America Is the Wal-Mart Republic

“Americans are living in the `Wal-Mart Country.` The USA Today reported on the 29th that the dependency of the US economy for the Wal-Mart, which was just one private company, was being deepened more than ever since the `Standard Oil` of the 19th century. The Wal-Mart, in just about 40 years since the founder Sam Walton opened the first shop in a suburban area in the State of Arkansas, has grown to have some 4,300 shops all over the world and to record 220 billion dollars of sale per year. According to a consulting company, McKenzie, the 25% of the growth of the US productivity during 95 ~ 99 was due to Wal-Mart.

The historians and economists are saying that Wal-Mart has the cutting edge technology and huge buying power at the same time, so it becomes to have enormous power that cannot be compared with the General Electrics and the Microsoft of the 90`s.

The computer satellite communication system of Wal-Mart, which is being used for cost calculation and fast transportation, is the best of the private companies and can be compared with the US Department of Defense. The sales of the wolrd`s major consumer products producing companies such as Kraft, P&G, and Gillette through the Wal-Mart shops are 10%, 17%, and 12%, and they are getting bigger.

The low price strategy of Wal-Mart using `economy of scale` is not only controlling the wages and prices, which are the main axes of economy, but also controlling the composition of goods.

Experts analyze that we cannot deny the effect of Wal-Mart that slows down the rise of wages these days. Wal-Mart is the company that creates the most jobs in the world by hiring 1.3 million people, which are equal to one in every 123 American labor population.

The newspaper reported that Wal-Mart affected the low inflation rate, too. Due to the pressure of Wal-Mart, which has enormous buying power, production companies cannot easily raise prices. The Rubbermade, which was the biggest plastic consumer goods producing company of the 90`s, raised prices against the request of Wal-Mart, but it was humiliated by merging to a competing company because of drastic drop of sales in 1999.

Wal-Mart even changed the management of the production companies. Wal-Mart directly asks the production companies to concentrate on the salable products other than variety of goods to reduce the costs.

And it is also Wal-Mart that induces the merge of production companies for the economy of scale. The taking over of Kibler by Kellogg`s and the merge between Nabisco and Kraft are the examples.

And in Bentonville, where the headquarter of the Wal-Mart is located, around 450 production companies opened branches in the 90`s, and around 800 branches are planning to be opened in the next 5 years.

The USA Today added that although criticism about exploitation of labor and related law suits were grabbing its ankle recently, the influence of Wal-Mart toward economy in general would be increased for a while.

Hye-Yoon Park parkhyey@donga.com