Walmart: The High Cost of Low Prices
The movie titled “Waltmart: The High Cost of Low Prices” strives to show that the Wal-Mart’s strategy, mission and executives as being unsafe, inhumane and unfair. It focuses on a number of issues starting with ways Walmart destroys the town (Greenwald et al., 2012). In the documentary, there is portrayed a family-owned business that has been vibrant and active for many years before it becomes crushed by the Walmart (Greenwald et al., 2012). It also shows how workers are harshly treated, and they cannot simply afford to pay the family medical bills with Walmart’s insurance while Walmart encourages people to use the government program. However, Walmart’s low price strategy has been detrimental to other firms.
The Downside of Walmart’s Low-Cost Strategy
Walmart’s low-cost strategies have been criticized for hurting the US sales and labor market. There have been claims from the employee that the Walmart’s business strategy has been worsening the business conditions within the company (Spotts, 2012). Walmart’s single-minded focus on cutting the cost has led to pervasive understaffing. Understaffing combined with computerized management initiatives, imposed by Walmart have resulted in development of long lines at the register resulting in restocking lags. As a result, the consumer shopping experience has deteriorated an aspect that has translated to a sales reduction further increasing the pressure on management to cut the costs (McDonald, 2015).
The payroll cut and understaffing are a result of the company’s policies that have left many associates disappointed and overworked, and unable to finish assigned tasks on time also led to poor customer services. Under the strategy, Walmart paid its employees’ wages and salaries that are 17 percent below the average wages of similarly sized grocery retailers (Spotts, 2012). As a result, this decrease in wages and salaries has suppressed the wages for other employees working in the nearby retail businesses. Furthermore, with the economic struggles, a change of business strategy by Walmart has had outsized effects on the financial situations of millions of the American citizen (Spotts, 2012).
Walmart low prices strategy has been found to cause an increase in unemployment levels in USA, particularly in the manufacturing sector. By 2011, more than 7 million manufacturing jobs have been lost since 1980 (McDonald, 2015). Although the report acknowledges that variety of complex factors have contributed to the loss of jobs, Walmart has played one of the most significant roles to the loss. Walmart pays its employees low wages since the bulk of its products are sourced from foreign factories, where labor and raw materials are cheap. As a result, this has posed a huge problem for the American companies whose products it sells (McDonald, 2015). For instance, Master Lock and Levi’s jeans have been pressured to shut down their factories located in USA in order to meet the Walmart‘s company demand for low prices product, an aspect that has led to loss of many jobs.
For Walmart to solve the issues affecting its productivity and reputation, the company needs to turn its competitive strengths into sustainable competitive advantages in order to maintain a strong foothold in the retail market.
· Walmart will be required to start paying its employing better wages and reduce the understaffing problem. As a result, it will create an upward pressure on the employees’ wages in the retail and other service sectors jobs, thus providing a boost to the consumer demand and economic growth.
· Although it important to remain persistent in driving cost down, it is recommendable for Walmart to pursue such initiative without sacrificing its human resources. It needs to offer competitive salary and a proper working environment in order to increase its productivity, morale and reduction in employee’s turnover rates.
· Since more than 70 percent of Walmart commodities comes from foreign factories, Walmart needs to mandates a 5 percent suppliers price increase for standardized product in order to support both international and domestic competition through discouraging low wages in factories where products are manufactured.
Greenwald, R., Gilliam, J., Smith, D., Borum, C., Candaele, K., Dantas, L., Feeley, S., Retail Project. (2005). Wal*Mart: The high cost of low price. New York: Retail Project L.L.C.
McDonald, A. (2015). Making Change at Walmart » Walmart’s Low Cost Strategies Hurting U.S. Sales, Long-Term Revenue Growth. Makingchangeatwalmart.org. http://makingchangeatwalmart.org/2011/10/11/high-price-of-low-cost-press-release/
Spotts, G. (2012). Wal-mart: The high cost of low price. New York: Disinformation.