Excerpt
Relevance of analysing Wal-Mart's customer value creation in combination with its social sustainability reputation
“[..] the work we do to help people live better goes far beyond our store walls. It extends into our communities and around the world and affects the lives of people we will never meet." (Wal-Mart web page, 2014).
Wal-Mart is the world’s largest public corporation, the biggest private employer with over two million employees and also the largest retailer (Fortune, 2014). However, Wal-Mart is a company which has been confronted with many revealing headlines about its poor social sustainability in recent years; for example, employees in the US are significantly underpaid so that they cannot even afford health insurance (Wedekind, 2009). With regard to these facts, this essay is aiming to analyse the following question:
“How can Wal-Mart create customer value in a low price industry in such a way that its customers disregard its lack of social sustainability?”
To answer this question, at first the status quo regarding Wal-Mart’s social sustainability and its customer value creation activities will be presented. Following this, managerial recommendations will be given on how Wal-Mart can create customer value via VRIN-resources and dynamic capabilities. Finally, a conclusion will be drawn.
Status quo regarding Wal-Mart’s social sustainability reputation and its activities for customer value creation The secret of Wal-Mart’s success consists of complex bundles of organizational capabilities and strategies. However, one of the basic beliefs on which Wal-Mart’s founder, Sam Walton, built the company was, "Service to Our Customers”, which aims at the lowest prices with the best possible service. Activities creating customer value are, for instance, the "greeters”, who welcome customers and hand out shopping baskets; the expectation for all employees to look customers in the eye, smile at them, and offer a verbal greeting; the "Satisfaction Guaranteed” program, which assures customers that Wal-Mart accepts returned merchandise on a no- questions-asked basis; and last but not least the low prices (Grant, 2008).
Moreover, Wal-Mart communicates frequently about its activities for global and social responsibility, reporting, for example, that it has pledged $2 billion in cash and in-kind contributions to help towards ending starvation in America (Duke, 2010).
Nevertheless, there have been many headlines and studies about Wal-Mart’s bad practices with regard to its social sustainability in recent years. Amongst other things, Wal-Mart is accused of lowering wages by entering local communities and killing small businesses as well as reducing social connectivity (Zhang et al., 2009). Lawsuits have alleged that, for instance, Wal-Mart forced its employees to work longer hours without a lunch break, or that it failed to provide suitable seating for its cashiers (MarketLine, 2014). Even more striking are the accusations made by Wal- Mart employees that the company discriminates against race and sex with unethical and unfair practices (Sellers, 2005). Independent audits have found serious, repeated violations of safety standards, social issues, and unauthorized subcontracting in its manufacturing plants in Bangladesh (Smith, 2013). These developments not only impact Wal-Mart’s brand image disadvantageously, but also affect its growth opportunities.
Wal-Mart’s competitors, such as Target, have been increasing their percentage of similar merchandise items considerably, and have also been catching up on the price front (MarketLine, 2014).
Managerial recommendations for a strategy to create sustained customer value The question is how Wal-Mart can further create customer value in a way that the customers’ awareness of its lack of social sustainability does not lead to diminishing profits or loss of market share. Ways to generate competitive advantage and build customer value are, firstly, to identify, build and manage VRIN-resources, and, secondly, to develop dynamic capabilities. VRIN-resources are resources that are valuable, rare, imperfectly imitable and non-substitutable (Ambrosini, 2007). Dynamic capabilities are "the firm’s ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environments” (Teece et al., 1997, p. 516).
Retaining customers and improving the shopping experience, while also remaining the low-price leader, are seen as critical factors for achieving customer value for Wal- Mart (Kenlon, 2009).
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