A Wal-Mart store, Inc. is an internationally known corporation. It is recognized worldwide for its pursuit of low prices on retailers. Wal-Mart’s continuing growth is directly attributed to its innovative business model. These models feature sophisticated aggressive cost cutting and sophisticated supply chain management. Wal-Marts sell a large variety of products at significantly lower prices than competing retail outlets. It hires large number of workers as well as generating revenue to the government through sales and property tax. Although Wal-Mart has experienced a milestone in being competitive, it has also experienced some antagonism.
From the extract, “Squeeze”,Wal-Mart has been viewed to disobey the laws of demand, supply, and competition. The effect of Wal-Mart has been praised for offering a balanced look on the global economy. Due to its relentless pursuit of low prices on their products, the retailers will have to adjust to become competitive. The price cut also affects the manufacturer’s wages and jobs. “Squeeze” has been used to describe the margins of suppliers of all sizes and pressure the smaller companies feel from the competition. The gallon jar is a display of abundance (excess). The store focuses on holding to its own agenda the suppliers to a business hostage. They also distort markets in ways that consumers cannot see and ways the suppliers cannot effectively counter. This makes Wal-Mart have a competitive advantage.
Explain the effects of Wal-Mart’s business practices on the American economy and what, if anything, the American consumer can do to counter these business practices.
Wal-Mart’s business practices have a lot of effects on the American economy. This can be categorized according to effects to consumers, retailers, employment, and revenue generation.
Effects on consumers. Wal-Mart connects with the producers of the goods efficiently hence leading to customer sells below the prices that other competing retailers can offer. In rural areas, Wal-Mart offers a wider variety of products for customers to choose from. Greater availability and lower prices in one location provides direct economic benefits to local consumers. The magnitude of the benefits depends on how much the prices are lower, and the distance required in accessing the wide variety of goods.
Effects on retailers. The ability of Wal-Mart to sell goods more cheaply poses a threat to the viability of other nearby retail outlets. These retailers can be forced out of business when a Wal-Mart opens its doors for business. The customer base of the retailers declines. On the other hand, businesses that do not offer goods and services that Wal-Mart does tend to benefit positively. This is mainly due to increase in drive by shoppers. The American consumer has little effort in countering these malpractices.
Employment effects. Wal-Mart employs a large number of people. Given Wal-Mart’s centralized supply chain management, distributors and wholesalers may see a decline in demands for their services. The net creation of new jobs, which is an indicator of economic impact, affects the community wide earnings. Wal-Mart jobs pay significantly lower than the other retail sector jobs. This is an outgrowth of Wal-Mart’s cost cutting, as well as hostility towards unionization of its workers. Thus, the increase in employment translates to an increase or decline in overall incomes associated with the coming of a Wal-Mart.
Fiscal impacts. A Wal-Mart generates substantial property and sales tax revenues for the country through the county. This would benefit the fiscal well being of the government. Thus, the wide variety of products and services makes it more likely that there would be an increase in retail sales with the coming of wall mart, hence increase in sales tax revenues. Hence the coming of Wal-Mart increases the revenue generated to the government. Wal-Mart must pay property tax before laying up any structure. By so doing, it generates revenue to the government.