Walmart Likely To Fare Better Than Wal-Mart

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You’ve probably been wondering what impact the emerging bribery scandal in Mexico  will have on both Wal-Mart, the corporate entity, and Walmart, the brand above the portals that consumers enter in their hometowns and online every day. More on the former than the latter, one intuitively suspects, but we thought we’d take a look at what others were writing this morning.

“Highly recognizable brands can be invaluable, but they require constant attention,” Douglas A. McIntyre wrote in a piece for 24/7 Wall St. a couple of weeks ago that is currently running on MSNBC.com. “Their value can rise or fall because of management decisions, changes in the competitive environment, and the beliefs that a brand has aged beyond its useful lifetime.”

McIntyre then endeavors to rank the nine most damaged brands in America. They are, in order of tarnish on their brass: Keith Olbermann, Chevy Volt, New Orleans Saints, Greece, Rush Limbaugh, Airbus 380, Netflix, Nokia and American Airlines. It’s enlightening to consider how many of those brands made the list because of boorish behavior or a false sense of entitlement –- which is perhaps what puts Wal-Mart in the position that is finds itself in this morning.

The New York Times broke a story on Sunday with a hed that suggests that an ill-advised attempt to gloss over the corruption in 2005 is beneath the blossoming crisis today: “Confronted with evidence of widespread corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing.”

The investigation by the Times’s David Barstow, Alejandra Xanic von Bertrab and James C. McKinley Jr. details “a prolonged struggle at the highest levels of Wal-Mart, a struggle that pitted the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.”

Vice chairman Eduardo Castro-Wright, a native of Ecuador who was recruited from Honeywell in 2001 to become Wal-Mart’s COO in Mexico and later was CEO of Wal-Mart Stores USA, is perhaps the primary villain in the scenarios laid out in the article, but there’s plenty of finger-pointing to go around.

The Week has a good capsule report on the allegations and where they are leading here. On the financial front, there’s no question that the company is taking a huge initial hit. 

“Wal-Mart's Mexican crisis is a $10 billion problem,” writes the Wall Street Journal’s Justin Lahart. “At least that was the stock market's first take.” 

And while Lahart writes that the 5% hit on the stock in the U.S. (and 12% on the Mexican market) might seem “harsh,” he points out that international sales represent an increasingly larger portion of Wal-Mart’s growth, the crisis will eat up a lot of its executives’ time and attention and, with a Justice Department investigation underway, it faces the prospects of huge fines. 

But let’s remember that the company has adeptly navigated other incidents over the years that would daunt most corporate communicators. 

“The world’s largest retailer has been frequently sued by the government, its own employees and its customers in cases that have also included accusations of corruption, as well as discrimination and destruction of evidence,” Bob Van Voris and Margaret Cronin Fisk write in Bloomberg Businessweek.

“Wal-Mart’s had a long history of legal conflict because they have a way of doing business that pushes the edges of what the law allows,” James Post, a professor at Boston University School of Management, tells them. “Sometimes it goes over the line.”

For its part, Wal-Mart is in “all-out damage control mode,” writes Andre Tartar in New York. His blog item contains video of David Tovar, its vp of corporate communications doing some classic marcomm dance steps:  

“This investigations is ongoing and we don't have a full explanation of what happened. It would be inappropriate for us to comment further on the specific allegations until we have finished the investigation. We are working hard to understand what occurred in Bentonville more than six years ago.”

Going back to the list of tarnished brands compiled by McIntyre, we see several that also have a history of sometimes going over the line in the POV of their critics, even if no criminal behavior is alleged. Olbermann and Limbaugh leap to mind. They tend to rebound.

Another thing to keep in mind about McIntyre’s list, of course, is that it represents one man’s opinion and is a mere snapshot in time. Our Consumer Republic not only has a short memory, it also loves a story that includes redemption. Particularly if the second act involves its keeping more money in its own pocket. As the lede of an AP story has it: “The public relations nightmare for Wal-Mart amid allegations of bribery in Mexico could be the least of its worries.”

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2 comments on "Walmart Likely To Fare Better Than Wal-Mart ".

1. George Parker from Parker Consultants
   

   commented on: April 24, 2012 at 10:54 a.m.
   You are forgetting the ongoing scandals in the rancid Murdoch empire. As with Wal-Mart, the major damage was caused by the attempted cover up. Even as I type this, over in London, James is blaming others, rather than himself. Expect the same tomorrow when "The Wizened of Oz" appears before the committee, no doubt with Wendi standing by to fend of pie throwers. More of this on "AdScam." Cheers/George
2. Paula Lynn from Who Else Unlimited
   

   commented on: April 24, 2012 at 11:34 a.m.
   Most of the non acknowledgement of wrong doing fines are already built into their expense of doing business. Until the fines are large enough especially personal fines not incorporated via the corporation, they do not have the privilege of the no wrong doing and substantial imprisonment for breaking laws, then you will continually see these things break (not to mention things you never hear about). The bigger they are, the more control and power they have to escape. The Murdoch fiasco came to light because they are media, their crap was public and their enemies are more knowingly scarred. The toilet paper buying public are not directly effected.

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