[connectthedots]

Wal-Mart is a very shrewd negotiator. They have been the indirect cause of putting several companies into bankruptcy because those companies start doing business with Wal-mart and Walmart is a very demanding customer. In may instances, companies sell to Wal-Mart at below their average costs, but a bit more than the marginal costs for a certain volume.

Wal-mart comes back an demands more product at the same low prices. There comes a point when the supplier is not only selling at below average costs, but below the average marginal costs.

At some point, it catches up and companies get sucked into it at a point where they think they can no longer turn away Walmart business. Wal-Mart is very good at threatening to tale away all the business if you do not supply as much as they want at the low price they demand.

There have been a few companies who understand how this works and have simply told Wal-Mart the terms under which they will sell to Wal-Mart. Those companies understand that no business is much better than bad business.

Wal-Mart is doing the same thing to China.