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Thursday, December 29, 2005

The reality of a Wal-Mart economy!

So, you think you're doing the economy good every time you shop at Wal-Mart? Well, think again!

As you probably already know, Wal-Mart is a multi-billion dollar retail giant, who's growth has surpassed many industries and is still one of the biggest and fastest growing business on the North American continent. There're many legitimate reasons behind its amazing growth. Some of which definitely are worth learning for the young entrepreneurs. But, what lurks behind is something much more complex; these are Wal-Mart's pricing and partnership strategy. I've summarized some of the cause and effects of these strategies, and how they inevitably affects our economy.

Wal-Mart's pricing strategy is one of a kind. Together with its vast and high-tech inventory tracking system, it is one of the deadliest of all the competitive advantages. By pricing at below cost, it can drive many nearby retail businesses out of service. However, in order to target at such a low price Wal-Mart must need a supplier who's willing to supply at lower than below cost. How does a supplier do this? It does this by outsourcing the labor to many Third-world country or in-the-development country, such as China and many Southeast Asian countries.

What does this done to the local and national economy? By outsourcing to other parts of the world, we lose ample employment opportunities for Canadians and sometimes even copy-rights, patents infringement of various kinds in underdeveloped countries (due to the outsourcing of patents for mass production). So as you may not have noticed, by lowering the price and outsourcing, it indirectly weakens the Canadian economy. We may not see it right now, but I guarantee you that we'll see it in the near future. This trend of unemployment has already happened across the US in many sectors, including high-end consumer-electronics manufacturering jobs.

Wal-Mart's partnership strategy also tides together with its pricing strategy.

By outsourcing to China or other Third-World countries, there exists a transparent partnership between Wal-Mart and the Southeast Asian countries. To quench the thirst of these underdeveloped or nearly developed countries, we exports out raw materials from North America to the Asian continent and, in return, we import manufactured goods from the same people we export to. Usually, the raw materials are less expensive than finished goods. This price difference ultimately leads to a large trade-deficit. The trade-deficit then influence our economy flow and the daily market trades. All of these setbacks are evident and has been demonstrated from our U.S. neighbor down south.

Ultimately, by choosing Wal-Mart and buying at Wal-Mart, we are only strangling ourselves by outsourcing jobs and creating trade deficits.

If you wish to learn more, I recommend you read and watch PBS's FRONTLINE documentary, Is Wal-Mart good for America?

Here's also a movie on the high cost of low price. I believe it's worth a look.

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