The Wal-Mart cost structure is known to be the lowest in the retail industry. Many economists do not agree with this structure because although consumers are happy with low prices Wal-Mart has forced its suppliers and competitors small and big to lower their prices in order for them to maintain the image and reputation of having the lowest prices around for quality products. Many cities and neighborhoods have banned Wal-Mart due to the fear of small businesses being run out of business sue to not being able to compete with a giant like Wal-Mart.
Like many other businesses Wal-Mart has various factors that affects it cost structure such as purchasing merchandise and real estate which seems to be the biggest expenses for this retail giant. Real estate is the biggest cost due to amount of store openings each year. Wal-Mart has focused its openings to isolated metropolitan areas and will continue to grow in order to conquer the majority of metropolitan areas. Then there is the Merchandise in which Wal-Mart keeps a large inventory of .
FIXED AND VARIABLE COSTS
The fixed and variable costs are nothing more than the corporations’ operating leverage in which the companies assets and liabilities are analyzed. Wal-Mart has used their operating leverage to the utmost of their ability. By purchasing the majority of real estate that the Wal-Mart stores and other divisions are located on, they are able to create assets rather than liabilities. Although there are areas of the United States and many other countries that lease the property for an specified amount. Along with other operating costs the company maintains to continually grow which adds to this dilemma.
Wal-Mart seems to be one of the top corporations with a low amount of fixed costs and variable costs being large. The merchandise of Wal-Mart amounts to another one of Wal-Mart’s biggest costs due to the amount of ,inventory. For when a product rings in they have to pay for the…