Wal-Mart Effects the Economy
Jim Lee Eng 101: Reames December 2, 2010 Wal-Mart Greatly Impacts the U. S. Economy Is Wal-Mart ruining the local businesses in America? Most professional business men can agree that Wal-Mart affects the United States economy in many different ways. Wal-Mart is an American public corporation that runs a chain of large, discount department stores. It is the world’s largest public corporation by revenue according to the 2008 Fortune Global 500. However this corporation has contraverisal issues about how they do their sales and the long term affects they put in the economy.
Professionals will agree that Wal-Mart has hurt many community businesses as Wal-Mart open in areas around them. There have been common statistics for when a Wal-Mart opens and the affect they have. This paper focuses on the affect Wal-Mart has in rural areas and the views of professionals intake on this topic. Also this paper will feature how Wal-Mart will affect our feature. The target audience for this paper is people who are interested in the learning of the affects of large corporations vs small businesses.
When analyzing the affects of Wal-Mart many researchers will agree with the fact that small businesses lose revenue when big corporation buy for low and sell also low to beat the competition. Stone (1997) states that “Studies in Iowa have shown that some small towns lose up to 47 percent of their retail trade after 10 years of Wal-Mart stores nearby” (Pg. 2). That is a big statistic to take in as the community will suffer from a high loss of the money for the community.
Also the small business helps keep the economy in flow and when small businesses start to fail, people start losing jobs and people will move out of communities which hurts the communities. Stone (1997) comments that “It is believed that this decline in sales happened because Wal-Mart placed its own stores too close together, causing a predatory effect” (Pg. 6). This statement is true because Wal-Mart uses the predatory effect to drive competitors out of business. The predatory effect is the practice of selling products and services at a very low price intending to drive competitors out of business.
That is how Wal-Mart has been dominant because of their ability to sell prices so low to attract consumers to continue to shop at Wal-Mart. Wal-Mart can do this because by attracting consumers to buy certain products at a lower price that other products are raised in value and consumers will shop throughout the store. The key is to get consumers to come to your business and Wal-Mart has almost perfected that. Overall Stone would agree with the idea of Wal-Mart is ruining the local businesses around America as Wal-Mart has become a fully national chain.
Understanding this topic would be important because it can tell what we will see in the future of the economy. Many would agree with Stone like Goetz and Swaminathan with the fact Wal-Mart has effects in local communities. Goetz and Swaminathan (2004) states that “We offer three possible explanations for this finding, including that Wal-Mart stores destroy civic capacity in the communities in which they locate by driving out local entrepreneurs and community leaders” (Pg. 2). This statement connects with Stone as well as my point of view of this topic.
Wal-Mart has downgrade the middle class economy with their style of retail sales and buying cheap products over seas. Goetz and Swaminathan (2004) quotes that “Local leaders and academic researchers are increasingly interested in the community-level effects of “big box” retailers and discount department stores” (Pg. 3). This has potential to have a positive outcome because America will realize that Wal-Mart has affected the United States so greatly that the government needs to step in and control how Wal-Mart conducts business.
Wal-Mart has received considerable and mostly negative recent public media and Congressional attention, in addition to spawning a number of hostile web-sites as Goetz and Swaminathan (2004) reports (Pg. 3). It is good that people are realizing this and speaking out about this effect on our economy. This will get this phenomenon brought up to the government level and will be talked about to high levels of authority. Goetz and Swaminathan are professionals that agree with my idea of local businesses being destroyed by Wal-Mart.
Common views of professionals will agree that our economy is partly affected by the Wal-Mart effect. Neumark, Zhang, and Ciccarella (2005) will agree with Stone, Goetz, and Swaminathan by saying that “We estimate the effects of Wal-Mart stores on county-level employment and earnings, accounting for endogeneity of the location and timing of Wal-Mart openings that most likely biases the evidence against finding adverse effects of Wal-Mart stores” (Pg. 1). This is another common aspect of all these professionals with the idea that there is a negative effect behind the openings of Wal-Mart.
All of the effects found are common as they reduce local businesses around new Wal-Marts. Neumark, Zhang, and Ciccarella (2005) quotes “ Yet two of the most commonly-heard criticisms are that Wal-Mart eliminates more jobs than it creates for a community and that Wal-Mart’s wage levels pull down standards for all workers—not simply creating low-wage jobs, but driving down wages” (Pg. 1). Not only is the Wal-Mart effect destroying the local businesses, Wal-Mart does not help create more jobs for the jobs it loses in the community.
Also Wal-Mart does not pay its workers a good wage. That can greatly affect a community because the citizens within that community will not have money to buy products, keeping the flow of the economy going. Neumark, Zhang, and Ciccarella (2005) also agrees on my idea of the topic of Wal-Mart by stating “There is also an academic literature on the impact of Wal-Mart stores, focusing on the effects of Wal-Mart openings on local employment, retail prices and sales, poverty rates, and the concentration of the retailing industry, as well as the impact on existing businesses” (Pg. ). They are basically stating that Wal-Mart impacts many aspects of the economy because of how Wal-Mart conducts business. Also that the impacts are not in positive ways in which they should be when new competition arises. The fact that Wal-Mart beats out its competitors really easy is a scary weapon that Wal-Mart can abuse. In which they have abuse their power to buy bulk supplies by demanding the prices of whom they buy from instead of negoicating. Neumark, Zhang, and Ciccarella can all agree that Wal-Mart is ruining the local businesses in America.
Furthermore into this topic, most professionals will all conform that Wal-Mart affects the economy in more negative ways then positive. Arindraji, William, and Barry (2007) states that “estimates that exploit the spatial diffusion of Wal-Mart stores find that a single Wal-Mart store opening reduces the average retail earnings in a county by 0. 5 – 0. 9 percent” (Pg. 4). This is not good for any economy that when a new business is open that the average retail earning is lowered instead of increased. This just means that when Wal-Mart opens it loses more of its competitor retailers then what Wal-Mart gains.
Ten new Wal-Mart stores in a state are found to reduce the average hourly wage of retail workers by around 2 percent as purpose by Arindraji, William, and Barry (Pg. 4). Wal-Mart should be able to pay their workers better if they are finacnically doing well as they are ranked number one in the Fortune 500 list. They are the number one ranked corporation and they do not pay their employers above the average. Wal-Mart has been making money other then the products and services they provide. As Wal-Mart can see that they can pay their workers the minimum wage and get away with it, while making billions of dollars world wide.
Arindraji, William, and Barry will confirm that Wal-Mart has been greatly impacting the economies in the where abouts they consult business. Wal-Mart has been overly competitive with the prices they put on the products and drive competition out of business. In the Lansing State Journal, Domsic reports that “The recent closings of three locally owned grocery stores reflect a traditional grocery sector struggling to compete with big-box stores and the growing number of pharmacies, convenience stores and other shops that have added more food to their lineups. The big box stores they are talking about are Wal-Mart, Meijers, and Kroger. Those stores have been competing with each other to cut prices really low, beating out the other local businesses. Competition is good but what happens when there is no competition? Then those who have beat out the other competition will have a garentee chance to always survive in the economy and basically take all the consumers in the area. Domsic also comments “bigger players have beefed up their food lines or cut prices as they vie for Lansing-area shoppers. The bigger players are the Wal-Mart, Meijer, and Kroger and they are competing fiercely for consumers. Even though competition is good, it is bad when some of the competition disappears from the market. Although there are many cons of Wal-Mart, Wal-Mart has many benefits as they provide low costs of products they sell. Irwin (2007) reports that “Wal-Mart’s food prices are estimated to be 8% to 27% lower than large supermarket chains for an identical market basket across different U. S. metro areas” (Pg. 1). This is a benefit for the lower and middle class to try and save money in these rough times in the United States.
That is why consumers are attracted to shop at Wal-Mart because you can save money and be able to buy other things. Irwin expresses this benefit as “This has generated tremendous savings for Wal-Mart consumers by offering lower priced goods in the community, and generating competition among retailers” (Pg. 1). Wal-Mart creates unbelievable savings for its consumers therefore keeps the competition alive for Wal-Mart’s competitors. Also that competition is very good for the economy in the United States. Those are some ways that Wal-Mart impacts the business industry in positive ways.
Those are not just the ways that Wal-Mart has benefited America. Wal-Mart has helped personal income and employment. Riper (2008) quotes “The study shows that between 1985 and 2003, personal income, overall employment and retail employment grew faster in counties with a Wal-Mart than in those without one. ” This means that the more Wal-Mart is built around the United States and other countries that it will benefit income of people and help raise employment in the area. That is a good because then people would have more money to help keep that economic flow in communities going.
Also the rise in employment will improve the surrounding unemployment of the location Wal-Mart is around. Nearly 90% of the U. S. population lives within 15 miles of a Wal-Mart store, and two-thirds of all retailers are located within five miles of one as Riper reports. That means a vast majority of America is surrounded by a Wal-Mart close by. This is good for Wal-Mart as they can be easily located and can be accessible to almost anyone. Wal-Mart is everywhere and that is a huge benefit Wal-Mart has over its competitors.
Wal-Mart has brought up some good positive impacts as there are aproximatly 3,600 Wal-Marts in the United States. One of the impacts is the amount of jobs each Wal-Mart creates as Wal-Mart’s site cites “Approximately 350 new positions will be needed at the store (a majority of those positions will be full time). An additional 100 construction jobs will be created. ” That means there are 1. 26 million jobs in America that are in the Wal-Mart industry. Also that 360,000 construction jobs was created for the building of Wal-Mart.
As long as Wal-Mart is doing well with profits, they will continue to expand new Wal-Marts. This will mean more jobs in America. Another good impact Wal-Mart has is how they provide savings to consumers as the Wal-Mart site reports “Studies have shown that Walmart stores save the average household $3,406. 00 a year. Customers can purchase over 300 generic pharmaceutical drugs for just $4. 00 or less. ” The amount you save at Wal-Mart builds up as you can see. That helps citizens save money if there income is sufficiently low or on certain budgets.
Not only do Wal-Mart provide savings for its consumers and employment, Wal-Mart has been involved in the environment by stating that “Wal-mart is leading a global sustainability effort to reduce energy consumption through a variety of initiatives that will also be used at this store. The store will purchase a number of grocery and garden products locally to save energy costs and support the local economy. ” That helps Wal-Mart with its community respect to be involve and not just a average corporation that does not care about the itself.
Also this tells that Wal-Mart cares about the environment and not just making profits. Overall, Wal-Mart is a benefit to the American economy. Wal-Mart has not been selfish at all in communities like Landover Hills. Wal-Mart has started up a program to help local businesses. Mui reports that “Wal-Mart said it would offer free advertising to local stores and seminars on how to do business and even compete with Wal-Mart. ” This is something that is rarely done in the business world. A competitor helping another competitor out.
This would help competition around the area and benefit the local stores into competing with Wal-Mart. Many people think having Wal-Mart around is a benefit. Mui quotes “Other store owners credit Wal-Mart for boosting their sales, through both its proximity and community outreach programs. ” Local businessmen are claiming that having a Wal-Mart around is a benefit. Somehow Wal-Mart has continue to benefit some people while some others do not believe so. Wal-Mart has brought up many views on how they affect the competition and how the employment is affect in several different ways.
My opinion on Wal-Mart is that Wal-Mart is destroying the American middle class slowly every year. Wal-Mart closes individual business owners and reduces competition in which an economy like America, competition keeps the economy in steady flow. Also that they are like a monopoly to me. Wal-Mart is not just a discount retail store. They provide all sorts of different services like eye examinations, haircuts, predacures, and they can provide and activate cell phones on the Wal-Mart plan. Wal-Mart is exploring all markets and providing them into their own stores.
That is not a good impact because Wal-Mart already dominates in the retail store and driving other retail stores and local businesses out of work, so providing these services just keeps Wal-Mart in benefits from those services. I believe that the government needs to take a bigger stand on what Wal-Mart can do because Wal-Mart has been changing so rapidly and dominating any corporation out there, that the government should regulate how they buy supplies. Wal-Mart buys most of their products for their shelves from China for low prices.
Thus, making a lot of job losses in America. How can an American corporation do this to America? Wal-Mart also does not have health benefits for its workers and Wal-Mart pays low wages for its workers. That does not help out the working class of the United States. Our economy is not doing so well right now as we are in debt from war. Wal-Mart should help stable the economy since they done some damage to the United States in ways the Founder of Wal-Mart should have knowledge about and try to find new ways to conduct business.
