Posted on 01/01/2006 3:06:28 PM PST by flixxx
The Wal-Mart Model
The American economy continues to surge ahead, though you won't read much about it in mainstream media. Economic growth in the third quarter was 4.1 percent--despite Hurricane Katrina!--the 10th consecutive quarter with growth over 3 percent. Unemployment is 5.0 percent--lower than the average for the 1970s, 1980s, or 1990s. Since April 2003 the economy has created a net 5.1 million new jobs. Core inflation is only 2.1 percent, and gas prices, which surged above $3 a gallon after Katrina, are now down around $2. Productivity growth for the five-year period of 2000-2005 is 3.4 percent, the highest of any five-year period in 50 years.
This is a remarkable performance and owes something surely to the Bush tax cuts and to Alan Greenspan's stewardship at the Federal Reserve. But it also tells us something broader about the American economy. Mainstream media coverage about the economy tends to be full of bad news, especially during Republican administrations, and to focus on economic problems. But over the longer term the story of the American economy is one of success. A quarter century ago many economic commentators said that the era of low-inflation, high-job-creation economic growth was over. In the ensuing 25 years it has come to be the norm.
The negative bias of economic coverage can be seen in stories about the current No. 1 private-sector employer in America, Wal-Mart, and the No. 1 employer back in the 1970s, General Motors. The GM story is genuinely grim: The company is laying off thousands of workers and closing plants and is threatened with bankruptcy. Stories about Wal-Mart tend to focus on allegedly low wages and healthcare benefits, and to say less about the company's continual profitability and the low prices that benefit consumers. These companies are not entirely comparable; they're in different businesses. But some of the differences between them illustrate why the American economy, which seemed to have run out of gas 25 years ago, is now doing so well.
One big difference is this: General Motors' business model was designed for a static economy; Wal-Mart's for a dynamic economy. From the 1930s, GM--as one of only three major automakers--was able to pass along to consumers the high costs imposed by wages, pensions, and health benefits negotiated with the United Auto Workers. When emerging foreign competition started to make life tougher for Detroit executives in the 1970s, they tried to insulate themselves with government tariffs and domestic-content requirements. More recently, they've tried to offload their high healthcare costs onto the government. Wal-Mart, in contrast, started off with many retail competitors and has sought more, by taking on supermarkets. It competes by holding down costs and prices for consumers.
Quick reaction. Wal-Mart has been much more skilled at adapting to market conditions. Its computers keep it instantly apprised of sales, and its distribution system keeps stores stocked with items consumers want. Someone making a 3-ton car cannot adapt so quickly, but even so it still takes GM years to get new models on the market--and often they're not what consumers turn out to want.
Then there are employment costs. Yes, Wal-Mart does not pay high wages or provide healthcare benefits to all employees. But not all workers today want full-time jobs (they may want to be home when kids return from school) or health insurance (many are covered by a spouse's policy or Medicare). And Wal-Mart promotes from within: You can work your way up from the store floor to management ranks. GM and the UAW, in contrast, insist on a sharp line between labor and management, with all employees working full time and getting full benefits. That made sense when almost all workers were men supporting families. But it is a poor fit with a labor market in which many workers are women, teenagers, or retirees seeking extra income.
In retrospect it's not so surprising that 25 years ago, when GM was deemed the prototypical firm, experts were pessimistic about the American economy. They failed to foresee that more nimble firms like Wal-Mart would rise and would supply the amazing resilience that has enabled the American economy to thrive, as Greenspan has observed, even when hit by calamities like September 11 and Katrina.
Karl made Bush make it happen on purpose.
I'd feel like a total fool if I didn't shop at Wal-Mart. The exact same toilet paper costs 50% more at my grocery shop than buying it two doors down at Wal-Mart. That would just be stoopid.
And th eother good point you bring up--at WM, I can buy most everything at once. This should make the enviros happy, not sad!
Nice, but not everyone wants or needs a salesman's help in purchasing a MP3 player.
When I want help, I go to Circuit City or Best Buy.
If I know what I want and just want to pick it up cheap, I go to WM.
Sometimes I go to Circuit City and talk to the salesmen and THEN go to WM and pick up the same product for cheaper! HA!
I agree with letting the market decide.......I don't really care where anyone shops.....I shop for price and convenience.........in fact I'm heading to WalMart in a few minutes.
And no, Target is not a French company.
"So the question is - would the American economy be better off if GM imports all of its cars from China?"
GM makes awful cars, period. They suck beyond belief. Only Chrysler rivals them for poor quality. Nobody but GM is responsible for their impending demise.
Hey GM! Your cars suck! If you don't do something about it right away, you will be gone.
This young black kid (maybe 19 or 20) waits on me. The kid is full of energy. Speaks perfect english to me (old white guy in a suit). We go over to the case with the players and he runs through five or six in my price range -- this many hours, this many songs etc. Twenty bucks more, you get this much more...the kid, absolutely, had the whole sales thing down. It took about five minutes and he's got me enthusiastic about buying the thing -- and I'm not an easy mark.
Long story made marginally shorter -- I bought one for forty bucks over what I intended to spend. Then he writes his name down on a piece of paper, if the kid I'm buying it for wants to return it, see him.
As I'm walking away, he turns to wait on a rapper type guy and his whole speech, body language changes and he's off selling the guy a flat panel TV, running through all the specs and features from memory.
I have no doubt that at some point, someone somewhere is going to recognize this kid's sales talents and give him an opportunity to make a great deal of money.
Try reading the first few chapters of this book:
John F. Lawhon, The Selling Bible
(ISBN 1-57178-007-6)
This kid had it down pat, I agree, he's going places!
Cheers!
Full Disclosure: No, I'm not in sales.
Employers have begun looking at employees differently. A good work force is an asset only until such time as savings have to be made. Then the workforce is disposable, generally in direct proportion to the salary. The higher the salary the more disposable a person is. Wal-Mart had embraced this big time, according to company documents.
Wal-Mart doesn't care about it's employees. It doesn't particularly care about its customers. It knows that so long as it sells cheap stuff in high volume then somebody out there will buy it.
Again, why does WM have to "care" about its employees? It has to make good business decisions, including business decisions regarding employees and employee relations, period.
Employees have ALWAYS been the place to look when a company needs to make savings. The higher paid employees have ALWAYS been in jeopardy when the accountants come and say the company needs to save x amount by year's end. (Fire one engineer, save $100K.)
This is not new. This is business.
Why does Michael Barone insist on kissing butt, especially Greenspan's? First, it took a few tries for GWB to get the tax cuts right. He finally left the details to Congressman Bill Thomas, who rejected GWB's Keynesian strategy that made the first couple of tax cuts failures. And as far as Greenspan is concerned, for everything he giveth, he taketh away. We are left with a government bubble, an oil bubble, and a housing bubble. Yes, the economy is growing, but not with the greatest fundamentals.
Credit as usual should be given to the American people, not the government leaders. We are going to have to rely on them more than ever when those bubbles give way.
Those disasters were nothing compared to Greenspan's godlike desire to control the economy, the Clinton/Rubin strong dollar, and GWB's early antiquated economic policies.
Employers have been doing this for years. Since the company in question is Wal-Mart, then it suddenly becomes newsworthy.
I guess to you corporations aren't allowed to make money.
so how about walmart demanding their customers have their check filled out before reaching the cashier, or get back in the end of the line?
like I said, their vendors choose to comply. too bad if there is traffic, or something else happens. and too bad for all their other deliveries too.
I'm not. Your Executive Vice President for Benefits is.
Now you're jumping to the ridiculous. Wal-Mart makes a lot of money. They want to make more money. They're free to do that. Some of the ways that they have looking at to make part of that additional income is by slashing the benefits they offer their existing employees and encouraging turn over. Again, they are free to do that. But why do you insist that that is not part of their business model in the face of all the evidence to the contrary?
bttt
Wal-Mart doesn't have to care about it's employees. And it's pretty evident that they don't care all that much about their employees, hokey commercials to the contrary notwithstanding. That's the way Wal-Mart chooses to do business and there is absolutely nothing illegal or unethical about it. Other companies choose to do business other ways. That doesn't mean that they are smarter than Wal-Mart or better than Wal-Mart, they just have a different way of looking at their employees.
Employees have ALWAYS been the place to look when a company needs to make savings. The higher paid employees have ALWAYS been in jeopardy when the accountants come and say the company needs to save x amount by year's end. (Fire one engineer, save $100K.)
You don't have to tell me that, I've learned it from past experience. And Wal-Mart obviously embraces that strategy. Employees are dollar figures only, and money is worth more than loyalty. Again, there is nothing illegal about Wal-Mart feeling that way. It is evidently part of their business model, and the only question about it is why so many people deny that it is.
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