Is Wal-Mart Good for the Economy?

Only available on StudyMode
  • Download(s) : 474
  • Published : November 7, 2010
Open Document
Text Preview
Debate Question: Is Wal-Mart Good for the Economy? Yes.
Wal-Mart is now the largest grocer, largest retailer, largest corporation in the world. "If Wal-Mart was a nation, it would have a bigger economy than 80 percent of the world's countries"(Singer and Mason). About "138 million people go to one of Wal-Mart's 5,000 stores in the United States and nine other countries", and purchase more than $300 billion every year (Singer and Mason). With a 1.6 million global workforce, Wal-Mart has become the biggest private employer "in the United States, as well as in Mexico and Canada"(Singer and Mason). "Wal-Mart already has 11 percent of all U.S. Grocery store sales," and "by 2013 that figure is likely to rise to 21 percent"(Singer and Mason). As a big corporation, Wal-Mart insists on providing "everyday low prices". The affordable prices for families, which are offered by Wal-Mart, generates "significant savings for consumers on their grocery, apparel, and general merchandise spending, and the redirected spending from the savings" also creates a lot of jobs (LAEDC). All of the above facts shows that Wal-Mart is good for the economy and makes a great contribution to the society. First of all, Wal-Mart Supercenters provide a "substantial cost advantage relative to traditional supermarkets, based on careful supply chain and inventory management, volume discounts, and lower labor costs"(LEADC). As a result, Wal-Mart offers lower prices on groceries than traditional grocery market chains. For example, "according to a UBS-Warburg study, Wal-Mart has grocery prices 17 to 20 percent lower than other supermarkets"(Singer and Mason). In "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effort of Wal-Mart.," an excerpt from Journal of Applied Econometrics, Hausman and Leibtag claim that in 2006 "prices for various food items in Wal-Mart were typically 5-48% less than prices for the same product in conventional supermarkets"(Irwin and Clark). Not only does Wal-Mart provide low prices everyday, but it also gradually builds market shares. In the case of Wal-Mart Supercenters in Southern California, "with Southern California's rapidly growing population, Wal-Mart is likely to increase its presence by taking a greater share of overall market growth, rather than by luring existing customer"(LAEDC). The growth of the market both increases the economy and the price competition in Southern California. As Baker estimates in "Selling a Cheaper Mousetrap: Wal-Mart's Effect on Retail Prices", prices declined "7-13% in the long run as a result of a Wal-Mart store opening", with the lowest prices "occurring with drugstore items such as toothpaste and shampoo"(Irwin and Clark). "In a study of the national economy, the consulting firm Global Insight Inc. estimates that the expansion of Wal-Mart from 1985 to 2004 is associated with a 3.1% decline in overall consumer prices as measured by the Consumer Price Index"(Irwin and Clark). While such a scenario "generates tremendous savings to consumers in the form of both a direct effect from having lower priced goods available in the community, as well an indirect effect generated through competition with other retailers"(Irwin and Clark). Hausman and Leibtag find that "the direct effect of having access to lower priced goods generates a saving of 20.2% in food expenditures for the average household"(Irwin and Clark). "The competition effect generates additional savings of 4.8%. Thus, the total consumer savings from these combined effects for a household with an average income and food expenditures is equal to 25% of the household’s total food expenditures. Not surprisingly, lower income households benefit even more from lower food prices; the estimated savings in expenditures is close to 30% for households with an annual income below $10,000"(Irwin and Clark). Although "shoppers face potential costs associated with supercenters", the consumers' substantial...
tracking img