Andrew Rossi
FIN 320 Project
“Is Wal-Mart Good for America?”

1. One of the things that Wal-Mart prides itself on is its ability to keep track of inventory. Wal-Mart uses a device that tracks how every item in the store is doing, whether it be for the month, week, day, or even an hour within a day. Wal-Mart knows exactly how the item is selling and when. It is important because this helps Wal-Mart keep their shelves full with what they need and when they need it. This also gives Wal-Mart an edge in the negotiating process with suppliers since they know exactly how the supplier’s goods have done in the past. This gives much more power to the retailer rather than the producer.

2. In the year 1994, Rubbermaid was ranked as the nation’s most admired company. This came in part because originally the company did not do business with Wal-Mart, but once Rubbermaid started dealing with Wal-Mart they saw their numbers grow. As the years went on Rubbermaid ran into a problem where the cost for the raw materials used in their products went up causing production costs to increase. As a result Rubbermaid attempted to ask its retailers to increase the price of Rubbermaid products. Wal-Mart refused because of their low price promise to the customer. Wal-Mart then began to cut some Rubbermaid products from their stores which negatively reflected on Rubbermaid. As a result in the year 2004, rather than Rubbermaid being the most admired company, it had become Wal-Mart.

3. An opening price point was a price on a product towards the front of that section of the store reflecting on what other items may be sold in that section. Wal-Mart would use this by putting, say a television in front of the electronics section at a very low price. This would then draw in customers to look at what else is in the section. They assume that since the price was so low on the initial item they saw then the rest of the products must follow suit. This is often times wrong because a former store manager in the video explained that often times these prices were not the lowest in the area. It was just that the customer believed them to be as a result of that first product they saw listed at such a bargain.

4. Originally since Wal-Mart was an American made company, the founder would encourage people to buy American made products. When the company first started he would purchase American made products to sell in the store, but low cost imports from Asia made it easier for Wal-Mart to keep its low price guarantee. This caused a major grow in the amount of stores that were nationwide as a result of their ability to cut costs internally.

5. When President Clinton opened up trade with China in 1994, many believed this was a path to sell many American made products abroad and to stimulate our economy. Once trade was opened up in China, many US companies realized how much cheaper it was to outsource rather than producing in America. This caused many companies to start to outsource their labor and production and making it harder on companies to compete that decided to keep producing in America.

6. As a result of this outsourcing, many jobs were lost in the United States. Such jobs included many of our manufacturing jobs. Many people who had been working in a certain factory for years now would find themselves out of work as a result of labor going overseas. Although we lost many jobs to outsourcing, there were many jobs that were created, specifically in the retail department, and more specifically, at Wal-Mart. Every time Wal-Mart opened one of their super-stores, this place had to be filled with employees. Although these stores did create some jobs for people, these jobs that were created were generally not as good as the ones that had left the states. Ranging from the decrease in wages to the loss of benefits, many people who thought they were set at their old manufacturing job found themselves working for a fraction of the wages and loss benefits that they counted on.

7. Those in favor of outsourcing are generally the people who run the business. In business if you can cut your internal costs and produce a larger profit while still supplying the customer with the same quality, then they are doing their job correctly and well. Another group that would be in favor of outsourcing, and maybe not knowingly, would be the customer. The customer is trying to get as much for the money they earn as possible. By outsourcing, a retailer like Wal-Mart has the ability to bring costs down and still turn a profit for the company. The people against outsourcing would be the workers who are losing their jobs. This is an obvious argument because we want Americans to have jobs. If we are taking jobs out of America, and replacing them with jobs of lesser quality, then we are lowering our standard of living. That is something that is important to every American.

8. Thompson and Five Star both had to deal with effect of Wal-Mart and outsourcing on their company. Both saw high-end products being produced in China at a fraction of the cost that they could produce for. At Thompson, they were informed that they were losing shelf space because a competitor from China was able to give Wal-Mart the same products while keeping the price down for Wal-Mart, and thus for the costumer. Wal-Mart had a price that they were telling people a TV was going to be sold for, and if a company couldn’t keep with that price they would lose shelf space. This pushed the company to look elsewhere, such as China, to cut costs and stay competitive. At Five Star, they ran into a similar problem, but this company tried to fight against it. Five Star did manage to show the government that China was using unfair trade practices and thus saved the company.

9. The people that have benefited the most from Wal-Mart I would have to say are the customers. They are able to get products at very low costs that they wouldn’t be able to get elsewhere. In addition to customers, the countries that America outsources to have benefitted from Wal-Mart. As a result of us outsourcing to them we have helped move their economy along. The ones that have not benefitted are American production companies. It has become so much cheaper for corporations to outsource that it is so difficult now to produce in America and remain competitive.

10. To balance all of these different aspects Wal-Mart needs to come up with a business plan that benefits all three involved in the corporation. You need workers to run the company, consumers to purchase the products, and shareholders for funding. Wal-Mart needs to lay out the positives and negatives for each of these three and choose the options that have the least negative effect on one another. One aspect cannot be catered to and so there will have to be some agreements to benefit the company as a whole rather than individually.