WAL-MART: IS IT GOOD

FOR US?
BUSINESS ETHICS REPORT

FEBRUARY 27, 2014

KUMAIL ZAIDI
ZOYA RAHMAN
NASIR SURTI
USMAN NAGI
Index
Letter of Acknowledgment: ............................................................................................................ 2
Executive Summary......................................................................................................................... 3
Wal-Marts Unethical Practices ...................................................................................................... 4
Solutions to the unethical practices done by wal-mart.................................................................. 5
Evaluation of unethical points ........................................................................................................ 6
ETHICAL ISSUE NO # 1:-............................................................................................................... 6
ETHICAL ISSUE NO # 2 ................................................................................................................. 6
ETHICAL ISSUE NO # 3 ................................................................................................................. 7
ETHICAL ISSUE NO4 ..................................................................................................................... 8
ETHICAL ISSUE NO # 5 ................................................................................................................. 9
Conclusion ..................................................................................................................................... 10

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Letter of Acknowledgment:

27th February 2014

Shaikh Sameed
Business Ethics
SZABIST

Respected Sir,

We are submitting you this report, which is based on the Walmart and its unethical practices
which has caused some issues in the international economy. And we also provide you with
suitable solutions that needs to be implemented by Walmart or any other business working
unethically. This report is due on the 27th of February, which is the 8th session of our course. We
hope we have done the work up to mark.

Thank you,

Kumail Zaidi
Usman Nagi
Zoya Rahman
Mohammad Nasir Surti

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Executive Summary

In today's modern business world, the road to success requires more than merely
technical skills, practical knowledge and a good product. Business ethics become the
fundamental building blocks that link up all these expectations. Here is a small report
highlighting the collection of all the unethical practices carried out by Wal-Mart.

Wal-Mart is the No. 1 company in the world. It has the most revenue over any other
company ($421 Billion). But its riches equal its controversies. In addition, Wal-Mart likes
to portray itself as a seller of U.S manufactured goods but in reality the company has
products on its shelves made in foreign countries and at questionable workshops. It
would seem that Wal-Mart encourages made in the USA but it really encourages
products made outside the USA. As a result, Wal-Mart has forced many manufacturers
out of business.
The list of unethical practices shown in the documentary Wal-Mart Is it good for us?
are misrepresentation and deceiving the real image of the products sold by the largest
retailers in the world, ignoring labor rights, dumping in China, unfair trade, rise In the
level of employment and driving the loyal businesses out of the market.

Furthermore, it gives an overview of the basic evaluation of reasonable solutions to all

the unethical practices.

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Wal-Marts Unethical Practices

1) Creating misleading and incorrect perception of their products for example the
starting cost was low while if they went further the cost increased, it was because
they want to maximize their profit. Walmart uses their huge buying power to control
the prices, once Walmart penetrates the market it destroys its competitors, giving
retailer the fear of price wars, cost advantages and a control over supplies.

2) Workers rights were not considered properly, there were no such worker rights
given which was a problem for the workers of china as they were underrepresented
and given few opportunities for advancement, there was gender discrimination many
female co-workers have been paid less than male co-workers.

3) Rise in the level of unemployment, due to which people couldnt afford proper goods
causing people to have unstable lives, which lead to low standard of living.

4) Due to US intervention less goods were exported to china and more were imported,
there was a budget deficit.

5) Rubber maids association with Wal-Mart disrupted due to strained relations with the
retailer and with drawl of Rubbermaids products.

6) Walmart is global supplier were over 6000 in total of which over 80 percent were
China based.

7) There is no fair trade. Dumping in China has become a frequent practice.

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Solutions to the unethical practices done by Wal-
Mart

Every unethical practice done by Walmart must have some amendments. Here are
some solutions to the unethical practices.
In order to be ethical , Wal-Mart needs to re-make their policies by giving chance to
its competitors , by providing competitors a friendlier environment in every
department , Wal-Mart should not interfere with the prices set by the market and
should obey every action given or taken by the government for the welfare of the
society . Organizations must research, develop, and document policies and
processes around defining, identifying, and reporting ethics violations.

What Wal-Mart can do is that, they can provide workers a safe-place to work, they
can provide employees with working conditions that are free of known dangers,
increasing their safety and health-standards, provide them with training and
assistance to workers and employees, provide them equal fair wage and
implementing such policies that are beneficial for the employees and enforcing to
stop gender discrimination. These policies should be articulated in the employee
handbook and protections should be put in place for those who raise ethical issues.
However, having a policy is not enough. You must practice what you preach.

Wal-Mart is one of the dominating super stores in the world and it is their
responsibility to provide jobs to the unemployed individuals Wal-Mart can improve in
the employability of the labor supply so that the unemployed have the right skill to
take up the responsibility , they can improve in the incentives for people to search
and then accept paid work, they can improve skills and can try to reduce
occupational immobility which is the lack of ability or willingness of people to move to
other jobs.

What they can do is that they can cut personal taxes this increases consumer
spending and this leads to growth, marginally increase the taxation income this pays
the budget deficit, should start to increase their exports rather than imports etc.

Risk management professionals will tell you that even with all the proper policies and
processes in place and a staff that understands them, it is also wise to perform
regular audits to help reduce opportunities to act unethically, incent individuals who
may act unethically to reconsider, help catch issues that have occurred by accident,
and diminish risk all around.

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Evaluation of unethical points

ETHICAL ISSUE NO # 1:- Creating misleading and incorrect perception of their

products for example the starting cost was low while if they went further the cost
increased, it was because they want to maximize their profit. Walmart uses their huge
buying power to control the prices, once Walmart penetrates the market it destroys its
competitors, giving retailer the fear of price wars, cost advantages and a control over
supplies.
FACTS:- Best Buy, Toys "R" Us and a number of regional supermarket chains have
filed complaints in several states against Walmart over the accuracy of its price-
comparison ads. Competitors say products aren't always identical or available, but
Walmart defends its ads as accurate. The news was first reported by The Wall Street
Journal
EVALUATION OF ALTERNATIVE OPTIONS:- Wal-Mart needs to re-make their
policies by giving chance to its competitors , by providing competitors a friendlier
environment in every department , Wal-Mart should not interfere with the prices set by
the market and should obey every action given or taken by the government for the
welfare of the society . Organizations must research, develop, and document policies
and processes around defining, identifying, and reporting ethics violations.
MAKING DECISION:-WALMART should implement such policies that are favorable for
the customers and competitors. They should stop interfering with the prices set by the
market and should obey every action given or taken by the government for the welfare
of the society.
ACT & REFLECT:-The Company will do a proper market research on the products that
they are offering and whether those products are according to the market standards.
The company will act according to the market prices and will provide products according
to the customer needs.

ETHICAL ISSUE NO # 2:- Workers rights were not considered properly, there were no
such worker rights given which was a problem for the workers of china as they were
underrepresented and given few opportunities for advancement, there was gender
discrimination many female co-workers have been paid less than male co-workers.
FACTS: - When it comes to price, its hard to beat Wal-Mart (WMT). But the "everyday
low prices" come at a high cost to its employees. A recent report from consumer group
Los Angeles Alliance for a New Economy found that Wal-Mart employees earn 20%
less than the average U.S. retail worker, and some $10,000 less than what the average
two-person family requires to meet its basic needs.

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Also, the company has fewer than half of its employees enrolled in its health insurance
plan, compared with 67% for the average large employer. As a result, taxpayers end up
subsidizing the companys workers.
EVALUATING ALTERNATING DECISIONS:- What Wal-Mart can do is that, they can
provide workers a safe-place to work, they can provide employees with working
conditions that are free of known dangers, increasing their safety and health-standards,
provide them with training and assistance to workers and employees, provide them
equal fair wage and implementing such policies that are beneficial for the employees
and enforcing to stop gender discrimination. These policies should be articulated in the
employee handbook and protections should be put in place for those who raise ethical
issues.
DECISIONS:-Walmart should use the good common approach by sharing large portion
of profits for societys benefit working in corporate social responsibility by introducing
training programs for free, employing more people and giving them fair wage according
to their designation and provide employees with a friendly environment where they feel
motivated and give their best in performance.
ACT & REFLECT:-Walmart should react positively to this decision as this will benefit
them in their production and sales. By providing fair wage to the employees it will
enhance their production capabilities making them more motivated towards their work
and in the end producing a desired result for the company itself.

ETHICAL ISSUE NO # 3:- Rise in the level of unemployment, due to which people
couldnt afford proper goods causing people to have unstable lives, which lead to low
standard of living.
FACTS: - A study published in the latest issue of Social Science Quarterly is the first to
examine the effect of Wal-Mart stores on poverty rates. The study found that nationwide
an estimated 20,000 families have fallen below the official poverty line as a result of the
chain s expansion. During the last decade, dependence on the food stamp program
nationwide increased by 8 percent, while in counties with Wal-Mart stores the increase
was almost twice as large at 15.3 percent. "After controlling for other factors determining
changes in the poverty rate over time, we find that both counties with more initial Wal-
Mart stores and with more additions of stores between 1987 and 1998 experienced
greater increases (or smaller decreases) in family poverty rates during the 1990s
economic boom period," Stephan Goetz a Professor of Agricultural and Regional
Economics at The Pennsylvania State University states. Although Wal-Mart employs
many people living in its communities, for most, the hours worked and the wages paid
do not help these families transition out of poverty.
EVALUATING ALTERNATIVE DECISIONS: - Wal-Mart could increase the quality of
the products that it is importing and keep the prices at lower levels in order to benefit the

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society. Wal-Mart can improve in the employability of the labor supply so that the
unemployed have the right skill to take up the responsibility, giving the employees more
incentives.
DECISIONS: - What Walmart can do is that they can either lower the prices down or
can use the protectionism approach in which the government restrain trade between
states through methods such as tariffs on imported goods, restrictive quotas, and a
variety of other government regulations.
ACT & REFLECT: - The decision of the either lowering down the prices or the
protectionism approach can uplift the standard of living in the society and this will
benefit Walmart by people going there and buying more products which leads to
increase their sale and production which will in the end benefit the whole society thus
increasing the standard of living.

ETHICAL ISSUE NO # 4:- Due to US intervention less goods were exported to china
and more were imported, there was a budget deficit.

FACTS: - The imports of Wal-Mart account for around $36 billion while the exports are
just worth around $3 billion. This is hurting the U.S economy by creating a deficit. Most
of the imported goods are imported from China.

EVALUATING ALTERNATIVE DECISIONS :- What they can do is that they can cut
personal taxes this increases consumer spending and this leads to growth, marginally
increase the taxation income this pays the budget deficit, should start to increase their
exports rather than imports , Increase tariffs which will lead to less imports .

DECISIONS: - The best decision for Walmart is to lower down their imports and try to
increase their exports and by this there will be zero intervention by the government and
Walmart will compensate for the whole budget deficit.

ACT & REFLECT: - The decision of Walmart of increasing export and decreasing the
imports will obviously provide a great platform for the US government as they will have
a positive deficit which will in the end flourish the economy.

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ETHICAL ISSUE NO # 5:- Rubber maids association with Wal-Mart disrupted due to
strained relations with the retailer and with drawl of Rubbermaids products.
Facts: Until 1994, Rubbermaid was one of the best-known plastic companies in
America. At that time, Wal-Mart was as much as 20% of Rubbermaid's business. In
1994, there was around 80% increase in the cost of a key ingredient in plastic container
which resulted in high production cost for Rubbermaid. When Rubbermaid tried to pass
a higher price for its products on to Wal-Mart, Wal-Mart warned that if prices rose,
Rubbermaid products would be dropped. Other stores increased the prices of
Rubbermaids products except Wal-Mart. But then those stores wanted Rubbermaid to
lower its prices for them also. In 1995, Rubbermaids profit plunged by 30% which then
lead to acquisition of Rubbermaid by Newell company.
Evaluating alternative decisions: Wal-Mart should increase Rubbermaid prices.
Rubbermaid fall was due, in part, to Wal-Mart's decision to pull Rubbermaid products
from its shelves. Even a plastics company proved to be unable to bounce back from
such an impact. So Wal-Mart's power over its manufacturers and its own employees are
consequences of its "everyday low prices". Most consumers have no idea where cheap
prices come from - a world-wide chain of exploitation. Some experts contend Wal-Marts
everyday low prices are causing a clash between the interests of Americans as
workers and the desire of American as consumers. We know that low prices is the
biggest source of success for Wal-Mart but it should have increased the prices of
Rubbermaid instead of dropped its products in order to save it from losses. And then let
the people decide that whether they want to buy Rubbermaid or not.
Decisions: We think that Wal-Mart should increase Rubbermaids prices instead of
dropping their products. And then let people decide whether they want to buy it or not.
Wal-Mart was near-sole distributor of Rubbermaid and it is unethical for Wal-Mart to
drop their products just because of its own interest. Rubbermaid needed to increase its
retail price by just a small, single-digit percentage but Wal-Mart was strictly committed
to its everyday low price (EDLP) policy.
Act and reflect outcome: If these increase in price neither effect Wal-Mart business
nor Rubbermaid sales then it would be the right decision.

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Conclusion

Wal-Mart being one of the dominated super market in the world, runs chains of large discount
department stores and warehouses stores .Wal-Mart being the worlds largest public
corporations has done a lot of unethical acts lately which should be stopped at all cost as it is
affecting the name of the corporation badly and all the policies should be re-made and
according to the policies stated by the government. Wal-Mart should actively let other
competitors to freely sell and purchase things by their own will, they should stop manipulating
the market forces (demand & supply) and should also stop affecting market prices. Wal-Mart
should provide rights to the employees and should give those facilities in order to boost up
their Morales. Wal-Mart being the top notch super market should set their standards according
to the customers point of view and should be fair to every competitor in every way possible.
Thus, no company is immune to problems. The companies that survive are the ones that can
spot ethical issues and correct them before they become problems. In this case Wal-Mart failed
to acknowledge those potential problems and they are probably going to pay for it. Therefore,
Wal-Marts unethical business practices have hurt its companys reputation. If Wal-Mart wants
to survive they will have to try hard to improve their image. That is, they need to show that
they care about ethics by treating employees fairly. As a result, it will attract good employees
and people will have no reason to complain about the company. In addition Wal-Mart needs to
be socially responsible in order to avoid economic harm and in order to maintain the legitimacy
granted by society.

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