Question

In: Finance

CASE 4.3 One Nation under Walmart THE HUgE CORpORATIONS THAT produce our cars, appliances, computers, and...

CASE 4.3
One Nation under Walmart

THE HUgE CORpORATIONS THAT produce our cars, appliances, computers, and other products—many of them household names like Nike, Coca-Cola, and Johnson & Johnson—are a familiar feature of contemporary capitalism.

But Walmart represents something new in the economic landscape. Now the world’s largest company, Walmart has achieved its corporate preeminence not in production but in retail. No other retailer, at any time or in any place, has ever come close to being as large and influential as Walmart has become. After years of nonstop growth, there are now more than 8,400 Walmart stores worldwide, and 140 million shoppers visit its U.S. stores each week. And the company is opening more stores all the time as it moves beyond its stronghold in the rural South and Midwest and into urban America. In fact, 82 percent of American households purchase at least one item from Walmart every year. As a result, the company’s marketplace clout is enormous: It controls about 30 percent of the market in household staples; it sells 15 percent of all magazines and 15–20 percent of all CDs, videos, and DVDs; and it is expected to control soon over 35 percent of U.S. food sales. For most companies selling consumer products, sales from Walmart represent a big chunk of their total business: 28 percent for Dial, 24 percent for Del Monte, and 23 percent for Revlon. Walmart is also responsible for 10 percent of all goods imported to the United States from China.

The good news for consumers is that Walmart has risen to retail supremacy through the bargain prices it offers them. The retail giant can afford its low prices because of the cost efficiencies it has achieved and the pressure it puts on suppliers to lower their prices. And the larger the store gets, the more market clout it has and the further it can push down prices for its customers.

Everyone, of course, loves low prices, but not everyone, it seems, loves Walmart. Why not? Here are some of the charges that critics level against the retail behemoth:

Walmart’s buying power and cost-saving efficiencies force local rivals out of business, thus costing jobs, disrupt- ing local communities, and injuring established business districts. One Walmart worker replaces approximately 1.4 other local retail workers, and typically within five years after a Walmart Supercenter opens, two other supermarkets close. Further, Walmart often insists on tax breaks when it moves into a community, so its presence does little or nothing to increase local tax revenues.

Walmart is staunchly anti-union and pays low wages. Its labor costs are 20 percent lower than those of unionized supermarkets; its average sales clerk earns only $8.23 an hour, and most of its employees must survive without company health insurance. Small wonder that employee turnover is 44 percent per year. Moreover, because of its size, Walmart exerts a downward pressure on retail wages and benefits throughout the country. Critics also charge that Walmart’s hard line on costs has forced many factories to move overseas, which sacrifices American jobs and holds wages down.

Government welfare programs subsidize Walmart’s poverty-level wages. According to one congressional report, a 200-employee store costs the government $42,000 a year in housing assistance, $108,000 in children’s health care, and $125,000 in tax credits and deductions for low-income families. And internal Walmart documents, leaked to the press, confirmed that 46 percent of the children of Walmart’s 1.33 million workers are uninsured or on Medicaid. The document also discusses strategies for holding down spending on health care and other benefits—for example, by hiring more part-time workers and discouraging unhealthy people from working at the store by requiring all jobs to include some physical labor.

As Walmart grows and grows, and as its competitors fall by the wayside, consumer choices narrow, and the retail giant exerts ever greater power as a cultural censor. Walmart, for example, won’t carry music or computer games with mature ratings. As a result, the big music companies now supply the chain with sanitized versions of the explicit CDs that they provide to radio stations and that are sold elsewhere. The retailer has removed racy magazines such as Maxim and FHM from its racks, and it obscures the covers of Glamour, Redbook, and Cosmopolitan with bind- ers. Although many locations offer inexpensive firearms, Walmart won’t sell Preven, a morning-after pill—the only one of the top ten drug chains to decline to do so.

For these reasons, Walmart’s expansion is frequently meeting determined local resistance, as concerned residents trying to preserve their communities and their local stores and downtown shopping areas from disruption by Walmart through petitions, political pressure, and zoning restrictions. As one economist remarks, for Walmart “the biggest barrier to growth” is not competition from rivals such as Target or Winn-Dixie stores but “opposition at the local level.” As a result, Walmart has begun responding to the criticism that it is a poor corporate citizen and a miserly employer by improving employee health insurance coverage and adopting greener business practices. And even its usual critics applauded when the company responded rapidly to Hurricane Katrina, sending truckloads of water and food, much of it reaching residents before federal supplies did.

When it comes to Walmart, Professor John E. Hoopes of Babson College encourages people to take a long-term view: “The history of the last 150 years in retailing would say that if you don’t like Walmart, be patient. There will be new models eventually that will do Walmart in, and Walmart won’t see it coming.” And, indeed, in recent years the company’s sales growth has slipped as the Internet has changed people’s shopping habits and as other discounters have done a better job of attracting affluent consumers and providing higher quality and better service.

In the meantime, where you stand on Walmart probably depends on where you sit, as Jeffrey Useem writes in Fortune magazine: “If you’re a consumer, Walmart is good for you. If you’re a wage-earner, there’s a good chance it’s bad for you. If you’re a Walmart shareholder, you want the company to grow. If you’re a citizen, you probably don’t want it growing in your backyard. So, which one are you?”

DISCUSSION QUESTIONS

1. Do you like Walmart? Do you shop there? If so, how frequently? If not, why not?

2. Is there a Walmart store in your area? If so, has it had any impact on your community or on the behavior of local consumers? If there’s no store in your area, would you be in favor of Walmart opening one? Explain why or why not.

3. Is Walmart’s rapid rise to retail dominance a positive or a negative development for our society? What does it tell us about capitalism, globalization, and the plight of workers?

4. Can a retailer ever become too large and too powerful?

5. Is opposition to Walmart’s expansion a legitimate part of the political process or is it unfair interference with our market system and a violation of the company’s rights? Do opponents of Walmart have any valid concerns?

Solutions

Expert Solution

As per rules I will answer the first 4 sub parts

1: I like Walmart because of the sheer variety that it provides. I often shop there once a week.

2. Yes there is a Walmart store in my area and after it opened most of the consumers started shopping at Walmart not only due to the variety that it provides but also due to the lower prices and offers that are available. This has had a huge impact on the local stores which were earlier running in the area. Their sales have drastically dipped and many stores closed down after Walmart arrived.
3. In my view the Rapid rise of Walmart is more of a negative development since it destroys the local business and takes away the jobs of people. Walmart has also spread into other countries and is extracting the wealth to the US markets. Although it is positive for USA it is a very disadvantages position for developing countries. Walmart has brought in a highly materialistic culture to the consumers of today's society.
4. Retailer can become very large such as Walmart and this can make him extremely powerful. Large retailers have strong political connections since they are able to make huge amounts of political donations and garner the favour of politicians. This makes them even more powerful and it has often been seen that they have used his power for the wrong purposes.

Related Solutions

Henry Ford built his huge River Rouge automobile plant to produce all of his cars. It...
Henry Ford built his huge River Rouge automobile plant to produce all of his cars. It was a disastrous mistake. What was the problem with the River Rouge plant? Did Ford ever find the solution to this problem. If so, what was it?
Nation A can produce with one worker per day 10 cakes or 5 pizzas. Nation B...
Nation A can produce with one worker per day 10 cakes or 5 pizzas. Nation B can produce with one worker per day 8 cakes or 2 pizzas. i. Determine a trade agreement for 1 pizza (price in terms of x number of cakes for 1 pizza) that both countries would benefit from. (Do not give me a range of prices. Just give me one price and one price only.) (Hint: who will be buying and who will be selling...
The Talbot Company uses electrical assemblies to produce anarray of small appliances. One of its...
The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year.Use the information,What is the economic order quantity for the XO-01?What is the annual inventory holding cost if Talbot orders using...
Dowell Manufacturing contracts to produce bumper cars for Five Flags Parks. Under the terms of the...
Dowell Manufacturing contracts to produce bumper cars for Five Flags Parks. Under the terms of the contract, Five Flags will pay Dowell a total of $60,000 when bumper cars are delivered six months later, and Five Flags can cancel the contract but must pay Dowell for work completed. Dowell believes that, if Five Flags cancelled the contract, Dowell could not sell the bumper cars to another park. As of December 31, 2020, the job is 80% complete. How much revenue...
For our discussion, you will address one of three slightly different versions of the case of...
For our discussion, you will address one of three slightly different versions of the case of a ball falling to the base of a 50.0 m tall building. Neglect air resistance. The magnitude of the acceleration is 9.80 m/s2. The eventual position of the ball is at the base of the building, 50.0 m below this initial position. Upward is defined as positive. Displacements, velocities and accelerations directed upwards are positive. Conversely, if directed downwards, these same quantities are negative....
Urea is one of our metabolic wastes and it’s small enough to get pushed under pressure...
Urea is one of our metabolic wastes and it’s small enough to get pushed under pressure through the glomerulus and get filtered and then excreted in the urine. Describe where and how urea gets into our blood in the first place (before getting into the kidneys).
Develop an analysis of one person’s experience or ‘case’ under COVID 19 (fictional or from your...
Develop an analysis of one person’s experience or ‘case’ under COVID 19 (fictional or from your experience).Using an intersectional lens discuss how this person experiences the challenges of the pandemic based on the intersection of gender with different structures in their lives (i.e. race, class, sexuality, nationality, age, ability, etc.) In your discussion, be sure to identify their gender (male/female/non-binary, cis or trans, etc.) and discuss how their relative privilege or disadvantage in society differently impacts their life chances under...
Explain illegal payments under the FCPA, giving at least one specific example from an FCPA case....
Explain illegal payments under the FCPA, giving at least one specific example from an FCPA case. Are there any exceptions? Discuss advantages and disadvantages of this law in terms of US companies doing business abroad. Give one specific example of an advantage, and a disadvantage, of the NAFTA regional free trade agreement. Discuss the effect of NAFTA on the US/Texas economy, both pro and con. Discuss update recommendations regarding this treaty. Give an example of dumping, and explain why it...
CASE ONE, KIKI CORPORATION Kiki Corporation, a US company, prepares its financial statements under US GAAP....
CASE ONE, KIKI CORPORATION Kiki Corporation, a US company, prepares its financial statements under US GAAP. For 2014, the company reported $1,000,000 income and stockholders’ equity balance of $8,000,000 on December 31, 2014. In preparation for a possible adoption of IFRS by the US companies, the management wishes to explore possible impacts of the move. You are engaged to prepare a reconciliation schedule to convert 2014 income as well as stockholders’ equity on December 31, 2014 from US GAAP basis...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT