Walmart and Starbucks

Walmart and Starbucks are two very different companies with an interesting similarity. I don't like either of these companies, but seeing as how Walmart represents low price and little else, it's hardly a popular company. Starbucks, on the other hand, cares a great deal about image and presentation, so disliking it puts me in a minority- a minority that includes anarchists and too-serious coffee-drinkers. However, both Starbucks and Walmart saturate areas with their stores, often replacing the existing businesses.

Walmart's business plan is highly successful. Starting in Arkansas, Walmart creeped across the country. Its popularity stemmed from one thing- lower prices. To acheive this, it made full use of what are called "economies of scale." These are the costs that decrease as a company grows larger. By building many large stores in one area, Walmart could buy products in larger volume (and therefore at a lower price,) distribute these products cheaply (by building stores near distribution centers,) and could save on building costs (by buying large tracts of land outside of urban areas.) Armed with lower costs than its competitors could achieve, Walmart spread across the land, eventually invading Canada as well. And to make the most profit it could, it saturated one area with Walmarts before moving on to the next.

Starbucks is also a highly successful company. It doesn't rely on economies of scale to make profit, but it does use the same technique of saturation that Walmart does. Profit doesn't come from lower prices, but rather from a desirable product that people will be willing to pay high prices for. And the reason there's a Starbucks at almost every street corner? They keep building them in one area until each one is barely making profit, so that together they're making the most profit possible.

If you've made it this far you're probably wondering "So what? Aren't companies supposed to be profitable? Isn't establishing a new company as the leader of its industry admirable?" Well, Walmart seems quite willing to turn a blind eye to the source of its profits (sweatshop labor, environmental abuses,) which is why I dislike Walmart. Starbucks, on the other hand, as a (probably?) green and ethical company should be entitled to make profit. But my problem is that by cutting its own profit margin thin, it cuts into independent coffee shops profit margins, often making them go out of business. And I'm not content to consume Starbucks' overpriced homogenity, so I'll take my money elsewhere. (Walmart has the same effect, but the businesses it's replacing are hardly and better than Walmart.)

Credit given where it's due: my knowledge of these two companies comes largely from the book No Logo by Naomi Klein. Noticing their similarity was all my doing, though. I would recommend No Logo to anyone who's interested in this sort of thing (*cough* Daniel *cough* Nick.)