Wal-Mart Sam Walton Owned Fifteen Essay

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For Wal-Mart, cost is the sole determinant of their purchasing policy. In terms of production costs, other countries have a competitive advantage over the United States. China, for example, has a technology level almost equivalent to the United States, which enables it to produce reasonable-quality goods. Their advantage, however, lies in labor costs. The average Chinese worker makes $100 per month. American factories simply cannot compete with that in terms of price. Those wages work in China, where a person can live comfortably on two dollars a day. That is not possible in the United States. We have built an economic model not on low cost, but on high quality of life. This used to drive our manufacturing sector. Firms such as Rubbermaid used to compete on quality, but Wal-Mart and other large discount chains have made cost a more important determinant in their purchasing practices.

The shift towards low-cost production has other implications as well. Wal-Mart does upwards of $30 billion per year in business with China. Between Wal-Mart and the big box stores that imitate them, this makes a significant contribution to America's trade deficit. The United States had a trade deficit with China of $256 billion last year. This contributes to weakness in the American dollar, reduced international purchasing power, and represents a real transfer of wealth from the United States to China. If the trend continues, it will erode our status as the largest economy, and as the most powerful nation.

Proponents of Wal-Mart's economic model point to the benefits of lower prices. Yet, those prices are often of inferior quality. Wal-Mart's inflexibility with their suppliers means that suppliers must find corners to cut in order to meet the retailer's demands.

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This reduces the quality level of the goods. Lower prices are only of benefit if the quality of the goods in maintained. Lower quality goods at lower prices is the same value proposition as higher quality goods at higher prices.

This is especially true in light of the job losses that American consumers are suffering as their factories close and production shifts overseas. Workers who formerly held well-paying factory jobs are now unemployed, or employed at wages far lower than they used to receive. This results in an erosion of purchasing power. Lower prices are only good for America, if the American consumer has the same amount of money to spend. Any benefits that accrue from lower prices are eliminated by the reduction in spending power caused by job loss.

In essence, Wal-Mart's proposition to the American people is to trade high-quality, high-cost goods for low-quality, low-cost goods; and high-paying jobs for unemployment or underemployment. The company is a significant contributor to a trade deficit with China that threatens our wealth and our dollar. The transfer of wealth from the U.S. To China is staggering. The billions we send there are making them wealthier and making us poorer. The wealth transfer out of America, the decline in our manufacturing base, the shift from high-paying jobs to low-paying ones and the reduction in quality in consumer goods have all been driven by Wal-Mart. Yet, the best they can offer in their defense is that you save a few pennies on mop buckets and lampshades. In terms of both economics and quality of life, Wal-Mart is….....

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