[lbo-talk] Re: WMT goes orgo

[ravi]

At around 29/8/06 2:32 pm, Doug Henwood wrote:
> On Aug 29, 2006, at 2:08 PM, ravi wrote:
> 
>>> Combined with a smart business strategy that
>>> sells a mix of higher-margin products to more affluent customers,
> 
> Talk about burying the lead (or lede, as they say in j'ism). Go to the
> respective websites - Costco <http://www.costco.com/Home.aspx> features
> digital cameras, computers, mid-level cookware sets. Wal-Mart
> <http://www.walmart.com/> features $16 chairs and $8 lamps.
> 
> WMT is a much bigger company, with a market cap nine times as large as
> COST's, six times the revenue, and profitability measures 1.5-2 times as
> big. If higher wages and lower turnover really led to higher
> profitability, who could argue that Wal-Mart managers wouldn't have
> figured this out? They're very smart people down there in Bentonville.
> 

To reiterate it is not appropriate to compare WMT to Costco (perhaps
like comparing Microsoft, which also has among other things a search
engine, to Google?). Also, the BW article does address this issue by
specifically noting that the WMT model (which I would label "parasitic")
works only because it is one company WMT practising it... it is not
scalable. Overall/long-term profitability itself is determined by, I
would think, a complex set of factors, including among them
sustainability. WMT, again as BW notes, passes the buck to the public in
hidden forms (health costs, etc). This is all arguable of course, but it
is not the case that BW's argument depends on assuming that WMT managers
are stupid, etc.


>From a mathematical POV these "philosophies" seem to be oscillatory and
there is money to be made (for WS) on either end. The impact of the
[down]swing is absorbed elsewhere.

	--ravi

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