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Strategies for a discontinuous future.












Sunday, February 08, 2004
 


The Post has a nice piece about Wal-Mart in China, which illustrates the classic Wal-Mart strategy of massively leveraging reach and scale to apply increasing cost pressure.

"In the beginning, we made money," said a manager reached by telephone, who gave his name as Mr. Li.

"But when Wal-Mart started to launch nationwide distribution, they pressured us for a special price at below our cost. Now, we're losing money on every box, while Wal-Mart is making more money."

The interesting thing is that it's taken Wal-Mart 20 years (and dozens of countries) - and they still haven't reached a cost floor on most goods (like many of critics suspected). I think the notion of cost floor needs to be rethought - at a macro level, there probably is no cost floor. That's what Wal-Mart keeps exploiting.

-- umair // 3:46 PM //


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