QUESTION: Should Wal-Mart be considered a monopoly?

I. Why Wal-Mart Should Be Considered A Monopoly: 

For the fifth time in six years Wal-Mart has been named the biggest company in the world. Below are some figures from CNNMoney’s section on fortune 500 (global) companies for 2007:

General Merchandise Industry

From the July 23, 2007 issue

Looking at the figures, it’s rather blatant that Wal-Mart is monopolizing. What exactly is going on? Is it legal? Is it good for America as a nation? 

     The text book reason for why Wal-Mart is ’successful’ is because of its ways of increasing profit and revenues by restricting output …the goal all businesses have. The not so clean reason is that the way they restrict output is by ‘rolling back’ their employee’s wages and rights, and acting as their own distributor rather than having a wholesaler. Although the latter may not seem like bad idea at first, if you take a closer look and take into consideration the fact that all the smaller businesses and local stores do not have the means of eliminating THEIR wholesalers (keeping prices up)…the general merchandise industry becomes a scary place to be in right now in a free market economy such as ours. Why would people buy something from a smaller store in their town for more money when they can walk down the street and buy the same thing at a cheaper price? This very situation is the reason Wal-Mart has in fact become a monopoly…the elimination of competition. Smaller stores selling the same products will inevitably go out of business because people will search for the smallest opportunity cost and with the big box giant stores on every corner, you just can’t beat low prices AND local availability. As for the manipulation of employee’s wages and rights, this tactic is blatantly unethical and bad for society. The average Wal-Mart employee hardly makes enough money annually to hit the poverty line which in 2001 was $14,630 and employees were making on average $13,861. ‘Associates’ were making $8.23 per hour as opposed to the average hourly rate of $10.35 for supermarket workers. This may not seem all together too bad but you must take into consideration the fact that Wal-Mart rarely lets workers work 40+ hours a week (full time) and they also do not include a healthcare plan or offer ones at affordable prices for a person working there. It’s pretty obvious that this is a problem if you read the itemized taxes on your own pay check every other week. On average, for one Wal-Mart with 200 employees taxpayers pay $421,000 a year. All of this money goes toward free and reduced lunches, section 8 housing assistance, federal tax credits and deductions for low income families, title I education funds, children’s health insurance costs, and subsidies for energy assistance. And that’s just for ONE store! 

     The wise Jeremy Bentham once said “…It is the greatest happiness of the greatest number that is the measure of right and wrong.” Who is benefiting from the practices of this massive merchandiser? It may seem like we are paying less for our goods, but we make up for it in our taxes. All in all, Wal-Mart is a detriment to America as a nation and is illegally acting as a monopoly. The big box retailer, the biggest company in the world, needs to either be shut down due to illegal practices or start paying their employees reasonable wages because American citizens should not be the ones doing it for them (3, 2 and 4.) 

II. Why Wal-Mart Should Not Be Considered a Monopoly: 

     Wal-Mart is the largest company in the world. That also makes it the largest (private sector) employer in the world! All allegations stating the big box retailer is bad to employees and makes healthcare plans unattainable are false accusations. 

     It is a fact that 86% of the associates do indeed have health insurance and those that do not are only lacking because they chose themselves to go with Medicaid rather than with one of the company’s plans. Wal-Mart is not a monopoly, there are plenty of other general merchandisers in the industry including Target, Sears, Macy’s and J.C. Penny’s all of which have the same opportunities to work with but all of which choose to keep prices high in an effort to gain substantial profits. Wal-Mart chooses to help the people (and stockholders, many of which are associates!) by keeping goods affordable. The annual stats from 2007 show the company’s’ revenues to be  $351,139 million, profits to be $11,284 million, assets to be $151,193 million and stockholders’ equity to be $61,573 million as opposed to, say, Exxon Mobile’s stats (in slot number 2) of  $347,254 million in revenue, profits of $39,500 million, assets of $219,015 million and Stockholder’s equity of $113,844 million. It’s obvious from these statistics profit is not the main concern. As for having a large company in rural areas…yes, the bigger stores do tend to cause the smaller ones within a small radius to die out…but that’s the consumer’s choice and it’s mostly just due to convenience. If you travel a few miles down the road you will see Wal-Mart actually IMPROVES competition in that stores adapt and start to offer better services and goods in order to stay in the game. Not only that but for example, unlike Sears, a more catalogue based store, Wal-Mart offers so many jobs to people in the community it’s actually helping the economy flow locally. Stockholders for saw the success of Wal-Mart and invested, what would happen to them (many of them who are also employees) if the store is labeled inappropriately as a ‘monopoly?’ They made a good choice, made some money and then would have to lose it all only because some feel the store is getting too big. 

     To conclude, I’d like to again point out that the Wal-Mart store is in business to help people and it’s because of this motto that everything has been successful (1, 2, 3, 4 and 5.)

III. Conclusion: 

     After reviewing multiple sources of research, it is plain that Wal-Mart is guilty of monopolistic practices. Why should they have an un-fair advantage over other businesses when the only reason they’ve ‘gotten ahead’ in the game is by manipulating others and basically just cheating their way through loop holes? They don’t pay their workers well enough, they need to give full time workers who’s families depend on their salaries better (if they had any to begin with) heath care plans, and they need to stop contributing to the widening gap between the rich and the poor. Okay, sure 86% of the stores ‘associates’ DO have some sort of health care…buuut only 48% of them are insured directly by their employer whereas the other 86% are under either their spouses plan or something else. Healthcare plans are not cheap; why aren’t the other 86% (with the exception of those using the insurance of their spouse) under a plan set up for them by Wal-Mart? American tax payers should not be the ones paying the difference between a Wal-Mart employee’s salary and the money he/she should be making in order to be able to afford basic necessities. Although it seems they are trying to shape up (only because the media has it’s eye on them now) this is a matter of ethics. Wal-Mart shouldn’t need the pressure of widespread media criticism to treat workers like human beings; it is obvious by the insane amount of money they undoubtedly spend on advertising to tell America how good their ‘associates’ are really being treated that they care more about the company then their workers as people and an eye should be kept on their practices at all times. 

Works Cited

1. Soderquist, Don. The Wal-Mart Way. Nashville: Thomas Nelson, Inc., 2005.

2. Parkin, Michael. Microeconomics. Boston: Greg Tobin, 2008.

3. “Fortune Global 500 2007.” CNNMoney. 31 Jan. 2007. CNN. 18 Mar. 2008 <http://money.cnn.com/magazines/fortune/global500/2007/snapshots/2255.html>.

5. Courser, Zachary. “Economists Explain Why America Benefits From Wal Mart.” CFIF. 15 Dec. 2005. University of Virginia. 19 Mar. 2008 <http://www.cfif.org/htdocs/freedomline/current/in_our_opinion/wal-mart-is-good.htm