Walmart’s Trade Barriers
In any business, it is essential to make profits and gain more market power. Most of the global companies have barriers that keep them from growing and making more profits. The restrictions may be internal or external. Internal barriers may be controlled by changing tha management of the organization to suit a particular order, but external conditions are harder to control. The organization, therefore, has to adapt to its presence by changing their routine practices. Wallmart is one of the most renowned global enterprises that has shops in many places all over the globe. It grew significantly in the early 2000s. Many people prefer it due to their ability to offer a large number of customer services in one shop. They are also known to offer goods at a relatively lower price. This paper is an analysis of the barriers that Wallmart faces taking into consideration the current market, competition, technological advances, among others.
EXECUTIVE SUMMARY
Wallmart is a multinational enterprise. It deals with hypermarkets, grocery stores, and discount stores. It was started in 1962 and has grown over time. It has 11503 stores in 27 countries. It has different operational names depending on ten locations that it is found in. It has a lot of market power, especially in the United States, due to its large sales. As per the research in 2019, Walmart is the biggest company in terms of revenue, with a net worth of $514.405 billion. It has a very big workforce to run the chain of markets, which makes it a force to reckon within the current market. It has so much power that in the early 2000s, it changed the normal operation strategies between the manufacturers of goods and retail shops. Before 2000, the manufacturers were the core determinants of the number of goods to be produced and the time of delivery that they used. In those times, manufacturers had more market power and could use it to manipulate the market to their gain. Wallmart, however, changed the terms of engagement by becoming customers favorite and overriding all the previous competition in the market. It used the strategy of cost reduction and discounts. It bought goods from the manufactures that sold them at a lower price and sold them at a relatively lower price in the retail stores. Though the profit per product reduced, there was a general increase in the overall profit since many people purchased the products. The manufacturers who supplied the goods to Wallmart, such as Rubbermaid, reaped significant profits. The chain of markets kept growing, and more manufacturers intended to do business with the rapidly growing company. Wallmart took the chance to change the terms of engagement such that it has begun to make the orders that it needed to be delivered to them. It created a pull system of product manufacturing. There have, however, been problems due to the increase in power. One of them is the ethical claim that it has become a bully in the market. There have also been significant changes in technology in the market, leading to an increase in competition and the need to adapt to new market conditions. The issues will be addressed below.
ETHICAL ISSUES
Ethics is the accepted mode of behavior, depending on the community that one is in. In the case of a global business, organizations must have a specified code of conduct. In the case of large companies such as Walmart and Apple, any measure they take has significant effects on Large populations. If the effects are negative to the shareholders in the business, it may be termed as unethical even when there is no legal implication of the act. One such act was the reduction in sales for Rubbermaid in the early 2000s. It led to the collapse and change in ownership of the plastic manufacturer. Business ethics state that any organization should always help other organizations to grow. The only exception of this rue is when there is healthy competition in the market. In that case, any business that loses the competition has no ethical complaint against the competitor.
Rubbermaid was one of the companies that gained popularity from investing with Wallmart. The pull system makes the company look like a bully in the market since the manufacturers have to follow the needs of the organization. Due to the market power that the organization has, it can switch the positions of the producers drastically. Its most significant buyer and retailer of their products were Wallmart. It bought the goods at a stipulated price that was lower than the other producers. Rubbermaid was, however, straining with the production costs from the beginning of their trade with Wallmart. When it got famous for the production of high-quality goods, its demand for products rose significantly, and so did the production costs on their side. It was hard to maintain the initial low price that the organization had earlier. Wallmart, however, refused to buy the products within the new price range. Instead, it dropped some of the products that Rubbermaid produced, leading to the failure of the organization. By losing a buyer such as Wallmart, a manufacturer loses significant power and sales, leading to its collapse. It also makes sure that the suppliers of their goods are at the lowest price level reducing their profits significantly. It makes Walmart appear as if it is the core decider of what the manufacturers must do. This was one of the drawbacks that Rubbermaid suffered due to the power of Wallmart.
ECONOMIC BARRIERS
Economic barriers have many forms. One of the most significant ones is the competition. The current market trends are changing. What the people preferred some time back is not similar to the current needs of the people. Te grocery and chain stores market is open, and there are no barriers to entry. Some companies come up every day and are willing to start at lower prices than Walmart. They may also offer higher discounts on goods compared to the levels that Wallmart can offer. The competition has led to the need to find better strategies to keep the customers it has. One of the biggest competitors of Wallmart is Tesco. It offers similar products to its clients and has been gaining universal recognition over the past ten years. The increase in suppliers means that the demand of products decreases.
TECHNOLOGICAL BARRIERS
Every day marks a new invention of new technological devices. There has also been a significant leap in the rise of online shopping and nine platforms allover the world. Wallmart has to adapt to the new changes in the market if it is to remain afloat. The prices f creating websites in the different states are expensive, and it requires the introduction of new branches of management to ensure that the online platforms are fully functional. The expenses pose a significant threat in the development of Wallmart, considering that it sells its goods at a lower price compared to the other competitors. The initial capital reduces profits for the organization.
POLITICAL BARRIERS
Politics are an aspect of all nations. Political leaders make the rules that govern the state. Sometimes, the nations may pass laws that are unfavorable to businesses, especially those that are from the outside nations. Over the past ten years, Walmart has lost a lot of market power in china. Nations intend to develop their local markets by banning any outside suppliers of similar goods. The first means to accomplish this is the increase in import duty. The organizations that are international such as Walmart, therefore, have to either buy goods from the local suppliers instead of importing their own. There are also instances when governments impose high taxes on businesses that are not local. The effect is the reduction of profits and limitation f growth. Some nations, such as China, also have a different perspective of branding. Instead of going for goods from well-developed brands that are more expensive, Chinese people believe in the cheaper goods. The result is reduced sales and market power for Wallmart.
SOCIAL CULTURAL BARRIERS
Walmart has tried to expand its activity to countries such as India. There have been issues affecting the market in those states. People in those nations prefer to buy goods that are owned by local investors. The small retail stores have been a major competitor to the Walmart company. They have reduced the sales and increased competition to outside brands and reduce the level of development.
RECOMMENDATIONS
Wallmart has to ensure that they make partners that are consistent and well established. It may help in avoiding the notion that t is a bully to the market. They may also o[erate in terms of contracts that have a limited duration and specified time intervals of operation. If, for example, the Rubbermaid incident may be reduced. Besides that, the organization may prefer to make partners instead of investing as outside companies. It may use mergers to invest in nations such as India. It will not only promote the local companies but will also increase the operation scope of Walmart. Besides that, they may choose not to invest in nations that have puny political policies. The high power of the market power of Wallmart may lead to the dropping of such policies and allow them a chance to invest in the states such as China.