not change theirretail prices when a discount was given by suppliers By controlling payroll costs,fighting unions and hiring as little people as possible, Wal-Mart kept growingsteadily Technology also played a big role; in 1970, the company began usingcomputers to link stores with warehouses, achieving greater efficiency throughreducing inventories After the death of Sam Walton, the perception of Wal-Mart became increasingly negative Basing their strategy on Mr Walton’s; the new directors became increasingly obsessed by lowering costs, but they forgot to givethe employees a feeling of having a stake in the company Press reports increasedin negativity and in 2004, a report by McKinsey and Co found that 8 percent of Wal-Marts former customers did no longer shop there because of the bad reports.In order to turn this around, Wal-Mart has to work out its identity crisis in order to become a model for the industry (Frank, 2006)

1.1 History of Walmart:

The history of Walmart, an American discountdepartment store chain, began in 1950 when businessman Sam Walton purchased a store from Luther E.Harrison in Bentonville, Arkansas, and opened Walton's 5 And 10 The Walmartchain proper was founded in 1962 with a single store in Rogers, expanding outsideArkansas by 1968 and throughout the rest of theSouthern United States by the1980's, ultimately operating a store in every state of the United States, plus its firststores in Canada, by 1995 The expansion was largely fueled by new storeconstruction, although the chains Mohr- Value andKuhn's Big K_ were alsoacquired The company introduced its warehouse club chainSam's Club in 1983and its first Supercenter stores in 1988 By the second decade of the 21st century,the chain had grown to over 11,000 stores in 28 countries

1.2 What Does Wal-Mart Do?

Walmart Stores, Inc (WalMart) is a global brick and mortar - as well asonline Retail Company It operates in three segments; the WalMart US segment.Secondly, the WalMart International segment, with stores in 26 countries, and finally the Sam’s Club segment In 2011; the US segment accounted for 60% of netsales while WalMart International accounted for 28% Wal-Mart has wholly ownedsubsidiaries in China, Brazil, Canada, Japan, the United Kingdom, Mexico and Argentina The company operates in six merchandise units; grocery, entertainment, health & wellness and apparel

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& home, across a wide variety of stores including supercenters, discount stores and neighborhood centers or smaller venues (Reuters ,2012)

1.3 Walmart’s Strengths:

In this part of the SWOT analysis, Walmart’s strengths are all related to the size of its business These competitive strengths enable the company to withstandthreats despite its weaknesses as a low-cost retailer For exploiting global expansion

opportunities, Walmart’s strengths for further global growth are:

- Global organizational size - Global supply chain

- High efficiency of supply chain

Walmart’s global organizational size gives the business deep pockets to fund growth and expansion The global supply chain also provides business resiliencefrom market-specific risks, such as disruptions in local supply chains In addition, Walmart’s supply chain has high efficiency because of advanced technologies formonitoring and controlling the movement of products from suppliers to its stores.In this SWOT analysis, such organizational and business strengths providecompetitive advantage, especially against smaller retailers

1.4 Walmart’s Weaknesses:

Walmart’s weaknesses impose challenges on the firm’s ability to withstand the threats also identified in this SWOT analysis These weaknesses are directly related to the company’s generic strategy and itsimplications in businessdevelopment, capabilities, resources, and profit margins Walmart uses the costleadership generic strategy, which leads to the following weaknesses:

- Thin profit margins - Easily copied business model

- Competitive disadvantage against high-end specialty sellers

Thin profit margins are a typical effect of using the cost leadership strategy.Because Walmart minimizes selling prices, it also needs to minimize profitmargins and rely more on sales volume The cost leadership strategy also makes Walmart's business model easy to copy The firm does not have significant competitive differentiators, except for its business size and prices Furthermore, high-end specialty retailers have the upper hand in attracting quality-seeking buyers who have low sensitivity to price Thus, the weaknesses presented in this SWOT analysis of Walmart reflect business vulnerability

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to competitors and disruptions in the industry environment, especially in the presence of major e-commerce firms like Amazon

2 QUESTIONS AND ANSWERS

2.1 Do you think Walmart is doing enough to become more sustainable ?

Walmart, the American multinational retail corporation, has been criticized for its

environmental impact and sustainability practices While the company has taken steps to become more sustainable, many argue that itis not doing enough In this part, we will explore whether Wal-Mart is doing enough to become more sustainable

2.1.1 Sustainability efforts at Walmart

Waste: Walmart has made significant efforts to become more sustainable It's been a long time coming In 2005, then-CEO Lee Scott set three aspirational sustainability goals for Walmart: to create zero waste, operate with 100 percent renewable energy and sell products "that sustain resources and the environment.” Since then, the company has been working to live up those ambitious aspirations, a number of successes along the way

Now, more than a decade later, the company decided it was time to up its game Specifically, the world’s largest retailer is committing to, by 2025:

e Achieve zero waste to landfill in Canada, Japan, U.K and the U.S

e Be powered by 50 percent renewable energy sources under a plan designed to achieve science-based targets

e Double sales of locally grown produce

e Expand sustainable sourcing to cover 20 key commodities, including bananas, grapes, coffee and tea

e Use 100 percent recyclable packaging for all private-label brands

Wal-Mart has also implemented sustainability initiatives in its operations The company has increased the use of LED lighting in its stores and distribution centers, reducing energy consumption Wal-Mart has also implemented a recycling program for plastic bags and reduced the packaging of its products, reducing waste

Climate: Walmart aims to achieve zero emissions across its global operations by 2040 without relying on carbon offsets The company’s goal is to power its facilities with 100% renewable energy by 2035 globally Walmart also aims to move to cooling

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equipment that uses low-impact refrigerants and electrify its heating equipment and vehicles, including long-haul trucks, by 2040 Walmart is working with suppliers through its Project Gigaton initiative to avoid a gigaton of greenhouse gas emissions from the global value chain by 2030 because most of Walmart’s environmental impact comes from its supply chain

Nature: To address the urgent climate crisis and the threat to the environment, Walmart and the Walmart Foundation have set a target to protect, sustainably manage or restore at least 50 million acres of land and 1 million square miles of ocean by 2030 They are achieving this through partnerships that focus on conservation, restoration and sustainable management Their giving is not limited to a single commodity or issue as they work across multiple supply chains and geographies

As a business, Walmart collaborates with suppliers to provide affordable and sustainable products, promoting transparency and trust They encourage their suppliers to avoid using endangered forests, promote conservation solutions, and increase the use of recycled content to help prevent deforestation

People in supply chains: Walmart has pledged to collaborate with suppliers and other stakeholders to promote responsible global supply chains In accordance with their

values of customer service, respect, excellence, and integrity, Walmart's Standards for

Suppliers mandate that suppliers and their facilities operate in a responsible manner that safeguards the dignity of workers

2.1.2 Criticism of Wal-Mart's sustainability efforts

Despite these efforts, many argue that Walmart is not doing enough to become more sustainable One criticism is that the company's efforts are not ambitious enough, and it needs to set more aggressive targets For example, Walmart's goal of being powered by 50% renewable energy by 2025 is not ambitious enough compared to other companies that have set goals to be powered entirely by renewable energy

Another criticism is that Walmart's sustainability efforts are driven by cost-saving measures rather than a genuine commitment to environmental sustainability While reducing costs is a valid reason for implementing sustainability initiatives, it should not be the sole focus of the company’s sustainability efforts

Furthermore, the company has faced criticism for its supply chain practices, which have been linked to deforestation and human rights violations While Walmart has taken

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steps to address these issues, many argue that more needs to be done The company needs to ensure that its suppliers are also implementing sustainable practices and are held accountable for any violations

2.2 What are the ethical issues Walmart has faced?

Walmart is one of the largest retail companies in the world, with a long history of facing ethical issues These issues have ranged from discrimination to labor violations and environmental concerns We will explore some of the ethical issues Walmart has faced and how the company has responded to them

Despite accusations of low employee benefits and a strong stance against unions, Walmart remains the largest nongovernment employer in the United States, Mexico, and Canada It provides jobs to millions of people and is a mainstay of Fortune's "Most Admired Companies" list since the start of the twenty-first century However, in December 2005, Walmart was ordered to pay $172 million to more than 100,000 California employees in a class-action lawsuit claiming that Walmart routinely denied meal breaks The California employees also alleged that they were denied rest breaks and Walmart managers deliberately altered time cards to prevent overtime Similar accusations began to pop up in other states as well Walmart denied the allegations and filed an appeal in 2007 2008 Walmart agreed to pay up to $640 million to settle sixty- three such lawsuits

Another issue related to Walmart's workplace conditions is the company's use of part-time and temporary workers Walmart is known for hiring a large number of part- time workers, who are often denied benefits such as health insurance and paid time off

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Additionally, Walmart’s reliance on temporary workers has been criticized as a way to avoid paying benefits and to prevent workers from organizing

Discrimination is also a significant concern at Walmart The company has faced numerous lawsuits over allegations of gender discrimination, racial discrimination, and discrimination against workers with disabilities Although women account for more than two-thirds of all Walmart employees, they make up less than 10 percent of store management Walmart insists it trains and promotes women fairly, but in 2001 an internal study showed the company paid female store managers less than males in the same positions In 2004 a federal judge in San Francisco granted class-action status to a sex-discrimination law- suit against Walmart involving 1.6 million current and former female Walmart employees The plaintiffs claimed Walmart discriminated against them in regard to promotions, pay, training, and job assignments Walmart argued against the class-action suit, claiming promotions were made on an individual basis by each store Walmart took the case to the Supreme Court, claim- ing the suit violates the company's right of due process The Supreme Court determined that the women in the lawsuit do not have enough in common to classify for class-action status Although the women can sue Walmart individually, the impact on the company will be far less than if a class- action lawsuit had been allowed to proceed

Furthermore, Walmart has faced criticism for its treatment of workers with

disabilities In 2020, a lawsuit was filed against the company alleging that Walmart's policies and practices discriminated against workers with disabilities by denying them reasonable accommodations and by failing to promote them

2.2.2 Labor Violations

Walmart, being one of the largest employers in the world, has faced numerous allegations of labor violations over the years Here are some examples of labor violations at Walmart:

Wage Theft: In 2015, Walmart was accused of wage theft by workers who claimed they were not paid for all the hours they worked Walmart agreed to pay $42 million in a settlement to resolve the claims

Unfair Labor Practices: In 2015, the National Labor Relations Board (NLRB) found that Walmart had illegally retaliated against workers who participated in strikes and protests The NLRB ordered Walmart to reinstate workers who were fired for participating in the strikes and to give them back pay

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Safety Violations: In 2020, Walmart was fined $7,000 by the Occupational Safety and Health Administration (OSHA) for safety violations at a store in New Hampshire OSHA found that Walmart had failed to properly train workers on hazardous chemicals and did not provide proper protective equipment

Forced Overtime: In 2021, workers at a Walmart distribution center in Illinois filed

a lawsuit alleging that they were forced to work overtime without pay The lawsuit claims that Walmart required workers to work off the clock and did not pay them for all the hours they worked

These are just a few examples of the labor violations that have been alleged or confirmed at Walmart

2.2.3 Environmental Concerns

Walmart has also faced ethical issues related to the environment The company has been criticized for its use of plastic bags and its carbon footprint In 2005, Walmart committed to reducing its greenhouse gas emissions by 20% by 2012 However, the company did not meet this goal and was criticized for not doing enough to reduce its carbon footprint

In recent years, Walmart has made several efforts to become more environmentally friendly The company has committed to using renewable energy sources and reducing waste Walmart has also launched several initiatives to encourage its customers to recycle and reduce their environmental impact

2.2.4 Bribery Scandal

Walmart's bribery scandal was a major event in the company’s history, revealing serious ethical and legal breaches in its operations The scandal erupted in 2012, when a New York Times investigation found evidence that Walmart had allegedly paid millions of dollars in bribes to officials in Mexico to speed up the process of obtaining building permits and other approvals The investigation also found that Walmart executives in the US had been aware of the bribes and had tried to cover them up

The scandal quickly grew to include other countries where Walmart operates,

including Brazil, China, and India In Brazil, for instance, Walmart was accused of

paying bribes to officials to obtain construction permits, while in China, the company