Although Walmart is a United States domestic corporation, it is really an international corporation-that’s the irony. Walmart has a very unique business model, in which it displays a form of monopoly behavior, while being the broadest, most powerful, and influential company in America. They are now a model, not just for retail, but all companies across the United States and the world. Walmart is setting new standards that firms need to follow in order to even compete. They are the paradox of economies of scale.
So, how did Walmart get to be as successful as it is today? Walmart is the epitome of one-stop-shopping, with a cornucopia of differing products at the lowest prices. They make their money from high volume and very fast turnover. Walmart is also an efficiency machine when it comes to logistics. They use a system that keeps track of every item in their store and as soon as a number of items are sold, if it is noted to, it will automatically send a reorder to the distributer. This speeds up delivery and the distributor promotes greater efficiency among suppliers creating a push to pull production system.
Because Walmart has had such a dramatic shift over to the big box retailers over a short period of time and has become one of the most powerful companies in the world, manufacturers sit naked in front of them. There are no negotiations with Walmart; it’s very one-sided. Walmart knows all other companies’ records and information, and have huge volumes to back them up, and if they don’t take their offer, Walmart will simply go somewhere else. It’s all about driving down the cost of goods.
The opening price point is how they communicate with their customers; it’s the heart of their business. However, once the customer walks past the lowest price points on the end-caps, and after the customer forms a certain perception of lowest prices, they go to the item that they really want and assumer that it has the lowest comparable price, but it’s not; that’s how they get you.
During the late 1990’s is when Walmart had an immediate impact; their margins were higher than ever and they were making so much profit. This was all possible because they had started importing products from China and other Asian countries. Because Walmart started importing from China and had such low prices, this effectively forced other companies to start moving their importing to China as well.
The floodgates had opened! Walmart currently has about 6,000 global suppliers, while 80% of them are in China. Walmart is providing a gateway for overseas suppliers and doing it on a scale that is unprecedented. Walmart and China are a joint venture; both are trying to dominate the United States economy as much as they can. And with $36 billion of consumer goods being imported, and only $3 billion of raw goods being exported, an imbalance is going to be felt all over the United States.
The enormously growing trading market with China has trapped the United States in a relationship that has gained us a trade deficit that is bad and growing. With more money flowing out than in, the United States has lost over a million jobs to China. Retail price pressure driven by Chinese producers forces companies to go to China in order to compete. This puts plants out of operation, which means loss of jobs.
Manufacturing was a key component of the United States economy and it has been shipped overseas. Walmart claimed to generate trade going the other way, but it was a lie. They took control of the whole manufacturing end in the United States and flipped it abroad. It’s not fair trade and it’s not free trade; it’s a rigged system. So when United States customers buy the lowest prices at Walmart, what they are really doing for their country is putting people out of work and lowering their country’s standard of living. Thanks for nothing Walmart.
Works CitedJohnson, Cecil. “A look inside the Wal-Mart business model.” ILRF.org. Knight-Ridder, 26 Feb. 2006. Web. 6 Mar. 2014. “Is Walmart good for America?” Frontline. 16 Nov. 2004. pbs.org. Web.