Managerial Economics

Introduction

Wal-Mart has had a massive impact on the economy of the United States. This impact was felt on the national as well as the community level around the country. Despite the global financial crisis and unfavorable environmental disasters, Wal-Mart has been able to achieve a sales growth of about $6.4 billion over the last decade, a figure which represents an eleven percent growth. During the last ten years, Wal-Mart has gone from being a local enterprise to becoming one of the world’s largest enterprises. Wal-Mart is also among the most powerful retailers. This makes it a very influential in the business world. This paper is an analysis of the economic impact of Wal-Mart. The analysis is performed on a national as well as the community level. The paper also touches on the influence that Wal-Mart has on the global scale (Chiou 2009, 285).

The evaluation of the national impact is, indeed, an estimation of a holistic effect that Wal-Mart has as measured by metrics which help define the national economic performance. Nationally, Wal-Mart has made a significant economic impact. This has resulted from its increased capital investment. The level of investment has advanced the efficiency of production and supply in the American enterprise sector. With the increase of supply, productivity has improved, and this has led to decreasing prices of the goods being offered. Consumer purchasing power has been improved since individuals are able to acquire extra commodities for the same price (Angotti 2010).

The purchasing ability of Wal-Mart has impacted on its relation with suppliers and their networks. Several of the suppliers are located close to the company which also serves as a controlling center where network externalities impact on the revenue of embracing.  Its entry into Mexico has brought about profits and growth of the supplier networks. However critics is using its bargaining strength to lower whole sale prices hence blamed for business drop amongst the suppliers. It is however not easy to identify that with strong supplier network observed.

According to a number of studies, Wal-Mart is a consumer oriented company. This is especially true regarding the manner in which the company improves service delivery as well as the quality of products it offers. The rapid growth of Wal-Mart is attributed to a cumulative 9% decline in the price of food items as well as other associated commodities. According to Global Statistics, the reduction in prices facilitated a $270 billion rise in profit over the last decade (Angotti 2010).

Saving resources is, indeed, financially advantageous since individuals are able to utilize funds for other purposes thereby saving the country a substantial level of expenditure. As it was mentioned before, saving costs improves consumer purchasing power, which, indeed, leads to increased profits for the organization. As a result, the organization is able to offer wage increases to its staff, in this way increasing their wellbeing. In fact, several observers note that Wal-Mart offers better wages than most organizations in the United States (Global Insight et al 2005, 12-18). Nevertheless, Wal-Mart pays its wages in accordance with the skills, experience, and the level of education of the employees. The management of Wal-Mart has been venturing in capital intensive engagements, and this gave it a competitive advantage over other similar enterprises. However competitive pressures presented by large retailers had been contentious. It is argued that certain retail chains have been offering low wages, not contributing to their societies, acquiring from the community, paying limited taxes. Such similar accusations have been laid against Wal-Mart presently. Its economic impact has been a case of concern with the locals, according to Pew Research Center, attributing it to having a negative impact. Some of these engagements have increased efficiency in inventory control and, as a result, Wal-Mart was able to meet the needs and expectations of its customers (Anderson et al 2011).

The location of Wal-Mart is geared towards acquiring profit with reliance on demand and cost aspects as well as the competitive surrounding and the manner it is to grow with the entrance of Wal-Mart. In a study by Holmes (2006) and Jia (2005) Wal-Mart stores have been close to one another and this is seen in the supercenters. This method is however criticized as it is a recipe for cannibalizing the sales of the other stores in the chain, though on the other hand benefit has been acquired.

Wal-Mart has at times been criticized for prompting cheap import of goods, a situation which enables the importers to offer their commodities at prices which are 5% lower than the normal retailing prices (Jia 2008, 1263). Critics argue that by offering reduced prices, Wal-Mart is able to attract customers and, therefore, it becomes imperative to hold large stock volumes. These volumes are primarily meant to enhance the efficiency of the commodities being offered to the clients. Through its innovative strategies, however, Wal-Mart was able to improve its operations, and this has been a motivating factor for other retail enterprises. In this way, Wal-Mart, was promoting advanced business practices in the American market (Holmes 2001, 708). The difficulty to contrast between Wal-Mart’s size and its efficiency level has been attributed to on one side Wal-Mart having limited costs in comparison to other retailers and this benefit cost would be liable for its progress. This would have made it benefit from the economies of scale, limiting its costs to competitors. According to Basker and Van’s argument there is a close relation between its growth and economies of scale, hence increased advantage of the Wal-Mart store (Ellickson et al 2010; Basker 2012, 198).

As indicated in the preceding discussion, Wal-Mart has been an important player in the national labor market. It has been a major influence on determination of productivity as well as appropriate salaries and wages for various categories of workers. Wal-Mart has been a source of employment to a significant number of Americans (Hausman & Leibtag 2007, 1177). Although there are those who criticize the company for offering lower wages than it could, the management has been arguing that a significant portion of earnings are used for research, which eventually ends up in creation of extra employment positions. Wal-Mart is a recognized retail chain. It has made a positive impact on the economy and, although the actual statistics vary from one state to another, its presence has prompted advanced business practices that nurture professionalism in the retail sector (Anderson et al 2011).

Conclusion

Wal-Mart is among those stable organizations which have high borrowing capacity. This is the reason its management is able to overcome the challenges which come as an obstacle for Wal-Mart competitors. With an efficient channel of distribution and marketing, Wal-Mart is able to save a substantial amount or resources and, offer a competitive customer service at the same time, Therefore customers find it to be attractive due to the innovative and attractive strategies that it has availed to the market (Jia 2008, 1263). Wal-Mart is globally recognized and its policies have been adopted by several other organizations during the global economic downturn in order to restore stability.  Its competitive advantage has enabled expansion to several countries where Wal-Mart continues to implement up-to-date technology, resources, and expertise which contribute to its strategic growth and expansion (Ailawadi et al 2010, 577-593).