Wall-Marts Take over of Asda
Wal-Mart is a US-based multinational corporation. Critically discuss the likely costs and benefits of its takeover of Asda, a UK-based company
Wal-Mart is the world’s largest retailer with over 8400 stores worldwide employing 2 million people. It serves more than 200 million people with global sales exceeding £291 billion. (Basker, 2007) Wal-Mart is globally organised so that it can respond quickly to changing markets and cost conditions in its international locations. The UK is one of these locations. This essay will firstly explore features that are of benefit before considering features that are of detriment to Wal-Mart and the UK in the aftermath of its take-over of Asda.
Wal-Mart benefited from the acquisition of Asda because Asda had a skilled, trained work force with low wages and labour costs. This meant it took over an already successful retail business, and so expanding its global foot print while making savings due to avoidance of tariffs for being based in the UK. Wal-Mart can make further savings by exploiting its economies of scale related to advertising, procurement and transportation that its global network gives it.
In addition the UK government created an attractive environment for Multi National Companies like Wal-Mart to invest in. This environment was created by offering a number of cost reducing and financial incentives. The effect of these incentives was designed to reduce investment risk and so encourage investment and create jobs. But consequentially, Asda’s acquisition by Wal-Mart signalled a change in food retailing in the UK. In response its competitors intensified the price and cost pressures they exerted on their suppliers. Responses from a Competition Commission survey indicated that since the Wal-Mart take over relationships between suppliers and supermarkets had largely worsened. (Competition Commission).
A benefit to the UK population is Wal-Mart/Asda’s stated value proposition based on offering
Wal-Mart is the world’s largest retailer with over 8400 stores worldwide employing 2 million people. It serves more than 200 million people with global sales exceeding £291 billion. (Basker, 2007) Wal-Mart is globally organised so that it can respond quickly to changing markets and cost conditions in its international locations. The UK is one of these locations. This essay will firstly explore features that are of benefit before considering features that are of detriment to Wal-Mart and the UK in the aftermath of its take-over of Asda.
Wal-Mart benefited from the acquisition of Asda because Asda had a skilled, trained work force with low wages and labour costs. This meant it took over an already successful retail business, and so expanding its global foot print while making savings due to avoidance of tariffs for being based in the UK. Wal-Mart can make further savings by exploiting its economies of scale related to advertising, procurement and transportation that its global network gives it.
In addition the UK government created an attractive environment for Multi National Companies like Wal-Mart to invest in. This environment was created by offering a number of cost reducing and financial incentives. The effect of these incentives was designed to reduce investment risk and so encourage investment and create jobs. But consequentially, Asda’s acquisition by Wal-Mart signalled a change in food retailing in the UK. In response its competitors intensified the price and cost pressures they exerted on their suppliers. Responses from a Competition Commission survey indicated that since the Wal-Mart take over relationships between suppliers and supermarkets had largely worsened. (Competition Commission).
A benefit to the UK population is Wal-Mart/Asda’s stated value proposition based on offering