Wal-Mart: Save money, be better.

31 03 2011

Is the world better or worse off because of Wal-Mart?

When you think low prices and one-stop shopping, what do you think of? I, like  hundreds of millions around the world think of Wal-Mart. Established in 1962 by American businessman Sam Walton, Wal-Mart has created a name for itself as an economic powerhouse, with it’s 8,100 big box stores worldwide and 405 billion dollar revenue. But, like every other successful thing, with great fortune comes great criticism. Wal-Mart has been pinpointed by worker’s unions, political figures and store owners, but overall, I do think that the world  has greatly benefited from Wal-Mart.

The Good.

Wal-Mart is a great example of a winning combination of the things that make a business successful: adaptability, innovation and stretching the boundaries. They are one of the first businesses to successfully export labor overseas and use it to their advantage. It led the way for other companies (and even countries) to begin a new era of foreign investment, providing jobs worldwide and sparking a newer, cheaper way to produce any kind of good. With Wal-Mart’s innovation in outsourcing (importing goods from other places in the world at a much lesser cost), it has become one of the top importers of Chinese goods which improves foreign investments as well as promotes trade with other countries.

From a consumer standpoint, Wal-Mart provides thousands of goods to hundreds of millions of people. It seems pretty obvious that people would prefer to buy things for less than they would for more. Those with lower incomes prefer to shop at Wal-Mart and many people even make trips from far away places in order to shop. Even for those who don’t shop at Wal-Mart, other places will mark down their prices in order to compete against Wal-Mart, benefiting the customer either way.

Wal-Mart has also brought on new horizons for people who want their products on the shelf. Wal-Mart, a monopsony (perhaps a oligopsony), buys from 61,000 suppliers worldwide. By being able to harness such a high traffic store, suppliers are given the opportunity to put their products out into the eyes of millions and creates massive amounts of sales. This has made a symbiotic relationship that benefits both suppliers and Wal-Mart as well as the consumers, who are able to shop through a variety new and emerging products.

Did I mention they also give back? From a philanthropic standpoint, Wal-Mart is one of the top corporate donors in the entire world, giving back $296.2 million dollars (US) to charity.

Now, the bad.

Wal-Mart’s business structure is one of many things. To consumers, is classified as being in an oligopoly with other one-stop retailers such as Target, but has much more control over the prices due to it’s size and it’s economies of scale. They have also many suppliers overseas who produce their products at a much cheaper price. Because of it’s cheap production costs, it has the ability to bully other companies (even the larger Target and Zellers) and their prices with such a high market power and control over goods. This has driven a lot of criticism from owners of smaller companies because they simply cannot compete with these low, low prices, giving Wal-Mart the title of “category-killer”. But these assumptions are not entirely true, as a matter of fact, in many cases, it has been known to bring in economic prosperity to otherwise lesser cities.

In 2002, Ryerson University completed the first major study on the company’s impact on nearby small retailers, and found the opening of a new outlet is generally an economic boon for the whole area — attracting other retailers and driving up sales at nearby stores. In metropolitan areas, a new Wal-Mart was generally followed by an increase of $56.8 million in local sales, and the opening of 12.9 new stores. In rural areas, the commercial boost was $74.1 million and 16.7 new stores on average.

Steve Maich, Macleans Business

Additionally, it should be noted that we cannot blame Wal-Mart for what it has done. Wal-Mart got where it was (competing against the, at the time, largest retailer, K-Mart) by revolutionizing and coming up with new ways to gain a competitive advantage. How is it fair that we are blaming a company when it’s only fault is being successful and innovative? I believe that if anything, Wal-Mart is doing something good, as it promotes creativity in new businesses in order to find a way to gain competitive advantage. By closing the market to only the strongest of businesses, we’ll see a better and more efficient market that constantly strives to make new conveniences to the customer, or die trying.

Another common point of criticism Wal-Mart often takes is it’s under-paid employees and lack of benefits as well as the borderline ethics of their international suppliers. But why should Wal-mart be responsible for that? Being an employee at Wal-Mart is a low-paying and lackluster job only because it doesn’t have to be anything else. There are no credentials required, no education required and no skilled labour involved. Why, then, should people working there expect anything more than what they are getting? Because almost anybody can apply for the job, there will be thousands of applicants for the same position, and therefore it’s only natural that Wal-Mart lowers the wages for these jobs.  

In conclusion, Wal-Mart has taken a lot of flak in the past for things that it’s just not deserving of. As a successful business model, it cannot be liable for low-paying jobs or beating the competition. On the other side of the coin, it is a very powerful tool that helped pave the way for foreign investments, helps put suppliers into the global market, saves money for the customer and creates a more innovative and competitive marketplace for smaller businesses. Wal-Mart also promotes the hiring of the mentally handicapped as well as the elderly in many stores for those who are trying to be independent, a program that very few other stores have.

Wal-mart… do they like make walls there?

Paris Hilton

Resources:

http://www.flickr.com/photos/gdsdigital/4306320990/sizes/l/in/photostream/

http://www.macleans.ca/business/companies/article.jsp?content=20050725_109503_109503

http://www.slate.com/id/2144517/entry/2144705/

Advertisements

Actions

Information

3 responses

16 06 2011
Christopher Lee: Posting Summary (categorized this time) « The Blog for WLMac Economics

[…] Journal 5- Wal-Mart: Save money, be better […]

18 06 2011
basshist

This was an interesting journal to read. You took a different stance than most did on the Wal-Mart debate, and brought up many good points to make your case. The way you structured the post was good as well, where you addressed your points as to why Wal-Mart is good, and then addressed the common arguments against by turning them on their heads. However, one major point against you I noticed you didn’t address was the impact Wal-Mart has on local businesses in the area, who may not be able to lower their prices as far down as Wal-Mart can. Many local businesses cannot compete with the big box store prices, be it Wal-Mart, or other warehouse suppliers like Home Depot, Target, etc. The big companies stomp on the little guys, and it affects the little business owner and their family. It’s a problem that follows Wal-Mart like a plague, and in my opinion should have been addressed in an article like this. Overall though, that’s a small gripe on a solid journal.

18 06 2011

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




%d bloggers like this: