Free «Wal-Mart's Business Performance in China» Essay Sample
Table of Contents
In the modern world, the phenomenon of economic globalization happens by means of a worldwide expansion of the multinational corporations. Undoubtedly, the most vivid example is the business operation of Wal-Mart, which is known as the biggest contemporary retailer. Moreover, the core principles and mechanisms of the Wal-Mart’s performance are especially well seen while operating in the world’s biggest economy of China. Although the penetration of Wal-Mart has obvious strong positive tendencies, it is also claimed to support and cultivate the poverty.
The Purpose of the Study
To comprehend the role of Wal-Mart in the modern process of economic globalization, this research paper is aimed to explore the ‘Walmartization’ phenomenon. In particular, it is necessary to identify how and to what extent the business operations of this corporation affect its main stakeholders. Besides, the shortcomings of the company’s performance will be discussed as an example of the wicked problem. Furthermore, surveying Wal-Mart’s sustainability it is appropriate to examine the factors that assure the company’s competitiveness, for instance, its successful rivalry, achieved thanks to the advantageous location and the adoption of local cultural attitudes. Moreover, considering that the greatest capitalistic company operates in a communist country, one should explore the way in which Wal-Mart manages and anticipates current and expected political risks.
The ‘Walmartization’ Phenomenon
It is not surprising that as the biggest global retailer, Walmart’s worldwide performance initiated the appearance of the term ‘Walmartization’. The research of the company’s performance reveals that “economies of scale allowed Walmart to buy cheap and cell cheap so that it could honor its “everyday low price” promise to consumers” (Chan, 2011, p. 2). The ‘Walmartization’ of China is known to be a mutually beneficial process for both Wal-Mart Corporation and Chinese government. Specifically for Wal-Mart, this state is a valuable destination in terms of reduced manufacturing costs and potential huge client base. Similarly, the company’s business performance makes a general positive impact on the Chinese economy by providing more job places for local dwellers. Consequently, the process of ‘Walmartization’ is supported and welcomed by the Chinese government.
Wal-Mart’s Performance as a Wicked Problem
Nevertheless, the downside of “Walmartization” is the strengthening of so-called wicked problem. A definition of a wicked issue presumes that it consists of numerous components and thus, cannot be completely solved (Camillus, 2008). Instead, the wicked problem can be tamed. To comprehend the nature of the wicked issue one should identify its main characteristics. For example, in a case of Wal-Mart the wicked problem gains significance as the result of “constant change or unprecedented challenges” (Camillus, 2008). It goes without saying that the largest multinational corporation is supposed to embrace the ongoing changes in order to adjust its performance and values in accordance with local demands. Naturally, this approach presumes the need to face and endure constant challengers. For instance, the corporation should manage to align its global business approaches and code of ethics with the local laws and ethics compliances. Considering the above-mentioned challenges, it is appropriate to deduce that diverse cultural attitudes make the biggest global retailer possess a wicked issue that cannot be totally eliminated as long as the corporation exists.
What is more, the “disagreement among stakeholders” considerably complicates this situation (Camillus, 2008). The fact is that different Wal-Mart’s stakeholders have diverse priorities and valuables. In particular, consumers are attracted by the low-cost competitive strategy of Wal-Mart; meanwhile, the employees are paid minimal wages and deprived of benefits. As a result, the Chinese staff of Wal-Mart revolts such company’s policy. This conflict of interests between different groups of Wal-Mart’s stakeholders cannot be solved completely because low prices presume low manufacturing costs; which contradicts the notion of decent salaries and social benefits. That is why, the Wal-Mart’s performance in China can be rightfully considered as a wicked issue, which cannot be eliminated, but can be tamed.
Relations between Wal-Mart and Its Employees
To identify the ways in which the wicked business operation of this company can be improved, it is necessary to survey and discuss the work conditions of the Chinese Wal-Mart’s associates. On the one hand, the positive aspect is that the employees are paid without delays while the other manufacturing factories are known to delay the salaries (Chan, 2008). On the other hand, Wal-Mart “has been criticized for being more invested in GDP growth than in protecting workers” (Wang, 2013). In particular, in summer 2007 Students and Scholars against Corporate Misbehavior (2007) surveyed the cases of Wal-Mart’s violations of labor standards in China. This research reveals the following findings.
Firstly, the surveyed corporation is noticed to practice “excessive and forced overtime” (SACOM, 2007, p. 3). Notably is that the collaborators are obligated to work up to 11 hours per day 6 days per week. As a result, the Wal-Mart’s staff performs around 300 working hours per month. What makes the things even worse is that the employees can be deprived of the ill days when they are sick.
Secondly, the SACOM’s research accentuates the issue of wage violations in all Wal-Mart’s factories. Consider the case, it is reported that “workers earn only between RMB 600 and 800 per month” (SACOM, 2007, p. 3). Moreover, the company neglects the legal norms to pay increased wages for overtime hours; neither does it adequately compensate working hours of the weekends and/or statutory holidays.
Thirdly, it is announced that Wal-Mart fails to provide safe working conditions. For instance, SACOM (2007) claims that Wal-Mart’s “workplace practices are in serious violations of the Chinese Labor Law, the Production Safety Law, and the Code of Occupational Disease Prevention” (p. 4). Specifically, the employees claim that the factories are not equipped with protection gears and, thus, the workers are in a constant danger of getting injured. Besides, numerous employees report the need to work under the deadline stress that is caused by the set enormously quick workflow standards. Without a doubt, such violations of labor conditions lead to the increased cases of work accidents.
Fourthly, Wal-Mart’s employees testify “unsanitary housing conditions” (SACOM, 2007, p. 4). For instance, they state that the food served in factories’ canteens is not eatable. In addition, the workers have to live up to 12 persons per one dormitory where they do not have any personal space not even talking about long queues to the showers.
Fifthly, the fines are also unfair in all Wal-Mart’s factories. For example, “employees are deducted 3 days’ wages and bonuses if they miss a day of work” (SACOM, 2007, p. 5). Besides, the workers are inadequately penalized for losing the staff card or other minor issues. Sixthly, another negative regular Wal-Mart’s practice is to use the work of people without signing working contracts. This important issue generates another essential violation, and it is the company’s failure to provide social security to its collaborators. Undoubtedly, the above-stated legal and ethical violations of labor conditions are greatly reproachful and are known to be the biggest current issue of Wal-Mart. Nowadays, the reduced manufacturing costs ensure company’s sustainability; however, in a long run, connected with its omission of corporate social responsibility may have a significant negative impact on the company’s prosperity.
The Reasons of Wal-Mart’s Sustainability
Continuing the discussion of Wal-Mart’s sustainability, it is appropriate to point to the advantageous location of its factories. Indeed, the decision to locate the manufacture in a relatively cheap area with the abundance of the cheap workforce is a smart approach that enhances the return of investment. Considering the case, in China, Wal-Mart can easily employ the cultural attitude of patriarchal society, where the females are hired to work for the minimal wages up to 28 days per month (Ngai, 2005, p. 5).
Moreover, targeting the Chinese market is a rather ambitious and promising approach considering the huge population of this state. Undoubtedly, to conquer the local market this multinational corporation is supposed to adopt the cultural attitudes of the Chinese. To succeed in this goal, the Wal-Mart collaborators should explore the regional demand and find the effective ways of integration of the global and local notions (Matusitz & Leanza, 2008). That is why “Wal-Mart teams arrive 5 months early in order to research the local consumption habits and to fine-tune store merchandise” (Gereffi & Ong, 2007, p. 47). Without doubts, for a multinational corporation the exploration of customers’ needs is an essential step that helps to construct an effective marketing outline, which assures company’s competitiveness in the case of significant internal domestic rivalry.
This approach supports the development of the so-called ‘cathedral of consumption’ (Matusitz & Leanza, 2008). This notion reveals “an incomparable magnitude of global success (achieved by a major corporation) that gives birth to a consumer religion and a display of abundance and excess” (Matusitz & Leanza, 2008). In this way, Wal-Mart strengthens its sustainability in the huge and challenging international market of China.
Managing Political Risks
Apart from considerable rivalry and diverse cultural attitudes, Wal-Mart is supposed to manage the political risks of conducting offshore business. Undoubtedly, this aspect is critically important for every multinational corporation that intends to enter an international market; however, in the case of Wal-Mart the ability to handle political risks is especially relevant. The fact is that, initially, Wal-Mart is the American company, which implements the capitalistic approaches of business performance dictated by the appropriate mentality and way of thinking. Similarly, “China’s status as a “socialist” state with a Marxist-Leninist political system” presumes the diverse approaches to business (French, 2007, p. 38). As it was mentioned above, this company strives to align its policy with the local requirements, but it is noticed to violate several important legal and ethical norms of the labor conditions and compensations. Nevertheless, despite certain inconsistencies, Wal-Mart Corporation and Chinese government construct mutually beneficial and productive relations.
Summing up the above-mentioned, it is appropriate to conclude that the phenomenon of ‘Walmartiarion’ has both strong and weak sides. Keeping the pace of economic globalization, the expansion of Wal-Mart in China is the crucial step for this corporation. Firstly, it assures greater return of investment because of moderate manufacturing costs. Secondly, the market that consists of more than a billion people is highly valuable for every business. Undoubtedly, the decision to locate manufacture in China ensures the company’s success.
Nevertheless, the downside of the issue reveals the Wal-Mart’s performance as the wicked issue, which cannot be completely solved because of the opposite interests of the company’s main stakeholders that cannot be simultaneously fulfilled. Besides, the wicked nature of Wal-Mart’s business operations reveals a conjunctive issue, the neglect of corporate social responsibility. In particular, it is clearly visible in constructing unethical relations with the staff. This reproachful performance has a negative impact on the company’s reputation; besides, it affects the Chinese community by cultivating the poverty. Considering this compromising and even incriminating situation, the company should consider the adoption of business ethics in order to avoid bad reputation and decreased sales in the future. Becoming responsible in relation to all stakeholders is a necessary step that must be taken in order to remain competitive and prosperous. Another essential approach is to monitor the political and cultural changes with the aim to succeed in managing political risks.