(Solved by Humans)-1. The profit-leverage effect is an important tool that we have

Paper Details

?1. ?The profit-leverage effect is an important tool that we have in our tool bag. Watch the brief video below. Don't get hung up on the financial calculations at this point, but pay attention to the overarching message, then, also considering the information in your text, answer the following.

Briefly describe the profit-leverage effect. How might this effect change in different organizations, either by industry, size, or comparing the public and private sector?

?? Consider the article in Doc Sharing: ?Wal-Mart: A bully benefactor? and the Ford Motor Company Case (Case 2-3) in your text while forming your response to the following:

Confrontational relationships with suppliers have been going on for years. Is this a good thing? Explain your thinking.

2. ?Consider the article in Doc Sharing: ?Wal-Mart: A bully benefactor? and the Ford Motor Company Case (Case 2-3) in your text while forming your response to the following:

Confrontational relationships with suppliers have been going on for years. Is this a good thing? Explain your thinking.

Retreived from:
http://archive.fortune.com/2008/12/02/news/companies/walmart_gunther.fortune/i
ndex.htm

Wal-Mart: A bully benefactor
The giant retailer is using its power to help the global poor
and protect the planet.
By Marc Gunther, senior writer
Last Updated: December 5, 2008: 2:56 PM ET
(Fortune) -- Children who are forced to pick cotton in Uzbekistan, farmers scratching out a living
in Guatemala and salmon fishermen in Bristol Bay, Alaska, would not seem to have much in
common. But all are feeling the global impact of Wal-Mart.
As the world's largest retailer, with $379 billion in revenues last year, Wal-Mart has long been a
powerful force in the global economy - a bully, its critics would say. For years, they assailed
Wal-Mart for squeezing suppliers over costs, driving mom-and-pop stores out of business or
crushing efforts to organize its workers.
These days, though, the company is winning praise for using its leverage - that's a polite term for
bullying - to protect the environment and help the poor.
What's changed? Wal-Mart CEO Lee Scott, who announced last month that he will step down in
February, has led an ambitious sustainability campaign, opened up to critics and promised to
behave more responsibly. One of his last acts as CEO was to convene a summit of Wal-Mart
suppliers in China to tell them that they had to adhere to higher ethical and environmental
standards.
Consider, as an example, Wal-Mart's confrontation with the authoritarian government of
Uzbekistan over child labor.
Last spring, shareholder advocates from pension, labor and investment funds that call themselves
socially responsible began a campaign on behalf of Uzbek children who, according to media
reports and human rights groups, are forced to pick cotton for low wages and under inhumane
conditions. The BBC spotlighted the problem with an eye-opening investigative report that said,
among other things, that "for two-and-a-half months a year, classrooms are emptied across this
Central Asian nation so that the crop can be harvested."

Uzbekistan is the world's third largest cotton grower and cotton is the nation's biggest export - so
pressure from retailers in Europe and the United States could bring about change.
The activist investors, including the nonprofit As You Sow and the Calvert and Domini mutual
fund groups, wrote to more than 100 retailers and brands, asking them to trace the cotton used in
the goods they sell and avoid Uzbek cotton. Most ignored the letter. (Bed Bath and Beyond
(BBBY, Fortune 500), Costco (COST, Fortune 500) and J.C. Penney (JCP, Fortune 500) were
among those who did not respond.)
Others, including Levi Strauss, Target (TGT, Fortune 500), Limited Group and Gap (GPS,
Fortune 500), agreed to try to exclude Uzbek cotton, according to the shareholder coalition. WalMart went further: It helped organize retail trade associations to pressure the Uzbek authorities
and issued a strong public statement pledging to stop buying Uzbek cotton.
"We just thought, this is about as atrocious as it's going to get," Richard Coyle, senior director of
international corporate affairs for Wal-Mart, told Fortune. "We just couldn't idly sit by."
As You Sow, an organizer of the shareholder coalition, praised Wal-Mart for its leadership, as
did the Interfaith Center on Corporate Responsibility, an alliance of faith-based investors
representing more than $100 billion in invested capital.
Because Wal-Mart is asking its suppliers to avoid Uzbek cotton, the company is for the first time
requiring them to trace the origins of the cotton they use to make apparel and home furnishings.
This is a breakthrough - other retailers had claimed that it was hard or impossible to trace cotton
to its source.
"The fact that you have a retailer like Wal-Mart asking for this from suppliers, it's going to have
huge ripple effects," said Patricia Jurewicz, associate director of As You Sow's corporate social
responsibility program. It means others can be persuaded to follow suit.
In Guatemala, meanwhile, Wal-Mart's stores have begun working with local farmers, in an effort
to secure a steady supply of locally grown food while boosting the incomes of some of the
poorest people in the region. The company has joined forces with a nonprofit development group
called Mercy Corps and with the U.S. Agency for International Development to train about 600
farmers in sustainable agricultural practices, food safety and hygiene, processing and packaging.
"Most of these people are native Mayans, and they've been neglected and marginalized for
years," said Karen Scriven, senior director of corporate partnerships for Mercy Corps. "They've
never had to grow anything but corn and beans," mostly to feed their families. Now they are
selling cash crops desired by Wal-Mart and other retailers including tomatoes, potatoes, yucca
and cilantro and other cash crops.
The three-year program will cost $2.2 million - with $600,000 coming from Wal-Mart, $500,000
from Mercy Corps and U.S. AID matching their donations with $1.1 million. That sounds like a
lot of money to train 600 farmers but Scriven says the effort could affect 4,200 family members
as well as neighbors.

Manuel Zuniga, vice president of corporate affairs for Wal-Mart Central America, says dealing
directly with farmers - thereby cutting out various middlemen - enables Wal-Mart to save money
and build relationships with trusted growers who meet its quality standards.
"We can create a loyal base of suppliers who know us well and know what the customer wants,"
he said. "We can provide a lower price to the customer, as well as a better price to the farmer."
You can read more about the project at the Mercy Corps Web site.
Want some fish to go with those veggies? Up in Bristol Bay, Alaska, the world's largest wild
sockeye salmon fishery, fishermen are also cheering Wal-Mart because the retailer has agreed to
feature their catch as part of its sustainable seafood initiative. They're running newspaper ads in
Alaska thanking Wal-Mart for promoting the frozen wild salmon.
Wal-Mart agreed to support the Bristol Bay fishery as part of a commitment made in 2006 that
within five years, all of the wild-caught fresh and frozen fish it sells in North America would be
sourced from fisheries that are independently certified as sustainably managed. Elsewhere, wild
salmon populations have declined from over-fishing.
"This will increase the demand for Bristol Bay salmon, boost fish prices and keep more dollars in
Bristol Bay," said Bob Waldrop of the Bristol Bay Regional Seafood Association, an industry
group.
To be sure, not everyone is buying into Wal-Mart's sustainability work. The International Labor
Rights Forum, an activist group, has an ongoing campaign against Wal-Mart, saying its "ethical
sourcing" program is ineffective. Some environmentalists argue that Wal-Mart's business model
- selling cheap stuff made all around the world in big-box stores - can never become sustainable.
But they are the dissenters. There's no doubt that Lee Scott has had a profound impact on how
Wal-Mart sees its role in the world - and on how the world sees Wal-Mart.
First Published: December 3, 2008: 7:51 AM ET



Solution details: