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= Wal-Mart's Global Supply Chains and Market Forces = Carrie Hecker, Christain Torti, Greg Eng, Jakub Buczek, Jason Nazarian, and Nate Clark


 * How does Wal-Mart reflect and drive changes in the global economy? Specifically, what is Wal-Mart's role in China's metamorphosis into a manufacturing center of the world?**

** Wal-Mart's effect on American stores **
Wal-Mart prides itself on "always low prices" and will do almost anything to achieve the lowest prices. Wal-Mart employee Eric shared that **"60% of the products we sell here are made in China"**. This has created stiff competition for other large discount chains such as Kmart, Sears, and Target, as well as small "mom and pop" shops that just don't have enough customers to stay in business. Customers that are enticed by the low prices often disregard the power they are giving to Wal-Mart by buying from this store. This has created problems for many American stores, and have either forced them to close down, or to start offering services and/or goods that Wal-Mart can't provide. Publix Market, a grocery store chain has been gaining a large customer base solely on the service that Wal-Mart can't provide, customer service. **"Publix has ranked number one out of supermarkets on the American Consumer Satisfaction Index, published by the University of Michigan, since it began 14 years ago, whereas Wal-Mart ranks last."** Wal-Mart's hold on the American consumer creates the need for American stores who want to compete with such a large and well known store, to be unique. This is regarded as bad by some store owners, because ever since Wal-Mart's explosion, their business has been down to the point where many stores have had to close. Although Wal-Mart tells consumers the store is "pro-American"-ma de goods, **"t** **he chain was broadly criticized for being the primary distributor of many goods attracting controversy, including Kathie Lee Gifford's clothing line, Disney's Haitian-made pajamas, child-produced clothing from Bangladesh and sweatshop-produced toys and sports gear from Asia."** Wal-Mart's  access to low wage countries, has enabled it to give consumers the lowest price possible, and that is exactly what drives Wal-Mart: Americans getting hooked on the low prices made available there, but nowhere else. We as American consumers keep demanding low priced foods and goods, so Wal-Mart supplies those low cost goods for us, often by taking advantage of other countries workers in the process. When asked about Wal-Mart, Sharon and Ian Hecker had nothing good to say. **"The store is just too big and overbearing. Towns are doing fine, but when you plant a Wal-Mart in the middle, local businesses are put out of business only because of the extremely low prices at Wal-Mart. It is a shame that this keeps happening, because so many cultural and historical shops are being overpowered by a large chain that sells low quality products."**

Home Depot: $77,349,000,000 Kroger: $70,235,000,000 Target: $63,367,000,000 Sears: $50,703,000 Costco: $72,483,020,000 WAL-MART: $374,000,000,000
 * Yearly sales in 2008** (taken from yahoo finance)

In 2008, Wal-Mart made more money than all five of these large competing companies combined. Costco on average pays $17 dollars an hour Wal-Mart on average pays $11.75 an hour

** Wal-Mart's Statement on Sweatshop Allegations: **
"Wal-Mart strives to do business only with factories run legally and ethically. We continue to commit extensive resources to making the Wal-Mart system one of the very best. We require suppliers to ensure that every factory conforms to local workplace laws and that there is no illegal child labor or forced labor. Wal-Mart also works with independent monitoring firms to randomly inspect these factories to help ensure compliance. In fact, we conduct more than 200 factory inspections each week to ensure these facilities are being run legally and ethically." (PBS). **Wal-Mart says this, but how can they possibly ensure that every one of their workers is being treated fairly and paid well, in addition to creating the cheapest products possible?** There is no possible way to sell cheap products, unless the wages are low as well. Wal-Mart's suppliers do not treat their workers legally or ethically.

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The Wal-Mart effect, as seen in the video above, is as contagious as a virus. Recently Wal-Mart decided to move to India to maximize revenue. Recent studies show that India is projected to have the fastest growing economy in the world, even surpassing China. Due to India's marketing policies the company cannot sell directly in India seeing as they are a foreign company. The stores in India will have a different name, but Wal-Mart will be pulling the strings for the manufacturing and executive decisions. Through an Indian based company Wal-Mart looks to capitalize in the Asian market, but the effect on the 40 million store owners already in India will be devastating. As seen in America, Wal-Mart stores wipe out all competition from smaller 'mom and pop' stores, and the other retail stores can only hope for the best. India is teeming with the smaller stores, from which many Indians make their living; it is still the way most people shop in India. Wal-Mart will most likely become a huge hit in India, as it has in its expansions to other periphery countries such as China and Mexico, but inversely it will damage the work force, adding more unemployment. The move to India may not be just a bad idea. Wal-Mart's branches in the different countries give the United States(or Wal-Mart) a bigger range for sales, and because Wal-Mart will be dealing with all the business and manufacturing the American economy will benefit.

** How has Wal-Mart changed China's economy and infrastructure? **
Due to the fact that Wal-Mart's business model is to buy goods for as cheap as possible and sell them at lower prices than other retailers, they make a strong push for their manufacturers to give them the lowest possible bottom price at any cost. This has caused increased industrialization in many Asian and South American countries for one reason and one reason alone: wages. In countries like America, Germany, England, and other countries with strong governments, protective laws keep workers from being exploited by their bosses; they are paid fair wages, must work reasonable hours under reasonable conditions, and have HR representatives and other people to help mediate problems and fight for the common worker.

In other countries, however, factory standards are lax to the point of nonexistence, or just not enforced because the local government is corrupt or doesn't care. The high demand that American consumers put on factories in periphery countries like China are the reason why workers are treated so poorly. When Wal-Mart asks a factory to manufacture an item for them, that factory cannot deny the request, for that will possibly drive them out of business. Therefore, Wal-Mart essentially runs the factory since it will do anything to keep Wal-Mart buying from them. When Wal-Mart asks for a ridiculous order (ex. a high number of items at an extremely low cost) the factory will comply and force the workers to work exsessive hours, and even beat the workers when they aren't productive enough.

When local resident Piotr Buczek was asked whether Wal-Mart affects his daily life, he answered, "No, I don't shop in or support Wal-Mart." After explaining to him that that doesn't matter, that Wal-Mart is still powerful whether he shops in it or not, and that it controls our global economy in ways he wouldn't believe, he replied with an ever so fascinating, "oh.". 90% of Americans live within 5 miles of a Wal-Mart, and, as read earlier, it is evident that Americans shop there like no where else considering the amount of revenue Wal-Mart takes in. We, the consumers, are the ones keeping Wal-Mart in business, for we are buying the goods, and therefore "voting" in a sense with our dollars. Because of our demand, Wal-Mart puts extreme pressures on global economies, such as in China. Wal-Mart has, in effect, lowered the standards of a factory worker in China, which then translates into a less-stable and poorer economy there.

Furthermore, couldn't Wal-Mart's business plan actually give the factory owners justification for the way they treat their workers? Think about it. Wal-Mart emphasizes the bottom line cost of products //more than anything else//, and will cut down any quality or extra features that exist in a product if it will lower the cost. In America, they pay their workers minimum wage (and about half as much per hour Costco, another large retailer). They'll pay the cheapest amount legally possible, and people will still work for them (largely due to minimum-wage laws that encompass all industries). In China, they aren't forced to pay a certain amount, and people will still work for them for ridiculously low wages because they are struggling just to hold on and survive. The factory owners are essentially applying the Wal-Mart strategy to their environment when they force workers to stand for 14 hours and beat them when they aren't being productive enough. After all, it will contribute to fewer labor costs for them as well as for Wal-Mart.

Deng Xiaopeng, the Chinese president, opened China to Western investment in the late 80's. This resulted in a massive influx of businesses, factories, and personell in China, primarily because of the pressure Wal-Mart puts on manufacturers to get the lowest price. In Shenzhen, a region of China, the Chinese president created a "special economic zone" with no taxes for foreign businesses. The yuan was being devalued at the same time, and the combined effect was felt //immediately.

"Across South China, the government began building roads, ports, and other infrastructure. In 1994, it devalued China's currency, from roughly 5 to 8 yuan to the dollar, further fueling the country's explosive development. China, suddenly the cheapest workshop in Asia, attracted vast capital investment. Millions of migrant workers flooded industrial centers. World-savvy entrepreneurs migrated from Hong Kong and Taiwan, eager for a piece of the action. Many shut down their plants at home in the rush to set up new factories and hire mainland Chinese workers." -Wal-Mart and China: A Joint Venture//

With President Clinton in office, America further opened its trade routes with the People's Republic of China, which only contributed to the "China bug". China, specifically the Shenzhen region, had become the global hotspot for cheap labor, and the physical growth of China's cities mirrored the increasing number of factories producing goods for America.

//"Shenzhen boomed. Growing at 20 percent a year, it became known as China's "Miracle City." In two decades, a fishing village mushroomed into a city of 7 million people, with high rises, miles of factories, and modern electronics headquarters. Here too, Wal-Mart sited its global sourcing headquarters." -Wal-Mart and China: A Joint Venture//

American Trade with China The opening of American trade routes to include China affected more than just China's economy, though. There is a significant before and after effect that can be seen in both China and America. The United State's deficit began to increase at an alarming rate, especially to China. The debt to China increased by approximately $10 billion every month for two years, showing both how interested America was with China, and how successful the Chinese economy was. Wal-Mart, before the 90's and Sam Walton's death, was exclusively a pro-America business; they chose to buy their supplies and goods primarily from American factories. However, with America's embrace of Chinese trade, Wal-Mart essentially did a u-turn, focusing its attention on the low-cost of Chinese labor. Wal-Mart's stock price sky-rocketed from $12 in 1995 to nearly $70 at the turn of the century. That is a 500% increase, most of which due to the Chinese. China has also benefited from American business, as their GDP has increased by over 300% since the 90's. It is clear to see that Wal-Mart and China are very happy to be business partners together, and that they need each other to sustain their growth.

As previously stated, Wal-Mart forces factory owners to move their business overseas to China in order to maintain that "always low prices" slogan, and this practice has a widespread effect on the rest of the world. Core countries, such as those in Europe, have basic laws and regulations for factories and their workers. Periphery countries lack the incentives to instate such rules, and can therefore afford to supply Wal-Mart at such low costs. With the Chinese economy booming, and workers there eager for jobs, Wal-Mart has driven away even the chance of a company in a core nation benefitting from Wal-Mart's partnership.