Wal-Mart’s Chinese Suppliers

Wal-Mart is the world’s largest retailer. It built to dominance on the mantra of “everyday low prices”. The low price has required Wal-Mart to source many of the goods it sells from factories that operate at the low cost. Wal-Mart has an ethical supplier’s code of conduct. Amongst other things in the code of conduct are: 1. The supplier do not employ under wage labour 2. They must pay the labour at least the legal minimum wage for the nation 3. Do not make employees work excessive overtime 4.

Adhere to basic safety standards

So, Wal-Mart decided to audit the factories of its supplier. If the factory is found to have four high- risk violations in a two year, it is banned from producing goods for Wal-Mart for one year. Tang Yinghong is a manager of a Chinese factory that supplies pen, mechanical pencils and highlighters to Wal-Mart. The factory had already three high-risk violations. Tang hired a consultant from a Shaghai consulting company for the factory would get past from the audit.

The company advice Tang on how to create fake but authentic looking records and suggested Tang hustle any workers grievance out of the factory on the day of the audit.

They also teach Tang on what questions to expect from the auditor and how to answer. Factory manager produced time sheet showily each working put in an eight hour a day and was paid double from the local minimum wage of $0. 43 cents per hour. But, when auditor interviews the workers, they said they were paid less than minimum wage and they obliged to work on extra three to five hours a day without overtime pay.

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The factory manager claims that Wal-Mart puts constant pressure on them to reduce price, so they decide to falsify their records.

From the problem, Wal-Mart has recognized the problem and started to work with some of its supplier to help them improve their productivity. CASE DISCUSSION 1. Yes, it is legitimate for an enterprise like Wal-Mart to demand that its suppliers adhere to a code of ethics. The benefits of this practice to Wal-Mart are: * Can get higher revenue because the company get demand positive consumer report. * Improved brand and business awareness and recognition * Better supplier motivation * Better employee motivation and recruitment * They can get new sources of finance for example from ethical investors.

The costs of this practice are: * The company will incurred higher cost for example fees for the auditor * It is especially difficult because standards for what constitutes ethical behaviour lie in a “grey zone” where clear-cut right-versus wrong answers may not always exist. 2. The impact upon ethical behaviour at its suppliers is they will do unethical things like Tang, China factory manager; he was falsifying the record of the company. This is because they want to meet the Wal-Mart’s demand and do not want to lose the contract between the factory and Wal-Mart. 3.

No, Wal-Mart not doing enough to ensure the suppliers adhere the code of conduct. They can do: * The company must actively communicate and evaluate the implementation of a code of conduct and ethical practices in all suppliers. * Act to prevent and follow up harassment and discrimination. * Make awareness of ethical practices 4. No, the company do not should do business in countries because the behaviour has been widespread and it will highly probable other company will follow the practice. It must be a useful teaching for the company and other company that they must follow the code of conduct.