Wal-Mart
Wal-Mart is one of the most aggressive retailers opening hundreds of new stores during 1990s. Wal-Mart holds 40% of the retail market. Wal-Mart, positioned it self as a wholesaler, catering to the professional trade rather than as a retailer selling to final consumers. By maintaining this distinction Wal-Mart is able to open businesses in sites which are not designated for other retailers. Most of Wal-Marr’s customers are purchasing for their own use, not for a wholesale use. Thesis Wal-Mart is detrimental for America because it shifts American jobs overseas (Wal-Mart Home Page 2008).
Wal-Mart’s strategy is to penetrate both urban and rural areas and become a market leader. Mal-Mart proposes low quality products of different types at low prices reducing competition and rivalry. As a result, many local firms bankrupt unable to propose low prices and remain profitable. The mission reflects this policy: “Always low prices, always!” (Wal-Mart Home Page 2008). Another problem for the economy is that Wal-Mart prefers to shift its production overseas in order to reduce production costs and reduce prices for merchandise Wal-Mart has launched a range of value lines. These products are aggressively priced and are expected to impact retail competition. Wal-Mart is a giant company which has to dismiss its employees in order to save operational and inventory costs. Retail buying is centralized for three reasons: (1) to achieve economies of scale in buying; (2) to be able to employ specialized, high caliber staff in buying positions; and (3) to enjoy greater bargaining power with suppliers. Private label products account for 30% of packaged grocery turnover, and a large volume is needed to support this private label program. The case of Wal-Mart shows that modern labor unions are unable to protect employees from exploitation and introduce effective policies for the American workforce. The need for improved negotiating power is event thus it requires new and strict legislation and legal norms able to protect national workers from unemployment (Wal-Mart: Is it Good for America? 2005).
Wal-Mart was a pioneer in retail market creating a new business model, the big box retailers. The US is often cited as an attractive market for discount stores. The margin for goods is high in the USA, although the reason for this difference with the continent is not necessarily greater. More likely it is a result of the evolution in retailing. Data from the United States suggest that private labels increase through both economic ups and downs. Current private label programs are not focused on reducing price, but at offering higher quality for the price. The model introduced by Wal-Mart and adopted by target and Costco allows consumers to buy more goods they need but it creates a new demands for low quality cheap products. The main problem is that structure of production in America does not allow giant retailers to buy cheap goods and products, so have to move overseas. Low pricing is when a retail store uses advertised specials to convince consumers that they are receiving an excellent retail bargain (Wal-Mart: Is it Good for America? 2005). This type of technology allows the capture of information for the use of the retailer in market positioning and product planning, therefore shifting power from the manufacturer to the retailer. The other problem connected with production overseas is that it prevents many small retailers to compete with such giants as Wal-Mart. In its turn, this situation leads to decrease consumption of the national products and goods. The national manufactures will have to cut production and close their factories. The only benefit of the Wal-Mart strategy is that it allows low classes to improve their standards of living and consumer more products. Vertical integration and merger activities have reduced the number of major retail buyers to five. This means that the purchasing retailers have tremendous power through introducing bulk purchasing and more efficient logistics systems. Distribution centers, higher delivery frequency to stores, and the adoption of optimal shelf-stocking techniques have streamlined the logistics of distribution. Again, the benefit of lower prices proposed by Wal-Mart is that unemployed people will be able to buy cheap goods and products manufactured overseas. The main argument for the Wal-Mart strategy is that it is not the only US-based company which turns its production abroad. It does not has a crucial impact on national unemployment, so its strategies benefit low class and poor citizens.
Works Cited
Wal-Mart: Is it Good for America? 2005. Web.