Walmart and Corruption in Mexico - Essay Example

7 pages
1843 words
Harvey Mudd College
Type of paper: 
Case study
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

In 1962, Sam Walton the founder of Walmart opened the first Walmart store in Rogers, Ark. The founder, Walton, was born the year 1918 in Kingfisher, Oklahoma. He married Helen Robson in 1943 after joining the military, and they later moved to Newport, Arkansas after his military service ended. At that point, he gained retail experience by operating his own variety store. Seven years after their marriage, the Waltons opened Waltons 5 and 10 on the downtown square in Bentonville after moving to this location. Sam and his brother by late 1950s had owned nine Ben Franklin franchises. After a while, the brothers decided to open their first Walmart Discount City in Rogers, Arkansas. The department-sized stores attracted a wide radius with its concept of huge stores offering their consumers a variety of goods at deep discounts that were part of the everyday low price strategy.

In the late 1960s, there had been 18 Walmart stores, while the brothers still owned fifteen Ben Franklin variety stores. The ventures were incorporated to form the Walmart Stores, Inc. within that period. The growing franchise implemented warehousing through building its own warehouse for distribution strategies. This allowed Walmarts cost to go down giving it more control over its general operations. It meant that restocking was constantly efficient and advertising was concentrated in given regions with low cost of distribution. The business franchise went public as a traded company with their first stock being sold at USD16.50 per share. In this period, Walmart was listed on the New York Stock Exchange (NYSE) after opening its first distribution center and home office in Bentonville, Ark. At this point, the organization had 51 stores with a record of USD78 million in sales. Development was the aim of this ever-growing business as they introduced the Walmart cheer that was inspired by the Korean manufacturing facility. The Waltons had done away with their Ben Franklin stores in 1976 to allow the expansion of the Walmart stores. Two years later, Walmart started operating its pharmacy, auto repair center, jewelry divisions, and Hutchenson Shoe Company which was a shoe-department lease operation. By the end of this decade, Walmart had already had 276 stores in about eleven states with sales shooting from USD44 million in 1970 to USD1025 billion making it the fastest company to hit the USD1 billion mark. Already by the 1970s, the franchise had started using computers to manage and connect its stores and warehouses for business data processing. The data was used to keep track of items and cut on inventory miscalculations.

Walmarts growth was rapid in the 1980s since the company was diversified with high quality, brand name merchandise at low prices and location of its stores in small towns being its fundamental principles at that time. The economy was facing a downturn, and people moved to suburbs. This was an advantage to the company as the consumers were willing to go further in order to access low price products. During this period, local chambers of commerce supported Walmart because it helped the local economy by price reductions. This brought up opposition from the local independent merchants as they said successful company hurt them. Despite the critics, the local chambers still endorsed Walmart since they argued that the business provided jobs for locals and offered a diverse opportunity for local merchants by adopting new business environment.

In 1983s, the company opened the first Sams Wholesale Club in Midwest City, Okla., where it replaced cash registers with computerized point-of-sale systems enhancing accuracy and speed as well as expansion into bigger city markets. By the year 1987, Walmart has acquired 18 Supersaver Wholesale Clubs with the emergence of its Hypermart USA, which are stores combined with different service centers on a large field of up to the area of six football pitches. This idea reduced prices to 40 percent below retail level, with a sales volume of USD1 million per week compared to the USD200, 000 for a discount store. In that year, 100,000 independent manufacturers initiated a campaign against Walmarts effort to eliminate them, claiming that the elimination contradicted their rights to choose how to sell their products. All through this period, however, Walmart had a 12-year streak of 35 percent annual profit growth. William R. Fields, an executive vice president of merchandise and sales, made estimations that Walmart cut imports through reducing the cost by approximately 5 percent in a span of four years. Analysts also estimated a purchase of between 25 and 30 percent of goods from overseas for the giant company. Although Walmart had a great growth continuity, some challenges rose over time.


Among Walmarts worries was the challenge of criticism for its impact on small-scale retail businesses. The emergence of superstore economy made independent store owners go out business as they were unable to compete favorably. Lowa State University economist, Kenneth Stone, stated that towns in Illinois where Walmart has been operating for a period of 8 to 10 years, the downtowns are empty and they resemble a ghost town. He added that most affected businesses were a drug, hardware, five and dime, sporting goods and fabric stores as textile and food industries flourished due to the increased traffic.

To stop this resistance, Walmart offered community service by awarding USD1, 000 scholarships to high school students in the areas they operated. The company also had rejected the idea of stocking adult and teen magazines and therefore had critics insinuating that Walmart was knowingly reducing the options of customers through bowing to pressure from special interest groups.

Waltons death

As much as Walmart held core their values and the idea that the organization was governed by principles and not a single person, a post-Sam environment appeared to be difficult as it ended up showing a fateful change on how the organization was understood. Sam Walton died in 1992 at the age of 74 years. Rob Walton became the board chairman, and in the same year, the company employed 371,000 associates in different clubs and stores.

The pinch was felt more when Dateline NBC exposed the company sourcing practices. Even though Walmart was advocating for support of goods made in America, signs over merchandise showed they were actually manufactured from far away sweatshops. The exposure led to a decline in the organizations stock by 3 percent. Wall Street later found other reasons to lose trust in the organization leading to reductions in profit margins. David Glass, the CEO, focused on development and infrastructure and even though it seemed smart, investors were scared off.

Slow growth

Waltons death affected more than just Walmarts image. It affected even the business processes and how Walmart did its business. The new leaders lost their attention on other company values and majored on reducing the prices and cost. Employees started feeling they were not part of the company and the growth rate reduced significantly. As much the company used to have massive growth in the past, the beginning of 1994 was terrible. Sales in the fiscal year had dropped to almost the average of 4 to 7 percent in the retail industry. The general net sales had typically risen to 25 percent or more per year in the 1980s but between 1996 to 1998 net sales increased by an average of 12 percent.

Foreign investment

Walmart started on a rural mountain but had come up strongly by growing its reach, continued growth, and influence. Walmart expanded into the world marketplace CITATION Hay02 \l 1033 (Hayden, Lee, McMahon, & Pereira, 2002). They say the retailer already closed to 400 European countries, mostly in the UK and Germany. According to Hayden, Lee, McMahon, and Pereira (2002), where Walmart wants to grow is in the Asian market.

In the year 2003, Democrats started making an issue of Walmart's wages and benefits. This was the involvement of Washington. Rep. George Miller, from California, gave out a report termed Everyday low wages: The Hidden Price We All Pay for Walmart. Recently, two Washington-based groups were gathered: Wake Up Wal-mart, backed by the United Food and Commercial Workers (UFCW), and Wal-mart Watch, supported by the Service Employees International Union (SEIU). Opposition form this groups grew as they informed on Walmarts alleged misconducts.

Negative reports on Walmart

Similarly, a report prepared in 2004 by McKinsey and Co. for Walmart showed that around 8 percent of Wal-Mart customers stopped shopping there due to the negative press they heard. In 2006, the company reported lower sales on the two previous Christmas seasons. Maryland also gave a final approval that January to a Walmart bill requiring large employers to spend 8 percent of their payroll on health benefits at least. Thirty other states considered such a similar bill. Walmart formed a war room of political experts due to the development of such bills and opposition in order to offer more positive media coverage.

According to Bianco & Zellner (2003), Walmart Stores (WMT) Inc. is the worlds largest company in the retail and wholesale industry. As of 2002, the revenues collected by this company were USD245 billion. Every week, 138 million shoppers visit WalMarts 4,750 stores; last year, 82 percent of America households made at least one purchase at Walmart. CITATION Bia03 \l 1033 (Bianco & Zellner, 2003). New England Consulting estimates that Walmart saved its United States (US) customer as the sum of USD20 billion in 2002 only. This was contributed by the low prices that other retailers had to adapt to compete favorably giving a total of approximately USD100 billion in annual savings. This Walmart effect has minimized inflation and increased productivity gains.

Overstating Walmart's marketplace clout is hard. In utilities such as shampoo, toothpaste, and paper and towels, the organization supplies about 30 percent of the U.S. market. This numbers could rise to 50 percent before the end of the decade Bianco & Zellner (2003) add. With an account of 15 to 20 percent of every sale of multimedia devices, Walmart serves as Hollywoods largest outlet, and with the introduction of magazines selling to the business, it makes 15 percent of all single-copy sales in the U.S.

Mexico Scandal(Challenge identified)

Above all challenges, sticks the Walmart and Mexico scandal. Articles, by the media, have been written concerning this cultural, political, and economic issues. An example of this is The New York Times magazine. Barstows (2012) article indicated that Walmarts lawyer received an alarming email from a former executive at the companys largest foreign subsidiary, Walmart de Mexico. It describes how Walmart de Mexico had incorporated the campaign of bribery to win market dominance CITATION BAR12 \t \l 1033 (Barstow, 2012). The document allegedly claims that Walmart de Mexico had been involved in cases of corruption involving the local government.

Upon Investigations done by Walmart, a trail of hundreds of suspect payments summing up to over USD24 million was found. Among the findings documented that insinuated Walmart de Mexicos top officials knew about the payments but had already covered their misdeeds from the Walmarts headquarters in Bentoville, Barstow (2012) continues. Neither of the two regions political enforcement was notified.

According to a later article was written by the Barstow (2012), the zoning map for location of the Aboudega Aurora. He adds that Walmart had been eyeing the Elda Pinedas alfalfa field. The location was ideal since it was just off the towns main entrance and approximately one mile from the cultural heritage of the locals. The ancient pyramids served a cultural heritage drawing to...

Have the same topic and dont`t know what to write?
We can write a custom paper on any topic you need.

Request Removal

If you are the original author of this essay and no longer wish to have it published on the website, please click below to request its removal: