By: Team A
ECONOMICS FOR BUSINESS I - ECO/360
June 13, 2005
Wal-Mart has grown to be one of the biggest corporations in the world, employing 1.3 million workers worldwide in 2003 in over 4,300 stores with sales around $256 billion. They sell everything from clothing, tools, toys, electronic goods, appliances and groceries. A major force behind its success was the vision, enterprise and daring of its founder, Sam Walton. He was the one who started the "super center" retail event. He also implemented a supply chain strategy that required stores to reorder stocks only as needed instead of keeping huge amounts of merchandise in warehouses. Mr. Walton also …show more content…
ANALYSIS OF THE COST STRUCTURE OF THE WAL-MART
There are many reasons account for Wal-Mart's financial success and growth. While its "everyday low prices" shopper-centric business model makes Wal-Mart an attractive place to shop, it has a troubled history as an employer. (Internet)
Wall Street has seen Wal-Mart's low-wage strategy as a plus, viewing the company as an excellent example of a capitalist entrepreneur who squeezes productivity from its employees while paying them as little as it can get away with. In fact, this feature has been singled out by prominent Wall Street analysts in recommending the company's stock.
While there is extensive agreement that Wal-Mart is a low-paying employer, there is disagreement about its exact cost structure. To put this issue into perspective, it is useful to fall back on a distinction made by labor economists between labor rates and labor costs. Labor rates consist of the wages, salaries and benefits that are actually paid to employees for their services. Viewed from this perspective, Wal-Mart truly is a low-wage-rate employer. One estimate places Wal-Mart's average wage at $8.23 per hour, yielding an annual income of $13,861 which is below the