GLOBAL ECONOMICS

Global Economics

Introduction

Wal-Mart is the largest discount store in the United States. The retail store has not only successfully operated in the United States but also across the globe. The company is still in the process of expansion. The company has witnessed the success in its local market. However, the success in the local market does not guarantee success in the international market. When expanding internationally, companies come across various issues.

Global Operations

The Company now is well established in larger cities and has tapped into the international market, where it is gained popularity and is expanding on a rapid pace. Wal-Mart is a globalized company with more than 1.9 million associates worldwide and nearly 6,500 stores and wholesale clubs across 13 countries in the world (Soderquist, 2009). Their mission statement is “Lower the world's cost of living” as it is passionately dedicated to its value proposition of “Always Low Prices, Always”. They believe that everyone is entitled to some sort of luxury. That is why they carefully segment the market and therefore, target those who need the most, offering them a larger variety of things under one roof. In the global arena, the company operates in El Salvador, Argentina, Canada, Chile, Brazil, China, Guatemala, Costa Rica, Honduras, Japan, Puerto Rico, Mexico, India, Nicaragua, and the United Kingdom.

Comparative Advantage

The model of comparative advantage is one of the basic concepts underlying the theory of international trade and shows that countries tend to specialize in the production and export of those goods produced with a relatively lower cost compared to the rest of the world, the comparatively more efficient than others and tend to import the goods in which they are ineffective and thus produce with comparatively higher costs than the rest of the world. (Marquard, 2006). Here the theory applies to comparative advantage that Wall-mart has over its competitors that enables the giant to abide by the claim of offering lowest prices.

Wal-Mart's 'comparative advantage' is at least partly due to its ability to trade in 'cost externalization'. The company has comparative advantage since because of its policies regarding contracts with the companies which allow them to keep their costs low.

Economic Implications

Competing in a monopolistically competitive market, Wal-Mart is an international retail organization that has been established with the objective of becomes a global low-cost provider and simultaneously giving out the best and most cost-effective discounts to both its warehouses. To understand the ...