Contemporary Ethical Issues in Wal-Mart

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Table of Contents

Introduction
Relationship with Suppliers
Emerging Ethical Issues
Ethical Impact of Globalisation
Effects of Sustainability and Fair Trade
Ethical Sourcing
Conclusion
Reference List

Introduction

Over the years, the groceries market has encountered significant changes. These changes have greatly affected the relationship that exists between grocery stores and their suppliers. Today, owners of grocery stores have significant influence on suppliers (Boone & Kurtz 2010).

Globalisation and improvement in technology has helped grocery stores to come up with novel management strategies. These strategies enable retailers to stock and manage their stores efficiently. Besides, stores like Wal-Mart have come up with strong brands thus weakening the suppliers brands (Boone & Kurtz 2010).

As the groceries market expands, novel ethical issues continue to emerge in the process. Retailers in this market are continuously abdicating the call to conduct honest businesses. On the other hand, grocery stores are not keeping abreast with the demand for environment conservation.

Globalisation has facilitated the emergence of human rights as a parameter for determining if an organisation is operating ethically. As grocery stores seek to be sustainable and achieve ethical standards, they are gradually shifting some of the responsibilities to suppliers. This paper aims at looking at the ethical issues surrounding Wal-Mart stores.

Relationship with Suppliers

Today, Wal-Mart stores enjoy strong buyer power and this power gives the stores significant control over their suppliers. Wal-Mart stores could not have such immense influence on suppliers if there were a sound equilibrium of bargaining power between the parties.

The most affected suppliers are those that supply agricultural products. The supply side encounters great fragmentation (Biong 2007). Consequently, it weakens the suppliers bargaining power leaving the Wal-Mart stores at a better position to control the suppliers.

Besides the fragmentation, Wal-Mart stores enjoy buyer power since they also have retailer power. With time, Wal-Mart stores are dominating the food products market. In most of the developed economies, grocery stores sell food products. In the United States, Wal-Mart stores dominate the food market.

Hence, the stores have significant influence in the food market since they have a wide consumer base. Being the biggest stores in the market, Wal-Mart stores have significant influence on their suppliers (Biong 2007).

In an environment where suppliers do not have a pool of buyers to select from, the existing buyers end up exploiting them. The buyers take the advantage of being the only alternative for suppliers to influence the selling price the suppliers set for their products (Burch 2007).

In groceries market, some suppliers offer perishable products. This implies that they require getting the buyers as fast as possible to avoid losing their products. In a majority of the countries, there are a limited number of grocery stores, which stand between suppliers and the numerous consumers (Burch 2007).

Consequently, suppliers are forced to comply with the demands the suppliers present, and which in most cases, end up affecting their profit margin.

The current imbalance of bargaining power between suppliers and Wal-Mart stores promotes an abusive buying culture, in the United States market and other developed countries. Most of the abuses are fiscal in nature and lead to suppliers losing trust in the stores.

Some of the abuses include threatening to cut ties with suppliers who fail to comply with their demands (Burch 2007). At times, Wal-Mart stores require their suppliers to reduce their prices.

However, even when the suppliers reduce their prices, Wal-Mart stores do not pass this to consumers since they sell their products at high prices. Whenever suppliers fail to reduce the prices, Wal-Mart stores stop relating with them or threaten them with de-listing.

These threats make the suppliers have inferior bargaining power while some become uncertain about the stores (Burch 2007). Whenever a person becomes uncertain about anything, it becomes hard for him or her to plan for it. The same happens to suppliers.

Whenever they develop the fear of the Wal-Mart stores, it becomes hard for them to plan, giving the store operators an upper hand to control their operations.

In some instances, some Wal-Mart stores acquire goods on credit from the suppliers. The parties involved agree on the payment duration but the retailers end up violating the agreement. Occasionally, the stores pay for the goods after the agreed date and do not pay in full.

These late payments drastically affect the suppliers since they interrupt their cash flow making it hard for suppliers to continue serving the grocery stores (Williams et al. 2010). In a bid to continue serving their customers, suppliers end up looking for alternative sources of money, which in most cases, lead to them incurring huge costs.

As Wal-Mart stores continue increasing their market power and reputation, they are coming up with branded products (Burt 2010). These brands are assuming a significant share of the groceries market. In the United States, the stores brand products take about 25 per cent of the national market.

Hence, with time Wal-Mart stores are assuming a new role in the United States market (Burt 2010). Unlike in the past where operators of grocery stores were solely purchasers, they are currently waging competition against the suppliers (Freeman 2006).

Limited shelf space in most of the grocery stores is leading to retailers replacing most of the branded products with their own brands. For the Wal-Mart stores, their brands are profitable relative to other brands.

Besides, the stores do not incur extra costs in promoting these products since they advertise them as they do for the entire business (Freeman 2006).

Emerging Ethical Issues

As grocery stores continue to come up with novel brands, numerous ethical issues are emerging at the personal and organisational level. One of the ethical issues that have emerged at the personal level deals with integrity.

This element entails running the stores operations honestly, responsibly, in accordance with the laws, and diligently (Volpe & Lavoie 2008). Retailers in grocery stores are expected not to overcharge their customers and exploit their suppliers. Ethically, businesses should operate in an environment that does not propagate exploitation of any nature.

Nevertheless, this does not apply to most of the Wal-Mart stores. Contemporarily, Wal-Mart stores use their influence to exploit the suppliers and force them to lower their prices. Even after suppliers agree to lower their prices, the stores do not reciprocate by lowering the prices for consumers.

Instead, they continue selling their goods at high prices. They take advantage of consumer ignorance to exploit them.

Ethical issues have also emerged at the organisational level. One of these ethical issues deals with environmental pollution (Memery, Megicks & Williams 2005). Most of the environment conscious consumers consider groceries like supermarkets as havens of imbalanced consumerism (Megicks, Memery & Williams 2008).

Wal-Mart stores deal with products like fruits that emit high levels of carbon to the atmosphere. Moreover, the stores package their products in containers that at times pollute the environment. Failure by most of the grocery stores to put environmental considerations in their operations is drastically affecting their performance.

This aspect underlines the reason why Wal-Mart stores embarked on an environmental campaign. Currently, most of the Wal-Mart stores have embarked on an environmental conservation campaign dubbed going green (Megicks, Memery & Williams 2008).

The campaign intends to paint the stores as environmental conscious entities in the public, and thus attract more consumers in the process. There is unhealthy competition between brands established by Wal-Mart stores and other brands.

It is unethical for organisations to decrease their prices extensively in the name of curbing competition (Memery et al. 2012). For a fair playing ground, organisations are only required to lower their prices to a reasonable level. Nevertheless, this does not happen in the groceries market.

At times, Wal-Mart stores lower their prices significantly as a way of discouraging suppliers from selling their products to consumers directly. It leaves the suppliers with no option but to sell their products to Wal-Mart store, which in return buy their products at lower prices.

Ethical Impact of Globalisation

Globalisation has utterly transformed the world in the past few years. Today, people are able to transit national borders and do business in foreign countries without difficulties. In the past, people had to go through the overhead of acquiring government permit before transacting businesses in foreign soils.

Globalisation has led to the world becoming one large market (Raynolds, Lurray & Wilkinson 2007). In addition, it has altered the way people think and relate with one another. Hence, with time the issue of ethics in the business world is becoming a nightmare with new ethical issues emerging.

Globalisation has led to changes in parameters used to determine the ethical level of a business. Increase in demand for organisations to partake in corporate social responsibility, environment conservation, and changes in labour rights have transformed the parameters used in determining if grocery stores are ethical or not.

Grocery stores that record high level of environmental pollution are considered unethical. This underlines why grocery stores like Wal-Mart stores and Mark & Spencer are opting to use sustainable palm oil.

The objective is to achieve their environment conservation policies thus abiding by the established environment conservation policies (Talaulicar 2007). Besides environment conservation, globalisation has led to health becoming one of the parameters used to gauge if an organisation is ethical.

Wal-Mart stores are required to abide by policies established by Food Standards Agency. It is unethical for any store to use genetically modified ingredients in producing their food products. Moreover, in line with environment conservation policies, the stores are encouraged to stock products that are more organic (Whysall 2010).

These ethical issues have emerged due to the unrelenting call for a concerted effort in environmental conservation brought about by globalisation.

Effects of Sustainability and Fair Trade

Both the abuse and use of market power by retailers and propagation of policies for ethics and sustainability dominate todays business environment in the groceries market. In future, partnership and protest will significantly characterise the trading relationship.

As environmental conservation continues posing sustainability challenges to grocery stores, with time, Wal-Mart stores are transferring the responsibility of environment conservation to their suppliers. Sustainability is intertwined with ethics. To achieve sustainability, grocery stores need to be ethical (Ozcaglar-Toulouse, Shiu & Shaw 2006).

Hence, Wal-Mart stores are cutting down on the number of suppliers as away of enhancing their ethics. Organisations achieve ethical standards easily when dealing with few partners. Monitoring these partners is easy. Hence, an organisation is capable of implementing ethical standards without challenges.

The need by Wal-Mart to remain in the groceries market has forced it to reduce the number of factories it works with in its operations. The move aims at helping the company implement ethical policies on these factories and easily monitor them to ensure that they stick to the standards.

The fight for brand dominance characterises the groceries market. Wal-Mart stores struggle to make their brands dominant thus doing away with other brands. This has adverse effects on marginalised suppliers. The stores only support marginalised suppliers to a level where they are of benefit to them (Szmigin & Carrigan 2009).

In a bid to curb this exploitation, governments and other institutions, which are responsible for ensuring that there is a level playing ground for all parties in the market, have come up with a fair trade policy.

All grocery stores; including Wal-Mart stores are required to stock products with a fair trade label as a way of promoting equality in the market. Currently, there are numerous fair trade products stocked in Wal-Mart stores.

Ethical Sourcing

Consumers are increasingly becoming environment conscious. They are increasingly relating with organisations that are environment friendly and participate in environment friendly projects (Pretious & Love 2006). Hence, Wal-Mart stores are working tirelessly to ensure that they exhibit their effort to conserve the environment.

Wal-Mart stores are embarking on ethical sourcing strategies. The strategies address four main areas that include environmental compliance, corruption, working conditions and labour rights (Pretious & Love 2006). The stores, especially those selling candy make sure that they source their raw materials from sustainable sources.

Besides, the stores aim at investing on projects that target at manufacturing environmental friendly packaging materials. Most of the products sold in Wal-Mart stores require packaging. Initially, the stores packed their products in polythene bags.

These bags were not environmental friendly thus forcing the company to look for alternative sources of packaging materials. Currently, the stores liaise with companies manufacturing biodegradable packaging materials to supply them with these requisite materials.

Conclusion

Wal-Mart stores, like other businesses in different markets have numerous ethical issues that influence their activities. Contemporarily, Wal-Mart stores enjoy strong buyer power. Hence, the stores have significant control over the suppliers.

Exploitation of suppliers by retailers in the groceries market has led to the emergence of numerous ethical issues. Wal-Mart stores take advantage of their influence to exploit both suppliers and consumers.

Besides, Wal-Mart is shifting the responsibility of environment conservation to suppliers as a way of ensuring that its stores remain sustainable. Globalisation has forced the organisation to reconsider its ethical standards. It has led to the emergence of new parameters like human rights and health, which gauge if an organisation is operating ethically.

There has been an introduction of fair trade policies to bar retailers in the groceries market from marginalising suppliers. Moreover, Wal-Mart stores and other grocery businesses in the groceries market are working on ethical sourcing strategies to increase their customer base and achieve sustainability.

Reference List

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Boone, L & Kurtz, D 2010, Contemporary Marketing, Routledge, London.

Burch, D 2007, Supermarkets and Agri-food supply chains: Transformations in the production and consumptions of food, Edward Elgar Publishing Limited, Cheltenham.

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Freeman, R 2006, The Wal-Mart effect and business, ethics, and society, Academy of Management Perspectives, vol. 20 no. 3, pp. 38-40.

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Ozcaglar-Toulouse, N, Shiu, E & Shaw, D 2006, In search of fair trade: Ethical consumer decision making in France, International Journal of Consumer Studies, vol. 30 no. 5, pp. 502-514.

Pretious, M & Love, M 2006, Sourcing ethics and the global market: The case of the UK retail clothing sector, International Journal of Retail & Distribution Management, vol. 34 no. 12, pp.892 903.

Raynolds, L, Lurray, D & Wilkinson, J 2007, Fair Trade: The Challenges of Transforming Globalisation, Routledge, New York.

Szmigin, I & Carrigan, M 2009, The conscious consumer: taking a flexible approach to ethical behaviour, International Journal of Consumer Studies, vol. 33 no. 2, pp. 224-231.

Talaulicar, T 2007, Global retailers and their corporate codes of ethics: the case of Wal-Mart in Germany, Ethical Issue in the Service Industries, vol. 28 no. 1, pp. 47-58.

Volpe, R & Lavoie, N 2008, The effect of Wal-Mart supercenters on grocery prices in New England, Applied Economic Perspectives and Policy, vol. 30 no. 1, pp. 4-26.

Williams, J, Memery, J, Megicks, P & Morrison, M 2010, Ethics and social responsibility in Australian grocery shopping, International Journal of Retail & Distribution Management, vol. 38 no. 4, pp.297 316.

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