Even Jack Welch Deserves Praise……Sometimes

Saturday, April 29, 2006
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In a Business Week article (pay only), Jack and Suzy Welch do an excellent job of praising Wal-Mart and its benefits to the world. He makes several excellent points, especially this one about the mom-and-pop shop fantasy that alot of folks seem to have:

Yes, Wal-Mart has meant the end of many local stores. And yes, at some of them, customers might have been greeted by name when they walked in the door. But those customers chose to shop at Wal-Mart when it came to town because low prices, apparently, meant more to their quality of life than a wave and a smile. No conspiracy, just the free market at work.

AS FOR TAKING BETTER CARE of employees — nonsense. In most small towns the storeowner drove the best car, lived in the fanciest house, and belonged to the country club. Meanwhile, employees weren’t exactly sharing the wealth. They rarely had life insurance or health benefits and certainly did not receive much in the way of training or big salaries. And few of these storeowners had plans for growth or expansion: Their lives were nicely set. That was good for them but a killer for employees seeking life-changing careers.

He also compares Wal-Mart hate to the Toyota hate that once raged through America:

Yes, there will be “casualties” of Wal-Mart’s success: competitors that fold, jobs lost. But in that way, Wal-Mart is no different than Toyota (TM ). When Toyota arrived in the 1970s, it was accused of upsetting the status quo. Decades later most people accept that Toyota simply had a better way of doing business. Its value proposition to consumers was a wake-up call to the auto industry, raising standards and requiring companies that had lost their edge to reinvent themselves and start making better cars for a lot less. And that’s the Wal-Mart story.

Jack is right on the mark, there. However, Jack will be Jack, and this is where I shudder:

Only the military rivals Wal-Mart when it comes to providing training and opportunity for individuals who have no other way to break out of a paycheck-to-paycheck lifestyle and into a whole new world of possibility.

First, Jack needs to ask himself why people have to live paycheck to paycheck. I have an answer here. Second, to praise the government’s Empire-building machine as the answer for “opportunity” and education and growth is just plain nuts. And cluieless. And typical of these corporatist bigwigs who love the welfare state. Pasted below is the full piece:


MAY 1, 2006

IDEAS — THE WELCH WAY
By Jack and Suzy Welch

What’s Right About Wal-Mart

Is Wal-Mart a force for good or evil in the world? — Anonymous, Exeter, N.H.

We have heard this question again and again in recent months, but it was posed perhaps most fervently by the high school student above. He added: “You claim business is good for society — but Wal-Mart destroys it.”

Destroys it? No way.

Maybe it’s politically incorrect these days to say this, but Wal-Mart helps individuals, communities, and whole economies prosper.

Without question, Wal-Mart is huge and getting more so. Its business model is threatening to rivals and its purchasing power frightening to suppliers. But that doesn’t make Wal-Mart bad — just a fat target for critics who, for reasons of their own, won’t concede how Wal-Mart improves lives.

Take individuals. Most obviously, Wal-Mart’s prices have a positive impact on the quality of life of millions of consumers. No other retailer offers so many good products for so little, from groceries to school supplies to medicine. The net effect: Wal-Mart does more to hold down household expenses than any social or government program.

In addition, Wal-Mart provides its employees with tremendous access to upward mobility, even those with modest educational credentials. There are stories galore of employees who started on the floor or as cashiers and worked their way up to management positions. And with Wal-Mart’s international growth, you are now seeing career paths that can start in merchandising in Texas, move to logistics in Arkansas, and end up in divisional leadership positions in Europe and Asia. Only the military rivals Wal-Mart when it comes to providing training and opportunity for individuals who have no other way to break out of a paycheck-to-paycheck lifestyle and into a whole new world of
possibility.

Wal-Mart’s low prices and large workforce, of course, have a cumulative effect on the local and national economies where the company operates. Low prices keep inflation down, while the employees’ purchasing power keeps demand high.

This is evil?

There are critics who claim that Wal-Mart destroys communities by wiping out mom-and-pop stores — the little pharmacies, hardware, and grocery stores — that took much better care of customers and employees. These critics are nostalgic for a time that never was.

Yes, Wal-Mart has meant the end of many local stores. And yes, at some of them, customers might have been greeted by name when they walked in the door. But those customers chose to shop at Wal-Mart when it came to town because low prices, apparently, meant more to their quality of life than a wave and a smile. No conspiracy, just the free market at work.

AS FOR TAKING BETTER CARE of employees — nonsense. In most small towns the storeowner drove the best car, lived in the fanciest house, and belonged to the country club. Meanwhile, employees weren’t exactly sharing the wealth. They rarely had life insurance or health benefits and certainly did not receive much in the way of training or big salaries. And few of these storeowners had plans for growth or expansion: Their lives were nicely set. That was good for them but a killer for employees seeking life-changing careers.

Critics also lambaste Wal-Mart for being brutal to its suppliers. Be it swing sets or beef jerky, you sell to Wal-Mart on its terms, or you don’t sell at all.

We’d say this is pretty true. Wal-Mart’s huge market share gives it enormous leverage. One of us (Jack) negotiated for decades with Wal-Mart buyers at General Electric (GE ), and they were never unethical or unfair. Just tough. GE won plenty of rounds and lost a few. But losing had its upside. It forced GE to look inside to see how it could do its job better by lowering manufacturing costs, for instance, or being more flexible in how a product was packaged.

Ultimately, prices stayed low, and the customer won. And that is what drives Wal-Mart — keeping its customers satisfied — and why it keeps increasing sales and profits.

Yes, there will be “casualties” of Wal-Mart’s success: competitors that fold, jobs lost. But in that way, Wal-Mart is no different than Toyota (TM ). When Toyota arrived in the 1970s, it was accused of upsetting the status quo. Decades later most people accept that Toyota simply had a better way of doing business. Its value proposition to consumers was a wake-up call to the auto industry, raising standards and requiring companies that had lost their edge to reinvent themselves and start making better cars for a lot less. And that’s the Wal-Mart story. It’s a great company that helps consumers win and employees grow. And as long as it does, it will, too.

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