Wal-Mart has become a household name in business and society today. It is a symbol of success, efficiency and wealth. Wal-Mart tops the list of the largest companies in the world. Additionally, its founders the Walton family is among the richest people in the world since they hold from the 7 to 10 position in the billionaires list (Caraway, 2016).The Wal-Mart Company showed the world what an efficient business is. Every day in 4457 stores of a chain, the company sells goods for $1.25 billion a day. The impact of its business cannot be underestimated since the Wal-Mart business model is adopted in the international retail trade chains all over the world (Caraway, 2016).
Success Secret
The company has achieved high performance owing to the reforms undertaken in the 1990s (Jia, 2008). Interestingly, Wal-Mart has not make investment in the revision of business processes. A new way to build relationships with partners, adjusted system storage and delivery of goods, and even change of the location of stores was among the aims of these reforms. The original concept Walton implemented in the first store was to provide commuters with inexpensive and high-quality goods. He used the fact that in the suburbs, the price of cheap products was always higher than in the city centers (Brea-Sol?s, Casadesus-Masanell, & Grifell-Tatj?, 2015). Sam Walton devised a new strategy by disregarding this income in order to increase the income gaining speed. It was necessary to ensure that people went shopping not from the outskirts to the center but from the center to the outskirts because there is a large supermarket with relatively cheap and high-quality goods (Brea-Sol?s et al., 2015).
From the very beginning, Wal-Mart had its philosophy with the basic philosophical credo that was “Low Prices.” In fact, this is the main secret of the company success. Sooner or later, a buyer receives information about where to buy cheap goods and becomes a regular visitor to Wal-Mart stores. Thus, the first Wal-Mart discounters were focused on providing customers with the lowest possible prices (Brea-Sol?s et al., 2015).
With time, the network grew so that there were new destinations such as supercenters offering the possibility of buying all kinds of goods from food to tools as well as the shopping area. The whole system was designed to catch a person into a giant network and make them a regular customer. Sam Walton won his competitors for the simple reason that is to be constantly guided by the objectives of the company’s development rather than the high yield. Thereafter, his philosophical principle was “stable income rather than the high one.”
Social Impact
The main conceptual feature of the chain was opening of stores in small towns. This approach seemed rather strange, given the size of the shops and the volume of production. Nevertheless, Walton realized that in small towns, where people mostly visit small shops, where there are not always the necessary goods and prices for some exclusive products are much higher. Therefore, due to the fact that Wal-Mart provides affordable prices and a wide range of products, the entrepreneur can easily attract most of the buyers.
On the one hand, such approach has a positive social impact in terms of creating a huge number of employment places for residents of the local area. The creation of jobs led to the temporary economic growth of the area due to new job opportunities (Neumarka, Zhangb, & Ciccarellac, 2008). Apparently, this was especially vital for small areas where previously there was a lack of occupations. Therefore, this contributed to a high growth of society in the area since people were able to satisfy their basic needs (Neumarka et al., 2008). In fact, the research on 2010 has shown that Wal-Mart employed 1.4 million people, which comprised 1% of working population of America (Blodget, 2011).
Among other positive social changes, one can notice that the expansion of Wal-Mart and the like dictated the American model of leading business in retail trading. In fact, this serves as the economic and societal promotion of America as well as raises pride among American population for having such a powerful trading machine (Jia, 2008; Clifford, 2013). Additionally, Wal-Mart positions itself as a retailer of products produced by American manufacturers, thereby promoting American goods even when opening stores overseas. Therefore, the popularization of Wal-Mart makes American manufacturers well-known worldwide, leading to the growth in employment and wage for workers at American factories, who are positioned as Wal-Mart suppliers (Clifford, 2013).
On the other hand, Walton was highly criticized for this approach because he, according to analysts, dealt a blow to small businesses (Jia, 2008). The opening of a massive store with the extensive range of goods made small retailers such as “corner shops” either close or experience difficulties in trade (Jia, 2008; Ficano, 2013). Wal-Mart founder replied to such criticism by advising the owners to choose a narrow specification in order to survive in the fight with the chain. The very effect of the network causing a decline of small family shops in the city or town received the name “Wal-Mart Effect,” leading to a 40-50% decrease in the number of small shops (Jia, 2008). This phenomenon is even often parodied in the American animated series such as “The Simpsons” and “Family Guy” (Ficano, 2013).
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However, not all aspects of the company looked equally smooth. For example, there were apparent problems with the integration of employees with higher education. It is clear that many network professionals were primarily workshops traders who have studied in the best case in parallel with the work, wanting to reach higher positions in the company. The growth in popularity of the brand has attracted the attention of another kind of workers, namely yesterday’s students wishing to reach career peaks at Wal-Mart. Therefore, it led to the conflicts between educated and undereducated workers and the difficulties in integration of both types of employees. Furthermore, this contributed to social deterioration due to conflicts and inability to integrate into the working environment or find an appropriate place in the chain.
Additionally, it was already said that Wal-Mart positioned its strategy mostly in proposing low prices. However, prices reduction also decreased the wages for the employees and led to almost complete absence of benefits. Therefore, despite creating a great number of workplaces, the wages are rather low in comparison with the company’s income. The wage in Wal-Mart totals $11.75 per hour, which is only 2.5% less than the average one (Blodget, 2010). However, taking into account the company’s annual $15 billion profit (Blodget, 2010), it is constantly under attack of employees for low benefits or their lack, which creates instability in the society and overall inequality in wages among big-box stores employees (Neumarka et al., 2008). Nevertheless, the overall trend of big-box retail chain is to propose higher wages than “small-box” urban stores (Cardiff-Hicks, Lafontaine, & Shaw, 2015). Additionally, employees have only 10% discounts for goods in the chain, which also did not contribute to the improvement of economic conditions of local workers (Blodget, 2010). As a result, it caused growing poverty, and lowered overall income of local people made them unable to support their families.
Several researchers also found a close connection between Wal-Mart opening and greater obesity levels in the area. In fact, these effects were closely related to the lack of movement related to visiting a huge store once a month rather than several small shops several times to complete the shopping list. Additionally, low prices also mean that people could afford to buy more. As a result, the Body Mass Index (BMI) of people who had Wal-Mart in their area was generally higher that BMI in “Wal-Mart-free” areas (Courtemanchea, & Cardenb, 2011).
Wal-Mart has also contributed to the rise in crime rates in the area. The research by Wolfe and Pyrooz, (2014) indicates than from the 1990s to 2000s the rate of property crime in Wal-Mart areas has grown by 18% on average. The rate of violent crimes has also increased for two units per capita on average. Such increase is explained by the reduction of income due to low wages and high poverty levels in the society (Wolfe & Pyrooz, 2014). Finally, the box-retailers areas, including ones with Wal-Mart stores, show lower tax revenues from the area (Langdon, n. d.). Thus, such decrease is evidence of low rates of urban development that is easily explained by massive closing of small local retail shops.
Despite the fact that Wal-Mart has become the most popular and successful American business and is often perceived as a role model by all start-up companies connected with retail trading, it has the long list of negative impacts on society in terms of health, crime rates, employment rates, and business. On the one hand, Wal-Mart contributes to higher employment rates and popularization of American products in the chain. On the other hand, the appearance of Wal-Mart in the area means the increase in obesity prevalence, higher crime rates, greater social instability connected with protests and conflicts of Wal-Mart officials and employees, low wages and overall deterioration.