Walmart and Globalization

Background

• Walmart's success comes from globalization.
  • Beginning in the late 1970's, Walmart began its search for cheap imports. Yet, its main rivals (JC Penny, Kmart, etc.)started importing their products before Walmart. What gave Walmart the comparative atvantage over the other chain stores was its use of computers. It allowed Walmart to be more organized and more efficent than its competitors. Using computers Walmart knows what product was selling where, how much of it was being produced, where it was avaliable, and then communicated all this information to its suppliers around the world.
  • Walmart's dependance on offshore sourcing continued to increase during the 80's and 90's.
  • Today, Walmart imports more than half of all its non-food products.

• Though imports Walmart is able to offer its garenteed low prices and still increase its profits.

China

• In 2002, Walmart expanded by setting up a global procurement center in South China near all the leading export industries.
• This center is where Walmart decides what they will import and from which companies. Walmart is such a large company that they are able to control, to an extent, the price of goods.
  • "Walmart gets its economic power because it is a gateway to the consumer. The demand for Walmart stores is what provides China and other countries in Asia with their access to the most powerful capitalist economy in the world. - Professor Gereffi, Duke
• Walmart can tell companies where and what to produce and then determine the price because companies that supply for Walmart make money.
• Because they are able to offer goods at a lower price, Chinese manufacterors win out of those in the United States. This makes United States manufacerors uncompetitive in the market; the cost of labor is much less in China.