MEASURING THE EFFECTS OF WAL-MART

Recently announced global news and business analysis about the effects of Wal-Mart are quite mixed. For example, the company decided to shift its market activities from Europe to high growing and far more upward-yielding markets in East Asia. Wal Mart's retreat from Germany was reasonable. German business culture and ethics did not sustain Wal Mart's so far rapidly successful strategic approach. All of his retail centers have been aquired by the largest German retailer Metro AG's Real Division. Perhaps the most tragic story in this particular situation is that Marxists are now wordfully saying that Wal Mart is facing tackling a battle between "labor" and "capital". Well, we're not in the 19th century anymore to boost such misstepped non-sense and Marxist worshippers should take that into account seriously. So far the most realistic and rational analysis about Wal Mart's global ventures has been pinned by Ken A. Mark and Pankaj Ghemawat, a professor at Harvard Business School. He tells that "there is hard evidence that Wal-Mart has grown the economic pie available to be divided among its various stakeholders."

Marxist worshippers and social activists took a full-blown stance when they have started to stress how the world's largest retail company is primarily treating its workers. Overt criticism has been underpinned by Anthony Bianco's The Bully of Bentonville: How the High Cost of Wal-Mart's Everyday Low Prices is Hurting America. Even balanced and cooly tended books raise questions about the real economic impact of Wal Mart, saying that it destoryed more jobs in 2005 than it created. How is then "mixed economic impact" translated into action?

Anykind of questioning whether Wal-Mart's overall economic impact has been positive or negative reflects a failure to engage properly with the data. There is an evidence that Wal Mart has grown into economic pie which has been divided to its stakeholders. McKinsey Global Institute's study specifically examined the U.S. labor productivity growth between 1995 and 2000. Robert Solow, Nobel laureate in economics and the advisor to the study, told that "by far the most important factor in that growth is Wal-Mart." The company indeed has some issues to tackle in the future but it seems highly inappropriate to label Wal Mart as a kind of devastating impact for workers, because of those issues. If I managed a company and if there were no issues to challenge in the future, then I would be truly concerned. The value which has been created by Wal Mart benefited the pockets of consumers. It brought them low-prices and an opportunity to penetrate a large volume of free choice in the market. According to Global Insight, Wal Mart's prices are approximately 8 percent lower than the prices of its competitors. Applying the price gap to domestic sales volumes of Wal Mart, then U.S. consumers on the order save $14 billion per year. Low Wal Mart's prices force its competitor to charge lower price, so this is only a fraction of company's real economic impact. This particular kinds of savings outscored costs which Wal Mart allegedly imposed on the society. The savings to Wal Mart costumers appear large in the relation to the surplus that it passes on to its stakeholders. In recent years, the retailer netted just 1,5 to 2 percent of its revenues as an income to its shareholders compared with 8-plus percent for its customers.

Charles Fishman, in The Wal Mart Effect, sets up another issue when he says that a giant boa is squeezing the life of capitalism to sheer market dominance. This statement is a little bit ovre the edge. Wal Mart accounts less than 10 percent of total non-automotive retail sales in the U.S. and its rate of market growth has varied significantly. In recent years, Wal Mart's growth temporarily cooled due to a large imposition of cost elements such as healthcare insurance and pressures on stock prices. Historical features suggest that successful new retailing formats provoke rigiorous reactions, wheater it be in market or non-market sector.

The arguments stressed above suggest that Wal Mart is very far from a conflict between "capital" and "labor" as far-fetched Marxist worshippers try to propagate. In fact, Wal-Mart has brought an extensive panel of benefits which no welfare program has never had. U.S. legislation thankfully favors consumers. The to the question if Wal-Mart supply strategy is good heavily depends on the identity of the consumers who benefited from low prices. Without Wal-Mart, the rural poor in particular would pay several percentage points more for the food and nonfood merchandise that, after housing, is their second-largest household expense.