A Dent In Wal-Marts Public Image- PR Strategy

Presented By:Bhawna Sikka Nishant Pratap Arun Yadav Pooja Jain Sneha Gera Presented To:- Prof. Mani Thomas & Class Sarang Miskin Nakul Parnami

About Wal-Mart
The history of Wal-Mart can be traced back to the 1940s Sam Walton began his career in retailing at J.C. Penney 1943: Walton met the Butler Brothers who owned the retail chain Ben Franklin Stores Ozark Mountain town of 2,900 residents would become the headquarters for the world's largest retailer 1962: Walton invested 95% of the capital to open the first Wal-Mart store

Introduction To The Case

2004: Wal-Mart Stores with sales of $256 billion accounted for 2% of the GDP Strategy: Everyday low prices and widespread presence Emerged as the largest retail store in the world As it grew in size, it began to draw the attention of the media and the labor unions Its non-unionized labor and anticompetitive practices faced resistance

Contd

Wal-Mart had been avoiding interaction with the media and was labeled media-shy Led to more criticisms against its public relations policies Labor lawsuits that alleged low wages, gender discrimination and illegal immigrant labor further damaged the companys image Consumer advocates publicly claimed that WalMart was bad and cancer on the economy

Contd
Anti-globalization activists blamed the company for having exploited labor In sweatshops in Bangladesh, China and other Asian countries to offer low prices to the customers

Campaign Launched
2005: Launched a major public relations campaign in 100 newspapers like New York Times, USA Today and Wall Street Journal To assure: 1) It was a fair employer 2) It provided most of the health benefits to its employees Television advertisements featured Wal-Mart employees especially the women talking about Wal-Mart as a great working place

Contd
For the first time in 43 years, the company had formally faced media Lee Scott, CEO, Wal-Mart Inc. signed the print advertisement: Wal-Mart is working for everyone Analysts felt that such a campaign was insufficient to revamp the image, damaged over years

Contd
This reactive public relations and companys defensive stand would further harm the company by attracting more attention Other claimed that: 1) By buying media slots in major newspapers, the company was trying to gain favor from media 2) Also, the company was misleading the public with its false claims

For too long, others have had free rein to say things about our company that just arent true. We have decided its time to draw our own line in the sand. -Lee Scott, Chief Executive Officer, Wal-Mart Inc. I think they are going to have a tough time suddenly overcoming the perceptions of some people. It is going to be a tough sell on their part. -Larry Bevington, Chairman, Save our Community

Lowest Prices For All- Always

World Economies Liberalized, Wal-Mart jumped to Outsourcing. Continuously focused on its philosophy of bringing the lowest prices to the customer. It put pressure on its suppliers in US and Overseas to cut down prices. Wal-Mart became more powerful in its retail landscape. Wal-Mart demanded the prices of its products to drop every year which put pressure on its suppliers.

Continued
Merchandise sold in an year was twice more than all it competitors. Communication strategy revolved around the lower price strategy that the company believed as its cornerstone. Smiley Yellow Face- promoted its superior image as a discount store that offered quality products at lowest prices. As Wal-Mart expanded from small towns to large cities, critics questioned its anticompetitive practices.

Continued.
Relied more on central circulars and national newspapers over local newspapers. In 1994, Fortune magazine named Wal-Mart as Most Admired Company in America. It also faced lawsuits. Critics sent ripples through the public leading to a large scale opposition against Wal-Mart Local Media were a big criticism to Wal-Marts expansion as it feared increase in failure rate of local stores.

No Comment, Shouts Wal-Mart!

Wal-Marts Public Relation took a new turn by the 1990s


In December 1992, , in an interview with NBC,CEO David Glass was questioned about the non-American labor and the low wages of the workers and child labor in sweatshops in Bangladesh For the charges, Glass affirmed that it was equally depend on American factories for its merchandize and that the Buy American campaign

Not satisfied with Glass reply

NBC in another episode showed Made in USA labels being hung over the merchandise bought from overseas in most of the Wal-Mart stores Glass defended that it was mistake at store level and for the child labor he said, we dont buy from any vendor that uses child labor

Few weeks later, company arranged for another media interaction with channel 

Glass remarked that he was not prepared with facts in previous interview This time, he said, he had evidence to prove that there is no child labor at the factories in Bangladesh When reporter insisted showing the videos taken at plants, Glass claimed the videotapes had been doctored and abruptly walked out of the interview.

In another interview with 60 minutes in 1994

When Wal-Mart was charged of impairing growth of small stores in the country, the company did not react and avoided any interaction with media.

In 1995, during a press meeting at Canada, the company officials seemed so unsure and dubious However, the growth continued. By 2002, it had 4800 stores and more than $8 billion in revenues.

No Comments, Shouts Wal-Mart..!

Wal Marts was against unionizing labor. Employees were not allowed to interact with UFCW workers. California and New York oppose Wal-Mart. Discrimination against women. UFCW claimed Wal-Mart workers were paid 30% less than industry norms.

No Comments, Shouts Wal-Mart..!

Law suit filed by 1.6 million women workers. Share value drop by 84 cents on NYSE on a single day. Protests from National Organization for Women. Websites posting criticism about the company.

PR Path: The Defensive Way!

Steps taken to improve its image in the society

To face communication crisis a PR Team was put in place Under CEO, Lee Scott PR Campaign in over 100 newspapers were launched It included the major 1ce like New York Times, Wall Street Journal & others.. Jay Allen, senior VP stated that :Campaign was not response to any recent affairs but was addressed towards long term solution for the image drained over the years

The CEO confirmed that the campaign wanted to get rid of the MYTHS among the customers, union workers & the public about the company The CEO also issued an Open Letter in the ads stating that the company provides good jobs with excellent advancement opportunities PR Team was sent to major metro areas to attend media calls Employees themselves took initiative to send mails to editors refuting the criticisms In the Print Advertisements the company held some special interest groups & critics responsible for spreading misinformation

Wal-Marts benefits manager sent a letter to New York Times stating that the company provides health benefits to their employees The district manager wrote a similar letter to The Salt Lake Tribune The CEO became the 1st person to address the National Retailer Federation Trade Group In which he openly condemned the medias wide coverage on its imports from china & employees labor policies

The executives declared that IF the policies would have been so bad then the chain would not have grown to the size it did It changed its low prices proposition which had been guiding its advertising strategy The commercials the released were not meant to sell any product but focused on creating overall goodwill about the company

Meanwhile, as the company was working towards restoring good employers image, Federal raids in the store in the country bought to light 200 workers with illegal immigration licenses However it reported that the Federal Government had betrayed themas it stated that it had already agreed with Federal Government to corporate with the immigration officers in exchange of which it was to be left untouched

An internal lawyer was appointed to regularly investigate the hiring practices of the company The company also began to actively corporate to smoothen the investigation process A professor specializing in Labor Issues stated that I think we have reached a critical mass of bad publicity for Wal-Mart. Settlements, as expensive as they are, stop the bleeding.

The company accelerated its image makeover efforts by :   

Launching testimonial advertisements 1st time increasing its political donations to $1 million Other advertisements shoed hoe Wal-Mart contributed to other local communities In an alliance with NPR (National Public Radio) , WalMart announced in radio about it being a good employer It further began to offer scholarship for journalist studies in about 10 universities nationwide

Some observers claimed that the company was seeing corporate benefits

A Behemoth called Wal-Mart..

Revenue- US$ 421.849 billion. Nearly 2 % contribution to the GDP. Wal-Mart employs 2.1 million associates worldwide in more than 6,700 stores in the US and more than 1,500 throughout the rest of the world. Serves more than 138 million customers per week.

Wal-Marts very success may be working against it. Big empires are hard to manage, the public tends to mistrust institutions that get too mighty. David Berkowitz (Brand Consultant)

Wal-Mart- Accused of doing PR the wrong way. What went wrong ?  Media stone-walling.  No Comment strategy.  Companys hesitant attitude. Remedial Measures undertaken :  Paid search Ads from Yahoo and others.  Launched walmartfacts.com

walmartfacts.com
Press Releases. Community Fact Sheet Corporate & Financial Fact Sheet Health & Wellness Fact Sheet Opportunity Fact Sheet Sustainability Fact Sheet How many jobs we provide Average wages Supplier jobs we support How we give back in your community

The Bigger The Worse (Contd.)

Negative publicity bloated in size affect the growth prospects of a company as large as Wal-Mart. UFCW skeptical about the facts revealed believed that the company was trying to solve the problem temporarily in reality was misleading the media and the public. The Democratic Socialists of America challenged Wal-Mart to prove the facts opportunity to debate its critics. One PR campaign would not negate the long list of PR blunders of the earlier years.

The Bigger The Worse (Contd.)

Not going to make Wal-Mart look like a great place for low wage workers downsides too well known. Must be followed by changes at the factory level comparing it with the pro smoking ads of the 1930s and 1940s smoke-and-mirrors diversion tactic. Image of the company hanging on the prevailing lawsuits regarding gender discrimination and the immigrant labor. No lawsuits If the labor policies were flawless.

The Bigger The Worse (Contd.)

Humility and acknowledging mistakes willing to make good. Spend money on wages and solving problems instead of unrealistic and glossy advertisements.

Wal-Marts Financial Results

Year Jan 04 Jan 03 Jan 02 Jan 01 Jan 00 Jan 99 Jan 98 Jan 97 Jan 96 Jan 95 Revenue($M il.) 256,329.0 244,524.0 217,799.0 191,329.0 165,013.0 137,634.0 117,958.0 104,859.0 93,627.0 82,494.0 Net Income 9,054.0 8,039.0 6,671.0 6,295.0 5,377.0 4,430.0 3,526.0 3,056.0 2,740.0 2,681.0 Net Profit Margin 3.5% 3.3% 3.1% 3.3% 3.3% 3.2% 3.0% 2.9% 2.9% 3.2% Employees 1,500,000 1,400,000 1,383,000 1,244,000 1,140,000 910,000 825,000 728,000 675,000 622,000

Stock Value
Year Stock Price ($) FY High Jan 04 Jan 03 Jan 02 Jan 01 Jan 00 Jan 99 Jan 98 Jan 97 Jan 96 Jan 95 60.75 63.94 59.98 64.94 70.25 43.22 20.97 14.13 13.81 14.63 FY Low 46.01 41.50 41.50 41.44 38.88 20.09 11.50 10.06 9.55 10.31 FY Close 53.85 47.80 59.98 56.80 54.75 43.00 19.91 11.88 10.19 11.44 P/E High 29 35 40 46 56 44 27 21 23 25 Low 22 23 28 30 31 20 15 15 16 17 Per Share ($) Earns 2.07 1.81 1.49 1.40 1.21 .99 .78 .67 .60 .59 Div. .36 .30 .28 .24 .20 .16 .14 .11 .10 .09 Book Value 10.12 8.95 7.88 7.01 5.80 4.75 4.13 3.75 3.22 2.77

Conclusion
Wal-Mart has been growing at an impressive rate. But, there is no smoke without fire. Present hard facts and figures to the media. Adopt media friendly strategy with backup. Solve problems from within.