Case analysis report on Wal-mart
The growth and dominance of Wal-Mart over the years has indeed turned it into an economy all its own. There is no single corporation in the world that has as much impact as Wal-Mart has, save perhaps for oil corporations, on any single domestic or even international economy (Hicks 27). The volume of sales which Wal-Mart generates is enough to keep the rest of the world happily employed and is also enough to keep the consumerist population of the United States happy in their spending habits (Hicks 27). Every single commodity manufacturer who is interested in surviving must be able to gain the good graces of Wal-Mart.
The impact of Wal-Mart is such that it “has life-or-death decision over [almost] all the consumer goods industries that exist in the United States (Gereffi 216). ” This virtually unbridled power of the life or death of consumer goods industries now makes it relevant to discuss how Wal-Mart can take advantage of this position. While it certainly does create jobs and sustains the consumer goods industries of America, it also has the same power of taking such benefits away and perhaps leaving the American economy in a far worse off situation than it is
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Wal-Mart has become so powerful that any shift in its purchasing and production policies will certainly result in some imbalance on a certain economy in the world. An example of the power of Wal-Mart is the fact that because of the immense volume of sales that Wal-Mart generates it is able to dictate where goods are to be manufactured in the world despite the fact that it is not a producer but simply a retail-chain (Hausman, J. & Leibtag, E. 205).
For a retail chain to be able to dictate to suppliers where they are to produce their items in order to be able to sell to Wal-Mart at a lower cost means that the retail chain has either a huge stake in the ownership of the supplier or buys so much from the supplier that it is able to dictate the price that it is willing to buy at and by doing so dictate where such goods are to be produced (Hausman, J. & Leibtag, E. 205). Another impact that Wal-Mart has upon the economy of the United States is the boost that it provides by improving the productivity and efficiency of the domestic retail sector.
This effect has been shown in a study conducted by Global Insight (2007) that while Wal-Mart has been the cause for the drop in nominal wages, with wage rates dropping by nearly 2. 2 percent in 2004, it has also contributed to an overall reduction in consumer prices over the same time period, with a 3. 1 percent decline in consumer prices. This in effect translates to an increased level of disposable income for the consumers of 0. 9 percent (Global Insight 1). In dollars and cents, this 0. 9 percent increase in disposable income translates into nearly US$ 263 billion in added spending dollars or nearly US$ 895 per person (Global Insight 1).