Source: Dr. Jay A. Dewhurst An Introduction to Business and Business Planning 1s

Question

Source: Dr. Jay A. Dewhurst An Introduction to Business and Business Planning 1st edition bookboon.com, 2014

Ethical Dilemma: “How do you save all that money?”

Wal-Mart is known for its relentless approach in offering its customers the lowest possible prices, but does that lower price come at a cost too great to be offset by the short-term gains of a few extra dollars in your pocket? Many believe the answer to that question is a resounding “Yes.” Small businesses around the country have been pushed to bankruptcy and outsourcing due to the unbeatable competition from Wal-Mart.

In nearly every town and village across Europe you can find butchers, shoemakers, music stores, and local famers’ markets. These businesses are what drive not only economies, but also job creation and skilled labor careers. In the United States, this was once also the case; however, large retail giants like Wal-Mart have offered customers prices that are impossible to match by these local shops.

Customers, thinking they will save a little bit of cash, opt for the national retail chain, and the doors of small businesses everywhere close for good. The short-term losses are in the jobs of shop owners and employees, but the long-term losses are in the decimation of entire career fields whose skills have been lost.

Other long-term effects are direct results of Wal-Mart’s business practices. Wal-Mart not only offers low prices to its customers, but it also demands these low prices from its suppliers. For example, Levi Strauss, the American clothing company that introduced the world to blue jeans, was a top player in the business. Unfortunately, customers are increasingly buying jeans from Wal-Mart due to their low prices, and in order to stay in business, Levi Strauss must now sell their jeans in Wal- Mart stores around the country. The problem with this union is that Levi’s Jeans were originally prided for their American-made quality, providing skilled labor and jobs to thousands of American workers. However, once Wal-Mart became Levi’s largest seller of jeans, they began to demand lower-prices of the brand. In order to meet these demands, Levi Strauss had to fire nearly its entire American workforce and outsource its manufacturing to Mexico where labor is cheaper. Other companies like Master Lock, Vlasic, and Nabisco also found themselves in the same predicament as Levi Strauss.

Another issue that, while not illegal, could be considered unethical, if not also a major conflict of interest, is Wal-Mart’s routine demands to see the financial reporting of its suppliers in order to find out where they need to make cuts in order to maintain their low prices. Some may ask why these suppliers don’t simply cut ties with Wal-Mart and choose to sell elsewhere. The problem is many of these companies would be run out of business by competitors that took a deal with Wal-Mart, the world’s largest retailer. In order to stay viable and successful, these companies and suppliers made deals that would inevitably hand over control of their business to Wal-Mart.

Small towns that once had factories filled with skilled laborers in trade industries have seen their and the laborers turn to unemployment. Factories and small businesses that once supplied the needs of small towns and cities have been replaced with huge retail stores filled with low-quality merchandise manufactured in foreign countries, and Wal-Mart, the very company that helped cause the collapse of these industries now employs the resulted abandon workforce. On other words, small businesses owned my families are not gone and those same families work for Walmart and a large

decrease in pay.

Once, a long time ago, Wal-Mart prided itself of American-made products, at least on paper, but in its drive for being the cheapest retailer in the business, quality has been set to the side, and its slogan has demonstrated the change in ethics. Now, the slogan reads, ‘Save Money...’ which seems to me more accurate of Wal-Mart’s real ideals: driving all competition to extinction by selling products as cheap as possible. Unfortunately, or rather fortunately, this sort of practice is self- destructive. When you cut the ground out from under a pyramid in order to build it, it will inevitable crumble.

Discussion questions:

1. Though Wal-Mart may not be breaking the law by some of its business practices, are they ethical? Give specific examples. Also, give a scenario in which one of the ethical dilemmas
that Wal-Mart has faced in recent years could have been handled better.
2. Answer in essay form (give at least two paragraphs and cite sources when necessary): Should financial gain be the ultimate objective of a business? Does the Wal-Mart approach to

business leave the customer and the economy better or worse off than before?

Explanation / Answer

1) Betraying customers in any form is unethical for any form of business. This is the case like paying a cheap price for groceries at Wal-Mart but not paying a fair price. Every price tag in Wal-Mart’s food inventory is the product of agricultural subsidies, financial zed commodities exchanges, and hyper inflated marketing. Wal-Mart has come under fire for mistreating its store associates, the supply-chain workers are exploited in even more complex ways, with even less recourse against the company, as Wal-Mart does not directly employ them. While wages are low at Wal-Mart, too often employees didn’t get paid at all for overtime. It used illegal immigrants as workers. Wal-Mart ha she tendency to crush compeitiors, the more successful the Wal-Mart the more there will be bankruptcy of caller business.

2) The ultimate objective of financial gain is ultimately leading to maximizing profits by a company and minimizing value it creates. the objective of maximizing profit is making our economy worse as well as customers .the focus is on financial aspect of business at cost of value the customers expects from a company. To restore the economy to health, we need to persuade our companies to balance their priorities--to share more of their wealth with the employees who help earn it. We need to persuade our companies to focus on creating value for all of their constituencies, not just shareholders. Americans who are dedicating their lives to making Wal-Mart successful are paid so little that they're nearly poor. If companies pay their employees more, they'll increase loyalty, reduce turnover, and get better employees. Over the long term, this should reduce training and hiring costs. By increasing customer satisfaction, it should also increase revenue. If Wal-Mart has to survive they will have to try harder to improve their image not only at the corporate level but also within each individual establishment level.

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