Wal Mart's Price Reducing Tactics Essay

989 words - 4 pages

Price reducing tactics
Wal-Mart is well-known for its extremely low prices offers to its customers, not only in America, but around the world; now, over the last couple of decades, consumers are starting to realized how and why Wal-Mart can offer such low prices on its products: at the cost of its employees. For example, a 15 ounce box of Kellogg’s frosted flakes is advertised on sale for $3.49 on Jewel-Osco’s website for Park Ridge, IL, while that same box of 15 ounces of Kellogg’s frosted flakes cereal is offered on Wal-Mart’s website for Park Ridge, IL for $2.98 (jewelosco.com, walmart.com).Wal-Mart is able to offer able to offer extremely reduced prices on its products, because “much of the labor that goes into its products is that of foreigners…who get paid about 12 cents an hour”, reducing Wal-Mart’s overhead costs on the products significantly (2013, Kinsley, p.13). Another tactics Wal-Mart uses to greatly reduce its overhead costs is by paying its employees minimum wage. The federal minimum wage in the United States is $7.25, while in the state of Illinois the minimum wage is set at $8.25 per hour (dol.gov), which amounts to an annual salary of $16,500, assuming the employee is full-time and worked 50 weeks out of the year. According to Massachusetts Institute of Technology, a single adult living in Cook County, Illinois, needs to make a minimum of $10.48 per hour, working as a full-time employee, for 50 weeks out of the year, in order to be at the living wage for Cook County, Illinois (livingwage.mit.edu.). Wal-Mart employees living in Cook County, that have an annual earnings of $16,500 (IL minimum wage), are making less than the living wage, or the standard cost of living in Cook County, IL which amounts to $20,290 annually to resident in Cook County, IL. The living wage for expenses for Cook County, IL are shown below in Figure 1.1:
Monthly Expenses 1 Adult 1 Adult, 1 Child 2 Adults 2 Adults, 1 Child 2 Adults, 2 Children
Food $242 $357 $444 $553 $713
Child Care $0 $550 $0 $0 $0
Medical $145 $419 $298 $410 $383
Housing $790 $1,015 $903 $1,015 $1,015
Transportation $306 $595 $595 $686 $736
Other $83 $183 $139 $174 $196
Required monthly income after taxes $1,566 $3,119 $2,379 $2,838 $3,043
Required annual income after taxes $18,792 $37,428 $28,548 $34,056 $36,516
Annual taxes $2,998 $5,961 $4,561 $5,429 $5,812
Required annual income before taxes $21,790 $43,389 $33,109 $39,485 $42,328
(Figure 1.1) (livingwage.mit.edu)

According to Michael Kinsley’s article in The New Republic, “the average wage of a Wal-Mart ‘associate’ is $8.81 an hour. A raise to $12.50 would be 41 percent…a wage of $12.50 an hour would be $25,000 a year—just a hair above the poverty line (2013, p.13). A wage increase to at...

Find Another Essay On Wal-Mart's Price Reducing Tactics

Wal-Mart Case Study

6292 words - 25 pages production and employment in the U.S.Despite the positive public image it portrays, Wal-Mart's size and growth have also allowed it to force other stores out of business, often causing a disintegration of communities and ultimately reducing consumer choices. One question this case study considers is whether Wal-Mart has lived up to its image as an American success story.Although focused on Wal-Mart, this case study is more than a study of one

Walmart Valuation Analysis

2014 words - 8 pages and convenient store market. Wal-Mart has increased competition through these other outlets which gives consumer more means to purchase goods. Lastly, competitors are continuously attempting to imitate Wal-Mart's technology, logistics, and cost reducing mechanisms. The resources that Wal-Mart possesses are heavily desired by its competitors who will try to apply them to their own operations.Opportunities Wal-Mart's biggest risk, expanding into

Wal-Mart’s Strategic Research Project

655 words - 3 pages are reducing manufacturing costs, which can be an opportunity for a new company to compete in the retail industry because Wal-Mart's customers seek low prices.Power of suppliers, buyers, and Threat of substituting existing productWal-Mart's suppliers must maintain low cost manufacturing practices by substituting products that they use to package and produce their goods, which helps to meet Wal-Mart's pricing requirements that is dictated by the

Wal-Mart Stores Case Study (competitve advantages, sustainable, transferable?)

565 words - 2 pages Wal-Mart is a lowest Price leader and they have a competitive advantage in pricing, distribution center, and store locations. Wal-Mart keeps its promise of everyday low prices, by having a smooth business cycle maintained by unbeatable distribution center supported by trucking networks, and excellent store locations. Wal-Mart maintains its slogan of "Everyday low prices", by keeping its merchandise's prices low. Through my analogy, Wal-Mart has

Wal-Mart: is it the source of all evil in America?

601 words - 2 pages Based on the reading that I have done, my position on Wal-Mart is that the benefits to Wal-Mart's consumers outweigh the negative effects of Wal-Mart's business practices. I believe this for several reasons, which I will explain.One reason for my position is because Wal-Mart can offer lower prices than any other major retail store in the world. They can do this because of the demands on their suppliers. Wal-Mart will accept nothing but the

Bohhh

3893 words - 16 pages environment reveals that competition among existing firms in the industry, specifically price competition, is the most critical driving force of the industry. The key success factors include low price, wide product range and convenient location, and fast response to market demand. Wal-Mart's strategy of being a leader in reducing cost is aligned with the condition of the external environment that it is in, and cost efficiency is embedded in its

Wal-Mart: Good or Bad?

1363 words - 5 pages reflection of employee satisfaction, Hicks study refutes the idea that Wal-Mart suppresses its employees. In actuality, Wal-Mart has long aided in profit-sharing plans and good performance bonuses rewarded to its employees. Recently, Wal-Mart has developed insurance programs aimed at reducing costs for its employees allowing for more employees being insured.Wal-Mart Taking Advantage of Impoverished NationsCritics contend that Wal-Mart's

Wal-mart & Wal-mart Grocery Financial Analysis

6457 words - 26 pages price lower than the traditional standard, and strengthening its brand in countries which may not already be familiar with what the Wal-Mart brand stands for and exemplifies. Wal-Mart's international strategies do not demonstrate sensitivity for cultures or people who may be hurt by the company's presence and this will cause problems for Wal-Mart in the near future.Problems in Situational AnalysisWal-Mart must contend with a number of problems

Walmart Case Study

584 words - 2 pages way to explain this concept, competitive advantage is the way which a company manages to add more distinct value to their products, sustain its customers and stay highly profitable. Wal-Mart has achieved sustainable competitive advantage for a long period of time in the retail sector. In 2009, Wal-Mart was ranked number one in the Fortune 500 Companies while one of its competitors, Target, ranked 30th. Many would agree that Wal-Mart's competitive

Walmart Business Analysis

2254 words - 9 pages at its avowed ever lower price. "Wal-Mart's aggressive adoption of information technology to improve logistics and back-office efficiency has also been a major driver of productivity," (Business Week, November 2005). Each Wal-Mart store is electronically connected via a secure private network to Wal-Mart headquarters in Bentonville, Arkansas. "They are able to track sales volume of each individual item rung up on cash registers at each store and

Wal-Mart Business Analysis

1518 words - 6 pages of the game at Wal-Mart is identifying consumer buying trends better than the competition and then having a buying and pricing strategy for every situation to take advantage of those ever changing trends. Wal-Mart is in the business of being the smartest buyer in the region, nation, and world - so it can be the most profitable seller at its avowed ever lower price. "Wal-Mart's aggressive adoption of information technology to improve logistics and

Similar Essays

Control Mechanisms Wal Mart Team Paper

1210 words - 5 pages understand their needs by purchasing affordable merchandise. As a large organization, Wal-Mart's must protect its products by conducting audits both externally and internally; to ensure the company is audit compliant. Control mechanisms are a contribution to meet strategic goals set by the company. Wal-Mart's successful tactics have consistently proven by the use of control mechanisms and its innovation to meet consumer and employee needs.Reference

Walmart De Mexico Essay

1457 words - 6 pages , helped not only Wal-Mart but also its competitors, like Comerci. However Wal-Mart used the advantages of NAFTA better than anyone else. Rather than pocketing the differences the lower tariffs made, Wal-Mart reduced its prices. In 1999, it closed one of its Supercenters for a day to discount up to 6,000 items by 14 percent. Comerci and others have combated Wal-Mart's tactics by lowering their own prices, but on many items, they can't get the prices as

Wal Mart Company Overview Essay

1630 words - 7 pages happen. Wal-Mart landed in Europe, causing many retailers to merge in order to survive.                          Questions      1.     Describe Wal-Mart’s global strategy? What tactics has it used to become a major global retailer? Wal-Mart's success is mainly based on its

This Case Study Is Based Upon The Case Article By Peter A. Stanwick And Sarah D. Stanwick Titled; ‘Wal Mart: But We Do Give Them A 10 Percent Employee Discount’, In Which Addresses The Ethical Issues...

1472 words - 6 pages than 16,000 violations of "workers not taking their required breaks and more than 15,000 violations for workers not having any time off to have a meal," (p. 418). When the consumers are pressuring Wal-Mart for lower prices, the company looks for them in unethical ways, including not enforcing the company's code of conduct with Wal-Mart's suppliers. The company would prefer the lowest price it can negotiate, even at the expense of workers in