Instituational Affiliation
Walmart’s business model is built on being the cost leader, in being able to provide the lowest possible prices to consumers. In exchange for slim margins, it produces its profits by generating huge volumes of sales, which produces economies of scale which reduces costs. The large volumes of materials and products required allows Walmart to dictate terms when it is negotiating with suppliers.
All of these makes Walmart’s business viable as long as operations are working smoothly without interruption. One day of lost sales means a large proportion of profits lost. This is the reason why Walmart cannot afford one even one day in operation and the biggest threat to that is a labor strike.
The business model of Walmart forces it to keep its costs low and that includes the salaries of employees. Walmart’s offer is the preservation of one’s job while it is seeking ways on how to uplift the economy, without cancelling or denying campaign sorties. Walmart had a choice on making the prices lower for the customers by keeping wages low; or raising its prices so it can raise salaries. Walmart chose the first one because it still adheres to its promise to its customers of “Everday Low Prices” (Hyde, n.d.). It serves poor US citizens when it strictly follows its cost leader strategy.
References
Hyde, R. (n.d.). How Walmart Model Wins With "Everyday Low Prices". Investopedia. Retrieved April 25, 2016 from http://www.investopedia.com/articles/personal-finance/011815/how-walmart-model-wins-everyday-low-prices.asp
