Effects of the Hispanic population on Arkansas small business.
Bradley, Don B., III ; Fryar, Stephen ; van Riper, Damon 等
ABSTRACT
The growth in population of Hispanics in Arkansas is a trend that
business simply cannot ignore. Many businessmen are afraid to respond to
the new market because they do not understand it or the people within
it. Some Arkansans do not welcome these new guests. But, like it or not,
Hispanics are here, and they are planning to stay. Not only are they
working in our factories and production plants, they are starting their
own businesses, buying our products, viewing real estate, and looking to
start a new life in this land of opportunity. Instead of being uneasy,
business should be excited at the influx of new customers. However,
entrepreneurs should also be aware that while these people from Latin
American may learn our language, live in our country, go to our schools,
salute our flag and trade with U.S. dollars, they are different from us,
and the differences affect how they will do business in Arkansas.
INTRODUCTION
The importance of the Hispanic population in Arkansas has recently
increased as more immigrants from Latin America have come to the state
seeking jobs. There are a myriad of aspects associated with the
increased importance. In regard to the economic impact, the significance
can be attributed to two considerations.
First, many of the Hispanic immigrants are willing to do work that
many non-Hispanic American citizens are not willing to do. To the
Hispanic laborers, this "undesirable" work is a better
opportunity than they could have attained in their native countries. The
second consideration is related to the growing Hispanic population and
their purchasing power. Sales to Latinos contribute economically because
members of the Hispanic population are likely to have a high Marginal
Propensity to Consume (MPC).
The following study will focus on the Hispanic population in the
state of Arkansas. This includes focus on the growth of this group of
immigrants, public perception, the Hispanic labor force, and
opportunities for small business.
GROWING HISPANIC POPULATION IN ARKANSAS
The Hispanic population in Arkansas is increasing dramatically.
This fact has been studied, but perhaps the most definitive recent work
is Jeralynn S. Cossman and Edward L. Powers' Winter 2000 article,
"Dynamics of Hispanic Population Growth in Arkansas."
According to the article, the 2000 Census showed there are approximately
86,866 Hispanics living in Arkansas, and this statistic is a dramatic
increase over the 19,876 Hispanics counted during the 1990 Census
(Cossman & Powers, 2000). The most recent numbers reveal a
population that is almost four and a half times larger than counted in
1990 (Cossman & Powers, 2000). Therefore, a departure from the rest
of recent history exists because the 19,876 Hispanics counted in 1990
represented a population only 1.1 times as large as the 17,904 counted
in 1980 (Cossman & Powers, 2000). Nationally, Arkansas' 337
percent increase in total Hispanic population was second only to North
Carolina's increase (Greico, 2003). The total U.S. Hispanic
population increased from 22 million in 1990 to 35.2 million in 2000
(Grieco, 2003). Immigrants were 47 percent of the 13.3 million increase
(Grieco, 2003).
The best way to assess the Hispanic population in Arkansas is to
look regionally within the state. As of 2000, the largest Hispanic
concentrations were located in the Northwest, Central, and Western
regions (Cossman & Powers, 2000). The following Table 1 lists the
populations in these regions. As indicated by the Table, more than 50%
of Arkansas' Hispanics live in these three regions (Cossman &
Powers, 2000).
The next step is to analyze the Hispanic population in regard to
Arkansas counties. Cossman and Powers (2000) state, "From a policy
orientation, a better indicator of Hispanic impact might be found by
considering the 'saturation rate' or the proportion of the
population who claim Hispanic ethnicity. In general, saturation rates
tell a more moderate tale about Hispanics in Arkansas" (Cossman
& Powers, 2000). Table 2 displays the counties with the highest
saturation rates, and Table 3 lists the counties with the least
saturation rates.
Another method used to look at Hispanic growth in Arkansas counties
is to analyze the impact of the Hispanic population on the population
changes over the decade (1990-2000). For the decade, 55 of
Arkansas' 75 counties experienced a net growth in population
(Cossman & Powers, 2000). "Hispanic growth accounted for 100%
of the net growth for four of these 55 counties (Bradley, Prairie,
Sevier, and St. Francis)" (Cossman & Powers, 2000). For the
remaining 51 counties, the average of new population growth in these
counties that is attributed to new Hispanic residents is 18.7% (Cossman
& Powers, 2000). The following Table 4 displays the results for the
51 counties.
Sixteen Arkansas counties showed population growth at over twenty
percent, while four counties had over seventy percent. Counties with the
greatest growth were not necessarily the counties with the highest
Hispanic populations. This seems to suggest that the growth is expanding
into new areas of the state.
The distribution of Hispanic nationalities in Arkansas needs to be
addressed. "While 'Hispanic' may be a solid distinction
for a small group it begins to lose its explanatory usefulness as the
group increases in size" (Cossman & Powers, 2000). The 2000
Census determined Hispanic status nationwide, and by states. Table 5
lists results for Arkansas.
As indicated by the Table, the predominant Hispanic ancestry in
Arkansas is Mexican. However, many of those of Mexican heritage did not
come to Arkansas directly from their respective countries. Gazi Shbikat
and Steve Striffler (2000), in their article "Arkansas migration
and population," state "However, the vast majority came to
Arkansas after having spent considerable time in other states,
particularly California". This held true for the case study
conducted on a Hispanic owned business.
PUBLIC PERCEPTION
No matter where you go throughout the state, and in some areas in
:particular, you can hear Spanish spoken and see "tiendas"
catering to Hispanic tastes. Hispanics are a growing part of
Arkansas' human landscape. But are they a welcome one?
Arkansas has many distinctions as a state in the U.S.A. We have
been home to a former U.S. President, we are the birthplace of the
world's largest retailer Wal-Mart, and have established ourselves
in agriculture by being one of the top rice producers globally. But
along with our good points are few bad ones. We have a heritage that
could include a strong tradition of prejudice against people of other
races. The 1957 Little Rock Central High School lockout is an example.
The governor kept out black students at the time in an effort to prevent
desegregation of public schools (http://www. centralhigh57.org/ 1).
Racism and prejudice continued from that time through the 60s and 70s
with public mobs protesting integration, and many cases of
discrimination against African-Americans. Even today some underlying
prejudice may exist, particularly toward Hispanics. On Nov. 3, 1998,
Rogers gave the boot to 17-year incumbent Mayor John Sampier, a backer
of innovative efforts to harmoniously integrate thousands of immigrant
Mexican and Central American poultry workers into a previously all-white
community. Challenger Steve Womack, a veteran of two terms on the city
council, took 56 per cent of the vote after campaigning on a platform of
"zero tolerance" toward illegal immigrants and insistence that
legal newcomers "speak the language" and conform to community
norms (http://www.steinreport.com/sampierl.htm 1). Womack's
campaign strategy, while not necessarily racist, was a disturbing one
for Hispanics, especially because it occurred in northwest Arkansas
where Hispanic population growth has been the highest. Maria Hinojosa, a
CNN correspondent who specializes in urban affairs highlighted some of
the difficulties faced by Hispanics after her visit to Rogers, Arkansas in 2001. Hinojosa reported that the growth of the Hispanic population in
Rogers has been so rapid that it has given the native population very
little time to adjust to the new demographics of their town. On the one
hand, this means that they have not had time to organize against it, but
on the other hand neither has there been time to adjust
(http://www.cnn.com/COMMUNITY/ transcripts/2001/04/12/hinojosa/1).
Surveys conducted by the University of Arkansas of families living in
Northwest Arkansas show that the growth of Hispanics in their area is
not necessarily appreciated. When asked about whether the growth in
Hispanics in their area had been good for the area, not good for the
area, or had not made a difference, 35.2% said bad while another 20.5%
say both good and bad (http://www.uark.edu/misc/family/survey/survey.
html 1).
Communications has been one of the primary areas of difficulty for
Hispanics in Arkansas. "Well if their going to live in our country,
they should learn to speak our language," is a common phrase heard
among Arkansans across the state. And, although most Hispanics who move
to Arkansas say that they want to learn English, they do not have very
many resources available to do so. To their credit, some towns in
Arkansas have stepped up the plate to help by offering English as a
Second Language (ESL) courses at local community centers and within
large businesses.
BUSINESS EFFECTS/ASPECTS
With the increasing Hispanic population, there are a multitude of
effects on business. These effects are generally categorized as human
resource, legal, ethical, and marketing concerns. Both small businesses
and large corporate businesses are impacted in these areas. Therefore,
business leaders need to be knowledgeable and proactive with their
business practices as they relate to significant Hispanic demographics.
Human Resources
In regard to human resource concerns, the outreach, employment, and
retention of Hispanics in corporate business needs to be addressed.
Failure in this effort early on means that corporate businesses are
"playing catch-up" at all levels of their organizations. There
have been studies conducted that have focused on Corporate America and
their Hispanic human resource practices. An organization that has
researched the aspect is the Hispanic Association on Corporate
Responsibility (HACR).
A corporate culture that fosters Hispanic representation is
developed at the top levels of corporate organizations. Therefore, it is
useful to focus on the highest levels of corporate organizations. If
Hispanic representation is not a top priority at those levels, then
Hispanic representation will more than likely not be a top priority at
other corporate levels. "Since 1993, the Hispanic Association on
Corporate Responsibility has examined Hispanic representation at the
highest levels of Corporate America" (Cabral, 2001). On October 18,
2001, the HACR released a study titled "2001 HACR Corporate
Governance Study" (Cabral, 2001).
The HACR study revealed that there are more of the largest
companies in the nation (Fortune 1,000 companies) are recognizing the
need for Hispanic inclusion (Cabral, 2001). The study showed that 146 of
the Fortune 1,000 companies have Hispanics on their boards (Cabral,
2001). This was an increase from 120 companies the previous year
(Cabral, 2001). In terms of percentage, the study showed that Hispanics
hold only 1.7 percent of all board seats in the Fortune 1,000 companies,
up by one percent since 1993 (Cabral, 2001). The President of the HACR
states:
"In addition, 85 percent of all Fortune 1,000 companies have no
Hispanic representation in their governing bodies--854 of the
largest companies in America doing business in our communities on a
daily basis. And if we look at entire industries, 20 key industries
have no Hispanic board members. Some of them include health care,
sporting goods, food and grocery wholesalers, and securities firms.
These industries represent 5 million employees and $1 trillion
dollars in annual revenues" (Cabral, 2001).
An additional and interesting aspect indicated in the HACR study
pertains to Hispanic women. According to the study, there has not been
any real progress in the improvement of Hispanic women representation
(Cabral, 2001). The rate of Hispanic women board members decreased from
the previous year (Cabral, 2001). The percentage rate for the previous
year was 15 percent, whereas the decreased rate was 14.5 percent
(Cabral, 2001). There are large corporate businesses that are at the
forefront in regard to Hispanic human resource practices. In 2002, the
HACR released another study titled. "HACR Corporate Best Practices:
2002 Hispanic Workforce." This study identified successful models
to improve Hispanic representation that have been implemented by some of
the largest companies in the nation (Hispanic Heritage,2002). Three of
the thirteen companies included in this best practices study were
McDonald's Corporation, Bank of America, and General Mills (Hispanic Heritage, 2002). There are numerous McDonald's
restaurants in Arkansas, and additionally Bank of America has business
operations in the state. "According to the study, McDonald's
strategic approach to hiring, retaining, and promoting Hispanics has
resulted in greater representation at all levels of the company"
(Hispanic Heritage, 2002). McDonald's has developed groups that
support Hispanic employees (Hispanic Heritage, 2002). These groups are
the Hispanic Employee Networks, Hispanic Leadership Council, Hispanic
Summits, and Hispanic Steering Committee (Hispanic Heritage, 2002).
"All of these groups in one way or another support Hispanic
employees with career development, and provide the company with valuable
information on Hispanic issues" (Hispanic Heritage, 2002).
At the time the study was released, McDonald's efforts had
outstanding results. Hispanics represented 29.3 percent of its workforce
and 18 percent of its restaurant managers (Hispanic Heritage, 2002).
"In addition, two of the three McDonald's USA presidents, and
three of six McDonald's global presidents, are Hispanic"
(Hispanic Heritage, 2002). The company also boasts representation in its
governance (Hispanic Heritage, 2002). "Enrique Hernandez, Jr.,
chairman and chief executive officer of Inter-Con Security Systems, is a
member of the board of directors" (Hispanic Heritage, 2002).
At Bank of America, corporate executives are increasing the
Hispanic representation in their workforce pipelines through a job
training and scholarship program (Hispanic Heritage, 2002). "The
program has succeeded in bringing Hispanic talent as permanent employees
and in encouraging low-income students to pursue a college degree"
(Hispanic Heritage, 2002). Additionally, Bank of America's Youth
Job Program brings together students with company executives and assigns
them to a banking center where they receive job training. (Hispanic
Heritage, 2002). "Upon completion of the program and graduation
from high school, they receive a four-year $10,000 scholarship"
(Hispanic Heritage, 2002). At the time of the HACR study, the program
had served 315 students, of which 77 were currently enrolled, and among
the program graduates, 26 percent were Hispanics (Hispanic Heritage,
2002).
Lastly, the number one cereal maker in the United States, General
Mills, believes Hispanic representation in its workforce is imperative
to ensure the continued success of the company (Hispanic Heritage,
2002). General Mills' successful recruitment strategy results from
Chairman and CEO Steve Sanger's active and vocal support, the
participation of Hispanic senior level employees, and the Hispanic
employee network (Hispanic Heritage, 2002). General Mills emphasizes
clear accountability on each human resource function in order to ensure
the development of the Hispanic employee pipeline to higher-level
positions, and the accurate measurement of results (Hispanic Heritage,
2002).
General Mills also has co-mentoring programs, and their Hispanic
revisit weekend program encourages potential new hires to join the
General Mills family of employees (Hispanic Heritage, 2002). According
to the HACR best practices study, a sound strategy for Hispanic
inclusion in Corporate America's workforce should include the
following aspects:
1. Company CEO and senior management's commitment to Hispanic inclusion
2. An articulated and well communicated rationale linking Hispanic
inclusion to the company's vision
3. Accountability measures for managers in meeting Hispanic inclusion
goals
4. Use of a measurement system to determine gaps and monitor progress
in Hispanic inclusion
5. Career development programs for high-potential Hispanic candidates
to address pipeline issues
6. Support of mentoring and Hispanic employee networks to boost
recruitment and career development efforts
7. A communication plan that explains Hispanic inclusion goals at all
levels of the company
8. Strong partnerships with Hispanic community organizations to further
employment efforts
Source: Hispanic Heritage, 2002
Hispanic representation in governance and at all levels of the
workforce is an essential business practice (Cabral, 2001). Companies
that have diverse executive teams are more inclined to find business
opportunities that are not obvious (Cabral, 2001). "Additionally,
Hispanic consumers are more likely to purchase goods and services from
companies that have embraced Hispanic inclusion" (Cabral, 2001).
Legal
Another feature associated business and Hispanics legal aspect. One
such issue pertains to illegal Hispanic immigrants. Determining an
actual number of illegal immigrants in a given locale is an extremely
difficult undertaking. This is due to the fact that no documentation
exits in regard to individuals who are illegal immigrants. According to
the Immigration and Naturalization Service (INS) estimates, there were
27,000 illegal immigrants residing in Arkansas as of 2000 (FAIR, 2003).
This was also shown in the year 2000 census. Many of these illegal
immigrants are Hispanic, and are arriving to work in the poultry
industry and construction jobs (FAIR, 2003). Arkansas' poultry
industry is the largest industry in the state.
Organizations in Arkansas' poultry industry and construction
businesses have to be very cognizant of the legal ramifications of
hiring illegal immigrants. The Immigration Reform & Control Act of
1986 (IRCA) made it illegal for employers to "knowingly" hire
undocumented workers (National Immigration Law Center, 2003). Tyson
Foods, Inc., the world's largest poultry producer based in
Springdale, Arkansas, has learned that the lack of due diligence in its
hiring practices with Hispanics is a costly mistake. On December 19,
2001, Tyson Foods, Inc., and six of its managerial personnel were
indicted by a Chattanooga, Tennessee Federal Grand Jury. The charge was
conspiring to smuggle illegal immigrants across the Mexican border to
work in Tyson's processing plants (Barboza, 2001). On March 26,
2003, a federal jury acquitted Tyson Foods and three of the managers of
the charges in spite of the fact that two of the other three managers
reached a plea agreement and testified that they were doing what the
company demanded by hiring illegal immigrants (Poovey, 2003). Even
though Tyson Foods was acquitted, there was a cost associated with the
ordeal. Tyson Foods incurred significant legal bills and negative
publicity.
There are several reasons for the growing number of Hispanic
immigrants (both legal and illegal). Growth of the poultry industry in
Arkansas may be one. The consumer demand for poultry products is high,
leading to an intense rivalry for market share among producers in the
industry. The fight for profits means that poultry producers are focused
on distinctive competitive advantages. One key advantage is being the
organization with the lowest operation costs. Since poultry processing
is relatively labor-intensive, there is a propensity to
"slash" labor costs. One way to do this is to hire immigrant
workers. "Today, the processing and packing plants are largely
staffed by low-paid non-union workers from places like Mexico and
Guatemala. Many of them start at $6 an hour" (Barboza, 2001).
Another reason for the Hispanic immigrant (legal and illegal)
growth in the poultry industry is associated with the fact that poultry
producers have a difficult (if not impossible) time finding workers to
work at certain "undesirable" jobs that are a part of the
poultry production process. One such job is "live hanging."
Non-Hispanic citizens simply do not want to do this type of work.
Hispanic immigrants are willing to work at "undesirable jobs"
because Hispanic immigrants are seeking "opportunity," and
even though certain poultry jobs are "undesirable," the job
attractiveness aspect is more than likely outweighed by the
"opportunity" aspect. Hispanic immigrants usually have
migrated from zero to very little opportunity, so the burgeoning
Arkansas poultry industry consisting of producers desperate for workers,
provides a level of opportunity for Hispanic immigrants. Enrique G.
Murillo, Jr., in his essay, "Only the Labor is Welcome Not the
Entire Human Being: The Racialized Experiences of the New Latino
Diaspora," covers the poultry producers/Hispanic immigrants aspect.
Murillo, Jr., states:
"Latino immigrant laborers have filled the gap in needed unskilled
labor due primarily to the local large-scale poultry-processing
industry's responses to the processes of national and global
restructuring that have transformed occupational structures. As
previously noted, it is these economic processes, fostered by a
changing configuration of immigration legislation that encourage
and sustain immigration, rather than the influx of immigrants
themselves, that has created the concentration of immigrant workers
in certain industries and jobs" (Murillo, 2001).
The large meatpacking organizations stated on December 21, 2001
that they would work to ensure that they were not hiring illegal
immigrants (Barboza, 2003). The organizations have always maintained
that it is a difficult task to accomplish (Barboza, 2003). Industry
experts though, have asserted that it has long been believed that
American food companies recruit in Mexico and knowingly hire illegal
workers (Barboza, 2003). "But industry and government officials say
that, for better or worse, foreign-born workers are now one of the most
vital elements in the American food and agriculture system"
(Barboza, 2003).
Ethical
There are ethical considerations when dealing with Hispanic
immigrants. One ethical concern involves the working conditions that
Hispanic immigrants encounter. The poultry industry in Arkansas and
other states is notorious for having sub-par working conditions in terms
of safety and cleanliness. "The poultry industry's illness and
injury rate is more than twice the national average" (Poultry.org,
2003). "According to the United Food and Commercial Workers (UFCW),
one in five poultry workers is seriously injured on the job"
(George, 2000). Many Hispanic immigrants take some of the nation's
most dangerous jobs because those jobs were the only jobs they could get
(Hopkins, 2003).
Besides the poultry industry, another industry in Arkansas that
Hispanic immigrants (legal and illegal) are increasingly working in is
the construction industry. With the economic "boom" in
Northwest Arkansas and Central Arkansas, construction of highways and
buildings has exponentially increased. Nationally, by 2001, Hispanics11%
of all workers-held 17.4% of construction jobs (Hopkins, 2003).
According to the Pew Hispanic Center, about 57% of the USA's
estimated 1.1 million Hispanic construction workers are illegal
immigrants (Hopkins, 2003). This industry needs to be scrutinized
because of the alarming Hispanic immigrant fatality rate. According to
the Occupational Safety and Health Administration (OSHA), nationwide
construction-related accidents accounted for 31.5% of Hispanic
fatalities in 2001, up from 20.3% in 1992 (Hopkins, 2003).
There are reasons for the high Hispanic fatalities in the
construction industry that need to be addressed. First, inadequate
training of Hispanic immigrants occurs because of language barriers.
Many construction business owners and supervisors do not know how to
effectively communicate with Hispanic workers. Another reason is the
fact that Hispanic immigrants are often too scared of losing jobs to
press for safer working conditions (Hopkins, 2003). "They also
worry about employers making threats, such as 'be quiet or
we'll turn you in' for deportation" says Peg Seminario,
director of safety and health at the AFL-CIO (Hopkins, 2003).
The construction industry and governmental agencies are starting to
take notice of the alarming fatality rate, but it is very unfortunate
that action had not occurred earlier. Utility Contractors, a
construction business in Wichita, Kansas, has seen the need, and taken
action. (Mazzullo, 2001). The President, Chuck Grier, has made a point
to learn Spanish, and since he is not fluent, he has hired an assistant
who speaks Spanish (Mazzullo, 2001). Patti Sullivan, director of human
resources for the company, says "it's gone beyond speaking the
language. Newsletters and birthday cards are sent to native speakers in
Spanish; insurance and 401 (k) paperwork is translated; and all safety
meetings are held with Spanish available" (Mazzullo, 2001). In
February of 2003, Labor Secretary Elaine Chao announced that her
department will seek $13 million to promote and facilitate better
training of workers who are faced with language barriers (Wist, 2003).
Most of these efforts will initially focus on the construction industry
(Wist, 2003). OSHA's web site contains a Spanish-language page with
information about OSHA's mission, how to electronically file
work-related complaints, worker and employer rights and
responsibilities, and a list of resources (Pittman,2003). Another
ethical aspect concerning Hispanic immigrants regards wages. Since many
Hispanic immigrants are working in the poultry industry in Arkansas (and
other states), the Hispanic immigrants encounter unethical pay
practices. In Abosede George's article, "UFCW Joins Alliance
Seeking Justice for Poultry Workers," George states:
"Workers throughout the poultry industry, mostly African American,
Latinos, and increasingly immigrants, are routinely cheated out of
already meager wages (usually less than $7 an hour) by supervisors
who fail to pay for the time it takes to put on, take-off and clean
required safety and sanitary gear. This time amounts to about one
hour per day, per worker, and totals about $100 million a year in
lost pay" (Geroge, 2000).
In 2000, the U.S. Department of Labor's Wage and Hour Division
(WHD) conducted an investigation-based survey of 51 randomly selected
poultry processing plants located throughout the U.S., which led to the
finding that there was across-the-industry non-compliance under the Fair
Labor Standards Act (FLSA) (National Interfaith Committee, 2003, 1-2).
The following were the results of the survey:
Type of Violations Percentage of Plants
in Violation
1. Unpaid hours of work 100%
2. Mis-classified exemptions 65%
3. Impermissible deductions from pay 35%
4. Bonus payments not included in OT 8%
5. Child labor violations 4%
6. FMLA violations 4%
Source: National Interfaith Committee, 2003
Poultry producers have made denials in the past, but the above
results show that the denials were more than likely incorrect. The court
system has been involved with this matter. The U.S. Supreme Court
decided the Hoffman Plastic Compounds, Inc. v. National Labor Relations
Board case (March 27, 2002) (National Immigration Law Center, 2003). As
a result of the decision, undocumented immigrants have limited remedies
available (National Immigration Law Center, 2003). One year since the
decision, the following is the status of undocumented immigrants'
rights:
Right to Unionize--Undocumented workers/immigrants continue to be
employees under the NLRA and thus enjoy protections from unfair
labor practices, but they are not entitled to back pay, regardless
of whether the employer knew the worker/immigrant was undocumented
at the hiring stage.
Right to Minimum Wage and Overtime--Undocumented workers/immigrants
continue to be protected by the Fair Labor Standards Act (FLSA) and
state wage and hour laws for "work already performed."
Right to Be Free From Workplace Discrimination--Undocumented
workers/immigrants continue to be protected by the American with
Disabilities Act (ADA), Age Discrimination in Employment Act
(ADEA), Equal Pay Act, and Title VII of the Civil Rights Act
prohibiting employment discrimination based on race, national
origin, gender, and religion.
Right to a Healthy and Safe Working Environment--Undocumented
workers/immigrants continue to be protected by the Occupational
Safety and Health Act (OSHA) and the Mine Safety and Health Act.
Source: National Immigration Law Center, 2003
Marketing
Marketing to Hispanics is also a very important business activity.
As of 2001, the annual purchasing power of Hispanics was $560 billion
(Cabral, 2001). "The Santiago Solutions Group reports that Hispanic
purchasing power is expected to hit the $675 billion mark in 2003, $928
billion by 2007, and $1.2 trillion by 2010" (Association of
Hispanic Advertising Agencies, 2003). According to the Selig Center, the
top ten states as ranked by the rate of growth of Hispanic buying power over 1990-2002 are as follows:
1. North Carolina 912%
2. Arkansas 778%
3. Georgia 711%
4. Tennessee 655%
5. Alabama 466%
6. South Carolina 463%
7. Nevada 443%
8. Minnesota 418%
9. Kentucky 415%
10. Iowa 370%
Source: Association of Hispanic Advertising Agencies, 2003
As shown by the table, Arkansas is second nationwide in rate of
growth and buying power of Latinos. Additionally, according to a study
conducted by the Selig Center, the top areas where Hispanics spend more
than non-Hispanics are: groceries, telephone services, furniture,
men's and boys' apparel, children's clothing, and
footwear (Association of Hispanic Advertising Agencies, 2003).
Although the Hispanic advertising industry has grown at a healthy
rate since the late 1990s, there is room for significant growth (Valdes,
2003). "A 2002 study released by the Association of Hispanic
Advertising Agencies (AHAA) reveals that the majority of America's
top advertisers are significantly under-investing in their efforts to
reach Hispanic consumers" (Valdes, 2003). The study indicates that
in the past three years, nearly two-thirds of top companies targeting
the Hispanic market invested on average less than 3.2 percent of their
overall advertising budgets on reaching the Hispanic market (Valdes,
2003). The organizations in the study that received the top scores
approached or exceeded the recommended level of eight percent of their
total advertising budget (Valdes, 2003).
There are organizations in Arkansas that have realized the
significant and growing Hispanic market provides a tremendous marketing
opportunity. One organization that has implemented a proactive strategy
is the world's largest retailer, Bentonville, Arkansas based
Wal-Mart Stores, Inc. Recently, Wal-Mart Stores, Inc., reached an
agreement with Alliance Group Services Inc., a wholesale network
provider (Long & Seals, 2003). The agreement is to market co-branded
prepaid cards to Hispanics who want to call Mexico (Long &
Seals,2003). Sales of the prepaid cards have taken off at Wal-Mart since
they were introduced in south Texas on June 28, 2003 (Long & Seals,
2003). "The cards cost $10 for 103 minutes, and there are no
additional fees or connection charges" (Long & Seals, 2003, 1).
The cards are tailored specifically to Hispanics with Spanish
instructions on the card and voice prompts "en Espanol" (Long
& Seals,2003, 1). "The card is being sold at WalMart checkout
counters and in the clothing, auto and food sections, with the latter
being particularly significant" (Long & Seals, 2003, 2).
Wal-Mart has taken other steps to build brand equity among
Hispanics. "WalMart began printing bilingual circulars and
providing in-store translators" (Phillips, 2003, 2). Additionally,
Wal-Mart analyzes the cultural breakdown of the communities it serves,
and wisely tailors its merchandise selection (Phillips, 2003). For
instance, Wal-Mart opened a Neighborhood Market on West New Hope Road in
Rogers, Arkansas (WSL Strategic Retail, 2003). The Spanish influence is
very evident, and can been by the selection of canned goods, sauces and
flavorings, and even the decorations in the store (WSL Strategic Retail,
2003). The store speaks to the local community, which is heavily
Hispanic; an example of Wal-Mart's Store of the Community strategy
(WSL Strategic Retail, 2003).
There are other businesses in Arkansas that are focusing on the
Hispanic market. One group of businesses are Arkansas grocers
(businesses that totally sell grocery items). Arkansas grocers are
carrying authentic Mexican products, cutting prices to rates
significantly lower than the competition, and hiring bilingual clerks
(O'Reilly, 2003). Meriam Turner, Affiliated Foods' manager of
Hispanic marketing, states that 130 of Affiliated Foods' 400-plus
stores target the Hispanic population (O'Reilly, 2003). Randy
Weiss, director of marketing for Affiliated Foods Southwest Inc., states
that Hispanic customers don't want the Americanized Mexican-food
brands like Old El Paso (O'Reilly, 2003, 1-2). Weiss states,
"The Hispanic customers we have are looking for the authentic
brands they grew up with in Mexico" (O'Reilly, 2003, 2).
"Large grocery operations, such as Affiliated Foods' Harvest
Foods outfit, stock more than 25,000 items, including up to 500
authentic Mexican items" (O'Reilly, 2003, 2). Lastly, smaller
Arkansas discount grocers focus on the Hispanic market. Shane Vance,
assistant manager at Save-A-Lot on Pike Avenue in North Little Rock,
states, "If you look at all Save-A-Lot stores, they are basically
in lower income areas; they are designed to appeal to that lower income
market ..." (O'Reilly, 2003, 2).
Lastly, Arkansas' banks focus on Hispanic consumers. Art
Morris, President and CEO of Arkansas State Bank, hosted a cultural
diversity workshop for the financial professionals at his Siloam
Springs, Arkansas bank (Bemis, 2002). Morris states,
"Cultural diversity training is important to our bank in order to
give the proper service to all people, regardless of race. We are
here to serve and that means service to everyone. People from other
countries need assistance, many times more than those that are
familiar with our customs" (Bemis, 2002, 1).
Bill Bowden's 2000 article, "Businesses Benefit from
Hispanic Integration," addresses how First National Bank and Trust
in Rogers, Arkansas, is targeting Hispanics. Roland Goicoechea, then
vice president for mortgage lending, set up a system to give Hispanics
credit (Bowden, 2000). "He establishes a $560 certificate of
deposit in the name of the bank and the customer. The money stays in the
bank, and the customer makes payments on it for six months. After that
time, the loan is paid off, and the CD is available for the customer to
use as a down payment on a house or for other purposes" (Bowden,
2000, 3). Goicoechea states, "They created their first credit
history, and they have a CD that's worth $500" (Bowden, 2000,
3). The system has been lauded by the American Bankers Association and
the Fannie Mae Foundation (Bowden, 2000, 3). "It's now being
imitated by banks in other parts of the country" (Bowden, 2000, 3).
Goicoechea further stated that First National Bank of Rogers makes a
priority to see that 15 percent of its employees are bilingual (Bowden,
2000, 4).
The next section in this work will place a major focus on small
businesses. Particularly, there will be coverage of the opportunities
for small businesses in regard to the significant Hispanic population.
OPPORTUNITIES FOR SMALL BUSINESS
Case Study
On July 29, an impromptu interview was conducted by Stephen Fryar
(co-author), of a Latino storeowner in Russellville, AR. The purpose of
the interview was to obtain general information about small business for
Hispanic oriented businesses, markets, and clientele. The owner of the
Latino Market, Humberto Portillo, moved from El Salvador to California,
and then to Arkansas several years ago. He first started as a worker on
a chicken farm in Arkansas. He has built his business over the past
year. Mr. Portillo's store is like many "tiendas" in
Mexico or other parts of Central America. It is also reminiscent of the
neighbor grocer in Middle America in the 1950s and earlier. The variety
of goods included produce like Mangos and sliced prickly pear cactus (which are eaten in Mexico), spices used in typical Mexican dishes (e.g.
azafran), Mexican candies, a wide selection of Hispanic music, cheeses,
home baked breads, phone cards, and, Mexican laundry products (e.g.
detergent). Based upon the conversation that ensued, and the inventory
on hand, some general market characteristics were noted. His clientele,
according to the storeowner, were all Spanish-speaking working class
immigrants from many different countries in Latin America and other
states within the U.S. The Hispanics come to the store because the
products are familiar to them, says Humberto, "these are the things
that they ate and used in their native countries"(as translated).
Most of the products are shipped to the market from Texas, having
arrived there from several different countries in Latin America. The
shipping costs associated have raised prices considerably above the
prices that Hispanics are used to paying for the same items at home.
Still many are loyal to brand, and willing to pay a bit more for things
that are familiar to them. The Latino Market does not only sell goods to
remind Hispanics of home though, it connects them to home. Along with a
menagerie of calling cards with special international rates, the owner
of the store also does money wire transfers for his customers, a very
important issue for the Hispanic community. Of interest as well are the
numerous brochures and flyers for companies that offer products like
international cell phones, or services such as bilingual assistance and
English classes. Despite this wide array of potential profit making
items, Mr. Portillo admitted that business for the most part was not
very good. "Most of the Hispanics are in Dardanelle and Danville,
not in Russellville," said Portillo, "there are two markets
there that are doing well."(as translated) (Portillo, 2003). When
asked about what kind of marketing the store used to attract customers,
the owner explained that he was very limited in what he could do because
of finances and availability of a broadcast medium specifically aimed at
Hispanics. "There is no newspaper written in Spanish for this area,
with the exception of some classifieds," explained Portillo,
"and radio is too expensive."(Portillo, 2003). There is only
one radio station that broadcasts in Spanish for the Russellville area.
Mr. Portillo further commented that he felt it was hard for a Hispanic
in Arkansas to start his/her own business and make a profit at it. When
he started his store, explained the owner, he could not get financing
from the bank because, like many working class Hispanics, he didn't
have any stable collateral. He didn't own a house or property at
the time. In the end he hail to borrow the money from relatives. But,
with the continued growth of Hispanics in and around Russellville, Mr.
Portillo was hopeful that he could continue and grow his business.
General Impressions of Case Study
While limited in scope, this case study provides insight into what
a typical type of small, Hispanic business faces in rural Arkansas.
While the growth of population in Arkansas would seem to indicate a
strong potential market, small business entrance into the market is
fraught with difficulties. The study also showed many problem areas that
could be opportunities for the right kind of business. To demonstrate
this, it might be helpful to look at some of the small businesses
already in existence that cater to Hispanics.
Newspapers
One of the difficulties faced by any businessperson wanting to tap
into the Hispanic market is getting the word out about his/her company.
Newspapers published in Spanish, and targeted at Hispanic interests give
companies a medium to advertise, and are an open opportunity for
entrepreneurs. One such newspaper is "El Latino" which is
published by the National Association of Hispanic Publications (NAHP).
This paper is circulated free of charge in Benton, Conway, Jacksonville,
and Maumelle, Arkansas. Contents of the wo4Nay newspaper include news
articles from Mexico, stories that relate to Hispanics in Arkansas, and
numerous advertisements. The Small Business notes homepage recently
reported that the NAHP and the Small Business Administration have signed
a strategic alliance memorandum stating their commitment to work
together to provide information and resources to Hispanic publishers and
small business owners across the nation (Small Business Notes, 2003).
This will help businessmen in Arkansas advertise their product or
service at a lower cost.
Other Media
Radio stations, while not widespread in rural areas, are very
popular in larger communities where there is a strong Hispanic
influence. The stations not only offer advertising for businesses, but
also play hit songs from Latin America, and report on sports, especially
Soccer, in Arkansas and in Latin America.
Cable companies in Arkansas have recently started providing access
to a selection of channels broadcasted in Spanish. Comcast cable has one
such selection advertised in "El Latino" newspaper. AETN has
begun to air programs in Spanish on a monthly basis and plans to move to
a weekly schedule if there is sufficient support from public and private
sources. The programs will appear on television stations in Little Rock,
Mountain View, Arkadelphia, Fayetteville, and Jonesboro (Leiderman,
2003). Today's THV, a news station which covers most of Arkansas,
has also started broadcasting its news in Spanish through the Secondary
Audio Program (SAP) function available on most TVs.
Thrift Stores
One category of small businesses that have done very well in
Hispanic communities is thrift stores such as Goodwill and Salvation
Army. The low price clothing sold at these stores appeals to many
Latinos as an alternative to the higher cost department store brands.
The overwhelming influx of Spanish speakers has prompted Goodwill, and
many other thrift stores to employ bilingual workers to assist
customers. Though many of these second-hand stores are non-profit, the
market response of Hispanics to them indicates an opportunity for
entrepreneurs. Dollar stores like Dollar General and Dollar Tree have
also been popular in Hispanic circles, though big stores like Wal-Mart
have made it difficult to compete in the retail industry.
SWOT ANALYSIS OF HISPANIC ORIENTED SMALL BUSINESS
A general look at a small business oriented toward Hispanics by
analyzing strengths, weaknesses, opportunities, and threats reveals some
important considerations for potential entrepreneurs.
Strengths
The strengths of a Latino focused business include a large and
growing market base, Hispanic brand loyalty, and a market need for goods
and services among Spanish speaking workers. Where there are jobs and
low cost living for Hispanic workers, they will be there, and in many
cases will congregate to form close knit communities. A business located
in an area like this has a good chance of getting market share.
Furthermore, as shown in the first case study, consumers in this
market like to buy the brands that they know from their native country.
They are very loyal to certain brands. This tendency can help small
businesses create a niche market and help them better plan their
inventory. Market research on which brands are preferred is crucial in
this area. Another related preference that can be an asset is the
cultural and familial ties between Spanish speakers. They will go out of
their way to visit a business where a friend or relative works.
Weaknesses
Though weaknesses will vary by the type of business or service
industry, some general points about potential setbacks can be made based
on the research done.
One of the first potential weaknesses in forming a small business
in this market is the elasticity of demand. While it is true that brand
loyalty plays a major part in Hispanic purchasing behavior, price is
arguably the most significant factor. Many goods that newcomers to the
state find are completely unknown to them, as are brands. Some brands
that they are accustomed to are not even carried at stores. As many
Hispanic workers are living on a limited budget, and/or are sending
money back to their home country, they can be very frugal in their
shopping. This creates a problem for businesses like Humberto
Portillo's "Latino Market." Shipping costs from Mexico
-to the U.S. force businesses like his to raise prices. The small number
of businesses carrying these products also raises costs as deliveries
are often made on a custom basis.
For many Hispanic businessmen, lack of capital is a major
limitation since financing is hard to obtain without stable collateral,
and since there might be an underlying prejudice against them because of
their ethnic. background. Anglo businessmen, on the hand, while they
could have access to financing more readily, face the difficulty of
dealing with another language and culture. Furthermore, Hispanics often
prefer to deal with people from their own culture rather than an
outsider. This problem may easily be avoided by employing Hispanics as
"front men" to deal with customers.
Limited location is another weakness of this market. Though more
Hispanics are coming into Arkansas, the number of cities or regions with
a high saturation rate of Latinos is still relatively small. As observed
by the businessman in the case study, stores located among higher
density Hispanic populations are more likely to prosper. Selecting the
right city and region is therefore extremely important.
Opportunities
Some of the most lucrative opportunities for small businesses lie
in simply making their product or service available to the Hispanic
market. Hiring people with Spanish language skills or cultural
experience, advertising in Spanish, making store signage bilingual,
acting upon current market research, and developing rapport with
Hispanic customers and other Hispanic run businesses are all actions
that can go a long way in opening up the Latino market for a business.
Hispanics are relationship oriented. They are family focused. Many small
Latino stores never advertise their presence in the community because
they understand the effectiveness of "word of mouth"
advertising in their culture.
There are numerous services and societal practices that are
completely foreign to them or are closed to them because of language
barriers. For the most part, Hispanics are very open to the American
culture and want to learn and participate in it; they just don't
know how. Business has an opportunity to help them learn, and by doing
so gain a loyal customer.
Threats
Threats from big business are probably the most significant concern
for entrepreneurs. You don't have to go any further than Wal-Mart
to find a large corporation that can out compete about any retail store
in the world. And Wal- Mart is responding to the growth of the Hispanic
population, as mentioned earlier in this study. Leveraging their
economies of scale, they can often sell the same or similar products at
a lower price.
Another potential threat is the changing culture within the
Hispanic community. Many second and third generation Latinos are
forsaking their native language and culture to conform to American
ideals. A business may still access the market, but they must be aware
of the changing culture and needs of their clientele.
NOTE
This article was reprinted from the Academy of Entrepreneurship
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Don B. Bradley, III, University of Central Arkansas
Stephen Fryar, University of Central Arkansas
Damon Van Riper, University of Central Arkansas
Table 1: Hispanic Population in Three Arkansas Regions
Region Population
Northwest 30,354
Central 12,546
Western 11,372
Total 54,272
Source: US. Census Bureau; Cossman & Powers, 2000
Table 2: Arkansas Counties With Highest Hispanic Saturation Rates
Counties Saturation Rate
Sevier 19.7%
Yell 12.7%
Carroll 9.7%
Benton 8.8%
Bradley 8.3%
Source: U.S. Census Bureau; Cossman & Powers, 2000
Table 3: Arkansas Counties With Lowest Hispanic Saturation Rates
Counties Saturation Rate
Arkansas 0.8%
Marion 0.8%
Ouachita 0.7%
Lawrence 0.7%
Fulton 0.5%
Source: U.S. Census Bureau; Cossman & Powers, 2000
Table 4: Hispanic Growth as a Percentage of Total Growth, 2000
Less than 10% Between 20% or greater
of total growth 10% &, 20%
Marion (1.8%) Garland (10.1%) Conway (20.3%)
Fulton (2.1%) Craighead (10.3%) Clark (20.7%)
Baxter (3.0%) Independence (11.5%) Benton (21.7%)
Perry (3.3%) Cleveland (11.6%) Cross (23.9%)
Izard (3.3%) Crawford (11.9%) Poinsett (25.5%)
Boone (3.3%) Madison (12.4%) Washington (25.7%)
Sharp (3.7%) Montgomery (12.7%) Pike (28.5%)
Saline (3.7%) Searcy (12.9%) Johnson (28.6%)
Cleburne (3.8%) Lincoln (13.8%) Carroll (34.0%)
Grant (4.3%) Polk (14.1%) Sebastian (41.0%)
Faulkner (4.5%) Miller (16.8%) Crittenden (41.4%)
Randolph (4.5%) Drew (17.5%) Pulaski (47.2%)
Franklin (4.6%) Lawrence (19.1%) Scott (74.1%)
Stone (4.8%) Yell (74.4%)
Greene (4.8%) Hempstead (84.2%)
Lonoke (5.0%) Howard (86.6%)
Newton (5.3%)
Van Buren (5.4%)
Hot Spring (6.3%)
Logan (6.7%)
White (7.1 %)
Pope (8.2%)
Source: U.S. Census Bureau; Cossman & Powers, 2000
Table 5: Self-Reported Ancestry of Hispanics
in the U.S. and Arkansas
Hispanic Ancestry U.S. % Arkansas %
Mexican 58.4 70.5
Puerto Rican 9.6 2.8
Cuban 3.5 1.1
Other 28.4 25.6
Source: U.S. Census Bureau; Cossman & Powers, 2000