Two recent stories describe starkly different motives for and means of aiding farmers: that of the the celebrity advocate and that of the seller.

John Mellencamp may have been the celeb du jour at a Farm Aid press conference yesterday at the Copley Farmers' Market, but that didn't stop folks from capping on his gravity-defying rock star hair. Margaret Williams, Food Project director, rubbed her tousled locks and quipped, "Little did I know I would have the same hairdresser as John Mellencamp!" To which the singer zinged back, "What's that, your pillow?" Mellencamp, who released a new album yesterday and played Boston this week, visited the market with his wife, former supermodel Elaine Irwin-Mellencamp, to promote the 23rd Farm Aid concert, planned for Sept. 20 at the Comcast Center in Mansfield.

By my estimation the Somerville, MA-based Farm Aid tries to and has done some good work in the last 23 years. The "About Us" pages states that they have raised over $ 30 Million "to promote a strong and resilient family farm system of agriculture. Farm Aid is a nonprofit organization whose mission is to keep family farmers on their land." They accomplish this goal, they claim, by "Promoting Food from Family Farms... Growing the Good Food Movement...Helping Farmers Thrive... (and) Taking Action to Change the System." All of which sounds noble. But to be fair, announcing the concert date and location on the same day that your new album reaches record stores smacks of self-promotion.

Wal-Mart plans to help family farmers in a very different way- by buying and selling their produce:

Wal-Mart Stores Inc.'s plans to spend about $400 million this year -- and possibly more in coming years -- stocking stores with locally grown fruits and vegetables may increase competition to pick local produce, though area retailers aren't sure to what extent. The July 1 announcement also could cultivate larger sales channels for Kansas and Missouri farmers interested in supplying the supermarket giant, which according to a statement already gets a fifth of its produce during summer months from providers in the state where a store is located. Wal-Mart expects the effort to save money and reduce greenhouse gas emissions by cutting the distance food is shipped. ... Not every group jumps at the idea of supplying Wal-Mart stores.

Interestingly, the article's author speculates that Wal-Mart may encounter resistance to its plans:

Not every group jumps at the idea of supplying Wal-Mart stores. Several years ago, the chain approached Good Natured Family Farms, but the cooperative turned down the opportunity, farm-to-market coordinator Diana Endicott said. The co-op's clients include Balls Food Stores, based in Kansas City, Kan., with which it sells local produce and puts growers in stores to meet consumers. About 95 percent of the co-op's members are within 200 miles of the metro area. The group already was busy keeping pace with current demand and preferred to work with independent or locally owned businesses, she said.

My guess is that it is the intermediary, Good Natured Family Farms, that stands the most to lose by Wal-Mart's policy, not the local farmers. It economically-challenging times such as these family farmers have greater incentive to work with whoever is offering the most favorable terms, not necessarily those who mean well but have no dirt under their nails.

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Despite the difficulty it had in Germany, Wal-mart continues to do well in many other overseas markets like Mexico and India. Two recent articles underscore the retailer's alterations to its US business model in those markets. Regarding Mexico, Wal-Mart plans to open over 200 stores and restaurants this year, an almost 13% increase:

The plans include developing the "Mi Bodega Express" format, chief executive Eduardo Solorzano said. The format will be more of a neighborhood store than a convenience market and said the results of two such existing stores have been encouraging. The 2008 expansion plan also includes 17 Wal-Mart Supercenters, 79 Bodega Aurrera stores and 30 VIPs restaurants. Currently Walmex has 1,023 stores and restaurants. Results in Mexico have been good, with the stock of Walmex up 40% the past two years and earnings have grown 32% over that same time period.

A second story from the Hindustan Times details plans for Wal-Mart's cash-and-carry model in the Punjab:

The Bentonville-based retail giant Wal-Mart has finalised the business model for its cash & carry (wholesale) business in India. The first warehouse (distribution centre), which will be up and running in Ludhiana, Punjab, by this June, will have a format similar to Wal-Mart models in the US. However, the product profile will be different from the US stores. Wal-Mart’s cash & carry business, which is a 50:50 joint venture with the New Delhi-based Bharti group, is meant for large institutional or wholesale buyers and is not for retail sales. German retailing major Metro was the first international giant to set up cash & carry stores in India. Ted P Huffman, director of supply chain and logistics for Bharti Wal-Mart, said, “The distribution centre will be similar to Wal-Mart centres in the US, but it will be smaller.” While centres in the US are spread over 1 million sq ft —two football fields put together—the Indian centre will have a size of 80,000 sq ft. He says high real estate costs are the reason for smaller distribution centres. “We will be stocking grocery items and will not have items like toys and medical supplies, which we do in the US,” Huffman said.

Thus, overseas we are seeing a variety of retail formats: in addition to the super-centers, there are also restaurants; in addition to it's traditional focus on retail sales, we see experimentation with a wholesaler model; instead of going it alone, as in the US, we see a willingess to take on 50-50 joint ventures; instead of football-field size footprints, we see smaller distribution centers; and instead of every SKU under the sun, we see a more targeted selection. Doubtless there are other dimensions along which Wal-Mart's overseas business models diverge from the highly successful one developed in the US. How long until some of the successful overseas experiments are adopted back home in Bentonville? Perhaps not very long.

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nHas opinion turned on Wal-Mart? Like so may questions, it depends on who you ask. In the state of Indiana it just may have:

For years, Wal-Mart was best known as a business killer. The Arkansas-based retailer had a reputation for coming into town and putting competitors out of business. Now Wal-Mart is being hailed by Gov. Mitch Daniels and other Indianapolis officials as an economic savior for opening in a depressed commercial area around Lafayette Square Mall.

"Just by being who they are, Wal-mart is literally as good an anti-poverty program as we have in this country," Daniels said last week. "They leave thousands of dollars in the pockets of people who need them most. Other businesses could learn from Wal-Mart's successful business model by being value driven and taking out costs." "I think this Wal-Mart is a shot in the arm," said Mary Clark, president of a Lafayette Square retail group. "[It could be] a magnet for the rest of the retail industry to look at us again." More than 7,000 applications were submitted for the 400-plus jobs at the store, Wal-Mart said.

Elite opinion within the state Democratic party neither hews the Republican governor's line nor shares his enthusiasm for the retail giant:

Daniels' comment prompted criticism. Jennifer Wagner, communications director for the Indiana Democratic Party, told The Star Press, "It's one thing to laud a company for opening a store in an economically depressed area. It's quite another thing to hold up that company as a shining example of the kind of jobs we should be trying to recruit to our state." Wal-Mart and its place in the economy can lead to disagreement even among those concerned about the poor and disadvantaged.

Setting aside the inaccurate implication of the last sentence, i.e. that pro-business forces are less concerned about the poor and disadvantaged, it's worth noting that rank-and-file opinion within the party may be less ideologically driven:

"Any opportunity for economic development in a community is a good thing, especially when there's a need for more of that type of development," Tanasha Anders, vice president of Youth and Family Programs for Indiana Black Expo, told The Star Press. "I was raised in Gary, where our steel mills closed and we didn't have a lot of opportunity and alternatives," Anders said. "A number of things are debatable, but the fact that there's another source of employment for a community -- and not just low-income employment because there are management opportunities -- you can't discount that."

But there are some who, in the name of abstract notions of "social and economic justice", would "discount that". And there are others who- in the name of free markets- would discount prices.

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Digital Trends is reporting that a Tennessee father bought a iPod for his 10-year old daughter that had some content not meant for tender eyes and ears:

CNN has a reported that a man allegedly purchased an mp3 player for his 10-year-old daughter as a Christmas present from a Wal-Mart store in Sparta, Tennessee. However, when she began using it, she discovered it was already filled with songs about drugs and X-rated video clips. "Within 10 minutes, my daughter was crying," Daryl Hill told the network. "I wish I could take the thoughts and images out of her head." According to Hill, the device – one of three he purchased there – had been returned to the store, and he wondered why they would then sell it as new. He declined Wal-Mart’s offer of a new replacement player and is keeping the one he bought for when he talks to a lawyer. Wal-Mart told Nashville WSMV-TV in an e-mail that returned, open packages were not supposed to be sold, and are investigating the matter.

Continue reading "iPo(rne)d" »

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At long last, the city of Clevland, Ohio is getting a Wal-Mart. And the citizens are lining up. But not to shop there (at least not yet): they are lining up to apply for jobs, at a rate of 20 applicants per opening.

Cleveland's first Wal-Mart is about to open, and with it comes 300 jobs in a metro area that is struggling economically. The result, according to the Plain Dealer: 6,000 people applied, or 20 applicants for every one job. "We had to recount (the applications) three times," Mia Masten, Wal-Mart's director of corporate affairs in its Midwest division, told the newspaper.

Lest you think that everyone sees this as a good thing, think again:

Most of the jobs are lower-paying, lower-skills positions, and the demand for those posts disturbs some people. "That's Depression-era kind of imagery," Amy Hanauer, executive director of Policy Matters Ohio, told the Plain Dealer. "You can't have an economy that works that way. It speaks to the need to generate a different kind of employment in Cleveland."

Continue reading "The Ash Heap of Economic History" »

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The blog-hers over at Feministing have their knickers in a twist about t-shirts. No, they are not inflamed about wet t-shirt contests. Nor are they outraged that "tank tops" are now routinely referred to as "wifebeaters." Rather, they're exercised about the t-shirt to the right and apalled that Wal-Mart thinks it's right to sell it. (They probably also don't like that Wal-Mart's demographics skew to the Right, but that's a post for another day.)

In addition to being heinously ugly, this shirt represents some serious misogyny. And it's being sold at Wal-Mart. A woman in North Carolina who noticed the shirt is also a stalking victim, and she's justifiably horrified.

"People don't realize how serious stalking is," she said. "You constantly live in fear, look over your shoulder and suffer from psychological and physical symptoms due to the stress of the stalker."

She wondered aloud: What's next?

"Some say it's rape, I call it hot sex"? Or: "Some call it domestic violence, I say I'm just teaching her a lesson"?

Exactly. "Joke" shirts like these only further promote the idea that stalking is just romance taken a little too far. It's not. It's about power and control, and it's f**king scary as hell.

Unless of course, it's not. And doubly not if you're Sting, who wrote the multi-platinum single about stalking that about a million men and women have sung at their weddings in the last 24 years. Chances are you know the lyrics by heart:

Continue reading "Some Call it Clueless" »

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According to Porter's Five Forces, a firm's supplier has power over it to the degree that the following conditions are met:

a) It is dominated by a few companies is & more concentrated than the industry it sells to

e) The supplier group poses a credible threat of forward integration

Accordingly, to protect their bottom lines, strategically-managed firms like Wal-Mart take a variety of measures to offset supplier power. A recent Reuters article entitled "Wal-Mart to look at suppliers' energy efficiency" provides a new twist on this idea in part because of the way this aspect of market strategy is linked to a non-market issue- climate change:

Continue reading "Supplier Power (and Energy) at Wal-Mart" »

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Although Michael Porter's Five Forces Model is the most well-known of strategic management theories, there is a reason that it is only one of four or five that I teach. That reason is that like all theories, there are issues of importance that it does not address either in part or in full. Point in case is the role of corporate identity, or the lack thereof, in determining firm performance. Whether or not one thinks the role is minimal or substantial, it is clear that this issue does not fall neatly within the purview of Buyers, Suppliers, Barriers to Entry, Substitutes, or Rivalry. One theory that does posit a central role for corporate identity is Gary Hamel's Business Concept Innovation framework, as outlined in Chapter 3 of his most interesting and overlooked book from 2000, Leading the Revolution.

The four major components of BCI are Core Strategy, Strategic Resources, Customer Interface, and Value Network. The Core Strategy is defined as "the essence of how the firm chooses to compete" and its three aspects are:

Mission: the overall objective of the strategy- what the business model is designed to accomplish or deliver.

Product/Market Scope: where the firm does and does not compete, i.e. which customers, geographies, and product segments.

Basis for Differentiation: how the firm competes and, in particular, how it competes differently than its competitors.

Though the words "corporate identity" are not mentioned explicitly, it is clear that these three factors are important, if not central to it. Below is an example from a recent article in The Street.com about the role of corporate identity in explaining how Wal-Mart lost its way:

Continue reading "Wal-Mart's Corporate Identity Crisis" »

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Yesterday's Wall Street Journal has an excellent article about some increasingly-attractive private-sector alternatives to hospital-based health care.

It's Friday evening and you suspect that your child might have strep throat or a worsening ear infection. Do you bundle him up and wait half the night in an emergency room? Or do you suffer through the weekend and hope that you can get an appointment with your pediatrician on Monday -- taking time off your job to drive across town for another wait in the doctor's office?

Every parent has faced this dilemma. But now there are new options, courtesy of the competitive marketplace. You might instead be able to take a quick trip on Friday night to a RediClinic in the nearby Wal-Mart or a MinuteClinic at CVS, where you will be seen by a nurse practitioner within 15 minutes, most likely getting a prescription that you can have filled right there. Cost of the visit? Generally between $40 and $60.

These new retail health clinics are opening in big box stores and local pharmacies around the country to treat common maladies at prices lower than a typical doctor's visit and much lower than the emergency room. No appointment necessary. Open daytime, evenings and weekends. Most take insurance.

Continue reading "Wal-Mart, Redi-Clinic, and the Healtcare "Crisis"" »

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In his landmark 1958 book, The Psychology of Interpersonal Relations, psychologist Fritz Heider argued that people attempt to explain behavior by recourse to either internal or external attribution. The "12Manage" website describes the two processes:

External (Situational) Attribution: causality is assigned to an outside factor, agent or force. Outside factors fall outside your control. You perceive you have no choice. So your behavior is influenced, limited or even completely determined by influences outside your control. Therefore you feel not responsible. A generic example is the weather.

Internal (Dispositional) Attribution: causality is assigned to an inside factor, agent or force. Inside factors fall inside your own control. You can choose to behave in a particular way or not. So your behavior is not influenced, limited or even completely determined by influences outside your control. Therefore you feel responsible. A typical example is your own intelligence.

In the last few decades, several management scholars have applied the insights of attribution theory to managers explanations about their firm's performance. Though results of empirical are mixed, the general consensus is that external attribution is more frequently employed to explain poor or less-than-expected performance. Not surprisingly, market analysts are trained to look for this. A recent article about Wal-Mart in "The Street.com" provides a useful illustration:

Times are tough at Wal-Mart... The Bentonville, Ark., giant, which reports results before the bell Tuesday, is expected to post earnings of 68 cents a share on revenue of $87.1 billion, according to Thomson Financial. Wal-Mart has already warned, however, that its forecast of 68 cents to 71 cents would be difficult to achieve because of a tough sales environment in April. The month indeed turned out to be tough for the world's largest retailer. Same-store sales slid 3.5%, significantly worse than the 1.1% drop Wall Street projected. Goldman Sachs analyst Adrianne Shapira believes Wal-Mart likely will blame big-picture issues such as rising gas prices, the housing slowdown and lower consumer confidence for its sales woes.... Wal-Mart's problems, she maintains, are company-specific.

Commentary

Thus, as Attribution Theory would predict Wal-Mart managers point to industry, macro-environmental, and economy-level factors as explanations for poor performance. There is nothing inherently wrong or dishonest about this. Rather, it is just a recognition of a well-known human tendency to look inward for reasons explaining success and outward for reasons for explaining failure.

What is equally important as the attribution is the firm's plan of action for addressing the problematic performance. Explanations, by their very nature, are focussed upon explain what has already happened. Solutions that the same managers offer to address the deficits ought to be both proactive and prudent. That is to say, they should make clear what are the steps that are being and will be taken to correct the situation while also explicitly recognizing that there are always elements beyond management's ken and control. This is precisely what the article's author alludes to when he notes that "Wal-Mart isn't sitting back helplessly with subpar results. The company is remodeling stores in an attempt to appeal to a higher-end consumer. Additionally, it is focusing efforts on higher-margin items and departments." That quote highlights the difference between having a strategy (however effective or ineffective it may be) and waiting out a storm.

Tags: wal-mart

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One of the constant complaints about Wal-Mart is that its size and market power allow it tremendous leverage over its suppliers- and not just small ones. Even large firms have been known to complain that the behemoth of Bentonville has extracted economic concessions from them under extreme duress. True as this may be, there is a positive side to the story that rarely gets as much. That would be those instances where Wal-Mart starts to carry products and services that, for any number of reasons, have far less market penetration than they could or should. Today's announcement that Wal-Mart will now carry the Skype product line is a case in point:

Skype, the leading Internet communications company, today announced that it is teaming up with Wal-Mart, the world's largest retailer, to address the growing popularity and demand for Internet communications among U.S. consumers. Starting today, Wal-Mart is offering Skype Certified(TM) hardware in the Internet and voice communications area of 1,800 of its stores throughout the country, providing more opportunity and accessibility for people looking for affordable calling options. This partnership gives shoppers immediate hands-on access to headsets, webcams and handsets designed to work with Skype, as well as the first pre-paid cards for Skype available in the U.S.

he addition of Skype Internet communications products to Wal-Mart stores comes at a time when Voice over Internet Protocol (VoIP) adoption among U.S. households is growing rapidly. According to the Telecommunications Industry Association, 9.9% of all landlines in the U.S. were VoIP lines in 2006, and this will rise to 34.1% by 2010. In addition, Skype is the number one software-based VoIP application in the U.S. by market share, according to a March 2007 report by In-Stat.

"We applaud Wal-Mart for recognizing the popularity of Skype and making it more accessible to Wal-Mart shoppers. This relationship with Wal-Mart will increase exposure for Skype and our hardware partners in a single dedicated Internet communications section," said Don Albert, vice president and general manager of Skype North America. "Our research suggests that when users add a Skype Certified accessory like a headset, handset or webcam, it greatly enhances their experience and they use Skype more to connect with family, friends and business colleagues."

Continue reading "Wal-Mart to Carry Skype Product (Land)Line" »

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Verily I say unto you, Except ye be converted, and become as little children, ye shall not enter into the kingdom of heaven. - Matthew 18:3

I held off posting anything concerning ex-Senator John Edwards' inquiries to Wal-Mart about obtaining a PlayStation3 until more facts came to light. Boy did they ever. The reason why this story is news is because Edwards has become a very vocal critic of Wal-Mart of late. Clearly aware of the rank hypocrisy of trying to get a copy of PS3 before it goes on sale to the general public and from a retailer that one has just attacked the day before, the Edwards camp yesterday shifted the blame onto a "young" volunteer:

Wal-Mart Stores Inc. said Thursday that a staff member for former Sen. John Edwards -a vocal critic of the retailer- asked his local Wal-Mart store for help in getting the potential 2008 presidential candidate a Sony PlayStation 3. Edwards said a volunteer did so by mistake. Edwards told The Associated Press that the volunteer "feels terrible" about seeking the game unit at Wal-Mart a day after his boss criticized the company, saying it doesn't treat its employees fairly.

"My wife, Elizabeth, wanted to get a Playstation3 for my young children. She mentioned it in front of one of my staff people," Edwards said. "That staff person mentioned it in front of a volunteer who said he would make an effort to get one. He was making an effort to go get one for himself. "Elizabeth and I knew nothing about this. He feels terrible about this. He made a mistake, and he knows he should not have used my name," Edwards said. Edwards said the volunteer was "a young kid" unaware of what he called flawed Wal-Mart policies. He called the Wal-Mart statement an effort to divert attention from its own problems.

Commentary

Continue reading "Be Ye Like Little Children" »

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Part I of "The Plural of Anecdote" is here.

Here is one of the claims made by Wal-Mart critics, in this case WalMart Watch, that is addressed head-on by economists Russell Sobel and Andrea Dean in their recently published working paper "Has Wal-Mart Buried Mom and Pop?: The Impact of Wal-Mart on Self-Employment and Small Establishments in the United States"

Wal-MartWatch, one of the largest Anti-Wal-Mart organizations, features an academic article claiming that in Iowa, Wal-Mart’s expansion has been responsible for widespread closings of ‘mom and pop’ stores, including 555 grocery stores, 298 hardware stores, 293 building suppliers, 161 variety shops, 158 women’s stores, and 116 pharmacies.

Here is Sobel and Dean's argument in a nutshell:

Wal-Mart is big enough to have significant macroeconomic effects. Hausman and Leibtag (2004), for example, find that the Consumer Price Index (CPI) is biased because of the failure to specifically account for Wal-Mart. ... because of its sheer size, if Wal-Mart has a negative effect on small business activity, this effect should be discernable in aggregate U.S. data.

They continue by noting that if Wal-Mart is big enough to have the effect that critics claim, then the data ought to show it:

... because Iowa is a fairly representative state in the sample, an extrapolation would suggest that ...the overall size of the small business sector in the United States should have fallen by about one-third relative to days prior to Wal-Mart’s expansion across America. Has this one-third reduction in U.S. small business activity really happened? If so it should be clearly visible in the raw data on U.S. small business activity, and this is the first evidence we will examine.

In short, their results show that:

Continue reading "The Plural of Anecdote II: Wal-Mart's Impact on Mom and Pop" »

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Mr. Ron Sherman of the Chico (California) Enterprise-Record published an article today entitled "Wal-Mart survey flawed". It reads as follows:

A few decades ago, studies financed by tobacco companies showed that cigarette smoking is not harmful to your health. Recently, studies financed by oil companies showed that global warming is not caused by burning fossil fuels. Now, Bob Linscheid's study, financed by a $5,000 payment from Wal-Mart, shows that Wal-Marts are actually good for communities. Can you see a pattern here?

Linscheid's "impartial survey" consists of questions presented only to economic development officials and chamber of commerce officials, all people such as himself, whose main agendas are encouraging large-scale business expansion. The questions asked were of Linscheid's choosing, excluding areas of inquiry that could result in responses contrary to his desired results. He seems more like a Wal-Mart lobbyist than an independent researcher.

It's obviously of no concern to Linscheid that a Wal-Mart supercenter built in north Chico would forever ruin that entire beautiful area of our community. One need only look at places like Fresno or Stockton to see what results when people like Linscheid are successful in promoting big-time economic expansion.

Another study prepared by credentialed Ph.D.s and respected economists, who, unlike Linscheid, considered all relevant areas of concern, found that a Wal-Mart expansion would have a "devastating impact" on our local economy.

Wal-Mart spokesman Kevin Loscotoff said the Linscheid study was "done by a credible third-party organization." Does Loscotoff also have some oceanfront property in Arizona for sale?

I left the following comment on the webpage where this article appeared:

Continue reading "Call and Response" »

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"The plural of anecdote is data." - Berkeley political scientist Raymond Wolfinger

The aforementioned aphorism is one both true and truly in need of appreciation by Wal-Mart critics. Said critics have, for years now, claimed that when the Wal-Mart juggernaut comes to town it decimates small, family-owned, mom-and-pop, and fledgling local enterprises. Even after setting aside the self-righteous indignation, absolute certitude, and moral superiority with which critics have laid such charges at Wal-Mart's (and only Wal-Mart's) doorstep, I still have serious reservations about the critics' assertions.

The reservations stem from the fact that the "evidence" cited in support of such claims is always anecdotal. That is to say, some critics try to make their point by pointing to one region or county or city where Wal-Mart opened one or more stores and, as they tell it, local businesses were sent to an early grave.

The problem with this line of thinking is that while no thinking person doubts that some or even many local businesses may go under after Wal-Mart's entry, that fact alone in no way establishes either causality or ubiquity. It is an empirical question as to whether there is a Wal-Mart effect and, if so, whether it is the same in all times and climes.

Fortunately, someone has finally addressed this question head-on with a data set covering the entire US and with the application of empirical and econometric methods suited to the task. The someone in question is actually a someones- Professors Russell Sobel and Andrea Dean of West Virginia University. In their recently-released working paper, Sobel and Dean present results of a study whose abstract reads as follows:

Saving traditional small ‘mom and pop’ businesses has been a justification for political and court decisions preventing Wal-Mart from opening new stores virtually everywhere across the United States. We present the first rigorous econometric investigation of how Wal-Mart actually impacts the small business sector. We examine the rate of self- employment and the number of small employer establishments using both time-series and cross-sectional data. Contrary to popular belief, our results suggest that the process of creative destruction unleashed by Wal-Mart has had no statistically significant long-run impact on the overall size and profitability of the small business sector in the United States.

Because my thoughts on the research design and implications of the findings are deserving of an entire post by themselves, I will end this post with excerpts taken from Sobel and Dean's summary and conclusion:

Continue reading "The Plural of Anecdote: Does Wal-Mart Hurt "Mom-and-Pop" Businesses?" »

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In a post back in September entitled "Somewhere Over The Rainbow" I wrote about Wal-Mart's decision to partner with the National Gay and Lesbian Chamber of Commerce. In that post I cited an article from "The Morning News" of northwest Arkansas which stated attributed Wal-Mart's move as an effort "to help advance diversity within the Bentonville-based retailer’s operations."

What I overlooked at the time was the anger and disappointment by several parties, some of whom had been very supportive of Wal-Mart up to that point. I did take their palpable dismay as genuine, but I did not think it would lead to calls for a boycott, as reported yesterday by Bloomberg:

Continue reading "End of the Rainbow" »

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In one of my recent pay-to-read Five Forces analyses I wrote whether Wal-Mart's generics-for-$4 program will lead to increased rivalry in the retail pharmacy sector. In Note on the Structural Analysis of Industries Porter hypothesized that:

"In most industries competitive moves by one firm have noticeable effects on its competitors and thus may incite retaliation or efforts to counter the move…This pattern of action and reaction may or may not leave the initiating firm and the industry as a whole better off. If moves and countermoves escalate, then all the firms in the industry may suffer and be worse off than before." .

Two factors that influence the degree of rivalry experienced are the degree of product differentiation and switching costs. Concerning the first Porter said that “when a product or service is perceived as a commodity or a near-commodity”, then consumer choice is largely determined by two things- “price and service.” Product differentiation is, then, a way to “create layers of insulation against competitive warfare” because buyers are presented with clear choices and thus afforded the opportunity to develop preferences for and loyalties to particular producers.

Switching costs are the “one-time costs of switching brands, or switching from one competitors’ product to another.” When switching costs are low or non-existent we should expect that consumers can and will have little resistance to changing products and producers. It would seem almost axiomatic that switching costs for generic drugs are little or non-existent.

How it is that low product differentiation and low switching costs increase rivalry is made very clear in recent news reports about Wal-Mart’s generic drug program. In article entitled “Wal-Mart hurries $4 prescriptions into Michigan”, Mary Radigan of The Grand Rapids Press describes how Wal-Mart’s low-cost generic drug program was rapidly countered by Meijer with a free program and then how quickly Wal-Mart responded again.

Three days after Meijer stores announced free generic drugs to customers, Wal-Mart today launched its $4 prescription program in Michigan months earlier than expected. Company leaders said public demand, not Meijer, prompted them to roll out the program here and in 11 more states today instead of sometime after January, as first promised. "We were planning on rolling this out, and this is just our next step to add additional states," Wal-Mart spokesman David Tovar said. "This has nothing to do with Meijer."

Interstingly. Meijer officials have no problem stating that their moves were in response to Wal-Mart:

Meijer President Mark Murray said today that he "fully expected" Wal-Mart to move the drug program into Michigan. "They clearly have accelerated their rollout nationwide," Murray said. "This is a competitive business."

Here are some recent examples of countermoves by other national, regional, and local competitors. According to the Washington Business Journal:

Wegmans Food Markets of Rochester, N.Y., unveiled a cost-cutting plan for nearly 200 generic drugs and will make them available in a three-month supply. The supermarket chain says customers will be able to purchase the medicine in a 90-day supply for $11.99. The program will be implemented Oct. 26 in all of the company's stores in Maryland, Virginia, New York, Pennsylvania and New Jersey. Kmart has also announced plans to reduce the cost of some generic drug prescriptions.

Perceptions of an responses to Wal-Mart's moves seem to vary across by region and industry. For example, while pharmacies in Alabama remain unphased...

Continue reading "Parry and Thrust" »

Posted by Starling Hunter at 11:40 AM | Permalink | Comments (1) | TrackBacks (0) | Link Count

If you seek a five forces analysis of Wal-Mart, please try this page.

In his Five Forces theory of industry analysis, Michael Porter identifies several “barriers to entry”, i.e. economic, technical, financial, and other “obstacles in the path of a firm which wants to enter a given market.” Among the “barriers” mentioned by Porter in “Note on the Structural Analysis of Industries” is “Government Policy.” About this force he says:

“Government can limit or even foreclose entry into industries with such controls as licensing requirements and limits on access to raw materials ( like coal mines or mountains on which to build ski areas). Regulated industries like trucking, railroads, liquor retailing, and freight forwarding are obvious examples.”

While retail is not included in Porter’s list of regulated industries, entry into foreign retail markets inevitably requires the approval of the host country’s government. As a result, firms like Wal-Mart, which does business in several foreign countries, may face higher and/or different barriers to entry abroad than they do at home. Point in case is Wal-Mart's attempt to build a store in Cabo San Lucas, Mexico.

The world's largest retailer won preliminary approval on Tuesday to build a Wal-Mart in Cabo San Lucas after an almost two-year battle, but opponents vow to continue fighting the project with demonstrations or by blocking roads.

The Los Cabos city council voted unanimously to give conditional approval for the store, requiring it to be nonintrusive, pass environmental studies and not excessively affect traffic in this fishing and resort town of about 80,000 at the tip of the Baja California peninsula.

Residents and shopkeepers fear that the store — first proposed, and rejected, at a site near the middle of the city — could harm the town's laid-back atmosphere, where sports fishermen and tourists mingle with locals on the streets. Some also worry the store might replace the trademark stone sea arch as the first view people have when they drive into the city.

Continue reading "They Paved Paradise and Put a New Wal-Mart" »

Posted by Starling Hunter at 12:13 AM | Permalink | Comments (1) | TrackBacks (0) | Link Count

If you seek a five forces analysis of Wal-Mart, please try this page.

The world over there are men who commit acts of unspeakable cruelty against their fellow man, against the defenceless, against even women and children. The trail of their devastation fills our TV screens each night, making some numb and others convinced there is no way to stop such carnage. At the same time there are a number of determined groups who have made it their noble life's work to document the horrors and abuses committed by the wolves among us. Collectively I think of these groups as the "Human Rights Movement" (HRM) and I see their calling as a high one and their achievements something in which they can justifiably take pride.

And yet, knowing organization behavior as I do, I recognize growth strategies, mission creep, (un)related diversification, and brand dilution when I see it. I recognize when pride in even the noblest of deeds can make organizations and their leaders wrongly desire to see their franchises extended and the scope of their influence expanded. I also know when people from outside a field or "industry" watch the success and legitimacy built by other groups and decide to appropriate it for their own purposes. And above all I recognize when prior success in one market can make organizers think that strategies and rhetoric that worked in one place will carry over into others.

Some or all of these factors are at work in the creeping and increasingly creepy application of the terminology and methods of one HRM, i.e. the Human Rights Movement, to another HRM, Human Resource Management. Point in case is the recent announcement by AP2, the Swedish pension fund, of its decision to divest its shares of Wal-Mart, a move widely believed to be influenced by a similar one made by Norway this past summer.

Continue reading "Human Rights and Human Resources" »

Posted by Starling Hunter at 9:07 AM | Permalink | Comments (0) | TrackBacks (0) | Link Count

If you seek a five forces analysis of Wal-Mart, please try this page.

Appearing in today's New York Times is an article by Michael Barbaro and Stephanie Strom entitled "Wal-Mart Find's an Ally in Conservatives." My first reaction upon reading the title was "This is surprising why, exactly?" But as I read further I realized a rather important point is being made, one about the possible relationship between donations made by philanthropic foundations and the research produced, the opinion pieces written, and the policy positions taken by groups that receive them.

As Wal-Mart Stores struggles to rebut criticism from unions and Democratic leaders, the company has discovered a reliable ally: prominent conservative research groups like the American Enterprise Institute, the Heritage Foundation and the Manhattan Institute.

Top policy analysts at these groups have written newspaper opinion pieces around the country supporting Wal-Mart, defended the company in interviews with reporters and testified on its behalf before government committees in Washington.

But the groups — and their employees — have consistently failed to disclose a tie to the giant discount retailer: financing from the Walton Family Foundation, which is run by the Wal-Mart founder Sam Walton’s three children, who have a controlling stake in the company.

That the Times picks Wal-Mart, the Walton Family Foundation, and "prominent conservative research groups" to make its point is not surprising. But to their credit, in an effort to provide some semblance of balance, just six paragraphs in the authors do mention that "liberal policy groups receive significant financing from unions and left-leaning organizations without disclosing their financing."

What I did find surprising is what I found myself saying next: I fundamentally agree with the authors about the importance of the questions they raise about disclosure. But I do have one major concern, too. Before stating it, let me begin by saying that disclosure of conflicts of interest and monetary relationships is a good thing- for all concerned, be that bloggers, columnists, academics, and professional analysts, and private researchers. But as the article makes clear, disclosure doesn't always happen. There can be several legitimate reasons why.

In the article we are told that at times individuals advocating one position or another don't always know the sources of funding of the organization for which they work. At other times, they might not think that making financial or other ties known is relevant or they may not believe donations had any influence on their thinking. Sometimes the foundations that give the money place no expectation on the recipient to disclose. All good and well.

My concern about the article is one about what our priors ought to be. That is to say, in the absence of disclosure about financial and, perhaps, ideological ties, what should we assume about the position taken by a researcher, columnist, or policy wonk? I don't mean what should we assume about the existence of ties and relationships, I mean what should we assume about the merits of the argument. The passage below makes me think that the authors view lack of disclosure as a mark against a position, as discrediting it:

The lack of a clear quid pro quo between research groups and corporations like Wal-Mart makes the issue murky, said Diana Aviv, chief executive of the Independent Sector, a trade organization representing nonprofits and foundations. “I don’t know how one proves what’s the chicken and what’s the egg,” she said.

And what I don't know is whether or not this is the most important issue. If I worry about anything in this article it is the idea that relationships between research groups and corporations are an acceptable proxy for the quality of the research or the validity of the arguments advanced. To my mind, the best use of time for Wal-Mart critics, and defenders too for that matter, is to focus less on who sponsored what research and focus more on what is actually said.

Neither side should attempt to discredit research that they don't like because it was funded by an organization hostile to their own aims or agendas. Rather, arguments should be assessed on their merits; data, sources, and methods should be scrutinized; alternative theories and explanations should be advanced; limitations of the research should be acknowledged; questions still in need of objective answers should be clearly articulated...and then the process should begin again.

And speaking of disclosure, here's mine:

Disclosure: Many bloggers get email from Wal-Mart's PR firm, Edelman, about articles and blog posts written about Wal-Mart. I found out about the Barbaro and Strom article by way of an email message sent directly to me by Edelman earlier today. My doctoral thesis at Duke University's Fuqua School of Business focussed on economic and organizational impacts of retail information systems. While there my thesis advisor and I did once meet over lunch with Wal-Mart's Chief People Officer and some other members of the organization working in the logistics function. I never did, however, receive any funding from Wal-Mart or any other retailer for my research. Here's a link to one research paper I published about stock market reactions to announcements by major retailers about the retailer's investments in information systems and technologies. Warning: don't operate heavy machinery for at least 3 hours after reading it.

File Under: Wal-Mart

Continue reading "Disclosures and Discredits" »

Posted by Starling Hunter at 8:01 PM | Permalink | Comments (0) | TrackBacks (0) | Link Count

If you seek a five forces analysis of Wal-Mart, please try this page.

In a post entitled "Why Can’t Edelman Manage the Blogosphere?" over at "Writing on the Wal" (a much better name, by the way, than the original "No Cleveland Wal-Mart" ) Peter offers a correction to something I wrote in my "Circling" post a few days back. At the very bottom of the post I had the following disclaimer:

Note: Like many bloggers I get occasionally get email from employees of Edelman about articles written about Wal-Mart. I learned about this article in another way- by way of a "google alert" for news stories about Wal-Mart.

Here's what Peter had to say about that:

I hate to correct you Starling, but it’s not that “many bloggers” get e-mail from Edelman, it’s “many PRO-WAL-MART bloggers” get e-mail from Edelman. Edelman doesn’t want to discuss anything with us here at the Writing on the Wal. They just want to plant stories that make their client look good and, as Bruni implies, you can’t manage a debate if you only talk to one side.

Here's the comment I left on Peter's blog:

First let me say thanks for reading that far down into my post. That means I have at least one person who read (it all the way through) ! As for the substance of your remarks…point taken. I don’t know who gets emails from Edelman so I couldn’t feel confident to assert that only pro-Wal-Mart bloggers get them. Now that fact wouldn’t surprise me if I found it to be true. And if you ask me what I believe, I'd say “that’s what I believe to be true.” But since I didn’t know for sure, I refrained from assuming on this specific point. I think I probably do enough assuming as it is, don’t you? ;-)

And to that I'll add this:

Continue reading "Reply to Peter at "Writing on the Wal"" »

Posted by Starling Hunter at 10:38 PM | Permalink | Comments (1) | TrackBacks (0) | Link Count

If you seek a five forces analysis of Wal-Mart, please try this page.

Last week in a post entitled "Life Imitating (Wal-M)art" I intimated that Wal-Mart might soon begin a counter-offensive against a growing number of increasingly vocal critics. I had no first-hand or inside knowledge that such a response was forthcoming. It was just an educated guess, a prediction of sorts. Today, Michael Barbaro of the New York Times confirmed my hunch in an article entitled "Wal-Mart Counters Criticism With a Political-Style Ad Campaign." My take on the article is that while it accurately and fairly describes Wal-Mart's recent moves, it fundamentally misreads the underlying motivations for and potential consequences of them.

Wal-Mart, under attack now from unions and prominent Democrats, yesterday introduced a marketing campaign that closely resembles the television advertisements used by political candidates. ... For Wal-Mart, the ads represent a significant departure from its practice of rebutting critics in the media but presenting itself, at least in consumer television marketing, as untroubled by its image problems.

Strictly speaking, this seems more like a public relations, rather than a marketing, campaign. The latter term is more appropriately applicable when a firm is trying to persuade potential customers to buy its products or services and existing ones from shopping elsewhere. For example, Ford uses marketing campaigns to tout its cars, to persuade customers to buy its cars and not Chevrolet's or Toyota's.

Continue reading "Circling the wagons or... for the kill?" »

Posted by Starling Hunter at 11:25 AM | Permalink | Comments (1) | TrackBacks (0) | Link Count

If you seek a five forces analysis of Wal-Mart, please try this page.

If you read only one article about why the Democratic Party's recent anti-Wal-Mart campaign is a bad idea, let that one article be Sebastian Mallaby's "Shopping for Support Down the Wrong Aisle" in today's Washington Post. It is one of those rare articles to which snippets are an injustice. When I say I wish I had written it myself, I give it the highest compliment possible.

File Under: Wal-Mart

Tags: Wal-Mart | WalMart

Posted by Starling Hunter at 8:32 PM | Permalink | Comments (0) | TrackBacks (0) | Link Count

If you seek a five forces analysis of Wal-Mart, please try this page.

It has become fashionable of late to paint the war between Wal-Mart and its critics in starkly antithetical terms. On one side is the undeniably successful behemoth of Bentonville with strong support from the financial community, denizens of and politicians from Red States, pro-family groups happy with Wal-Mart's refusal to vend seemy and obscene CDs, several notable economists and journalists who praise the firm for its creation of massive consumer surpluses, as well as other pro-business types.

On the other side are Big Labor, unsettled but undeterred by its attempts to unionize the firm's 1 million-plus employees; a small army of union-funded and highly-motivated, if not always on-target, anti-Wal-Mart organizations; Blue State senators and big city politicians looking for votes; the brie and brioche-eating, Whole Foods-loving, Saab-driving, I-look-down-my-nose-at-Wal-Mart-and-their-customers types; anti-sprawl activists; small business groups claiming economic damage from Wal-Mart's competitive moves; disgruntled former employees; inefficient suppliers unable and/or unwilling able to meet the firm's increasingly rigorous demands; a large swath of the