28.2 Case Study: Walmart

Walmart’s past business decisions show what can happen when a company focuses only on profit for its shareholders. To keep prices low and increase earnings, Walmart pushed its suppliers to cut costs. Many companies moved their manufacturing overseas to meet Walmart’s demands.

One example is Rubbermaid, a once Ohio-based company. When the cost of materials went up, Walmart refused to accept higher prices. Instead, it bought cheaper versions of Rubbermaid’s products from suppliers in China. As a result, Rubbermaid lost business, and closed its Ohio factories.

These decisions hurt workers, local communities, and longtime suppliers. At the same time, customers benefited. Lower prices made Walmart a favorite for many shoppers, especially those with limited income. This shows how one group of stakeholders can gain while others lose.

The bigger question is how to balance these interests. Should businesses only serve shareholders, or should they also consider their employees, suppliers, customers, and communities? Obviously, businesses need to make a profit. They need to maintain their competitive advantage over competitors. But the idea of social responsibility encourages companies to think beyond profit and make choices that help more people.