The ART Of Business

Growing Wal-Mart Scandal Reveals Company's Flaws

The growing Wal-Mart scandal in Mexico is revealing some fundamental flaws of the Mega-retailer.

Despite the huge run-up in most share prices since 2009, Wal-Mart has floundered, lagging behind the broader S & P 500 Index by about 2/3.

As it seeks to expand outside the United States, Wal-Mart is finding it more difficult to make its domestic model work elsewhere.

The company's historic advantages of low wages, squeezed suppliers, and cheap Chinese manufacturing are each fading away.

Simply stated, Wal-Mart cannot pay its workers any less, whether it is in Mexico or the U.S.

Having extracted nearly every last drop from most of its suppliers, there is little, if anything, left for the company to get.

And, with manufacturing costs and inflation soaring in China, Wal-Mart's workshop has now become far more expensive to operate.

With growth feeble and its competitive advantages going by the wayside, we shouldn't be surprised that allegations of "cooking the books" are emerging.

As George Orwell observed, "It is only when someone is winning that they appear invincible".

TAGS: Supply Chain
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