Wal-mart is driven by the objective that they should serve their customers to the best way possible keeping the costs as low as possible but still earn a reasonable amount of profit. Wal-mart ends up reducing the wages and encouraging relocation elsewhere to meet the motive of low cost1,2.
The first point is that Wal-mart introduced a “pull” system of retailing. This means that Wal-mart would direct the manufacturers regarding what to produce and how much to produce. While studying macroeconomics, the first three basic questions that are asked are - what to produce, how much to produce and for whom to produce. In this case, also Wal-mart decides what consumer goods the manufacturers must produce. Wal-mart also instructs them regarding the quantity that is to be produced. Wal-mart, as any other company will want to maximize its profit level. For attracting more customers, it keeps the price of the goods at a low level. However, if prices are kept low then the profit level of the company must also be low. However, this does not happen because the company reduces its cost of production. One way of reducing the costs that has been adopted by the company is by paying low wages to the workers. In 2005, the average weekly wage was $8. While the average hourly wage rate is $8.23 on average, the average supermarket hourly rate is $10.35. In 2001 there was discrimination between female and male workers –“the average male employee was paid about $5000 more per year than the average female full time employee”3. In order to protect this low wage policy, Wal-mart does not support the formation of unions. In the year 2000, when a meat-cutting department built up a union at Wal-mart in Texas, the commercial giant phased out the department meticulously. Hence the largest private sector in Europe is free from any union. According to estimates of January