Term Paper: Economics Growth the Retailer Sector

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[. . .] As mentioned above, the swiftness with which the Bush administration will solve international problems or the depth of economic reforms implemented by the Kerry administration will prove paramount for the evolution of this indicator.

As for Wal-Mart, it is advisable that they have a much more prudent approach toward expenditure, combined with measures to strengthen revenues obtained from current customers. The period ahead might be one of carefully prepared plans to obtain as much profit as possible under the existing conditions, in parallel with cut-offs in various areas of the business.

Unemployment and Wage Rate Wal-Mart's employment policy is questionable. Obviously, the company is trying to produce and sell as much as possible with labor costs as low as possible. This has made managers to take the decision to move some of the organization's operations overseas, in countries such as China, where wages are significantly lower. However, that policy has its downturns. American unions are constantly pushing in order to obtain a more protective attitude toward workers, and are sometimes staging strikes or are applying various methods to attract the media's attention to the issue, as some press articles report.

For instance, in November 2002, Hugh R. Morely from Washington's Knight Ridder Tribune Business News reported that "More than 200 blue-jacketed union members demonstrated outside the Saddle Brook branch of the world's largest retailer Thursday, chanting "Hey, hey, ho, ho, Wal-Mart's got to go!" In a sweeping, national effort to unionize the company.

Bearing placards that said, "Wal-Mart is a lousy neighbor," the picket was part of a day of action Thursday by the United Food and Commercial Workers International Union aimed at breaking the union- free status that the Bentonville, Ark., behemoth has enjoyed since it was conceived by Sam Walton four decades ago.

The union demonstrated at about 40 locations across the nation, including outside New Jersey stores in Mays Landing and Mount Holly.

Although the main target was Wal-Mart's treatment of its employees, union officials sought to broaden the attack, saying the retail giant undermines small businesses, aggressively opposes union activity and harms U.S. workers by manufacturing goods at low-wage sweatshops overseas.

We're just simply sending a message to the public and to the people that Wal-Mart is not a good neighbor," said Harvey Whilley, president of the union's 1262 local in Clifton."

This view of the problem didn't obviously coincide with that of the company's officials, who "say their ranks remain without unions for a simple reason: employees are so happy they don't need a union.

We treat our people very well," said Bill Wertz, the company's spokesman. "In the very beginning, Sam Walton said, 'Only an unhappy associate would be interested in talking with a union."

UFCW national officials are seeking to promote their campaign by citing a litany of alleged ills committed by the company against workers. The union allegations include charges that Wal-Mart pays below living-wage paychecks with no medical benefits, forces employees to work without payment, and intimidates and fires employees who try to organize themselves."

Unfortunately for the company, the unions filed legal claims against Wal-Mart, accusing the organization of trying to stop unionizing efforts. The people who represent the workers are obviously unhappy: "We hope to shine a light on what Wal-Mart really is," said Richard Whelan, an executive assistant to the director of Local 464a in Little Falls. "They are a big, big employer, their success is built on the backs of the people that work for them."

Obviously, "Wal-Mart, however, denies the claims of illegal actions, saying they are a desperate smear campaign to solicit employees in the face of years of failed efforts to unionize the company. It has 1.26 million employees and 4,600 stores, of which 23 are in New Jersey."

Wal-Mart is one of the least unionized companies in the country, in spite of its size, or so the article tries to accredit the idea. The conclusion is that wages are low and that can be traced to the lack of organization among workers:" In New Jersey, almost every major supermarket chain is union organized, including Pathmark, ShopRite, and Stop & Shop. Whelan said that Wal-Mart pays $2 or $3 below the wages of unionized workers, which average between $8 and $9 an hour for the lowest paid part-time workers and $14 to $15 at the mid-level. Wal-Mart declined to discuss exact wage rates, except to say that they are competitive and always above minimum wage."

Wal-Mart's wage policy is not surprising and fits with the company's approach toward unemployment. As long as labor cost are lower abroad, the decision to use overseas labor and to pay very low wages to American workers is very sound, although not so ethical, or even legal, considering that the government is actively involved in the protection of local workers, by imposing protectionist schemes. Wal-Mart may have to change this approach, since it seems that it bring trouble, although the currently unstable economic situation shall also impose measures to reduce costs.

As for the next eighteen months, the thing that will probably happen with Wal-Mart's labor policy is that it will remain unchanged. Wages will continue to be very low, and employment will rise even more. These are, unfortunately, solutions that Wal-Mart management shall have to adopt, in order to maintain and increase the current profitability ratios.

Vendor Performance Wal-Mart has an active attitude toward the improvement of vendor performance, as the following statements, made by Wal-Mart official Tim Hale prove. This topic was discussed by panel at IQ '97, featuring representatives from three retailers and three manufacturers. (Tim Hale, systems analyst, Wal-Mart Stores; Mark Swanson, vendor performance group leader, Target; Lisa Lichtenberg, vp, merchandising, Federated Department Stores; Marsha Parr, corporate vp, Haggar Clothing; Caren Kaegebein, senior systems analyst, Wrangler Inc.; and John Murphy, manager of sales systems, Playtex Apparel.):

Wal-Mart's Hale noted that the retailer generates and processes all POS data in-house. "There is a fundamental disconnect when selling data to a third party who is repackaging it for your consumption. There's not enough detail and it's not timely," he said....Tim Hale of Wal-Mart said that all EDI processes and documents bring specific business benefits, including lead time reductions, lower labor costs, improved match rate of invoices and more timely payment, which can be quantified to measure ROI....Hale addressed vendors, saying, "You've got to do it better than we can. If you know about your product movement better than we do, that's fine, but it's got to be a certain type of product under certain circumstances...Security is a small issue; timing is a larger issue," said Wal-Mart's Hale, noting that EDI transaction sets are standardized through VICS, compared to the wide open terrain of the Internet, which has no protocols. "

Stock Prices Wal-Mart Stocks will follow the trend of the company's sales and profits. Since the forecast for the following period does not look so good, analysts expect that the Wal-Mart stocks shall be faced with value decreases. This may bring some opportunities for speculators who might buy shares in order to sell them later, at a higher price. If the economic situation improves, stock prices might go up suddenly. Elections in November and Christmas sales shall have a definite impact on prices. However, prudent investors may wish to avoid Wal-Mart, at least for the time being.

GDP The relation between modifications of the GDP, inflation, growth and the evolution of Wal-Mart is excellently captured by Charles Stein in his "Higher energy prices depress overall economy " of the Knight Ridder Tribune Business News. Here is an abstract of the article: "Democratic presidential nominee John F. Kerry has talked about gasoline prices, but he has not made the issue a top priority in his campaign thus far. In his acceptance speech in Boston, Kerry devoted one sentence to energy issues. In other appearances he said he would spend more money on alternative energy research and provide tax credits to companies making fuel-efficient cars. "He's been talking about the long-term," said Thorsten Fischer, an energy specialist at Economy.com. "He isn't addressing the current problem at all."

High energy prices have a direct effect on economic output, increasing costs across the board. "Nariman Behravesh, chief economist for Global Insight in Lexington, says a $10 increase in the price of a barrel of oil roughly shaves a half a percentage point off the growth in the gross domestic product. In other words, if the economy grew 4% a year with $30 oil, it would grow 3.5% with $40 oil. According to Behravesh, a year of $40 oil would cost the U.S. economy about 500,000 jobs. It would also boost inflation about half a percentage point. Consumer prices have been rising at a 3.2% clip this year."

The way Wal-Mart is affected by these changes is presented in the following way:

Expensive energy does most of its damage by depressing consumer spending. Wal-Mart offers a case… [END OF PREVIEW]

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Economics Growth the Retailer Sector.  (2004, October 10).  Retrieved July 23, 2019, from https://www.essaytown.com/subjects/paper/economics-growth-retailer-sector/7536362

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