Wal-Mart — Cont’d

25 August 2006 at 1:19 pm Leave a comment

| Nicolai Foss |

My co-blogger has recently drawn attention to how Wal-Mart contributes to reducing global poverty. On my recent visit to Atlanta, Georgia, he also arranged a trip to Alabama that in addition to a visit to the Ludwig von Mises Institute was also supposed to include a touristic visit to a Super Wal-Mart, no less (I shall not comment on why the latter visit never materialized, but Peter’s knowledge of the Georgia and Alabama roads may have played a role here).

Apropos of Wal-Mart, the latest issue of the Academy of Management Perspectives  (formerly the Academy of Management Executive) features an excerpt from Charles Fishman’s The Wal-Mart Effect: How the World’s Most Powerful Company Really Works — and How It Is Transforming the American Economy.  R. Edward Freeman contributes a commentary which predictably concludes that Wal-Mart “… can’t do much right, simply because it is trying to tell its story in the narrow economic mode” (p.40), and therefore sacrifices a number of relevant stakeholder interests. 

A different perspective is supplied in a commentary by Pankaj Ghemawat (see also this modified Opinion piece from NY Times):

Fishman estimates the savings to consumers associated with Wal-Mart’s lower prices … to be at least USD 30 billion per year on groceries alone, and up to USD 150 billion with aggressive estimation of an accounting for the effects of Wal-Mart’s low prices on its competitors pricing structures. In terms of costs, Fishman focuses on Wal-Mart’s employment patterns and practices, and discusses at some length a study estimating that while in the process of creating 125,000 new jobs in the US in 2005, Wal-Mart destroyed 127,500 jobs… In fact, these numbers don’t add up to a close call: they imply customer savings ranging from USD 12 million to USD 60 million for each lost job (on a net basis), depending on whether one works with Fishman’s aggressive or conservative estimate of total customer savings.  … Similar conclusions apply to most other attempts to total up up the costs that Wal-mart imposes on society. Yes, those costs are hard to estimate precisely, as Fishman emphasizes; but we can say conclusively that those costs are much smaller than their associated benefits. In other words, we can (and should) acknowledge that Wal-Mart expands the size of the economic pie available to society.

Entry filed under: - Foss -, Myths and Realities, Recommended Reading.

Dissing Prahalad Readings on Structural Equations Modeling

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
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