WalMart Versus the Unions

To me at least, Walmart is among the greatest examples of not only the power of America but more importantly capitalism in general. The same reason that I love Walmart makes a lot of other people hate it. Many people have demonized Walmart for putting so called mom and pops out of business. The reason that Walmart puts so called mom and pops out of business is because WalMart is able to consistently sell their products cheaper than the mom and pops. That, frankly, is capitalism. That's the thing about capitalism...it's dog eat dog, cut throat, and cruel. Capitalism doesn't care whether or not you have owned the business your entire life or not...whether or not your employees depend on you for their livlihood...or whether or not you are a nice person. All capitalism cares about is whether or not you can sell your good or service better and cheaper than your competitor.

Walmart's entire business model is built around the concept of economies of scale. Economies of scale uses a company's size to its advantage. The unique and remarkable thing about WalMart is that it is one of the few companies to figure out how to target the poor and use their lack of wealth to its own disadvantage. By driving prices well below their competition, WalMart appeals to those without much money. Since there are more of those than with money, WalMart has found a unique and effective business model. WalMart's appeal is that you can walk in and buy a variety of products, from food to guns to clothes, and buy them all cheaper than you can anywhere else.

The centerpiece of economies of scale is the focus on minimizing unit cost, razor thin margins, and maximizing volume. This is where Walmart's natural confrontation with unions comes in. Unions are a great and effective force in our society however unions and minimized unit costs don't mix. WalMart's entire strategy requires that they be able to do everything possible to minimize unit cost. The first way Walmart does this is by buying in bulk. By buying in bulk the force down unit cost. The second way they do this is by limiting labor cost. If Walmart's labor force were unionized, the WalMart would have to go through contract negotiations every couple years. This would drive up their unit cost and run counter to the entire strategy that WalMart has seen to overwhelming success. Unlike in the auto industry, where all sorts of things beside unit costs are considered, Walmart only wants to sell as many things as possible cheaper than everyone else. Can you imagine WalMart simultaneously working on buying goods in mass bulk to drive down cost while the union representing their workers demands pay increase to drive up their cost? The whole business model would be compromised.

This is what critics of WalMart refuse to acknowledge. WalMart isn't in business to give lot's of people good jobs. They are in business to maximize profits. They maximize profits by minimizing unit costs, keeping margins as razor thin as possible, and then maximizing profits by using the first two concepts to overwehlmingly maximize volume. A union takes that concept and spins it on its head. Critics of WalMart that insist that they must allow unions either fail to recognize their business plan or simply ignore it. If WalMart is forced to have unions, they cease to be WaMart, at least their business model ceases.

Critics are either naive to what makes WalMart successful or they just don't care. No one is forced to work at WalMart, however if you do it is under the understanding that your work won't be unionized. The critics and naysayers can continue to point to WalMart as some sort of symbol of unbridled capitalism gone wrong, however I see WalMart and its business model as capitalism at its finest, and no one should or can force it to compromise its business model...not even for unions.