Wal-Mart with a Target on its back

Regular readers may remember a guest-post back in July about the Gulf of Mexico oil spill. Tom argued that BP might well be copping a disproportionate amount of blame for the disaster, while lesser partners were getting off lately.  We described this as an instance of diseconomies of scale.

Wal-Mart Target logoThe Wall-Street Journal raised a further example last week (click through from this link for the full version of the article).

The article argues (and some trade union officials admit) that the world’s largest retailer Wal-Mart receives excessive scrutiny for its labour practices (i.e. it’s non-union status, low pays, miserly health benefits etc), while counterpart Target (the US firm, not the Aussie one) get off very lightly, despite having very similar employment conditions.

This manifests as a genuine disadvantage for Wal-Mart as public campaigns against new stores (especially in large cities) restrict expansion.

Meanwhile, Target appears to be deliberately, well, targetting the same neighbourhoods conscious of the lack of scrutiny, the perception of being the ‘lesser of two evils’, and the limited resources of campaigners.

Building such disadvantages into our understanding of competitive advantage, firm growth, and bargaining power seems increasingly important.

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One Response to “Wal-Mart with a Target on its back”

  1. Tom Osegowitsch Says:

    After the knock-back they received from the Canadian government for their take-over bid for Potash Corp, BHP Biliton’s Marius Kloppers is probably wondering “how big is too big?” and whether his company isn’t already in the “too big”-league.

    All of BHP Biliton’s major M&A bids under Klopper’s leadership have been turned down (the takeover of Rio, the Pilbara joint venture with Rio, a half-hearted tilt at Woodside, and now Potash Corp). While all major M&As (especially cross-border ones) come with a good deal of uncertainty, many of BHP’s difficulties can be attributed squarely to the company’s size. (BHP is the world’s largest mining company by any measure.)

    Customers (who do no like to see further concentration among their suppliers), regulators and governments (with the possible exception of the home country government) instinctively dislike the idea of adding to the girth of an already massive competitor. And the public (i.e. communities in the various countries touched in one way or other by a proposed M&A) can be more easily mobilized against a giant (foreign) corporation, thus putting even more pressure on governments to demand even tougher conditions or to reject their bid outright.

    It seems the giants of the corporate world have to work a lot harder to realize the next deal (if they get there at all), raising the possibility of yet another form of diseconomies of scale.

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