The documentary, “Is Wal-Mart Good for America,” demonstrates the growth and strategy for the world’s largest company. The documentary is divided into five chapters, shows the growth and procurement strategy for Wal-Mart and how it helped the organization to flourish (Is Wal-Mart good for America?). The essay provides insight into the strategies of Wal-Mart and understand if the organization is good or not for America.
Wal-Mart began with a clear intention to sell at the lowest price to the American consumers. Their initial suppliers were American manufacturers. Their strategy was to have low inventory and a high turnaround. As Wal-Mart aimed at cost-cutting, they put a lot of pressure on their suppliers to sell products at low cost and would not accept higher prices even it was due to a rise in the raw material.
When the American suppliers failed to supply at a low price, Sam Walton, the founder of Wal-Mart, started looking for suppliers abroad to gain a greater cost advantage. As a big retailer, Wal-Mart was demanding and the eventual outcome, as was in case of Rubbermaid (a popular brand that made plastic products), was the degeneration of the brand. As Wal-Mart’s share in Rubbermaid’s sales revenue increased, the former stopped shelving Rubbermaid’s products. The company’s profits dwindled, and eventually, it closed down.
In another instance, the documentary demonstrates that Wal-Mart deceives its customers with their extremely low price displays. However, a former store manager of Wal-Mart says that those prices are just a way to lure in customers to a specific section. The low prices are an inducement, and once the customers enter the section, they already have formed a perception that all products sold in the section are the lowest price, which is not the case.
The increase in foreign procurement, especially that from China, contributed to an increased trade deficit, lower employment, and low standard of living in America. Then in the late nineties, there emerged the phase of foreign procurement when Wal-Mart started importing their products from Chinese manufacturers. The city of Shenzhen in China has become the hub of manufacturers that supply to the American market.
For instance, for TLC, a company that manufactures electronic goods relates that most of its sales are generated from their partnership with Wal-Mart. Thomson, a French electronics brand, had a large manufacturing unit in Circleville, Ohio, and supplied to Sanyo. When Wal-Mart canceled Sanyo’s supplies in favor of lower-cost products from China, Sanyo canceled their order of manufacturing to Thomson. This resulted in a drop in living standard and good jobs in Circleville.
Some economists believe this a process of “creative destruction” wherein the town of Circleville lost many jobs to Wal-Mart’s aggressive procurement strategy (Is Wal-Mart good for America?); their new store in Circleville will provide jobs to many in the town. However, it must be noted that these jobs will not be on par with the manufacturing jobs provided by Thomson.
The Long Beach port in the US is one of the largest importers of consumer products from China. However, there are also shipments that are exported to China. The interview suggests that raw material in the form of cotton, scrap iron, animal hide, is exported to China, but the finished products are imported to America by China, and the cost of import exceeds that of the price of export creating an enormous trade deficit.
Overall, it is undeniable that the strategy Wal-Mart adopts for its expansion is harmful to the US economy (Heskett). Though it mints profit and gives employment to thousands, its strategy dwindles the fundamentals of the American economy.
Heskett, James. “Is Walmart Defying Economic Gravity?“. 2013. Forbes. Web.
“Is Wal-Mart good for America?“. 2004. Frontline. Web.