The Walmart Strategy

When we think of an American global retail corporation with chains of vast discount department stores and warehouse stores - Wal-Mart comes to mind. Why? To be successful, corporations need to take into consideration numerous environmental factors. A consistent increase in revenue is a gauge of the health of a corporation. To continue the upward trend, corporations must take into account the performance of a variety of economic indicators because they can directly or indirectly affect a corporation's performance. These economic indicators or statistics can range from the GDP, unemployment rate, and inflation, just to name a few. Determining how well the economy is doing and how well the economy is projected to do in the future are key in strategizing to maximize revenue. (About.com , 2012) For Wal-Mart, studying various economic indicators is paramount to their success.

Consumer Price Index

The Consumer Price index is an indicator that represents if/how inflation is impacting the pricing of consumer goods. It shows changes in the prices of goods and services for a period of time. Because inflation impacts availability of goods as well as pricing, this economic indicator is important to Wal-Mart's performance. Wal-Mart's economic and financial performance can be measured for a specific period of time using this indicator.

Wal-Mart's direct contribution to the decrease of prices of goods and services cannot be ignored. According to Global Insight, since 1985 Wal-Mart's aggressive expansion can be linked to the collective decline of 9.1% in food-at-home prices, 4.2% in commodities pricing, and an overall decrease in consumer prices by 3.1%. Therefore, it is proven that Wal-Mart's competitive pricing strategy has enabled consumers to save approximately $263 billion which, through the year 2004, has totaled approximately $2,330 per household per year. Wal-Mart's competitive pricing strategy increases in benefits during an economic recession. For during an economic recession or adverse economic conditions, consumers search for cheaper products as their purchasing power is reduced. (Insight, 2005)

Employment Rate

The Employment Rate reflects the number of working population as a percent that is currently employed in both private and public sectors. The rapid expansion of Wal-Mart directly influenced America's labor market in a profound way. The vast employment opportunities generated by this retail giant has a positive influence on productivity, labor wages and total economic output. This aggressive expansion, coupled with the increase in demand for Wal-Mart products and services significantly raised the demand in labor. According to Global Insight, Wal-Mart generated approximately 210,000 additional jobs through the year 2004 resulting in a 0.14% decrease in the unemployment rate. (Insight, 2005)

Employment Cost Index

The Employment Cost Index reflects the variation in labor cost for corporations and businesses that operate in the American economy. It details both the negative and the positive variations in relation to cost. This indicator is important to Wal-Mart, as any variation - negative or positive - inadvertently affects the corporation's operational costs. Wal-Mart provides employment to approximately 2.2 million people. Therefore, if not properly managed, any increase in labor costs, will significantly increase operations costs which then will be passed on to the consumer in the form of price increases - an unfortunate chain of events. (OECD, 1997)

Product Price Index

In America, the Product Price Index (PPI) is also known as the Wholesale Price Index. This index is indicative of the price of unfinished products and/or raw materials. The increase in cost of raw materials, over time will be reflected and directly impact the cost of finished products. Because of Wal-Mart's ability to effectively manage their supply chain and because of their vast base of suppliers, they are successfully able to negotiate and manage the cost of raw materials allowing them to offer finished products to consumers below what most competitors can offer. Therefore, even when PPI is higher in adverse economic conditions, Wal-Mart retains the ability to extend low prices to their consumers. (R. Stutely et al., 2003)

Interest Rate

The Interest Rate is set by the Federal Reserve. This is done in order to better manage the value of money while reflecting the current rate of inflation. With an increase in the interest rates, inflation increases while the value of currency (money) decreases. When this occurs, consumer purchasing power also decreases. Consumers curtail their spending yet increase their savings. This causes the flow of money to become more stagnant. It can also be said that with an increase in the interest rate, the rate at which consumers borrow money (e.g., credit cards) increases as well, thus leaving consumers to pay higher prices for goods and services. Any changes in the interest rate will directly affect Wal-Mart's bottom line (revenues), but because of proper planning and management, they have been able to hold their position in today's economy, even