Executive Summary
Presence of foreign firms within an economy is always healthy as it brings different methods of conducting business in the economy. A firm such as Wal-Mat has the potential of changing a given country’s retail sector for the better.
It has the financial capacity to do this, and it has embraced technology that would make this possible. However, the entry of this firm in a country’s retail industry is not recommended if the government is keen to develop economically. It would be an option that any country would try to avoid.
Introduction
Wal-Mart store is a large US retail company that was founded in 1962 by Sam Walton. According to a report by Forbes Global 2000, the company is ranked 18th in the world’s largest public companies survey1.
It is the largest retail store in the world operating in 50 states in United States and 15 other countries across the world. It has over 8500 stores operating under different names. With an employee base of about two million, Wal-Mat is the largest employer in the world.2
This company has successfully penetrated markets outside its parent country. Its entry into the markets of United Kingdom was successful. China, with its large customer base, was another successful story of this firm in its quest for new markets outside United States.
It is worth noting however that the firm capitalized on the local markets before setting out for foreign markets. This helped the firm develop a strong base, both materially and in the market mastery before setting forth to acquire external markets. In the external markets, Wal-Mat operates under different brand names.
In the United Kingdom, it operates under the name Asda, in Mexico it is known as Walmex, Best Price in India and Seiyu in Japan3. With all these potential, the company has not been keen to assert its presence in developing countries.
Wal-Mart: The Giant Beneficial Corporation
A report by Ernst Young4 has shown that Wal-Mat has had a consistent growth since its inception in 1962. The local American market has been faced with several challenges, top of which was the recent economic recession that ended in late 2009.
The company however was one of the few American firms that recorded positivity against such storms. Its branches in other countries around the world have also been witnessing growth. The firm is the world’s largest employer, estimated to have employed over two million. There are hosts of others who are employed by this firm indirectly.
United States of America, as well as other countries that this firm operates in, has had a number of benefits from this firm. Because of its size, this firm absorbs a large volume of American workforce. Its presence in any country would mean an increased rate of employment to the locals.
In America alone, this firm employs over one million individuals in its various units. The firm also employs a good number of Britons, Chinese, Japanese, and other nationals from different countries. Because of this, it eases the pressure on the government for job by the nationals.
When operating in a given country, this firm has to comply with taxation policies of that country. The government therefore stands a direct benefit in form of tax and other charges that may be necessary. With it comes a new idea in the industry. Wal-Mat is a global firm with experience in operating in various countries, including the United States.
Bringing this rich experience with it to the industry would make the local players appreciate the need to advance in their business strategies. The locals, who are employed in this firm, understand the culture of the company, which has made it such a successful story.
When such individuals move to other local firms within the country, they transfer this winning formula to the local firms. This helps transfer the knowledge and experience within various firms, making the local industries have a global outlook.
Wal-Mat has recently come out strongly as an advocate of a pollution free environment in all the countries where it operates. It announced that it would help in the implementation of various measures that would help in increasing energy efficiency. Andresen5 reports that the firm budgeted for about $ 500 million a year on enhancing fuel efficiency.
It announced its plans to increase the usage of renewable energy in its various branches within the United States and other countries where it has subsidiaries.
This would help the concerned countries cut down the emission of green house gases. Its planned tree planting programs and usage of bio-fuel energy would further create employment in the various countries that it operates.
Wal-Mat is one of the few large online stores in the world. Just like amazon.com, Wal-Mat has employed technology of e-commerce. Many third world countries are struggling to integrate effectively e-commerce into their systems, with minimal success.
Introducing a firm that has succeeded in using e-commerce would be the best option to make local firms adopt this technology. They would be in a position to monitor the way in which this firm uses this technology within the local market and this would enable them improvise the best approaches.
This technology would also have an impact on the educational sector. Many higher learning institutions would feel the challenge to start offering courses that would be able to respond to the emerging technologies.
Wal-Mart: The Manipulative Capitalist Firm
Although Wal-Mat’s presence would bring several advantages, some issues should be considered as they may have adverse effects on the local firms. This company is well developed meaning it enjoys the economies of scale. It is actually the world’s largest retailer.
Its presence in a given country may affect the local growing retailers. Although the protectionist policy to local firms may not be the best option to make a given industry within the country to prosper, at times, it may be the only option left for a country.
Local firms’ growth would be the ultimate goal of any government. However, Wal-Mat may not permit this. It would bring a strong competition in the local market that may force others to close businesses.
Cunningham6 reports that Wal-Mat is known to chock its competitors in the market by offering prices that are too low to be matched by other competitors. As such, it has been able to dominate various markets within which it operates. After taking over the market, the company then fixes prices that best suit it in its quest to get more profits.7
Wal-Mat is an American firm. It has a policy that guides how part of its profits are retained within the host country and part of it repatriated to the parent country.
Unlike the local firms, which would retain or spend all its profits within the country, this firm takes away most of its profits back to the US. After suppressing the local firms to extinction, they channel the wealth they generate locally back to their parent country at the expense of the host country.
In some instances, Wal-Mat has considered taking the parent country nationals to head their subsidiaries in the foreign countries. However, most of their employees are always host country nationals but the parent country nationals always hold top positions.
This policy of hiring human resource has enabled it keep its winning strategies hidden to other firms as those taken to head such regions are always trusted individuals, mostly taken from the company’s headquarters. However, this strategy is manipulative and denies locals the possibility of rising in the firm’s leadership ladder.
The employees may not also know the real tactics that has made this firm successful. Therefore, knowledge transfer within the industry may not be achieved as would be wished.
Environmentalists have accused this firm of polluting the environment. They have pointed out categorically that this firm accounts for the pollution of the environment in several ways. One such way is the introduction of plastic wrappers into the environment.
Most of the wrappers used by this firm are made of light plastic materials, which are not biodegradable. This firm makes huge sales on a daily basis and all these wastes accumulate in the environment. Because they are not biodegradable, they pile up hence posing real threats to the normal structure of the environment.
The firm also uses petroleum products as a back up to the electric power in case there is an electric power failure. This also amounts to environmental pollution.
Although it recently announced plans to implement environmentally friendly energy, most of its operations are still backed up by petroleum energy. Its recent announcements that it would cut down on the amount plastic wrappers, especially on toys and other popular products, is yet to take effect.
Armstrong, Kotler and Brannan8 report that Wal-Mat has been discriminative in remunerating their employees, based on the regions.
Employees of the firm at its headquarters and other American branches get a comparatively higher remuneration. The scholars criticize the firm saying that this policy is one of its capitalistic tracts that help it repatriate as much of its profits back as possible.
Suitability of the Wal-Mart Company
Presence of Wal-Mat in any given country comes with many benefits. This company is one of the largest employers in the world. Due to the nature of its activities, this firm is not in a position to avoid the need to employ people in mass in every region it sets to operate.
This would mean increased employment in the country hence improved living standard. The firm also increases the income of the government through taxation and other relevant charges. Its ability to embrace technology, vibrancy and the general prowess in the retail sector would definitely make this sector live and competitive.
The local firms would have no otherwise but to match this standard, a fact that would make them more competitive. Through this, such local firms may try to apply the learned tact to broaden their markets to other foreign countries. It would therefore be worth an effort to encourage such a firm to invest in the country.
However, this is only encouraged if the government has no alternative to improve the local industry, which may be on the verge of collapsing. Otherwise, this firm should not be permitted to a local industry that is experiencing growth and is able to support itself.
This is because it would most certainly eat up the local firms. After this, most of the profits gained locally would be repatriated back to the parent country, leaving the local economy worse than ever.
Bibliography
Andresen, Alan. Ethics in Social Marketing. Georgetown: Georgetown University Press, 2001.
Armstrong, Gary, Kotler Philip, and Brannan Ross. Marketing: An introduction. New Jersey: Prentice Hall, 2009.
Cunningham, Barton. The stress management sourcebook. Los Angeles: Cengage Learning. 2010.
Daft, Richard. Organizational theory and design. Mason: South-Western, 2010
Ernst, Young. Telecommunications: Transforming our society. New York: Lowell House, 2000.
Mills, Gordon. Retail pricing strategies and market power. Melbourne: Melbourne University Publishing, 2002.
Footnotes
1 Gordon, Mills. Retail pricing strategies and market power. Melbourne: Melbourne University Publishing, 2002.
2 Ibid p. 23
3 Ibid p.32
4 Ernst, Young. Telecommunications: Transforming our society. New York: Lowell House, 2000.
5 Alan, Andresen. Ethics in Social Marketing. Georgetown: Georgetown University Press, 2001.
6 Barton, Cunningham. The stress management sourcebook. Los Angeles: Lowell House. 2000.
7 Richard, Daft. Organizational theory and design. Mason: Cengage Learning, 2010.
8 Gary, Armstrong, Philip Kotler, and Ross Brannan. Marketing: An introduction. New Jersey: Prentice Hall. 2009.