Wal-Mart Case Analysis Essay Example for Free

Wal-Mart Case Analysis Essay Wal-Mart is the largest retail store in the United States today and it has remained that way for several decades now. In order to stay ahead of the competition Wal-Mart employs different kinds of strategies and campaigns. One of its strategies is to dominate the retail market through its philosophy â€Å"Everyday Low Prices. † The essence is this philosophy is to cut the price of an item to the minimum, lower the markup and earn profit on the increased volume of sales (Patrick Hayden, Seung Lee, and Kate McMahon Mike Pereira 4). Though this has generated a huge amount of profits for its shareholders, the company has to sacrifice two things: the quality of their products and the welfare of its employees (Scott Dalgleish 1) This company philosophy has been a success for Wal-Mart. According to Jim Hightower, the Waltons, owners of Wal-Mart are some of the richest people in the world. S. Robson Walton is ranked by London’s â€Å"Rich List 2001† as the wealthiest human on the planet having more than $65 billion surpassing Bill Gates. (1) This does not mean that things will continue the way they are. In the future, the public will eventually discover that sacrificing quality over cost is not worth the penny they save from buying at Wal-Mart. With all the bad publicity and reputation Wal-Mart has earned because of this company policy time will come that the public may no longer patronize Wal-Mart’s retail stores which may cause tremendous losses for its existing and future stockholders. According to Allen Long, Wal-Mart’s stocks has fallen by 11% over the last five years perhaps due to the bad publicity the company has been getting over the years. 2) If the company seeks to avoid this disaster, it must first give respect to its hundreds of thousands of employees who work for them. They must be given adequate wages, health-care benefits and must comply with existing labor laws. As the larges retail store in the United States, it is possible for the company to give proper wages and benefits to its employees while at the same time maintaining the price of its products low. Foreign Supplier Initially, Wal-Mart advertised its â€Å"Buy American† campaign. But over time it became clear that this was just an advertising gimmick rather than a company policy. As it is important for Wal-Mart to maintain its prices very low, they had to turn to foreign suppliers which can deliver to them goods at lower prices compared to their US-based suppliers. According to Jim Hightower, Wal-Mart is the largest importer of Chinese-made products in the world, buying $10 billion worth of merchandise from several thousand Chinese factories. (2) For the foreign suppliers, it became necessary to resort to different means in order to meet the price requirements of Wal-Mart. Some factories in Bangladesh had to employ child labor to keep its production costs down. Some companies have failed to comply with certain environmental laws while some companies in Hong Kong had to mislabel their products to make it appear that they are from Malaysia to avoid taxes. This has only resulted to further reduction of the quality of the products being sold by Wal-Mart in its retail stores (Thomas C. Hayes 2). The resort to foreign suppliers has seriously affected several companies in the United States. Jobs have been lost in the United States as a result of this company practice. For the foreign suppliers, the business may be good for one to two years but these foreign suppliers must realize that they too have been affected by the Wal-Mart Effect. They have violated their own country’s labor laws. They have deceived the US government. Eventually however, their labor laws violations in their own country will be discovered and their resort to mislabeling to avoid taxes here in the United States will be found out by the US Coast Guard. In fact, a number of these products by Sino Overseas, a Hong Kong based company, has been caught smuggled in the United States. This loss is disastrous for any business. If these foreign suppliers will calculate the risks involved in engaging in these operations just to meet Wal-Mart’s price requirements for its products, it is possible they will discover that its not worth the business risks they are taking. Local Retailing Stores  One of the strategies of Wal-Mart is to dominate the retail industry. In the past decades, it has succeeded in doing the same as it has been ranked as the world’s number one retail store and the number one company in the world in terms of sales on the Fortune 500 list. Also, Wal-Mart is currently ranked as the worlds number one retailer and the number one company in the world in terms of sales (over $200 billion) on the Fortune 500 list (Patrick Hayden, Seung Lee, Kate McMahon, and Mike Pereira 4). When a Wal-Mart retail store opens in a community, other retailers in the community suffocate because Wal-Mart is capable of reducing the price of its products down to the barest minimum (Abigail Goldman and Nancy Cleeland 2). This is confirmed in a study conducted by David Neumark. He said that â€Å"The employment results indicate that a Wal-Mart store opening reduces county-level retail employment by about 150 workers, implying that each Wal-Mart worker replaces approximately 1. 4 retail workers. This represents a 2. 7 percent reduction in average retail employment. (1) This race to the bottom strategy employed by Wal-Mart may have generated made it number one in the retail industry. It may have generated a lot of employment. It has, however, also created unemployment insofar as the employees of its competitors are concerned. When its competitors close their business other employees lose their jobs also. I believe this destructive force of Wal-Mart may someday come to an end as the public will eventually realize that sacrificing quality over a few pennies of saving is not worth it.