Mislabeling in Wal-Market Chinese Market, Essay Example

Wal-Mart was founded by the savvy businessman Sam Walton in 1962. The first Wal-Mart store open in Rogers Arkansas. Sam Walton went on to become one the world’s largest and very successful retail food chains.” Today, Wal-Mart employs over 2.2 million employees all over the world including 1.3 million in the U.S. Wal-Mart traditionally hires store employees as hourly wages while promoting approximately 160,000 people each year” (Wal-Mart, 2014).

Wal-Marts core values are service to its customers, company integrity and striving for excellence for each and every customers. Wal-Mart company culture is respect to everyone, support the associates so that can properly support customers and communicate by listening to the customer needs.Sam Walton founded Walmart with ethics of hard work and good products would help the company maintain a certain level of loyalty from consumers.This rich traditional is the reason Wal-Mart exist in the communities globally. Wal-Mart culture is represented by every employee seeking to work together to fulfill that purpose. These core values are incorporated into every aspect of our retail store business.

Wal-Mart is the largest retailer company in the world, and its business strategy has been aggressive expansion into global markets. Therefore, Wal-Mart has taken advantage of globalization to open stores throughout the world, as well as aggressively outsource production so to lower labor costs and increase revenue. A prominent location for Wal-Mart’s outsourcing has been factories in China, as Wal-Mart outsources to approximately 10,000 factories in China (China Labor Watch, 2014). However, Wal-Mart has also attempted to establish its retail presence in China through the opening of stores throughout the country. Theoutsourcing strategy has been effective for Wal-Mart from a business perspective, and controversies have emerged regarding Wal-Mart’s business structure in China from a labelling controversy that deliberately deceived consumers to concerns with worker’s rights. What makes these incidents more disturbing is that Wal-Mart has repeatedly emphasized in its business strategy a central place of ethics. The situation in Wal-Mart’s Chinese operations, from this perspective, can therefore be said to directly contradict with Wal-Mart’s own self-stated values and culture, leading to the conclusion that Wal-Mart’s ethical positions are not sincere and lack transparency (China Labor Watch, 2014). The following paper will address the problems of Wal-Mart’s business ethics in China in the following manner: 1) the ethical culture of Wal-Mart, 2) a summary of problems that have been detected in Wal-Mart’s outsourcing operations in China, and focus on one particular issue that is the labeling scandal in 2011, 3) an analysis of Wal-Mart’s response to these issues, 4) recommendations with how Wal-Mart should deal with these issues.

Case Study Analysis

The expansion of Wal-Mart to China was an attempt to enter the international markettoextended Wal-Marts to the borders of China. However, the Chinese culture, traditions, ethical views, employees,and consumers are quite different from the United States. The same authoritarian management style used in the United States did not work in China.The Chinese ethical parameters and human rights beliefs are more complex than their American counterparts.

Walmart is aware of the culture differences with the management style which has led to the some changing. The Wal-Mart executives has confirmed that the leading retail giant Wal-Mart has made a significant change at Wal-Mart China. They are hiring new management teams. (Chinaretailnews, 2013). The Wal-Mart executive teams in China realized that the American management presence in a Chinese culture was not working. Wal-Mart was using Chinese born management to push the authoritarian management style upon the Chinese people. This management style did not go over very well.  The practices that may have worked in the United States did not work in China. The Wal-Mart management did not understand the significance of their actions would ripple into a national incident. In Chongquing, the Wal-Mart team labeled some of the brand pork as organic. This type of mistake in the United States would have lasted for about 2 minutes because the management team would have just changed the labels. The culture of the Chinesepopulation take mislabeling very seriously as a lack of quality of their meats. In addition, the poor management decisions made by the Wal-Mart managers. Wal-Mart Stores Inc. (WMT) is reviewing management procedures in China as it reopened outlets in Chongqing after officials ordered all 13 of them shut for two weeks for mislabeling ordinary pork as organic”(Bloomberg News,2011).

Ethical Issues

Despite Wal-Mart’s clearly stated public ethical commitments, the company has been consistently criticized for its poor ethical record. Wal-Mart has been criticized ethically on numerous fronts, for example, unfair treatment of Wal-Mart workers, poor pay, and aggressive pricing (Giordano & O’Connor, 2014). All of these ethical concerns have emerged in Wal-Mart’s Chinese operations, from both its outsourced operations as well as the stores it runs in China. Moreover, Wal-Mart has practiced questionable business in terms of labeling, for example, marking certain products as “organic” in order to secure profit as well as manipulation of the expiration date on products (Giordano & O’Connor, 2014).    These problems makes an ethical issue of Wal-Mart in China complex, and it is clearly penetrates into all areas of Wal-Mart business operations. From another perspective, taking all of these ethical concerns in sum, thereby overlooking the very specific circumstances that contribute to each precise ethical concern could make an error. For example, the ethical concerns that are produced by Wal-Mart in terms of outsourcing are perhaps endemic to the very nature of outsourcing itself. The labeling issuewould be attributable to decisions made by Wal-Mart officials on the level of management. Therefore, it is important to not conflate the potentially diverse contexts that inform each of these ethical issues.

Wal-Mart’s outsourcing policyhas been criticized because of its pricing, which has been deemed too low, and it directly affecting factories that produce goods, thereby forcing them to produce more for less (China Labor Watch, 2014). The consequences of such a strategy has not only affected outsourcing factories, but has been construed as affecting the entire industry. (China Labor Watch, 2014) From a purely business perspective, this is an attempt by Wal-Mart to dominate the market. However, this domination is achieved at the expense of pressuring the market as a whole, potentially damaging other production in China in general. The basic business principle of turning a profit in Wal-Mart outsourcing operations trumps all ethical concerns. Certainly, it could be the result of outsourcing itself and the ethical concerns that are raised by outsourcing. In addition, it is debatable as to whether outsourcing in principle must be divorced from any type of ethics. A lack of concern for the Chinese market and Chinese workers as evidenced by Wal-Mart’s Chinese operations indicates the true culture and values of Wal-Mart’s business practice against what it proclaims publically to be its ethical concerns.

This indicates that a problem in Wal-Mart to the extent that ethics is only superficial. Manipulation of product labeling, such as the labeling of some products as organic and the tampering with expiration dates, are clear emphases on profit at the expense of honesty to consumers. In other words, not only are Wal-Mart’s business practices ethically questionable in relation to other companies, workers, either internal or outsourced, but also shows Wal-Mart disregard for its customers in China.

Giordano and O’Connor (2014),” thinks that the labeling controversy in Wal-Mart’s Chinese supermarkets is specifically the result of a “slight lack of revenue in China, whose people were relatively new to Wal-Mart stores and their products”.Therefore, increasing revenue became key to Wal-Mart’s operations in China. Wal-Mart attempting to create a more cost effective business through the manipulation of product information was deemed to the extent that it would improve revenue. In other words, managers emphasized increase profits at the expense of all other aspects of business, including ethics. Therefore, Wal-Mart was attempting to establish its foothold in China by emphasizing low-cost to the consumer at the expense of quality products. Nevertheless, mislabeling these products was not simply an issue of pricing, which is direct deceit by Wal-Mart.

The labeling scandal resulted in the punishment of 13 Wal-Mart stores being closed for a period of 15 days. After this incident happened, the chief executive and president of Wal-Mart China, and the senior vice president for personnel at Wal-Mart China, all resigned their positions at the same time (Bradsher, 2011). The official Wal-Mart statement on these resignations stressed that the timing of the resignations were coincidental, namely, the scandal, as well as the punishment handed out by the Chinese government was not the factor behind the resignations (Bradsher, 2011). Nevertheless, it is certainly questionable that two key executives in Wal-Mart’s Chinese operations resigned precisely at the time of this incident; further underscoring this hypothesis is the fact that Mr. Chan was replaced by Scott price, Which is the chief and President of Wal-Mart Asia. Because of price’s high responsibilities, the decision to have price occupy Chan’s role suggests the sudden nature of the resignations, which itself suggests a link to the labeling scandal.

Human Rights

Wal-Mart has been accused in other states of violating human rights. The media has reported on many occasions that Wal-Mart has openly refused to let unions into any of their locations. “Human Rights Watch’s investigation revealed that, in most cases, Wal-Mart begins to indoctrinate workers and managers to oppose unions from the moment they are hired. Managers receive explicit instructions on keeping out unions, many of which are found in the company’s “Manager’s Toolbox, a self-described guide to managers on “how to remain union free in the event union organizers choose your facility as their next target”(Human Rights Watch,2013). They have gone to the extreme of firing anyone that supports that agenda. Wal-Mart has been documented for only allowing employees to work less than 30 hours to avoid paying benefits. In addition, to violating the human rights of families or individuals from a foreign country and the human rights of the citizens of each community. In China, Wal-Mart has already faced complaints by the government of China threatening to close all the Wal-Mart stores because of the many number of violations against the people of China.

Wal-Mart’s Response

The resignations can be interpreted in different ways. For example, they may be understood as a different in business ethics. An American executive replaced the Chinese executives, it could be interpreted namely as a difference in Chinese and American management cultures. Such incidents have not occurred in Wal-Mart’s American operations. In this sense, they would be a reflection of labor in China in general, where violations of worker’s rights may be interpreted as systematic. Chinese business philosophy is thus above all informed by issues of revenue and profit, and the ethical element is non-existent in the approach to Wal-Mart operations. Concerns of human rights are placed on the margin to the extent that it interferes with profits. Because of Wal-Mart is attempting to establish itself in the Chinese market, these ethical violations were viewed as necessary sacrifices to establish such a position. Therefore, the decision to replace the Chinese management executives with an American management executive would thus reflect disconnect in business culture. Besides, Wal-Mart installed an American executive to emphasize ethical principles that had been lacking in the Chinese executive team.

However, such an interpretation of this particular case could be understood as the utilization of cultural differences as a scapegoat to mask questionable business practice by Wal-Mart in general. The mislabeling incident was not merely the result of isolated managers making decisions in particular supermarkets. Wal-Mart China executives resigned by this crisis is means that the mislabeling was part of Wal-Mart’s wider Chinese business strategy. The pressure of establishing a presence in the new marketplace led to the marginalization of any ethical principles towards the consumer. The Wal-Mart response in a manner reflects the recognition of a systematic problem in Wal-Mart’s Chinese operations. So far as the top executives resigned in this case, this would demonstrate Wal-Mart attributing responsibility to the highest levels of the Chinese Wal-Mart operation. In other words, Wal-Mart executives on the global level felt that the Chinese executives neither grasped nor implemented the core values of Wal-Mart. However, at the same time, Wal-Mart’s operations in Chinahave been questionable on multiple levels from pricing in the marketplace to worker’s conditions. The Wal-Mart response to this incident ignores the other systematic ethical violations that have occurred in Wal-Mart’s business practices in China. For example, Wal-Mart has not changed other questionable policies in its business practice in the wake of the labeling fraud (China Labor Watch, 2014). Such problems are still exit in Wal-Mart’s business practice. The Wal-Mart response rather reflects a decision to act after punishment had already been legislated by the Chinese government, so there were no internal mechanisms that would question these policies, but it was only after external mechanisms and organs identified this fraud that it was dealt with. Therefore,the Wal-Mart response addresses a particular ethical issue that was made public in the forced closure of Wal-Mart supermarkets by the Chinese government.This incident was not the result of different Chinese and American philosophies on business ethics, but rather that profit motivates Wal-Mart operations. The pursuit of profit at the expense of ethics is legitimate to the extent that the business remains profitable. The forced supermarkets closures damaged the Wal-Mart brand in the eyes of the public as well as the Chinese government, such that Wal-Mart was forced into making such a decision in light of these incidents.

Recommendations

Wal-Mart’s response to the labeling controversy reflected an internal decision to attribute blame to the Chinese executives in charge at the time of the incident. Namely, the labeling incident, although reaching the highest levels of Wal-Mart’s Chinese management structure, was viewed as an isolated incident. This is underscored by the fact that, firstly the Chinese executives were replaced by a non-Chinese executive. Secondly, that the Chinese executives were replaced by the leader of Wal-Mart Asia, thus indicating that Wal-Mart does not view its overall Asian business operations as problematic.

However, this particular supermarket incident that directly affected consumers to the other questionable business practices pursued by Wal-Mart, so the interpretation of the labeling scandal as an isolated incident seems untenable. Namely, the broader context of Wal-Mart’s business operations in Asia has to be emphasized. The conclusion is that Wal-Mart’s business ethics are radically lacking throughout their operations, and the labeling incident was merely a symptom of the overall ethical impoverishments of Wal-Mart operations. When considering that these ethical problems have been raised in Wal-Mart’s business operations, the ethical problems related to Wal-Mart’s approach to business could not be isolated to one specific area, such as pricing. Wal-Mart’s problems extend beyond merely one ethical area, thus suggesting that despite all of Wal-Mart’s banter about ethical commitments, these are only public relations maneuvers intended to placate management and business practice that is only concerned with profit. Wal-Mart’s operations have demonstrated the total gulf that they may exist between business practice and business ethics: from a more cynical perspective, it could be suggested that this gulf is inherent to business itself. Nevertheless, business ethics cannot accept this as a premise, there is no a prior incompatibility with business and ethics. However, in order to realize ethical business practice, management systematic changes must be made. Recommendations of how to address the labeling case would not merely address the labeling case itself, but rather how Wal-Mart operates in Asia.

Conclusion

The labeling scandal in Chinese Wal-Mart supermarkets presented a clear public violation of the public’s trust. When placed in the context of other ethical issues that related to Wal-Mart’s business practice in China, the conclusion is that the labeling incident was not merely an isolated incident, but rather a symptom of widespread ethical problems in the organization. Certainly, the aim of business is to produce profit and revenue. Moreover, at the same time this does not disqualify ethical responsibility. Wal-Mart itself emphasizes this responsibility in the declaration of its core values. Yet numerous incidents have shown that these core values have not been adhered to in a systematic fashion.

References

Bloomberg News. (2011, Oct).Wal-Mart reviewing management at China stores after pork probe. Bloomberg News. Retrieved from http://www.bloomberg.com/news/2011-10-25/wal-mart-reviewing-china-store-management-after-pork-mislabeling-incidents.html

Bradsher, K. (2011). Two top executives resign from Wal-Mart China, The New York Times, October 17. Retrieved 10 May 2014 at http://www.nytimes.com/2011/10/17/business/two-wal-mart-china-executives-resign-posts.html?_r=0

Chinaretailnews. (2013). Wal-Mart China announces new management changes. Retrieved from http://www.chinaretailnews.com/2013/10/29/6805-wal-mart-china-announces-new-management-changes/

China Labor Watch. (2009). Wal-Mart standards fail, workers suffer. China Labor Watch. Retrieved 10 May 2014 at http://www.chinalaborwatch.org/pro/proshow-102.html

Giordano, B. & O’Connor, M. (2013). Wal-Mart mislabels products in China, Business Ethics Case Analyses. Retrieved 10 May 2014 at http://businessethicscases.blogspot.com/2013/02/walmarts-ethics-in-question-worldwide.html

Human Rights Watch. (2013).US: Wal-Mart denies workers basic rights. Retrieved from http://www.hrw.org/news/2007/04/30/us-wal-mart-denies-workers-basic-rights

Wal-Mart (2014). Wal-Mart statement of ethics. Wal-Mart Corporation. Retrieved 10 May 2014 at http://cdn.walmartstores.com/statementofethics/pdf/U.S_SOE.pdf