Wal-Mart profitability is based on the efficiency in the core of their business model, which allows offering low prices to the customers through the economies of scale, advanced technology in logistics and the high efficiency of the supply chain. The idea of Wal-Mart is to reduce the per-product margin, while achieving high purchase volumes by offering their consumers the lowest possible prices.
The success of Wal-Mart strategy often comes at a high cost. The constant demand for lower prices damages the brands of Wal-Mart suppliers and puts a cost pressure on their operation. Squeezing the margins, Wal-Mart partners have to lay off workers and restructure their businesses in order to meet the pricing requirements of Wal-Mart.
The most serious charge against Wal-Mart is its attitude to the employees. High staff turnover rate in the company can be explained by low wages, poor working conditions and lack of social security. Wal-Mart was even charged with employing illegal immigrants in their stores and with the use of child labour.
Wal-Mart policies do not only bring harm to the local communities. Their high profitability even during crisis allows Wal-Mart to employ a large number of people, thus creating jobs in many regions. Low-pricing strategy of the stores makes many products more affordable for the customers even with relatively low-income.
The effect on the economic cost should be evaluated from two perspectives. Firstly, in the absolute monetary terms serving yourself saves money for the restaurant, as salary is not being paid. However, the opportunity cost of this decision should also be considered. If serving patrons takes you away from doing administrative task, or if your time could have been better invested in other activities, then the economic cost of serving yourself increases, even despite the decline in salary expenditures.
