Controversies over Wal-Mart

Topics: Corporation, Wal-Mart, Monopoly Pages: 2 (536 words) Published: March 5, 2012
The United States is a home to many influential multinational corporations, and the largest of them is Wal-Mart Stores Inc. Wal-Mart is an American public multinational corporation which owns chains of large discount department stores and warehouse stores. The Company was founded by Sam Walton in 1962, and today, it has over 8,500 stores in 15 countries. The company is so successful that it was the world’s largest public corporation in 2010 by revenue. Wal-Mart’s success can be accounted by its low price that distinguishes the company from other retailers. Although the low price makes the consumers happy, it has hurt other businesses greatly.

Since 1995, Wal-Mart has been accused of predatory pricing that injures the competitors and destroys competition. With such low prices, Wal-Mart gained monopoly in local market, hurting other businesses. The company was able to control the price from the suppliers by using monopsony power in which a buyer purchases less to force lower prices. Wal-Mart’s buying power is large enough to make the suppliers enter into self-defeating practices. For example, Kraft Foods is the typical supplier that was hurt by Wal-Mart’s monopsony practice. Kraft Foods shut down thirty-nine plants, unemployed 13,500 workers, and eliminated a quarter of its products. Thus, Wal-Mart dictates the price to its producers, using its monopolistic power. Another example would be the fall of Rubbermaid to whom Wal-Mart was the single most important customer. When the price of material went up, Wal-Mart did not accept the price increase for Rubbermaid products, making the company go out of business. Although this method might be beneficial to the consumers, ultimately, it has a negative influence on the economy of the United States by hurting other retailers and suppliers.

In addition to its forceful control over the suppliers, Wal-Mart’s use of foreign suppliers is unbeneficial to the American economy. Since the cost of production including...
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