Walmart Anti-corruption Probe may Clash with Chinese Market

   Date:2011-12-31     Source:puchangpingxyw

WALMART is attempting to reinstate its corporate values in its Chinese operations, but the success of its recent anti-corruption efforts will hinge on striking a balance between its existing model and realities in China, the China Business Journal reports.

Following a regulatory filing with the United States Securities and Exchange Commission describing a Walmart internal investigation into its international operations on Dec. 8, the retailer set up a compliance department in China on Dec. 15.

On Dec. 16, Wang Yuxiung, vice president of asset protection at Walmart China, resigned. Wang's untimely departure has been viewed in connection with an October incident in which Walmart was found to be selling mislabeled products in Chongqing, which also led to the resignation of former CEO Ed Chan later that month. A statement made by Walmart China to the China Business Journal said the current internal review is being carried out worldwide as part of an anti-corruption program initiated at the beginning of this year.

A Walmart China employee told the newspaper that a team sent from the American headquarters following the mislabeling incident had conducted an investigation on a scale unseen in its Chinese operations, gathering and reviewing data collected from the computers of all executives and key personnel.

Corruption, the newspaper said, is a persistent problem in China's retail sector, and global enterprises such as Walmart and Carrefour are not immune from it. Businesses often bribe officials to acquire superior store locations, while suppliers pay off purchasing staff for large orders or better shelf placement.

Zhang Jing, a trade and economics researcher, said that as opening a hypermarket in China only requires government approval, businesses emphasize on relation-building with the government. On the other hand, hearing processes in the US and France, which include representatives of industry groups and consumers, veto two-fifths of new Walmart stores and half of Carrefour's every year, respectively, Zhang added.

While Walmart is widely regarded as the retailer holding the strictest ethical standards, the employee said the pursuit of profits, China's relative poor business environment and the sometimes lacking business values in the country make it difficult for the retailer's Chinese operations to meet the same standards as those in other parts of the world.

The problems worsened after Chan took over the unsuccessful operations in 2006, said Shanghai-based retail analyst Zhong Sheng, because his localization efforts gave more power to regional divisions and prioritized profitability in performance evaluations.

As China is likely to become the focus of the American retailer's ongoing investigation, the view within the company is that the success of returning to its traditional values in the Chinese market will depend upon finding a balance between an ideal business model and the environment in China.  

2005-2011 www.researchinchina.com All Rights Reserved 京ICP备05069564号-1