Journal Assignment: The Low Cost Dilemma
As the Internet proliferated in the 1990's, trade barriers increasingly fell, and trade agreements increased, more businesses across the world began to do business globally. Many countries outside the United States (U.S.) were producing products much more cheaply due to lower labor costs in those countries.
As an example, when WalPart discovered many years ago that they were losing market share to other competitors, they began to look at ways to reduce costs. Originally, WalPart used products produced in countries such as China and India among others, only to provide the cheaper products at the end of the aisles to attract buyer attention. However, as competition increased, WalPart realized they needed to source as much as possible from cheaper producers from abroad in order to be competitive. As WalPart increased its product sourcing from abroad in less costly markets than the U.S., prices not only at Walart, but also at its competitors, began to fall. As prices fell, employers had to look for additional ways to economize. As the globalization of businesses increased, industry after industry felt compelled to keep pace by lowering their costs and their prices. In some cases, this meant jobs had to be either eliminated or outsourced to where the labor costs were lower. As a result of these low-cost strategies, a large number of Walmart's suppliers as well as its major competitors are now located in China or other low-cost manufacturing countries.
Some people say the pressure for profits from shareholders and Boards of Directors as well as consumer demand have fueled the lowering of prices and the outsourcing of jobs to lower wage countries at the expense of the American worker. As the largest U.S. retailer, Wal-Mart has become a favorite target of criticism that its pursuit for profits often comes at the expense of American jobs. Walmart officials counter that the firm is simply meeting the low-price demands of U.S. consumers.
After you have read about Walmart and considered this content within the context of Chapter 15 reading in this unit, journal your thoughts and feelings, about what you have read and how this would or would not impact you.
Write your thoughts and impressions about this exercise in your Journal in an entry exceeding 100 words.