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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Reader Comments (Page 1 of 1)
9-25-2006 @ 10:15AM
Joseph Kister said...
Why not allow the Walmart store in Boston and allow the citizens to decide if they want to work or shop there. Mr. Cohen's comments are typical of the current thinking of most college management professors.
9-25-2006 @ 10:16AM
Anonymous Analyst said...
You're mistaking Menino's own words as the WSJ's demonization of Menino. This article illuminates the sort of opposition Wal-Mart faces in certain areas; I did not detect any serious opining of the sort that offended you.
I live in Brookline, by the way.
9-26-2006 @ 10:10AM
Jerry Bluhm said...
Wal-mart being attacked in urban areas who want to keep Wal-mart out has little to do with Wal-mart's pay struture or it's employee benefits. Wal-Mart has always been a company who has targeted the middle class traditional family. Now that they are targeting communities that think they are more worldly educated and affluent Wal-Mart is coming up against a different value system than they are use to. Wal-Mart is not a company that allows local governments to run their companies and basically ditate to them what they can do or what they cannot do. It is all about politics as usual, and a little about what is best for the consumers. Where the money is you will find Liberals trying to get their hands in the cookie jar. Americans are too smart to think otherwise. I say Wal-Mart should stick to the traditional family states who care about family and let the Targets of the world have the urban areas that consist of those who think they are better than the rest of us.
9-30-2006 @ 12:03PM
K Clement said...
Here, Here for the Mayor of Boston. He has most definitely corresponded with Mayor's across our Country regarding Wal Mart's invasion of our surburban shopping sites. Wal Mart is a predator with no conscience for the local economy or it's people, contrary to the "TV ADS". To grow, it's main objective and mission statement, is to drive out all the competition, large and small. Local manufactures do not benefit, they can't compete with the international vendors Wal Mart uses, so they go out of business. Obviously Mom & Pop stores fall by the wayside quickly as Wal Mart undercuts them at every turn. The wages paid employees are just above or at a level where local government benefits kick in and health care is so expensive it is unaffordable. (Read the just released NEW benefits package offered by Wal Mart's to new employees for further verification of my point). So if a family can't afford the health benefits, partly because they only can work part time, Wal Mart doesn't mention that, guess who foots the bill for the sick? Tax Payers, that is you and me.
Trust me I know this, I am from California, where we have been fighting Wal Mart Super Stores for years. They drain your government services, pay substandard wages, offer substandard health care and once they have driven out the competition and are the only monster in town, watch out because the demands start!
Wal Mart does have prices that are extremely attractive but not compared to the drain on our local economies. Like the old adage says, "You Can Pay Now Or Pay Later".
9-30-2006 @ 8:25PM
W. Riley said...
People at Wal-Mart try to take care of the shoppers at the low incume range. The mom & pop stores charge 10 times to much. Wal-Mart is changing many programs to fit what you in the blue states want, but then you complane about that. Wal-Mart payes above minumine wage, but that is not good enough for you people.