The document discusses predatory pricing, defined as reducing prices to drive competitors out of business, and highlights its implications using Wal-Mart as a case study. It notes that while Wal-Mart's low pricing can benefit consumers, it has resulted in significant negative impacts on local economies, wages, and local retail sales. Wal-Mart's presence in communities has been associated with increased poverty rates and a rise in reliance on public healthcare for its employees' families.

1. OLCU350 – John N. Lente

2. What is Predatory Pricing?
 According to Boatright, predatory pricing
is “reducing prices to unreasonably low
or unprofitable levels in order to drive
competitors out of business.”
 The monopoly created in the absence of
competition allows the surviving business
to raise prices and make up for
previously lost revenue.

3. Allowable Predatory Pricing
 Low-cost businesses may be able to
endure limited profits as a routine
 Clearance sales move inventory at a loss
that wouldn’t be sold at all
 The need to introduce a new product or
service at a loss in order to gain entry
into the market (freeware or shareware)

4. Wal-Mart
 As of 29 February 2008, Wal-Mart has in the
United States…
 132 Neighborhood Markets
○ 42-55,000 sq. ft., 80-100 employees
○ Usually located to support Supercenters
 971 Discount Stores
○ Average 102,000 sq. ft.
 2,447 Supercenters
○ 100-220,000 sq. ft., 200-550 employees
○ Include full-service grocery stores
 591 Sam’s Club Warehouse Stores

5. Predatory Pricing or “Everyday
Low Prices?”
 Isn’t a low-cost business what healthy
competition is about?
 By reducing its own costs, Wal-Mart can lower
consumer prices on a full range of goods
 Customers spend less for goods they buy, thus
increasing availability of funds for other things…
…don’t they?

6. Wal-Mart’s Impact
 In the ten years following the opening of Wal-
Mart’s first store in Iowa, rural communities lost
nearly half of their local retail sales to Wal-
Mart, devastating their impoverished economies
 Wal-Mart Supercenters were estimated to depress
wages and benefits in the grocery industry in
southern California by $500 million - $1.4 billion
annually
 Counties with a Wal-Mart store witness an average
0.2% increase in their poverty rates compared to
counties with no Wal-Mart, attributed by experts to
the displaced local employees working at Wal-Mart
for lower wages than previously earned

7. Wal-Mart’s Impact
 46% of Wal-Mart employees’ children are
either on Medicaid or are uninsured – either
way increasing cost of health care to the
taxpaying community
 Wal-Mart stores produce an annual net loss
in tax revenues of $468 per 1,000 square
feet due to the increased cost of
infrastructure and public works

8. Big Box Mart
Click to View JibJab.com’s Hilarious Video

9. Sources
 Bernhardt, A., Chaddha, A., & McGrath, S. (2005, August). What do we know about Wal-
Mart?. Retrieved March 8, 2008, from
http://walmartwatch.com/img/documents/brennan_center.pdf
 Boarnet, M., & Crane, R. (1999, September). The impact of big box grocers on
southern California. Retrieved March 8, 2008, from
http://walmart.3cdn.net/256e083c51be1d38d6_78m6ih0g7.pdf
 Boatwright, J.R. (2007). Ethics and the conduct of business (5th ed.). Upper
Saddle River, NJ: Prentice-Hall.
 Chambers, S. (2005, October 26). Reviewing and revising Wal-Mart's benefits
strategy: memorandum to board of directors. New York Times. Retrieved March 8,
2008, from
http://walmartwatch.com/img/sitestream/docs/Susan_Chambers_Memo_to_Wal-
Mart_Board.pdf
 Stone, K. E. (1997). Impact of the Wal-Mart phenomenon on rural communities.
Retrieved March 8, 2008, from
http://walmartwatch.com/img/documents/iowa_farm_study.pdf
 Wal-Mart (2008, February 29). Corporate Profile. Retrieved March 7, 2008, from
http://investor.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome
 Wal-Mart. (n.d.). Corporate facts: Wal-Mart by the numbers. Retrieved March 7,
2008, from http://www.walmartfacts.com/FactSheets/Corporate_Facts.pdf
 Wal-Mart (n.d.). Divisions. Retrieved March 7, 2008, from
http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=504&contId=44