How corporate social responsibility affects multinational organization operations

Management - Corporate Social Responsibilities

Social Responsibility at Wal-Mart

The aim of this paper is to identify if and how a multi-national organization understands and implements the concepts of social responsibility and in turn, how these concepts have affected the company's operations. To offer an answer to the posed question, various resources will be studied, including the testimonials of Wal-Mart advocates and disclaimers, as well as resources written by neutral individuals and groups.

The contemporaneous business community is constantly marked by change that affects all aspects of how companies conduct their operations. They pay closer attention to the numerous regulations imposed by the government, first of all to reduce additional costs due to fines and then to attract the admiration of the general public. The companies then try to maximize the corporate value to gain more profits but also to satisfy the interests of their shareholders. Also, organizations place a greater than ever emphasis onto the complete satisfaction of their customers' needs and wants and increase their efforts to improve the on the job satisfaction of their staff members. Finally, they try to develop and integrate the latest technologies that not only increase the efficiency of the administrative and operational processes, but also reduce the level of adherent pollution, to the satisfaction and demands of the environmental organizations. The government, the general public, the environmental organizations, the investors, the customers and the employees, alongside with any other group or individual that is directly affected by the company's operations form the category of stakeholders. And to the benefit of their stakeholders, multinational organizations implement the concepts of social responsibility. "Social responsibility may be defined as balancing the pursuit of one's individual goals with the needs of others in establishing a safe and just world and ensuring the continuation of a democratic society" (Thompson and Smith, 1991).

2. Social Responsibility at Wal-Mart

Wal-Mart was founded in 1962 in Arkansas and it is today the largest chain of supermarkets in America. Along the years, the company registered success after success and began to expand its operations internationally. The primary strategy at the basis of Wal-Mart's corporate success was given by their pursuit of the lowest prices. The organization has often been accused of illicit or at least immoral operations, such as the insufficient employee benefits or the ruining of local mom & pop stores. But the company continued to remain strong and increased its awareness of the social impacts of their operations.

2.1 Stakeholders

As established in the introduction, stakeholders represent the individuals and groups of individuals who are directly or indirectly affected by the operations conducted by the multinational organization. And the fact that they are affected by Wal-Mart, gives them the right to make certain demands, to which the company often responds. In this line of thoughts, the supermarket chain has often been affected by the requests and complaints forwarded by its stakeholders.

Employees

The company states that they respect the rights and individuality of each and every employee, but some of them tend to disagree. In this particular instance, along the years, several staff members have intended law suits against their employer alleging discriminatory behavior and a breaking of their rights. A primary concern was that of the low wages received by the Wal-Mart employees, which attracted the interest of various individuals. "People are shocked that Wal-Mart employees are paid so little that they not only qualify for government aid, Wal-Mart helps them get it" (Spotts and Greenwald, 2005).

The company was influenced by this category of stakeholders from two perspectives:

First of all, the company had to reduce costs and retail prices, and as such paid the employees less than minimum wage, which eventually caused several internal problems: low personnel morale, lack of motivation and reduced performances to culminate with poor quality of the services delivered and dissatisfied customers

Then, in trying to repair the damage, the multinational company had to invest large sums of money and repair their reputation and public perception.

Communities

The people in the communities where Wal-Mart decides to open a new store often receive the initiative with reticence. And they do this out of the belief that large stores tend to 'kill' the small local stores, also know and mom & pop stores. And to counteract these beliefs, the multinational organization invests large sums of money into the development of the communities. "Wal-Mart, Neighborhood Markets and SAM'S CLUB help communities through matching funds, grants and other funding to local groups [...] This Wal-Mart (in Kentucky) raised funds to support their local community's military unit in Iraq, contributed to their local food bank and helped a local child's Make-a-Wish dream come true" (Wal-Mart 2006 Annual Report). The company also created an image of a large job creator and employer and a major contributor to community development to the large taxes they pay annually.

Customers

The Wal-Mart customers are most importantly driven by the low prices implemented by the organization. But they also expect the products purchased to meet certain standards of quality - and this sometimes fails to happen. Importing the cheapest products from various countries and in sometimes improper conditions, the final quality is often damaged. The customers were initially mesmerized by the low prices and cared less about the quality of the products, but their demands are currently increasing. Foremost, due to the low wages received, the staff was delivering low quality services, which also dissatisfied the customers. The complaints of both employees and customers are soothing the organization should strategically consider, but they do not represent a real threat as they can easily be replaced. In other words, if some Wal-Mart employees leave their jobs, others will come and take the free positions. And if some dissatisfied customers complain, chances are they will still continue to purchase from the store; and if they don't, there are others who will. An actual position in this matter remains yet to be taken.

Suppliers

It is a generally accepted fact that suppliers often have a great impact upon the organization as a change in the price of commodities can easily impact the retail price to the end consumer and consequently the politics implemented and revenues registered by the organization. In the case of Wal-Mart however, the purveyors have a rather limited influence upon the multinational organization, as the first is the one that dictates mostly. "A company with a brand name such as [...] Wal-Mart effectively controls a long chain of frequently shifting suppliers based primarily in low-wage countries, thus controlling much of what suppliers do: what product quality standards and schedules must be met, what products will be produced" (Florini, 2003)

These four categories are the primary which affect the operations undergone by Wal-Mart, but aside from them, there are also the governmental and non-governmental institutions. Both of these categories issues demands and regulations for the protection of the general public and the consumers, and in this particular sense, the multinational organization will have to comply with more rules and in doing so, they will have to invest larger sums of money.

2.2 Organizational Responses to Social Demands

There is a wide variety of social demands to which Wal-Mart has to answer.

Proaction

The opinions on Wal-Mart proaction vary, with division between statements of strong and basically inexistent proaction. As mentioned before, the company mostly relies on its ability to implement the lowest prices on the market and this then in turns offers then growing numbers of customers, who often accept the not so high quality of the products and services. On the other hand, the company emphasizes on its efforts to raise its social responsibility and sustain the communities and the general society in improving the quality of their lives. The multinational company does this by respecting the rights of their employees, by organizing and sponsoring social events and by trying to sell the best products. "That's why we are doubling the organic product and socially responsible offerings in select U.S. Wal-Mart stores. SAM'S CLUB also is expanding its array of organic and socially responsible products by more than 100 new items, such as Brazilian Marques de Paiva USDA organic coffee" (Wal-Mart 2006 Annual Report).

Accommodation

The level of accommodation as a response to the social demands made by Wal-Mart stakeholders can be looked at from two angles. First of all, it could be compared against the numerous complaints. In spite of them and their long history, the company continues to engage in dubious actions, such as offering low quality products and paying low employee wages and limited benefits. Then, the accommodation could be compared against the actions taken so far by the company. In this particular instance, it becomes obvious that Wal-Mart has increased its efforts to operate according on increased levels of social responsibility. "Hurricane Katrina helped change a lot of minds within Wal-Mart. When the government was unable to deliver necessities like food, medicine and water to those who were stranded, Wal-Mart stepped in. "We literally saved thousands of lives," Blackwell said. "What Katrina showed us was how we can use our size and resources to do something very good." Inspired by its role in helping Katrina victims, Wal-Mart looked at the impact a company its size could have throughout the world on a daily basis if it embraced corporate social responsibility (CSR)" (Ferdinand, 2007). But despite of this, a certain level of accommodation continues to exist.

Defense

The accusations brought to the supermarket chain are endless and they are likely to continue in the future as well. But the company has fought hard to counteract the harmful effects. Their best defense has been built on arguments such as:

Wal-Mart associate (employee) makes $17,000 per year and he is free to look for another job if he is dissatisfied

The company offers low prices, allowing as such the population to increase its savings and live a better life

The company obeys by the legal rules and their sole purpose is to maximize corporate value, not become a social institution (Wake Up Wal-Mart Blog, 2005)

Obstruction