Is Wal-Mart Good for America?

Introduction

The question as to whether Wal-Mart is good for America has generated a heated debate in America and abroad. In this case, each proponent and opponent states their argument to support their positions. However, the importance and contribution of Wal-Mart to the America economy cannot be underestimated but given the due respect it commands. Wal-Mart has not only contributed to the development of the America economy but also set standard on the operation of retail distribution models. According to Hart,(76)

“Traditional retail distribution models, manufacturers set the terms of sale for their products — prices, schedules, quantities, and displays — while retailers accepted these dictates and managed their inventories as best as possible. Wal-Mart alone changed this dynamic away from the old “push” system and toward a “pull” system in which the retailer tells the manufacturer what to produce and how much”.

The news behind Wal-Mart unprecedented growth is a great motivation and success story about a company which began on a humble note and has climb to the top. Frank, (31) Illustrates that:

The “pull” has even lured major multinational manufacturers, such as Hoover, Kodak, Timex and Kraft, to set up offices in Bentonville, near the international headquarters of Wal-Mart. As portrayed on Frontline, Wal-Mart buyers, armed with an overwhelming array of inventory histories and sales tracking data, tell the representatives of these and other corporations how many watches or boxes of macaroni they will buy. The ambassadors from “Vendorville,” as the rows of corporate offices next to Wal-Mart headquarters have come to be known, have little room to negotiate. Because of its inventory system’s unmatched efficiency and accuracy, Wal-Mart knows exactly what to buy and exactly how much to pay for it.

The importance of WAL-Mart to America

Wal-Mart contributes to the economic grow and development of US through provision of employment as well as giving the government revenue through tax. However, for faster growth and development, this multinational corporation has been widely out sourcing its supply chain management from other countries such as China.

(Gottfredson & Puryear, 2005, p.17).Harland & Knight, (2005, p. 43) further support this argument by illustrating that:

Outsourcing may reduce operation costs and free up asset. In the early 1980s, companies started outsourcing non-core activities to suppliers for the purpose of securing specialized expertise and lower costs. Firms have moved their internal manufacturing and operations to lower cost countries to seek competitive advantage. Reasons for such outsourcing practices include low cost strategy, proximity to foreign markets and easy access to innovative capabilities. In recent years, outsourcing is associated with attaining firm’s competitive advantages. Through outsourcing, firms can access to external technologies and increase operational flexibility and concentrate more on core business activities and innovative new projects.

Foreign direct investment in the Country

Foreign direct investment (FDI) is the most lucrative form of capital flow in an economy. The MNC such as Wal-Mart in most cases takes a long-term equity position in the domestic country in which they carry out their operations. In this case, They peg their operations mostly on mutual benefits which accrue to both the corporation and the domestic country. In this sense, if the investment does well, both the MNC and domestic country both benefit in a number of ways. The MNC in this case gets profits and the domestic country receives jobs for its population, an expanded tax base, and capital formation.

The role of government in the development of corporations

The role of the state in shaping economic performance of a nation and its relation to modern corporation and bureaucracy has been controversial for decades. Property right theory highlights the role of the state in establishing property rights and offering incentives for entrepreneurs to invest in innovation and productive activity (North 1981).available literature on the role of the state in directing positive economic growth indicates an involvement of the aspect of bureaucratic intervention. Furthermore, these literature points towards discord in the levels of state involvements and specific actions state may undertake towards economic development. In their influential study of the emergence of modern corporations, Berle and Means (127) show, “that the ability to raise equity capital from external sources enabled the modern corporation to achieve unprecedented productivity through massive collectivization in production and intensification of technological innovation”.

The development of multidivisional structures in the 1920s, which Berle and Means (145) describes as “the most significant organizational innovation of the twentieth century,” consolidated the position of the corporation as an organizational form. By the 1960s, the modern diversified corporation emerged as the dominant form of wealth creation in the global economy (Oliver 678). Modern Corporations remain way ahead of other forms of businesses in competitiveness due to their ability to secure large external funding for their operations.

The institutional arrangements that are put in place by the state to secure the rights of property in separating the ownership and control of corporations from shareholder remains the fundamental reason behind strength and rise of corporations. The risk that managers may pursue their own interests at the expense of shareholders and creditors could not be resolved through corporate governance structures internal to the firm (Hart 679).

While literature documented on corporations have illustrated the fact that there is always management problems between the investors and managers in a corporation and thus the resulting to demand for a legal protection of both parties, their have been efforts to create balance between this two parties.

As Berle and Means (278) observed, Corporations are essentially political constructs… [They] derive their profits partly indeed from their own operations, but partly also from their market position and increasingly from techniques resulting from state expenditures of taxpayers’ money…..without its activity, the enterprise, if it could exist at all, would be or would have been compelled to spend money and effort to create position, maintain access to market, and build technical development it currently takes for granted

Wal-Mart Company in my opinion has contributed positively in the development of American economy. In this regard, the question of whether the company is goog for the Americans should find its answers. According to Edelman,(23)

UCSB’s Nelson Lichtenstein borrows a term from Austrian economist Joseph Schumpeter in describing this effect: “creative destruction.” Wal-Mart’s newest outlet will create jobs for Circleville residents, including former Thomson factory employees who may now find work in the new superstore on the outskirts of town, ironically next to the shuttered plant. However, according to several analysts interviewed on Frontline, these new opportunities will not live up to the old manufacturing jobs in terms of wages or benefits. As Lichtenstein puts it, “Wal-Mart has…discovered, with this low-wage model…a sort of new model of world capitalism, really, beginning in America and the rest of the world. And it is destroying, creatively, but nevertheless destroying competitors and, really, other ways of thinking about the way the world works.

Conclusion

The success of many multinational corporations such Wal-Mart has been an integral factor to the growth of American economy. The company has over the years risen to be one of the most efficient and effective multination corporation. The company has got both positive and negative aspect. However, available literature point out to the fact that Wal-Mart is good for Americans.

Work Cited

Edelman, Lauren B. Legal Ambiguity and Symbolic Structures: Organizational Mediation of Civil Rights Laws. American Journal of Sociology 97: 1531-76.1992.

Frank, Thomas. One Market under God: Extreme Capitalism, Market Populism and End of Economic Democracy. Doubleday. 2000.

Hart, Oliver. Corporate Governance: Some Theory and Implications. The Economic Journal 105 (May): 678-689. 1995.

Berle, Adolf A. and Gardiner C. Means. The Modern Corporation & Private Property. News Brunswick and London: Transaction Press. 2005.