With suppliers located in China, Vietnam and Cambodia, Wal-Mart is able to provide consumers with products priced at a far lower rate as compared to their product counterparts from manufacturers based in the U.S.(CBC Documentary, 2009).
This situation is in part due to the far lower labor cost, material cost and business incentives that production in regions such as Asia brings. What this means for U.S. based consumers is the ability to buy products at a lower rate than they otherwise would have been able to resulting in significant savings over the course of a year (CBC Documentary, 2009).
As the world’s largest company and retailer, Wal-Mart has come to be a representation of a distinct shift in the balance of market power wherein retailers instead of manufacturers take a dominant role in today’s economy (Petrovic & Hamilton, N.D.).
This is in part due to the effects of globalization wherein the procurement strategies of retailers are no longer limited to a local or regional basis but rather take into account the reality of a global supplier base (Petrovic & Hamilton, N.D.).
Yet it must be questioned whether such savings actually helps American shoppers and in a larger context it must be asked whether Wal-Mart is truly good for America or is it detrimental towards the development of the American economy?
It must be noted that consumer spending is the driving force behind the American economy. People spending money on products keeps a local business functioning which in turn provides jobs in the local economy giving people the ability to spend. In essence it is a cycle of spending that encourages economic growth and stability.
When Wal-Mart came into the picture it presented consumers with the ability to purchase products at a far lower cost per product ratio as compared to other shopping centers (CBC Documentary, 2009).
This was done by reducing the pay scale of employees to the bare minimum which as result enabled the company to lower the cost of operations enabling it to lower the price of the products it sold (CBC Documentary, 2009).
Their strategy of cutting costs through any means possible in order to keep the price of products low has resulted in local manufacturing jobs to slowly but surely disappear from the landscape of the U.S. (Paruchuri et al., 2009). This of course creates problems for consumer spending resulting in a slowdown of the U.S. economy due to fewer people having jobs.
This resulting situation has more people choosing the affordable and cheap products that Wal-Mart provides and as a result this starts a new cycle where instead of continuous economic growth and prosperity there is a slow but sure deterioration of the U.S. economy (Elliot and Powell, 2003).
Is Wal-Mart Good For the World?
The procurement strategies employed by Wal-Mart are actually a boon for the economies of several countries. The global outsourcing industry has actually fueled the growth of countries such as China resulting in resurgence and growth in their economies.
The jobs that were once based in the U.S. are now in the hands of foreign workers which has fueled and increased consumer spending in their respective economies causing a sudden spike in their growth rates.
Within the past 20 years this method of lowering costs has encompassed the global outsourcing industry where products for sale within Wal-Mart are no longer exclusively produced in the U.S. but rather are sourced from multiple international locations.
Wal-Mart is not alone in this particular procurement strategy with multiple companies doing the exact same thing however it is due to the size of the superstore with 4,200 locations in the U.S. alone which causes it to have a greater impact on the economy (Palmer et al., 2003).
Conclusion
The reason why Wal-Mart has such a profound influence on both the U.S. and international economies is due to its sheer size and purchasing power which greatly influences the flow of products and services around the world.
As such, though the strategies employed by Wal-Mart are in fact detrimental for the growth of the U.S. economy they are in fact rather beneficial towards the growth of several countries in the global economy.
Works Cited
CBC Documentary. New Age of Walmart. (2009). Web.
Elliott, Dorinda, and Powell, Bill. “Walmart Nation.” Time 165.26 (2005): 36-39. Vocational and Career Collection. EBSCO. Web.
Paruchuri, Srikanth, Baum, Joel and Potere, David. “The Wal-Mart Effect:Wave of Destruction or Creative Destruction?.” Economic Geography 85.2 (2009): 209-236. Academic Search Premier. EBSCO. Web.
Petrovic, M. & Hamilton, G. Making Global Markets Walmart and its Suppliers. (N.D.). pg. 107 – 141.