Supply Chain

Growing Wal-Mart Scandal Reveals Company's Flaws

April 24, 2012

The growing Wal-Mart scandal in Mexico is revealing some fundamental flaws of the Mega-retailer.

Despite the huge run-up in most share prices since 2009, Wal-Mart has floundered, lagging behind the broader S & P 500 Index by about 2/3.

As it seeks to expand outside the United States, Wal-Mart is finding it more difficult to make its domestic model work elsewhere.

The company's historic advantages of low wages, squeezed suppliers, and cheap Chinese manufacturing are each fading away.

Simply stated, Wal-Mart cannot pay its workers any less, whether it is in Mexico or the U.S.

Having extracted nearly every last drop from most of its suppliers, there is little, if anything, left for the company to get.

And, with manufacturing costs and inflation soaring in China, Wal-Mart's workshop has now become far more expensive to operate.

With growth feeble and its competitive advantages going by the wayside, we shouldn't be surprised that allegations of "cooking the books" are emerging.

As George Orwell observed, "It is only when someone is winning that they appear invincible".

About the Author

Andrew R. Thomas Blog | Associate Professor of Marketing and International Business

Andrew R. Thomas, Ph.D., is associate professor of marketing and international business at the University of Akron; and, a member of the core faculty at the International School of Management in Paris, France.

He is a bestselling business author/editor, whose 23 books include, most recently, American Shale Energy and the Global Economy: Business and Geopolitical Implications of the Fracking Revolution, The Customer Trap: How to Avoid the Biggest Mistake in Business, Global Supply Chain Security, The Final Journey of the Saturn V, and Soft Landing: Airline Industry Strategy, Service and Safety.

His book The Distribution Trap was awarded the Berry-American Marketing Association Prize for the Best Marketing Book of 2010. Another work, Direct Marketing in Action, was a finalist for the same award in 2008.

Andrew is founding editor-in-chief of the Journal of Transportation Security and a regularly featured analyst for media outlets around the world.

He has traveled to and conducted business in 120 countries on all seven continents.