{"id":24848,"date":"2017-11-15T18:39:19","date_gmt":"2017-11-15T23:39:19","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/walmart-in-the-face-of-isolationism\/"},"modified":"2017-11-15T18:43:38","modified_gmt":"2017-11-15T23:43:38","slug":"walmart-in-the-face-of-isolationism","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/walmart-in-the-face-of-isolationism\/","title":{"rendered":"Walmart in the Face of Isolationism"},"content":{"rendered":"

Historical Context<\/strong><\/p>\n

In recent decades, improvements in technology and global communications allowed for offshoring of services and production of goods that could be delivered over long distances with minimal or no degradation of quality and lower costs. Boundaries between what was a \u2018tradable good\u2019 expanded and retail businesses moved production and sourcing offshore. By 2016 97% of apparel and 98% of footwear sold in the U.S. was made overseas1<\/sup>, up from 70% of clothing in the 1980\u2019s2<\/sup>.<\/p>\n

To compete with peers on pricing and product assortment, beginning in the 1980s Walmart led a push to look overseas for inexpensive inventory. Today the retail giant imports the majority (~80%) of merchandise it sells to U.S. consumers3<\/sup>.<\/p>\n

Today\u2019s Political & Retail Environment<\/strong><\/p>\n

Today political environments are trending towards economic nationalism across the globe. Backlash against freer trade is reshaping politics as significant signs of de-globalization continue to evolve. In this new age, trade flows are restricted, cross-border investment is prohibited and industrial policies that favor domestic firms at the expenses of imports and foreign competition take precedent. Global supply chains, which are inherent in most scale retail businesses, are at risk of actions that may stem from isolationist policies, as exemplified by President Trump\u2019s motto \u201cwe will buy American and we will hire American\u201d4<\/sup>.<\/p>\n

Walmart\u2019s First Wave of Actions \u2013 2013<\/strong><\/p>\n

Walmart started to implement changes in its strategy in 2013 when the company announced a shift in purchasing behavior to sell $250B worth of American-made products by 2023 to U.S. consumers5<\/sup>. At this time Walmart also announced a round of grants to six universities working on textile innovations to bring back U.S. manufacturing jobs. The company believed these initiatives would lead to the creation of 1M new US jobs (250K in direct manufacturing and 750K in support\/services). Management also began hosting an annual U.S. Manufacturing Supplier Summit which included an open call for suppliers to present locally produced products to Walmart, with the goal of supporting American jobs6<\/sup>.<\/p>\n

Walmart\u2019s Second Wave of Actions \u2013 July 2017<\/strong><\/p>\n

Despite the efforts implemented in 2013, finding U.S. based suppliers \u201cremain[ed] one of the top challenges across [Walmart\u2019s] supplier base\u201d4<\/sup>. In the wake of the Presidential election in the U.S., Walmart\u2019s CEO Doug McMillon committed Walmart to \u201cparticipating as a leader in the country when it comes to policy\u2026We believe that we should be one of the voices at the table and we want to help renew U.S. manufacturing and drive the creation of manufacturing jobs across the U.S.\u201d<\/p>\n

In 2017 Walmart increased its focus on a home-grown supply chain, releasing a \u201cPolicy Roadmap to Renew U.S. Manufacturing\u201d7<\/sup>. Decreasing barriers on domestic manufacturing created opportunities for a refocused long-term strategy which identifies four high impact policy barriers that have the potential to accelerate and grow U.S. manufacturing: 1) workforce; (2) coordination and financing; (3) regulation; (4) tax and trade and proposes specific policies. At its core the program, developed in partnership with BCG, strives to \u201chelp recapture $300B in production of consumer goods, and create 1.5M U.S. jobs\u201d8<\/sup>.<\/p>\n

While there is no single solution that will solve the lack of manufacturing infrastructure in this country, Walmart is leading the retail industry by providing a framework for collaboration among key stakeholders. The Company outlined ten actionable policies (see table below) competitors can adopt to mitigate the four main barriers. The hope is combined efforts of Walmart and peers can reduce long-term unemployment in the U.S., in line with policy trends.<\/p>\n

(see PDF page 5 for plan outline here: https:\/\/cdn.corporate.walmart.com\/63\/a8\/a8dfb5b54ebd8ff53c8374726ac8\/final-policy-roadmap.pdf)<\/p>\n

Recommended Steps and Potential Questions<\/strong><\/p>\n

While Walmart appears committed to these new business practices, recapturing $250M of products annually is still insignificant compared to its annual U.S. sales of ~$480B. I would challenge management to push the boundaries if increased U.S. manufacturing is a true goal.<\/p>\n

Additionally, two of the barriers (regulation and tax\/trade policy) show no influence on behalf of retailers. While Walmart may not have direct control over these policies, their involvement on the business and manufacturing councils under the Trump administration is important. I would encourage the company to continue to voice the opinions of manufacturers, retailers and consumers.<\/p>\n

On that front, one key question is whether or not revised tax policies such as excise taxes or border tax adjustments on imports would lead to increased prices for U.S. consumers, or if retailers\/manufacturers would absorb margin impact? Do U.S. consumers actually have higher willingness to pay for \u201cmade in America\u201d products? The effort to rebuild an emaciated manufacturing base in the U.S. is a monstrous effort3<\/sup> \u2013 will such expenditures leave retailers with diminished cash flow and profits, in an already strained retail market?<\/p>\n

Word Count: 767<\/p>\n

    \n
  1. Wahba, Phil. \u201cWalmart Touts 10,000 New Jobs as Trump Pressures American Companies.\u201d Fortune, 17 Jan. 2017, fortune.com\/2017\/01\/17\/walmart-jobs-donald-trump\/.<\/li>\n
  2. Vatz, Stephanie. \u201cWhy America Stopped Making Its Own Clothes.\u201d The Lowdown, 24 May 2013, ww2.kqed.org\/lowdown\/2013\/05\/24\/madeinamerica\/.<\/li>\n
  3. \u201cFACT SHEET: Walmart\u2019s Made in America Pledge.\u201d Alliance for American Manufacturer, 27 June 2016, www.americanmanufacturing.org\/press-releases\/entry\/fact-sheet-wal-marts-made-in-america-pledge.<\/li>\n
  4. Bose, Nandita. \u201cExclusive: Not Made in America – Wal-Mart Looks Overseas.\u201d Reuters, Thomson Reuters, 27 July 2017, www.reuters.com\/article\/us-walmart-vendors-exclusive\/exclusive-not-made-in-america-wal-mart-looks-overseas-for-online-vendors-idUSKBN1AC1VJ.<\/li>\n
  5. Walmart. Annual Report 2013.<\/em> \u201cAmerica at Work. Supporting Communities and Growing Jobs\u201d. Retrieved from https:\/\/corporate.walmart.com\/americaatwork?gclid=EAIaIQobChMIh-2s2Pm-1wIVGoGzCh2qCAraEAAYASAAEgKAvPD_BwE.<\/li>\n
  6. \u201c2016 U.S. Manufacturing Supplier Summit.\u201d Newsroom, Walmart Corporate Offices, 28 June 2016, news.walmart.com\/events\/2016-us-manufacturing-supplier-summit.<\/li>\n
  7. Walmart. Annual Report 2017.<\/em> \u201cA Policy Roadmap to Renew U.S. Manufacturing\u201d. Retrieved from https:\/\/cdn.corporate.walmart.com\/63\/a8\/a8dfb5b54ebd8ff53c8374726ac8\/final-policy-roadmap.pdf.<\/li>\n
  8. \u201cWalmart Outlines Policy Roadmap to Renew U.S. Manufacturing.\u201d Newsroom, Walmart Corporate Officess, 26 July 2017, news.walmart.com\/2017\/07\/26\/walmart-outlines-policy-roadmap-to-renew-us-manufacturing.<\/li>\n<\/ol>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

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