Critically discuss the likely costs and benefits of its takeover of USDA, a ILK-based company Wall-Mart is the world’s largest retailer with over 8400 stores worldwide employing 2 million people. It serves more than 200 million people with global sales exceeding IEEE billion. (Basket, 2007) Wall-Mart is globally organized so that it can respond quickly to changing markets and cost conditions in its international locations. The UK is one of these locations.
This essay Will firstly explore features that are Of benefit before considering features that are Of detriment to Wall-Mart and the UK in the aftermath of its take-over of USDA. Wall-Mart benefited from the acquisition of USDA because USDA had a skilled, trained work force with low wages and labor costs. This meant it took over an already successful retail business, and so expanding its global foot print while making savings due to avoidance of tariffs for being based in the ILK.Order now
Wall- Mart can make further savings by exploiting its economies of scale related to advertising, procurement and transportation that its global network gives it. In addition the ILK government created an attractive environment for Multi National Companies like Wall-Mart to invest in. This environment was created by offering a number of cost reducing and financial incentives. The effect of these incentives was designed to reduce investment risk and so encourage investment and create jobs.
But consequentially, Sad’s acquisition by Wall-Mart signaled a change in food retailing in the KICK_ In response its competitors intensified the price and cost pressures they exerted on their suppliers. Responses from a Competition Commission survey indicated that since the Wall-Mart take over relationships between suppliers and supermarkets had largely worsened. Competition Commission). A benefit to the UK population is Wall-Mart}Sad’s stated value proposition based on offering “Everyday Low Prices”.
Wall-Mart Mission statement says; ‘We save people money so they can live better”. Everything Wall-Mart/USDA does is designed to keep the everyday price low. This implies that customers do not need to wait for sales to get the best deals (Manning et al 1998). Not only are stores conveniently positioned around the I_J providing a wide range of products, but Wall-Mart/USDA is becoming a one stop shop for the purchasing of groceries, pharmaceuticals, holidays, and a raft of other goods and services.
An incidental benefit to the UK shopper is Wall-Marts appeal, as a 2007 Customer Relations report described. Wall-Mart/USDA is attractive to three types to customer: “brand aspirations”, people with love incomes who are obsessed with brand; “price-sensitive effluents”, wealthier shoppers who love deals; and ‘Value price shoppers” who like low prices and cannot afford much more, (Barbara, 2007) Wall-Mart is known as a company that does not waste money. Its aim always has been to drive down costs, this does not mean it will not take risks and invest in new infrastructure and technology.
Wall-Mart/USDA has a technological edge over TTS competitors With its inventory control, logistics, distribution and consumer data software. Moving goods quickly and efficiently keeps costs down, which is ultimately What the consumer wants. An example Of how this investment was put to use came in 2005. The compacts consumer data analysis software highlighted during the run up to Ramadan the stores that were located in areas with significant Muslim populations.
This allowed Wall-Mart/USDA to prepare for Ramadan in a culturally appropriate manner. Wall-Mart acquired USDA for sound business reasons which have brought benefit to the UK but it may face problems from this expansion. Being a US company Wall-Mart may find strategies that work in the LISA will tail in the K due to cultural and social differences, This could foster a belief locally that Wall-Mart is trying to impose LIST values and habits.
In turn, this could lead to resentment and a public backlash in the form of shoppers boycotting its stores, In recent years Wall-Mart has had difficulties in Germany, Argentina and Japan because it failed to understand local customs and culture, Additionally KICK or European Governments attitudes in the form of commercial regulations, financial incentives or working practices could change over time, making Wall-Mart/USDA equines less profitable. Wall-Mart could respond by locating elsewhere resulting in large job losses for UK workers.
Wall-Mart’s strategy appears to be; by way Of buy outs and joint ventures, move into an area, and dominate the market by undercutting the prices of local competition. Once this is achieved it consolidates into fewer but larger stores. Effectively this undermines local economies, reduces choice for consumers, eliminates jobs in the long term and can make consumers travel further to buy goods (Beakers 2007; Fisherman, 2006;). A repercussion of this could be the public could reject Wall-Mart/USDA and shop elsewhere.
Another problem for the ILK high street is that Wall-Mart}USDA is increasing its sales of non-food items at cheap prices; this is resulting in smaller local stores going out to business. These cheap goods are of dubious quality, because to this it is likely they may malfunction sooner than a quality brand. If this happens the public will USC)n learn that it may be in their economic_ interest to buy better quality the first time and save money in the long term. The added effect of all these cheap imported goods is, the profits from selling them is being repatriated overseas and not in the domestic economy.
Moreover the company is starting to introduce its specialty division as it already has in other parts of the world. This division sells products such as cars, holidays, pharmaceuticals and photographic items (Case study 2005 as sited in LB 160 2013). Again this is affecting local businesses and it can lead to limiting the consumer’s choice as Wall-Mart/USDA decides which products it will sell, dependent on the price it can squeeze from its suppliers. A risk to the ILK populations health is Wall-Mart/Sad’s introduction of its Smart Price food items, targeted at low income families.
There has always been a once that these items are of low quality due to their fat content, but attractive to low income families due to their low price. There has been speculation that Wall-Mart/USDA was interested in taking over the Safely chain of stores. Eventually this takeover did not happen, but it did raise concerns. If the takeover had gone ahead, Wall-Mart/USDA would have become so big, that it would have dominated the market and no other retailer would have been able to compete with them. The cost to this could have been the flooding of the UK with cheap low quality goods from China, an overbalance of Wall-
Mart/USDA, and an acceptance to cheap low quality goods by the UK population. Additionally it would have limited the [J consumers choices and would have affected people’s jobs as business down-scaled or closed down, as they could not compete with the Wall-Mart}Dada economy of scale, Wall-Mart/USDA does have other problems. In 2005 the company annual growth was at 2% running behind industry growth rates of This was taken as a sign that Wall-Mart/USDA was growing too big to fast and not concentrating on its core purpose; the supply of groceries. Wall-Mart as a company remains anti-union citing unionization increases costs.
In an effort to deflect union scrutiny it has Offered profit sharing and share option schemes to all employees. Despite these efforts problems still persist. The GUM trade union claims Walter/USDA plans the introduction of unsafe working practices, puts undue pressure on staff to take shorter breaks and wants to remove staff access to the arbitration service ACS KICK. In January 2003 union leaders in the United States warned the British public to avoid Wall-Mart. Charles Kernighan, director of the US National Labor Committee, said: “If British people knew more about Wall-Mart, they’d be quite frightened.
Wall- Mart is the nastiest company we’ve dealt with. It has no moral compass. It tours the world looking for workers willing to accept the lowest pay and the least benefits__. What impact it will have on Safely and USDA in the long run is very troubling” (Observer newspaper). As another example of Wall-Marts negative impact, and an issue that could cause the [J public to shop differently if it is given enough publicity, is the claim from charities that Wall-Mart/USDA keeps prices low by unfair strict regimes in its stores and suppliers.
The suppliers know that due to Wall-Mart’s huge network ND economy of scale, if they do not agree to the prices set, it can buy produce elsewhere Which could in the long term put the supplier out Of business. As an extreme example of this, Ralph Gonzales, Prime Minister of SST Vincent and the Grenadines, said in 2003 that he had seen a negative effect on the islands’ economy after the takeover of USDA by Wall-Mart: “What they want to do is to drive everyone out Of the market and then to raise the prices.
The people Who supply Wall-Mart are paying people starvation wages in Central America and Latin America in conditions that no civilized country would accept” (Trading away our rights, Sofas). In conclusion, the debate will continue as to the benefits and cost of the Wall- Mart take-over of USDA. It is true to say that the British public is profiting from Wall-Marts economy of scale and global network of suppliers. The low cost and variety to goods is unparalleled. As Wall-Mart}USDA grows in importance, so will its strategic interaction with other retail chains.
Wall-Mart’s decisions not only affect its large chain competitors, but are also shaped by their anticipated responses, creating an interaction that is more subtle and complex than the relationship between Wall-Mart and its small-scale local competitors. It is likely that other Hahn retailers have copied Wall-Mart or changed their practices in ways that reflect Wall-Mart’s influence. However, there is a downside. Wall-Mart/USDA is an embedded retail superpower. When it moves into an area, smaller businesses and local economies suffer.