Globalization and the Wal-Mart Effect

Globalization and the Wal-Mart Effect<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

By Kerby <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Anderson

In order to understand globalization, you need to understand the scope and influence of Wal-Mart. Thomas Friedman, in his book The World is Flat, says that if Wal-Mart were an individual economy, it would rank as China's eighth-biggest trading partner, ahead of Russia, Australia, and Canada. [1]
Charles Fishman', in his book The Wal-Mart Effect, [2] points out that more than half of all Americans live within five miles of a Wal-Mart store. For most people, that's about a ten-to fifteen-minute drive. Ninety percent of Americans live within fifteen miles of a Wal-Mart. In fact, when you drive down the interstate, it is rare for you to go more than a few minutes without seeing a Wal-Mart truck.
Wal-Mart has also become the national commons. Every seven days more than one hundred million Americans shop at Wal-Mart (that's one third of the country). Each year, ninety-three percent of American households shop at least once at Wal-Mart.
The size of this company is hard to grasp. Wal-Mart isn't just the largest retailer in the nation and the world. For most of this decade, it has been both the largest company in the world as well as the largest company in the history of the world.
Put another way, Wal-Mart is as big as Home Depot, Kroger, Target, Costco, Sears, and Kmart combined. Target might be considered Wal-Mart's biggest rival and closest competitor, but it is small in comparison. Wal-Mart sells more by St. Patrick's Day (March 17) than Target sells all year. [3]

The Wal-Mart Effect

Ask people to give you their opinion about Wal-Mart and you are likely to get lots of different responses. They may talk with enthusiasm about the "always low prices." Or they might talk about the impact Wal-Mart had on small businesses in their community when the first store arrived. They may even talk about the loss of American jobs overseas. Believe me, most will have an opinion about Wal-Mart.
Wal-Mart had its creation in the mind of Sam Walton who promoted a single idea: sell merchandise at the lowest price possible. It began with Wal-Mart working hard to keep the costs of their company as low as possible. This idea moved from their company to their suppliers as they asked them to be as frugal as possible. As the company grew in size, they began looking for every way to wring out the last penny of savings from materials, packaging, labor, transportation, and display. The result was "the Wal-Mart effect."
Consumers have embraced "the Wal-Mart effect." As a store moves into a community bringing lower prices, it drives down prices in other stores. And either they compete or close their doors. And it also reshapes the shopping habits of those in the community.
But with "the Wal-Mart effect" comes fears of "the Wal-Mart economy." This is the nagging feeling that there are social and economic costs to be paid for "always low prices." Critics talk about low wages, minimal benefits, and little chance for career advancement.
The company has found itself under attack from many quarters. There is a lawsuit on behalf of 1.6 million women who have worked at Wal-Mart that alleges systematic sex discrimination. Add to this the allegations that managers have required employees to work off the clock and even have locked employees in stores overnight.
There is also the constant complaint that Wal-Mart does not provide adequate health care benefits. Last year, for example, the Maryland legislature passed a bill that forces companies with more than 10,000 employees to spend at least eight percent of their payroll on health care or pay the state the difference. Since Wal-Mart is the only employer with over 10,000 employees in the state, it is easy to see that the legislation was only targeting Wal-Mart.
Wal-Mart recently settled a federal investigation of its use of illegal aliens to clean its stores. The company made a record-setting payment to the federal government.
Sam Walton's goal from the beginning was an unrelenting focus on controlling costs in order to provide "always low prices." He instilled in his employees core values like hard work, frugality, discipline, and loyalty. [4]
In his book The Wal-Mart Effect, Charles Fishman says these values have become inverted. He points out how the company has changed. When Sam Walton died in 1992, Wal-Mart was a $44 billion-a-year company with 370,000 employees. The number of employees has now grown by 1.2 million, and sales have grown by $240 billion. "Wal-Mart is not only not the company Sam Walton founded, it is no longer the company he left behind." [5]

Consumer Behavior

It is a bit misleading to think of Wal-Mart as merely a company. In reality it's a global market force. Without a doubt it is one of the most efficient entities at improving its supply chain not only in this country but around the world. Most of us just shop at the store and don't think of the implications of what we buy and where we buy it.
The size of Wal-Mart gives it the power to do many positive things. It recently announced fuel-savings plans for its stores and trucks. This could provide a model for the nation.
Wal-Mart also provided a model of how to deal with a disaster like Hurricane Katrina. Even though they had 171 facilities in the path of the storm, they were able to recover and reopen eighty-three percent of their facilities in the Gulf area within six days. [6]
One key to Wal-Mart's success was associates who were dedicated to their communities. The local connection helped it deliver goods when the government failed. Wal-Mart sprang into action even before the hurricane hit. Whenever there is a possibility of a hurricane, its supply chain automatically adjusts and sends in plenty of non-perishable food and generators.
What is Wal-Mart's effect on the local economy? One famous study found that the arrival of a Wal-Mart store had a dramatic impact. "Grocery stores lost 5 percent of their business, specialty stores lost 14 percent of their business, and clothing stores lost 18 percent of their business-all while total sales were rising 6 percent, mostly due to Wal-Mart." [7]
Critics of Wal-Mart say that it forces small businesses into bankruptcy. But if you think about it, it is the consumers who put people out of business. We vote with our wallets. Shoppers are the ones who have made it possible for Wal-Mart's phenomenal growth. And we are the ones who need to pay attention to what we buy and where we buy it.
Our consumer behavior can have a positive impact on our world. As individuals, we have a minimal impact, but collectively we have an impact on our lives and our economy every day when we spend money. For too long, Christians have been willing to separate ethics from economics. Yet in earlier centuries theologians asked important questions about the relationship of morality to money.
It is time to return to that moral reflection, especially in this age of globalization. Christians should be alert consumers in this global economy.
Notes

  1. Thomas Friedman, The World is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus and Giroux, 2005), 137-138.
  2. Charles Fishman, The Wal-Mart Effect (New York: Penquin, 2006). 
  3. Ibid., 7.
  4. Ibid., 27.
  5. Ibid., 48.
  6. Edwin J. Feulner, "Learning from Wal-Mart," Townhall.com, 24 Feb. 2006, www.townhall.com/opinion/columns/edwinfeulner/2006/02/24/187795.html.
  7. Fishman, 156.

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