I was watching Dateline last night, and I saw this report on Wal-Mart®, and due to the nature of the report, I figured Wal-Mart would be a perfect candidate for my presentation. The report was on Wal-Mart’s ethical practices overseas. As my topic is Marketing and Society, Wal-Mart’s ethical practices, or lack thereof, provide me with more than adequate information for my presentation. I did a little fishing around and came across an article called Wal-Mart's Pay Gap, by Sarah Anderson, on PoliticalAffairs.net, originally from the Institute for Policy Studies in Washington, DC. What I learned is that CEO compensation, as of April 15th of this year, showed that Wal-Mart CEO H. Lee Scott Jr. made $17,543,739 in total compensation last year. The average pay for leading U.S. CEOs is about $9.6 million. So Scott’s pay is 871 times greater than the average U.S. Wal-Mart worker, 50,000 times higher than Chinese Wal-Mart workers.
Not including about a quarter of Wal-Mart part-time workers, who are assumed to make considerably less, average Wal-Mart workers earn nine to ten dollars per hour… “37% lower than the national average wage of $15.35 for production and non-supervisory workers… As a result of Wal-Mart’s low wages, many employees of the world’s largest company must rely on government healthcare, food, housing and other aid. A study by Congressional Democratic staff estimated that Wal-Mart workers receive on average $2,103 per year in federal subsidies alone” (Anderson).
What I’ve just mentioned is limited to the U.S. alone, where, due to strict laws, Wal-Mart’s low wages are still within the legal realm. What is of more concern to me are Wal-Mart’s incredibly low international wages. According to the International Labor Rights Fund, among other sources, in Bangladesh and China, Wal-Mart subcontracted employees make about 17¢/hour, 46¢ in Indonesia, 23¢ in Nicaragua, and 53¢ in Swaziland.
The report I watched on Dateline showed working and living conditions primarily for workers in Bangladesh. According to the report, Wal-Mart claims to abide by all labor laws in the countries where it subcontracts and terminates relations with factories that do not. However, according to hidden camera reporting, as well as interviews with factory workers in Bangladesh, none of the factories in the report were abiding by national laws, as they are not really enforced. Furthermore, the camera crew went into the homes of some of the workers… makeshift huts where people often live with co-workers and prepare and eat food on the ground. In times of heavy rain flooding, they have no homes.
Anyhow, in some factories, the supervisors claimed to pay their workers $2/hour, but upon interviewing the workers, Dateline found that workers were paid around 12-17¢/hour, in accordance with the findings of the article. Other factories admitted outright that they paid their workers 17¢/hour, which, mind you is legal in Bangladesh. However, what is not legal is the fact that in the factories, employees often work 70-120 hours/week without any overtime pay (and sometimes deprived of standard pay to conceal, in documentation, their illegal overtime hours) to fulfill Wal-Mart quotas. Walmart's response to Dateline was that it had inspector checking factory audits, and would do so again to make sure that the factories were in compliance with Wal-Mart standards, yet the report showed that the audits were frequently lied on to conceal illegal policies. That was in the report and Wal-Mart still responded with that defense! If workers attempt to abide by the law and leave, or if they fall asleep at their posts, they may be physically abused or fired (also illegal). Unfortunately, as the people have no other means for survival, many of them living off of water and lentils, sometimes not eating (Chicken for dinner would cost about a week’s salary), they have no choice but to stay in their miserable jobs.
Wal-Mart has tremendous power in the global marketplace as the world’s largest company, so it can force its 68,000+ suppliers to cut costs or face elimination. “According to one company report on its monitoring program, ‘We [Wal-Mart] also know our customers and stakeholders expect our merchandise to be made in factories where workers are treated fairly and have superior working conditions.’ However, watchdog groups charge that there are rampant violations of worker rights in factories that produce goods for Wal-Mart shelves” (Anderson). In fact, a decent portion of the Dateline special was devoted to Wal-Mart responses to criticisms of illegal worker conditions. According to the story, one factory owner tried to increase his costs by about 1¢/unit to increase worker wages, as the increase would substantially improve their living conditions. Apparently, Wal-Mart came back and demanded that he lower his costs by 2¢/unit, or Wal-Mart would discontinue business with him. With no other choice, the owner did so, thereby effectively reducing worker wages. Unfortunately, in such-circumstances, Wal-Mart’s market dominance holds many factories hostage, and while Wal-Mart is repeatedly criticized for breaking up unions in the U.S. and firing union conspirators, in China, Wal-Mart workers “face an official ban on independent unions,” and “a study by the National Labor Committee found that workers in China's Guangdong Province who made toys for Wal-Mart toiled as much as 130 hours per week for wages averaging 16.5 cents per hour (below the minimum wage) and no health insurance” (Anderson). In addition to being underpaid, workers in many factories “alleged that doors were locked and they were not allowed to leave the garment factory until the Wal-Mart quota was filled” (Anderson).
Wal-Mart is frequently under great criticism. Among the many criticisms are its ethics policies and mistreatment of employees, notably in wages, its union busting tactics that leave its employees making about $2/hour less than average unionized workers, its nearly-unaffordable company health plan, the manner in which it sucks life out of mom-and-pop businesses, and the fact that it is the most sued private entity in the world, behind only the U.S. government.
In a response to criticisms stemming from Wal-Mart’s unethical practices, its CEO “claimed that the company’s profit margin per worker is too small to all them to pay workers more. This argument does not consider that higher wages in the pockets of Wal-Mart’s 1.3 million U.S. employees could have an enormous impact on national consumer spending, including spending at Wal-Mart” (Anderson). This is a response that comes from the head of a company with $10 billion dollars in annual profits, and a massive advertising and PR budget, millions of dollars of which are spent on suppressing the image of Wal-Mart as a corporate monster that exploits slave labor and puts competitors out of business.
According to Chapter 20 of Kotler & Armstrong’s Principles of Marketing 10th ed., Enlightened Marketing is defined as, “A marketing philosophy holding that a company’s marketing should support the best long-run performance of the marketing system” (K&A, 647) Enlightened Marketing is broken down into five principles (K&A, 648):
1. Consumer-Oriented Marketing: A principle of enlightened marketing that holds that the company should view and organize its marketing activities from the consumer’s point of view
2. Innovative Marketing: A principle of enlightened marketing that requires that a company seek real product and marketing improvements
3. Value Marketing: A principle of enlightened marketing that holds that a company should put most of its resources into value-building marketing investments
4. Sense-of-Mission Marketing: A principle of enlightened marketing that holds that a company should define its mission in broad social terms rather than narrow product terms
5. Societal Marketing: A principle of enlightened marketing that holds that a company should make marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests
After going through the elements of Enlightened Marketing, Principles of Marketing goes on to say that “92 percent of consumers said they believe it’s important for companies to be good corporate citizens. More than three-quarters responded that they would switch brands and retailers when price and quality are equal for a product associated with a good cause” (K&A, 649). Unfortunately, that’s where Wal-Mart has consumers trapped. Their slave-labor policies allow them to charge much lower prices than their competitors, while still making sizable overall profits. With such incredible buying power, as both the world’s largest superstore chain, as well as the world’s largest company, while Wal-Mart may be known “for the warm way it treats customers, it is equally well known for the cold, calculated way it wrings low prices from suppliers” (K&A, 443).
So, is Wal-Mart using Enlightened Marketing? Well, when is comes to consumer oriented marketing, yes and no. Most consumers do not support sweatshop labor, but as demonstrated by the survey, if it means lower prices, most seem to favor lower prices. Innovative marketing is not really an issue, simply because Wal-Mart either carries products made by other companies, or it subcontracts to have products made to a sufficient level of quality at low prices. With respect to value marketing, Wal-Mart does appear to provide value to its customers through its EDLP (everyday low price) strategy (though “Wal-Mart has been sued by dozens of small competitors charging that it lowered its prices in their specific areas to drive them out of business” (K&A, 390)), yet it does so at the expense of ethical treatment of many of its workers. In order to consider sense-of-mission” marketing, I had to look up Wal-Mart’s mission statement. Unfortunately, as much as I tried to find one online, there just didn’t appear to be a mission statement available to the public. Suspect. The closest thing I could find was a “vision statment,” that includes the following, “We are dedicated in recruiting rewarding, and retaining employees of good moral standing (9) by providing benefits for excellent performance, providing clean environments to work in, and by providing equal-opportunity for all individuals.” You’ve read what’s above. What do you think? If that’s part of Wal-Mart’s mission, then sure, they defined it in “social terms,” but their follow-through just doesn’t appear to be there. As far as societal marketing is concerned, Wal-Mart’s dedication to low prices definitely fulfills consumers’ wants and Wal-Mart’s requirements, but how about the long-run interests of consumers and society? Both are in question here. While consumers may continue to get low prices, will Wal-Mart be able to continue exploiting sweatshop labor without serious consequences? Sadly, the answer would seem to be “yes!” As the largest corporation in the world, Wal-Mart appears almost unstoppable. The only thing that seems to slow it down is when towns unite to protest Wal-Marts moving into their towns, which often just results in a Wal-Mart springing up not too far down the road and eventually assimilating itself into the area. In my opinion, Wal-Mart’s strategy is enlightened with respect to offering phenomenal consumer value in exchange for profit, but pretty unenlightened with respect to its monstrous ethics practices. Yet Wal-Mart appears to be satisfying consumers and dodging its many lawsuits well enough, and with approximately one out of every two-hundred-or-so employed Americans working for Wal-Mart, it doesn’t appear to show any signs of slowing any time soon.
Works Cited:
1.) Kotler, Philip. Principles of Marketing, 10th ed. Prentice Hall, 2004. New York.
2.) Wal-Mart Vision Statment
3.) Wal-Mart's Pay Gap
4.) Human Cost Behind Bargain Shopping
For more information on pending litigation against Wal-Mart, as well as info from Wal-Mart's perpective, check out Wal-Mart facts. You can also find Wal-Mart's full code of ethics there in PDF format. I read it. Comparing it to the Dateline report is almost comical.
