23 of 25 people found the following review helpful:
4.0 out of 5 stars
very very useful academic perspective, January 25, 2006
This review is from: Wal-Mart: The Face of Twenty-First-Century Capitalism (Paperback)
Neither a polemic nor a whitewash, this book is critical yet strives to be fair. Its perspective is predominantly historical and a bit too academic, but it is well written and simply fascinating.
Sam Walton was a natural salesman, passionate about building his retail business. When founded Wal-Mart in 1962, he did not entertain any dream of becoming the wealthiest man in America or creating the world's largest company. Instead, he wanted to bring big-city discounting to his corner of the rural American South, which would cut about 20% off the prices in local stores. But he wanted the discounts to be offered every day, rather than by one-time sales promotions of selected items. He chose to expand locally, opening stores in his native Arkansas and spreading slowly into Oklahoma, Missouri, and Louisiana. Thus, as the book points out, Wal-Mart's culture reflects where it was born, where its salaries were viewed as fair and people could live reasonably well on them and in a context without strong unions or organized workers.
Walton's strategy was simple: to make up for his low profit margins, he would have to sell in higher volumes of sales in a large number of stores. In addition, his company developed a relentless drive to lower costs by going directly to manufacturers and constantly increasing worker productivity, which often translated into low salaries for a high-turnover work force. He also paid close attention to the competition as well as trained Wal-Mart workers to treat customers with courtesy and consideration of their needs. It was a phenomenal success. In 1985, with just under 1,000 stores, he was named by Forbes Magazine as the richest man in America. By 1991, Wal-Mart was recognized as America's largest retailer as it began to expand overseas. It was repeatedly hailed as the most admired company in America.
In the aftermath of Walton's death, the expansion of the company accelerated with a combination of new technologies (the "logistics revolution") and the globalization of its operations. By 2004, Wal-Mart was number one on the Fortune 500 list, as both the world's largest corporation and the largest non-governmental employer.
From the mid-1990s, Wal-Mart became a pioneer in technology-driven productivity enhancement. Elements included: 1) point-of-sale data collection, enabling managers to track inventory and demand in real time; 2) data mining in order to exploit trends to boost sales via novel merchandising techniques, e.g. placing diapers and six packs of beer near store entryways on Fridays, to exploit a spike in demand for both items at the end of the workweek; 3) the establishment of a just-in-time delivery system, which suppliers and distributors were obligated to participate in and obey, in effect joining Wal-Mart's data network. According to a widely cited estimate by McKinsey and Co., Wal-Mart alone was responsible for 25% of the "gain in productivity" of the U.S. economy from 1995 to 1999! Many of these efficiency gains, the company claimed, were passed directly on to consumers in the form of lower prices. Wal-Mart, the company said, saved U.S. consumers over $100 billion per year.
Combined with its sheer size (Wal-Mart accounts for approximately 10% of all retail sales in the U.S.!) these technological capabilities enabled Wal-Mart to exert an unprecedented degree of control not only over its business partners (independent manufacturers, suppliers, and distributors), but over its employees as well.
On the one hand, this represents a fundamental shift of market power to the retailer, which traditionally had served as outlets for manufacturers. In practical terms, this meant that Wal-Mart could force its partners to set prices at whatever levels that the retailer deemed desirable, which translated into direct control of both their marketing through Wal-Mart stores and in many cases, even the manufacturers' brand. Given the imperative of cost containment, this tends to cut their profit margins to the bone. In the case of Vlasic pickles, for example, some have argued that Wal-Mart's insistence that the company lower prices led to its bankruptcy as well as derailed its brand strategy for high quality at slightly higher prices. One the other hand, managers in Wal-Mart headquarters are able track the productivity of workers in its individual stores, allowing them to push for "improvements", allegedly as unpaid over-time and refusal to take breaks, which many critics charged were degrading and often illegal.
Wal-Mart's size and reach attracted many critics, who condemn its practices and began to mount protest campaigns against the company. Their tactics include grassroots campaigns to block the establishment of new Wal-Mart Supercenters, targeted consumer boycotts, a barrage of media attacks (in films and television, on the internet, and in print), and efforts to unionize Wal-Mart associates. In addition, the company became the object of a growing number of lawsuits (on average two per hour, 365 days per year!) from both current and former employees and customers, including many class-action suits.
Wal-Mart's critics argue passionately that the company had to change in a variety of ways. First, they believe, Wal-Mart had to somehow lessen its impact on the communities that it entered. As it stood, they charge, Wal-Mart not only destroys local "mom and pop" stores that could not compete on price, which sometimes turn traditional downtown shopping areas from vital social centers into ghost towns, but also generate such second-hand effects of increased traffic, reduced demand for other local businesses such as newspapers, additional infrastructure costs that create new tax burdens. Second, Wal-Mart's labor practices, which they believe are brutal and unfair, have to change. The company, they demand, should allow associates to unionize, offer better wages and health insurance benefits, and treat them more humanely. Moreover, critics claim, Wal-Mart's labor practices were dragging down those of its unionized competitors, who were asking employees to "bargain away" their higher salaries, pension plans, and other benefits in order for the companies to survive. Third, they argue, Wal-Mart has to provide a more equitable management of its supply chain, from "sweatshop" workers in China to the company's truckers as well as its manufacturing partners. This often means that the company should pay more for the goods and services it buys.
This criticism amounts to nothing less than a fundamental repudiation of Wal-Mart's business model, which in the words of one critic in this book, "can flourish only by externalizing many of its most important social and economic costs, which are displaced onto a relentlessly squeezed supply chain, an underpaid retail work force, and those many thousand communities...which have been forced to absorb so many intangible expenses..." Even worse, evidence suggests that the criticism resonated with a growing portion of the public. In a 2004 confidential McKinsey & Co., it was reported, between 2 and 8% of the public had ceased to shop at Wal-Mart due to the "negative press" about the company. Most alarming to Wal-Mart executives, however, was the disapproval of more affluent, middle class consumers in urban areas, that is, the group that the company had identified as the market that it must next enter if its growth rates were to improve or even be sustained.
This is about where the book stops, which is unfortunate given the things that have happened recently. As media campaigns against the company grew in 2004, Wal-Mart President and CEO Lee Scott decided to mount a counter-offensive. In its aim respond directly to the claims of critics, this represented a new departure for the company. After hiring the public relations firm Edelman, the company created a rapid-response "war room" in summer, 2005. Among the tasks of the group was the cultivation of a more positive image of the company - as environmentally aware and more worker friendly - in the minds of the "swing voters" who had not yet decided against shopping at Wal-Mart. It wants to be viewed as a good guy again, which in my opinion is a dubious proposition.
The next phase of the story is whether or not this new PR will work. The company certainly got lots of praise for its Katrina relief efforts, and deservedly so if you ask me. But the opposition to the company will persist. My advice is: hold onto your seats because it's gonna be a heckuva ride. For example, just after Scott announced some progressive measures, such as a new health care plan and some environmental initiatives, foes of the company released a leaked internal memo (on strategies to keep employees off the company health care plans) with perfect political timing: the vilification was intense, focusing on how the leopard may not really have changed its spots. These opposition groups are media-savvy and driven - and they will not stop. I have interviewed some of them, and to say the least, they are passionate about their mission, which is not just to block Wal-Mart but on how to shape the direction in which their communities will develop. Instead of asking "how many jobs", they are looking at what kinds of jobs are being created. In my view, this represents a fundamentally new kind of social movement and Wal-Mart had better take heed.
Recommended as the best book I have yet read on the company. While it is predominantly historical, it explains many useful things about the company that are unavailable elsewhere. Also, there are wonderful histories about the retail trade.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
4.0 out of 5 stars
The Book Wal Mart Doesn't Want You To Read, Especially If You Work There, November 2, 2011
This review is from: Wal-Mart: The Face of Twenty-First-Century Capitalism (Paperback)
This is a collection of essays, each written by different authors, regarding the business strategy of Wal Mart over the past 50 years, with special focus on American Wal Mart in the early 2000's. Some are written better. I wouldn't call them 'biased' or 'dry' like the incoherent low starred reviews here.
Since I didn't know much about the topic, let me tell you what I learned from the book. Wal Mart based it's 'floor strategy' on a divide and conquer scheme (keep workers divided, very powerful management), where the objective is to have low margins with high volume. To maximize profits, the biggest item on the Wal Mart agenda has always been controlling 'fixed' labor costs (theoretically necessary with small margins). Corporate obsesses about labor costs. The culture exploits workers 'off the clock' by under staffing and assigning more work than a single person could possibly accomplish. During slow times, workers are simply told to go home and not paid, despite being scheduled to work. Internal rules (borderline legal and also unfair) allow management to arbitrarily assign 'violations' to employees who cannot accomplish the work of three people, and they do it to everyone. This means when Wal Mart fires you, no unemployment, because the firing was 'justified'. Wal Mart also wants their workers to get no benefits, and exploits state run insurance and food stamp programs wherever possible.
Men working at Wal Mart make more than women, and women are preferred for most jobs because they can be paid less. Entire chapter on a class action lawsuit complete with statistical evidence.)
I found it interesting, Wal Mart only has managed to avoid unions in the USA, in Germany, China, the UK, Argentina --- most everywhere else --- Wal Marts are unionized.
In this current economy, the culture of Wal Mart is a hypocritical 'family', where shame is used to control workers, most of whom have little hope of advancement and become gradually disenchanted. Managers enjoy treating unskilled workers as replaceable cogs. This leads to a high turnover (allowing Wal Mart to keep wages low). It is deliberate.
Overall, an enlightening book.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
10 of 16 people found the following review helpful:
4.0 out of 5 stars
Good Insights!, December 5, 2005
This review is from: Wal-Mart: The Face of Twenty-First-Century Capitalism (Paperback)
The book begins by summarizing the 10/11/03 lockout/strike of 59,000 Southern California grocery workers from 850 supermarkets in an effort to maintain wages and healthcare insurance the UFCW had negotiated over 50 years. The lockout/strike ended Feb./Mar. of '04 with a decisive defeat for grocery workers - the new contract slashed starting pay and capped health insurance payouts. The one point of agreement was that the struggle was initiated by industry management trying to prepare for expected competition from Wal-Mart in their area. (Some experts see Wal-Mart becoming the nation's leading grocer by '08.)
Wal-Mart is attributed to bring over 230,000 shipping containers across the Pacific each year - approximately 100 containership loads, and about 10-20% of transhipped through Southern California. Its overseas suppliers employ up to 65,000 at a single facility (Huyen-Binh-Chanh in VN).
Discounters' labor costs average about 15% of sales (about half that of department stores); Wal-Mart's are another 25% less. One means of selling its low wages is to also offer profit-sharing - however, few take advantage because qualifying requires two years' employment to qualify (40%+ turnover/year). Only 7% of its employees try to support a family with children on a single Wal-Mart income -> reduced need for benefits. A 32-hour week is considered "standard" at Wal-Mart (some employees do work 40 hours. It probably has a higher percentage of managers start in low-paying jobs and lacking a college/university degree than any other large company in the world.
Adding groceries to Wal-Mart's existing stores typically increased sales of non-food items 30%.
Wal-Mart's "Plus One" principal: - each product's price should be lowered or its quality improved each year. Over 500 large vendors have a permanent sales office near Wal-Mart's headquarters. It requires suppliers to open their books and undergo detailed cost analyses; trade-promotions and direct-marketing campaign costs are deducted from the wholesaler's price. Vendors can access saels data directly, providing the ability to test new products more easily/quickly, and to simply product production and setting inventory levels.
Providing national brands helps Wal-Mart document its status a a low-price leader; store brands (abouat 40% of the total) appeal to the more price conscious shoppers.
Methods of Controlling Labor Costs: Making indenpendent contractors out of truckers bringing containers out of port prevents them from trying to organize or join a union - would bring anti-trust suits; in addition, a large portion are immigrants - particularly difficult to organize. Staffing distribution centers with temporary agencies/employee-leasing firms allows a quick change if organizing develops.
Wal-Mart originally incorporated each store separately, thus allowing sales/store to fall under levels that would require paying the minimum wage - this was stopped by a court-ruling in '67. (K-Mart took the concept a step further - licensing out different departments within a store to different companies.) A computer staffing system dictates lower staffing/sale as sales levels increase; people are sent home early when sales fall. Managers are pushed to "beat yesterday" to retain their position and earn bonuses.
The rest of the book is taken up with general retail history, a summary of the class-action suit claiming Wal-Mart discriminates against women in promotion decisions, and background on Wal-Mart's foray into Mexico.
My opinion is that blaming Wal-Mart for low wages/benefits is misplaced - Wal-Mart would not be able to do this if the economy were better. Thus, the weak economy is the problem, and Wal-Mart provides a preview of how life will be for more and more Americans as international competition increases.
Help other customers find the most helpful reviews
Was this review helpful to you? Yes
No
