“Wal-Mart is one of the key forces that propelled global outsourcing — off-shoring of U.S. jobs — precisely because it controls so much of the purchasing power of the U.S. economy.”
– Gary Gereffi Duke University professor on global supply chains
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. 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. 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 2006).”
This virtually unbridled power of the life or death of consumer goods industries, however, presents the question of whether or not Wal-Mart is indeed good for America. While it certainly does create
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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. 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.
In determining whether or not Wal-Mart is good for America, the basic economic principles of any market must be analyzed. Every market is governed by two basic forces, supply and demand. Wal-Mart is able to control both these forces because of the immense size that it has. It controls supply by deciding what items it chooses to retail. It also decides the demand for the item by pricing competitively.
In its early years, Wal-Mart provided jobs for most Americans because a majority of the goods supplied were produced in the United States. With globalization and the theory of a flat world, other countries have become more competitive industrially and have now taken those production jobs that were previously held by Americans. The outsourcing of consumer goods industries to other countries can be theorized to have been created by the Wal-Mart demand for cheaper products from their suppliers. The problem with this scenario is that it creates unemployment for Americans who are the main buyers from Wal-Mart. In order to counteract this scenario, Wal-Mart must then reduce prices lower to meet the increasing lower income bracket of unemployed Americans who have lost their jobs because of the global production tilt to other countries. As this trend continues, it may be theorized that Wal-Mart will eventually strangle itself by driving the prices of goods down too much without protecting its major market which is the United States.
The status of Wal-Mart, therefore, as either a boon or a bane for the American economy solely depends on whether or not it is willing to protect its major market which is the United States. Wal-Mart not only determines which consumer goods industries are to survive but also which economies are to benefit.