Wal-Mart — Cont’d | Organizations and Markets

Wal-Mart — Cont’d

25 August 2006 at 1:19 pm Nicolai Foss 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.