Wal-Mart Economic Trend Economic Trends Case Study

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Once this take place, it means that the overall inflation rate will begin to rise sharply. (Seabury) in the case of Wal-Mart, they have been affected by higher fuel prices, in delivering goods to local stores. However, the company has found a way to keep their fuel costs as low as possible. Currently, they have been contracting out delivery services, from the manufacturer to its different distribution centers. What is happening is the company using two strategies. One is: delivering various products between the distribution center and the stores. The second part is: the delivery between the manufacturer / whole seller, which has been traditionally contacted out. Over the last couple of years, as fuel prices have increased, the company is seeking to take over delivery services between manufacturers and whole sellers. The reason why, is because as an organization, they can use strategies to reduce the effects of fuel prices such as: hedging. This is significant, because it shows how the increase in inflation rates, has allowed the company to begin taking over delivery options. Where, they are using a similar model of demanding low prices from manufacturers. While at the same time, they are seeking ways to reduce the cost to deliver various products to the stores. (Perry) When you combine this with the low prices that they offer to consumers, it means that the company can maintain their cost structure despite increases in inflation.

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This has a dramatic impact upon the bottom line of the company, where it will see a strong increase in sales and earnings. As consumers are desperately seeking out the lowest prices possible, to avoid the tremendous impact that inflation is having on their budgets. A good example of this can be seen in August 2008, when the company beat earnings expectations and raised sales forecast. This is because consumers were seeking out bargains, to help mitigate the effects of rising inflation. (Cheng)

To see the real effect that interest rates, unemployment and inflation have had on Wal-Mart's bottom line requires: looking no further than the price of the stock. This is because the common stock shows how both during good and bad times; consumers continue to spend more at Wal-Mart. The below graph highlights how Wal-Mart's cost structure has had a dramatic impact upon: the bottom line and the company's long-term growth.

("Wal-Mart")

Clearly, the long-term trend for Wal-Mart is positive over the next three to five years. This is because their low cost structure and the ability to augment it, with ways to maintain this structure, will allow their earnings to increase. Regardless of what happens with the economy or consumer spending, the company is well positioned to benefit......

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