Walmart Case:
“Save money. Live better.” This is the promise that the world biggest retailer “Walmart gives to customers since they started business back in early 1940. Low price has always been Walmart strategy. Since their early days, they claimed “We Sell for Less” as their tagline. Later on, “Always Low Prices. Always” displayed alongside with Walmart logo. The biggest challenge for them is to keep the price down with good product quality. Why does Walmart important for American economy and beyond? According to the figures from Charles Fishman’s book The Walmart Effect, more than half of all Americans live within 5 miles of a Walmart. Every week, more than 100 million Americans shop at Walmart (1).
In comparison to the similar scale of American companies like ExxonMobil, Walmart employs 1.6 million workers worldwide while ExxonMobil employed about 90,000 people. Interesting to know that ExxonMobil is growing by raising prices, but Walmart is growing despite lowering prices (1). Walmart net sales in 2012 hit $443,854millions (increase by 5.9%) with the gross profit margin of 24.5% (2). How does Walmart sell low price products and remain high margin of profit? PBS Frontline, a well-known TV program in the US pointed out on 2 aspects. First, Walmart managed to be the lead in technology and able them to track consumer behaviors. Knowing what consumers want and when they need it are not enough, they have to control the price of goods in order to complete with competitors (3).
Walmart found the same heaven as well as other American companies in China. In China, Walmart can offer low price products and still enjoy the widen profit margins. In fact, Walmart is distinctively different from other companies because if they were a country, they would be China’s sixth or seventh largest trading partner. In 2002, $12 billion of merchandises were import from China to Walmart. This was nearly 10% of all Chinese export to the US (4). The value of yuan has played an
In comparison to the similar scale of American companies like ExxonMobil, Walmart employs 1.6 million workers worldwide while ExxonMobil employed about 90,000 people. Interesting to know that ExxonMobil is growing by raising prices, but Walmart is growing despite lowering prices (1). Walmart net sales in 2012 hit $443,854millions (increase by 5.9%) with the gross profit margin of 24.5% (2). How does Walmart sell low price products and remain high margin of profit? PBS Frontline, a well-known TV program in the US pointed out on 2 aspects. First, Walmart managed to be the lead in technology and able them to track consumer behaviors. Knowing what consumers want and when they need it are not enough, they have to control the price of goods in order to complete with competitors (3).
Walmart found the same heaven as well as other American companies in China. In China, Walmart can offer low price products and still enjoy the widen profit margins. In fact, Walmart is distinctively different from other companies because if they were a country, they would be China’s sixth or seventh largest trading partner. In 2002, $12 billion of merchandises were import from China to Walmart. This was nearly 10% of all Chinese export to the US (4). The value of yuan has played an
References: 1) Kerby Anderson, 2006, Globalization and the Walmart Effect, Probe Ministries http://www.probe.org/site/c.fdKEIMNsEoG/b.4218005/k.783A/Globalization_and_the_WalMart_Effect.htm 3) Edna Bonacich, 2004, Inside the World’s Largest Company, Public Broadcasting Service http://www.pbs.org/wgbh/pages/frontline/shows/walmart/secrets/inside.html 4) Andrew Winston, 2008,Walmart’s New Sustainability Madate in China, Bloomberg Businessweek http://www.businessweek.com/stories/2008-10-28/wal-marts-new-sustainability-mandate-in-chinabusinessweek-business-news-stock-market-and-financial-advice 5) Robert E. Scott, 2011, Growing U.S. trade deficit with China cost 2.8 million jobs between 2001 and 2010, Economic Policy Institute http://www.epi.org/publication/growing-trade-deficit-china-cost-2-8-million/ 6) Reuters, 2012, U.S. Trade Deficit Exceeds Projections, The New York Times http://www.nytimes.com/2012/02/11/business/economy/us-trade-deficit-expands.html?_r=0 10) Rachel Horn and Emily Quanbeck, 2010, 5 Expert Takes on the U.S.-China Currency Tension, The Atlantic http://www.theatlantic.com/business/archive/2010/10/5-expert-takes-on-the-us-china-currency-tensions/65213/ 11) W 16) Robert E.Scott, 2007, The Walmart effect, Economic Policy Institute http://www.epi.org/publication/ib235/ 17) Sayali Bedekar Patil, 2012, Foreign Currency Hedging Strategies, Buzzle http://www.buzzle.com/articles/foreign-currency-hedging.html 18) Michael J. Marx, Ph.D., 2004, Walmart: The Ultimate Lever for Major Corporate Change, Seattle Community Network http://www.scn.org/neighbors/beacon/pdx/WM.pdf