The paper tries to explain the effect of Wal-Mart on a given market. How the low wages, benefits and restricting its employees to join the labor unions have affect the economic growth in a given region. The store’s opening in a given region reduced both the average earnings and health benefits of a retail worker both in the Wal-Mart and in the other retailers. At the county level, a new Wal-Mart store is found to reduce retail earnings.
Wal-Mart as a company has suffered from poor public relations. Wal-Mart is an American multinational retailer corporation. A corporation runs large discount stores. The company is one of the world’s largest public corporations. Wal-Mart is also one of the biggest private companies that hires the largest number of employees in the world. It is the largest retailer and thus it has millions of employees. Wal-Mart has over 8000 stores in 15 different countries. In some of the country it changes its name. The company operates under its own name in 50 states of United State. For example, in Mexico it is called Walmex, while in the United Kingdom it is ASDA and in India – Best Price. The company has invested in many companies and it has been successful in some and unsuccessful in others.
I analyzed secondary materials like articles and books, such as the New York Times. This comes up with the critiques of the Wal-Mart. I also interviewed 20 employees working in one of the stores of the company. This helped to get information on the payment they get while working for the company.
This study gives the critiques of the Wal-Mart. It has been criticized on the base of poor wages of employees and poor dealing with the suppliers (Aaron 2005). This has led to poor public relations and thus brought to the need for an alteration in the organization. The study tries to look at the reason of the poor public relations affecting the company. The study mainly focuses on the economic impact of Wal-Mart on the employees, local businesses and taxpayers. The entry of the company to the market of a given country results to the reduction of the income of the retailers.
Wal-Mart is one of the largest retailers in the whole world. It has many stores, which have offered employment to a large number of employees. Wal-Mart has become one of the main retailers in the United States of America and an employer of millions of workers. Wal-Mart is a very large company which has some management issues. Wal-Mart has been criticized on the bases of poor wages paid to its employees and poor dealing with suppliers. This has led to poor public relations that have brought to the need for alteration in the organization.
Although the company offers lower prices to consumers compared to other retailers, it has been criticized for several reasons. Wal-Mart has often been criticized as an employer who offers low wage and low benefits to the workers. The company also does not allow its employees to join labor unions (Miller 2004).
This is one of the critiques that the Wal-Mart company faced. As Wal-Mart grew fast to be the world’s largest corporation, it was subjected to criticism very often. The effect of the company’s stores on the employees, particularly in small towns, is negative. Wal-Mart offers lower wages to the workers than other retailers. The Wal-Mart’s entry to the market leads to reduction in the total income of the retail workers (Basker, 2005).
Production cost can be reduced by lowering the wages of the employees. Lower wages lead to low production costs while high wages lead to high production cost. Although Wal-Mart offers low prices to customers, the low wages of the employees reduce their income and it results to poor public relations. The company faces with negative public opinion because of the low wages it offers to its workers (Reich, 2005).
Wal-Mart’s entry into local labor market reduces the pay of workers in competing retailer companies. The fact that Wal-Mart offers low wages to its workers may lead to the other retailers’ reducing their wage rates. Wal-Mart is able to offer low prices partly because it has lowered the cost of production by lowering the wages of its workers. When Wal-Mart enters into a market it pressures the competitors to lower their wages to be able to offer their services at low prices to avoid losing their customers to Wal-Mart. The public may view Wal-Mart as the main cause of the low wages offered to them, and this leads to a negative public opinion about the company (Bianco, 2003).
Labor Union Opposition
Wal-Mart has been criticized for its policies against labor unions (Steven 2005). Workers are restricted to join the labor union. Wal-Mart uses tactics such as managerial surveillance and closure of stores or departments that choose to join unions. Wal-Mart states that it is not against unions and that it prefers its employees not to pay third parties to discuss problems, but they should discuss them with the management as the company’s open-door policy enables employees to give complaints and submit suggestions.
Labor unions help the employees to fight for better and fair wages (Jacobs, 2004). The labor unions are association of workers which ensure that the welfare of the employees in a given firm is ensured. The unions mainly act as the intermediary between the workers and employers. They may communicate to the employer the employees’ suggestions and complaints. The fact that Wal-Mart discourages its workers to join the labor unions can give an idea that the company is trying to exploit the employees by giving them unfair wages (Useem, 2003).
Lower Health Benefits
The health benefits Wal-Mart gives to its employees are lower than the ones given by the other large retailers. Wal-Mart reduces the overall compensation for retail workers, and this partially explains why the company is able to provide the reduced prices. As the company tries to achieve low prices they give low health benefits to its workers. After comparing the figures with other large retailers using March 2005 Current Population Survey, it could be seen that the rate of insurance and public coverage is higher among Wal-Mart’s workers in comparison with workers employed by other large retailers (Lang, 1998).
The reduction of the health benefits leads to the reduced compensation to the employees (Hausan, 2005). This may also lead to the low prices due to the lowered cost of production. Other retailers lower their health benefits given to their worker to lower the cost of production. This is done in order to be able to sell their products at low prices to enable them to compete with Wal-Mart’s goods. This will negatively affect the workers employed in the other retail stores (Upbin, 2004).
Poor Job Quality
The company concentrates more on giving the consumer low prices rather than quality services and goods (Susan, 2005). The fact the Wal-Mart offers very low prices to the consumers makes it very competitive in the market. The competitors have to come up with ways to lower their prices to be able to compete with Wal-Mart. This may, as a result, reduce the job quality of other retailers even that of Wal-Mart. They may offer poor quality goods to their customers. The tactics a company may use to lower the cost of production to enable them to sell services and products at low prices may lead to low quality production. This happens because retailers try not to lose their customers (Pearlstein, 2003).
When a company is trying to bring down the cost of production to be able to offer goods and services at lower prices, it may result in providing poor quality services to its customers. Wal-Mart has been criticized on giving low wages to its workers. This may lead to low production prices, but at the same time, this may reduce the job quality. High wages motivate worker to work more efficiently (Baker 2001). This may lead to higher quality services from the company. Low wages do not motivate the workers, and this may turn into inefficient work and, as a result, poor services.
Reduces the Purchasing Power of Citizens
Wal-Mart offers low wages to its employees and causes its competitors to lower their wages, too (Robert, 2005). This reduces the income of the retail workers and, as a result, reduces the ability of people to purchase products in a given region. Although Wal-Mart offers low prices for its services and products to the customers, entry of Wal-Mart stores in a location leads to a negative effect. The low wages may result to the reduction of the ability of people to purchase some products or services, and they will not be able to buy other products which are not offered at Wal-Mart. This is one of the critiques of Wal-Mart that although it offers low prices, it reduces the purchasing power of people in a given location where it is situated (Bernstein, 2005).
The company should come up with a model which retailers can use to compete on both prices and the quality of services that the company offers to its customers. Service quality may depend on wages that an employer offers to the workers. High wages tend to attract better workers. Workers with higher wages are more motivated and may give good quality results of the work they do (Daron, 2001). An employer can motivate workers by giving the fair wage mechanism and paying the workers on time. This motivates the workers making them work efficiently (Manning, 2003).
Fair wages also increase the purchasing power of the people. Increasing the wages and the benefits which Wal-Mart gives its workers could improve the public relations. Higher wages will increase the purchasing power of the workers. They would be able to afford the products offered by other retailers. Growth of the wages will be able to change the customers’ perception of Wal-Mart (Bernhardt, 2005).
Social responsibility as a way to improve the public opinion
After Hurricane Katrina in September 2005, Wal-Mart was able to use its economic ability in organizing a rapid response to the disaster, donating $20 million in cash, food for 100,000 meals, 1,500 truckloads of free merchandise and promised a job for every displaced worker. This is one of the best ways to improve the public relations and acquire positive public opinion (Peter, 2005). Wal-Mart should make use of their local knowledge about supply chains, infrastructure, decision making and other resources to reopen stores. The company was praised for its quick response.
Wal-Mart should allow its employees to join the labor unions. This will help the retailer to understand what its employees really want. Some employees may not be able to communicate directly to their managers, but with the help of labor unions they can speak their mind. This will improve public relations through ensuring communication of the employees’ needs and complaints (Daron, 2001).
Wal-Mart has many benefits after opening its store in any region. It has expanded productivity by using its knowledge of efficient supply chains. Many of the benefits the customers of Wal-Mart products and services acquire include the low prices of its products. However, there have been several main reasons to criticize Wal-Mart. These include the low wages which have reduced the purchasing power of people. Fairness in compensation to the worker is the main solution to the criticism of Wal-Mart. Wage raise will help to improve public relations of the organization.