Introduction
Wal-Mart can be described as one of the biggest discount retailer internationally. This corporation started its operations as a petite chain of stores, which were based mostly in rural towns. Samuel Walton started this company in 1962 and presently, it is one of the leading employers in the U.S.
According to annual financial report released in 2008, Wal-Mart recorded $374.5 billion sales. It sells an unbelievable collection of products such as oranges, gasoline, towels and power saws.
Much of the successes of Wal-Mart are dependent on building new shops and negotiating for the maximum imaginable profits on the cheapest goods, which normally involves purchasing goods produced in developing nations at a cheaper cost compared to where they are retailed (Soderquist, 2005).
Wal-Mart shops operate under the same principles. Their cost of goods habitually priced at a much lower cost compared to other stores. Nevertheless, if an individual requires a specific commodity, Wal-Mart cannot warrant its availability within their stores.
Wal-Mart has been censured for making smaller shops to go out of business, especially with its exceptionally low prices. Actually, some of the shops are regarded as Super Wal-Marts. Normally, they offer a grocery store as well as locomotive repair store for their clients.
Overview/Analysis
Wal-Mart’s fundamental competitive advantage lies in its size. In line with 2008 yearly statement, Sam’s club provides its clients with treasure finds. These commodities are not typically offered in most shops.
Owing to its enormous purchasing power of Wal-Mart, for instance, it can visit a book publisher and purchase about 5 per cent of the total production at a cheaper cost compared to other buyers. However, it cannot hold the product every time at this rate, though it can gain a temporary discount for its clients.
To a large extent, large scale achievement of Wal-Mart Company is dependent on its linkage with developing foreign markets, especially China.
These shops serve as outstanding suppliers since their labor resource is higher and living costs are lower, which implies that salaries can be lessened. Besides, the shops evade the restrictions on the safety of their workforce, and excellence that is associated with the product (Carbaugh, 2011).
Problem Definition
Consistent with customary retail circulation models, producers have an obligation of setting the terms and conditions of their produces such as costs, production plans, quantities, as well as demonstrations. On the other hand, retailers agreed to these terms and managed their stocks as appropriate as possible.
However, Wal-Mart by its self has changed this kind of push system to a pull system where the vender tells the producer what kind of commodities to produce and what quantity.
Thus system has even attracted the key international manufacturers, like Hoover, Timex, Kraft and Kodak to establish their agencies at Bentonville, close to Wal-Mart’s universal headquarters.
As is exposed on Frontline, Wal-Mart purchasers, equipped with a wide range of portfolio histories and sales tracing data, communicate to the agents of these and other companies the quantity of products they will purchase from them. Therefore, there is little or no room for negotiation.
Due to its inventory system’s incomparable effectiveness and precision, Wal-Mart determines precisely what to purchase and precisely the amount to pay for it. This kind of system, according to opponents, results into lower prices of goods, lower wages to employees and loss of employment.
Besides, it drives smaller retail shops out of business by offering extremely low priced goods. The overall effect of this is to lower the living standards of Americans (Smith, 2004).
Solutions/Recommendations
It appears like most people in America do not like Wal-Mart due to its destructive effects mentioned above. However, almost everyone shops there because their cheap prices are irresistible.
Therefore the solution for this situation would be to encourage members of the public to avoid Wal-Mart without necessarily increasing their shopping expenditures excessively.
Individuals should be encouraged to do their shopping at dollar or other discount stores since the price of their products, in most cases, are simply a few cents more compared to Wal-Mart, which cannot translate into much costs eventually.
Besides, brand-name products can be found in certain dollar chains if that, precisely, is what an individual needs. In addition to taking advantage of special offers that are sometimes offered by other retail shops to compete favorably with Wal-Mart, people should also be encouraged to check out bargains that are offered at local stores.
In some cases, these shops have regular shopper membership that could involve discount offers. All in all, smaller local shops should be given a chance at all cost. These could even involve government intervention in trade regulations that encourage smaller stores (Quinn, 2005).
Conclusion
In conclusion, Wal-Mart’s system of conducting business results into lower prices of goods, lower wages to employees and loss of employment, which has the overall effect of lowering the living standards of Americans.
The best solution for this kind of situation, as discussed above, would involve encouraging members of the public to avoid shopping at Wal-Mart without necessarily increasing their shopping expenditures too much.
References
Carbaugh, R. J. (2011). Contemporary economics: An applications approach. Armonk, N.Y: M.E. Sharpe.
Quinn, B. (2005). How Wal-Mart is destroying America (and the world) and what ýou can do about it. Berkeley, CA: Ten Speed Press, U.S.
Smith, H. (2004). “Is Wal-Mart Good for America?” Web.
Soderquist, D. (2005). The Wal-Mart way: The inside story of the success of the world’s largest company. Nashville: T. Nelson.