Extra Credit 1: Expanding David Gong`s Post
As a Price expert in this class, I had decided to expand David Gong post, Wal-Mart price strategy is EDLP and it promises everyday low prices on everything it sells. In contrast, Kmart`s recent attempts to macth Wal-Mart`s EDLP strategy failed (pg. 361). Wal- Mart uses the value price approach as the right combination between price and quality.
I found that for the fourth year in a row, Wal-Mart, the U.S.'s largest company is the world's biggest retailer, according to Fortune Magazine. Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be difficult to comprehend. Wal-Mart sold $244.5 billion worth of goods last year and employs over 1.2 million people. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. As a comparison, in 2003, the GDP of Canada was $856 billion, Mexico was $626 billion, and Israel was $110 billion... (Source:The World Bank Group). The bottom-line is that the American market economy is free. It is all about producing things consumers want to buy without price nor geographical restrictions (pg.379). Wal-Mart is offering consumers a wide range of goods at rock-bottom prices. It is, therefore, meeting the market test.(market penetration pricing pg. 371).
The Wal-Mart model is a double-edged sword though. On the one hand, Wal-Mart is probably the most efficient company in the history of American business. It's pushed a low-cost, global-sourcing model to different degrees. It's created suppliers that produce goods cheaper than they ever could before. One can say that poor people need cheaper goods but that is ignoring that people are not just consumers, but they also are workers. And Wal-Mart, in its promise to lower consumer costs, is participating in the lowering of worker standards. Why waiting to save the necessary amount to purchase a quality item when a copy is available at Wal-Mart for a discounted low price?The flip side of that model is that this has come at the cost of U.S. jobs that are actually moving offshore, and even Wal-Mart's own suppliers are concerned that by pushing costs down so low, companies can no longer be profitable.
posted by Lina Maria @ 10:54 PM
2 Comments:
i've noticed that large companies, by seemingly the nature of being big, automatically have negatives hung around their necks... look at google -- before they IPO'ed, they were considered darlings of the web for "doing no evil" and being all for the consumers... now, with its ridiculous stock valuation, all u read about them is "are they overpriced" and "are they violating copyrights" (w/ their library project)... the same can be said w/ microsoft, and i believe walmart once was thought to be a great american icon as well... but now, its as if their a scourge b/c of practices that have long been in place... of course, companies have to continuously make improvements, but i think ultimately, being successful will always bring criticism, deserved or not...
That's why we have something called substitution and innovation. Price is not simply pushed down by retailer's squeeze, it's largely driven by aggregrated productivity increase and new and innovative alternatives that provide similar or better features with lower costs.
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