Red state Wal-Mart's blue state blues


This morning's Wall Street Journal [subscription required] reiterates a common refrain against Wal-Mart Stores, Inc. (NYSE: WMT). Its size has forced it from rural to urban markets in order to grow. What's interesting to me about the story is the way the WSJ's arch-conservative editorial page has infiltrated its news coverage. As a result, the story is a thinly veiled attack on the "urbanized, educated, liberal" state of Massachusetts that has the blue state gall to challenge Wal-Mart's divine right to expand wherever it pleases.

Earlier this month, I posted on the limits to Wal-Mart's growth and highlighted the relatively successful experience of Wal-Mex, its Mexican subsidiary Wal-Mart de Mexico SA de CV (OTC ADR: WMMVY). From a strategic standpoint, today's WSJ article highlights the fundamental flaw in Wal-Mart's effort to expand into urban areas: When it faces intensified competition, the competitive advantages Wal-Mart enjoys in rural regions no longer apply. Simply put, successful urban expansion requires political and segment-focused differentiation skills that Wal-Mart lacks -- particularly when it faces off against competitors like Target Corp. (NYSE: TGT).

What makes today's WSJ story so interesting is that it attacks Massachusetts -- the state from which its parent Dow Jones & Co.'s (NYSE: DJ) owners, the Bancroft family, hails.

There is no question that Wal-Mart is a red state company. For example, in 2004, 85% of its contributions went to Republicans. Moreover, Wal-Mart's expansion battles pit the Republican value of keeping government out of the way of a company's right to grow against the Democratic values of workers' desires to get paid a reasonable wage with health benefits and small business's desire to continue operating in a local community.

The WSJ demonizes Boston mayor Tom Menino who voiced local opposition to a Wal-Mart in Boston, quoting him as saying: "Wal-Mart does not suit the clientele we have in the city of Boston. They don't pay wages that are sufficient. Their benefit structure is poor. I don't need employers like that in our city."

While I almost never agree with the WSJ's editorial page I believe its right to express its views is a fundamental part of being American. I just have a problem when the WSJ publishes a very long editorial attacking a blue state's right to protect its workers and small employers and calls it front page news.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College. He has no financial interest in the securities of Dow Jones, Target, Wal-Mart or Wal-Mex.

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