Economics slp module 02 - Essay Example

Wal-Mart’s Great Value (Organic) Milk What was the purchase? What circumstances led your organization to undertake it? Wal-Mart is the biggest retailer in the whole world. Its chain of stores and variety are huge in number. But, the latest trend of the market to buy organic products was one area where Wal-Mart was extremely limited. This is why in the month of May 2006, Wal-Mart officially launched its own organic products, and in September 2006 they extended this range by adding their own milk to it.

Basically these were products made locally by other companies and Wal-Mart bought them by setting specific standards for their order. Organic markets are still a very rare segment and hence there is a lot of potential in it right now. As the trend for going “Green” is on the rise globally, the demand for organic foods which are environmentally friendly, healthier and more nutritious than other grown foods is also growing rapidly. The official figures say that organic markets are increasing by about 20% per annum as compared to 2% to 4% in the non organic market1. 2. How widely did your organization examine the supply of whatever available to it?

The supply of organic milk is very hard to cope at the moment. This is because dairy farms have to follow extremely careful practices on providing their cows with the right environment and not over-milk them. Organic means natural, this is why cows have to be treated in the most natural way possible. Wal-Mart therefore lay down strict guidelines for its organic milk producer Aurora, to meet. Being Wal-Mart, the whole procedure had to be big as well, so Aurora is currently using 3500 cows for its organic milk production.

The cows are given a break when they are not lactating, which is about three to four months a year. Apart from this, the cows are also given a huge field to roam around in and graze in grass like they would naturally do. This 3500 figure might not look big enough for most dairy farms, but for organic milk production this is a huge number of cows to handle. This is why the company tripled its size of grazing fields since the start of production.3. Were there demands from other organizations for whatever?

How strong? How do you perceive the overall market situation for whatever?Naturally, Wal-Mart has since encountered many criticisms from its competitors. The biggest is Whole Foods. This is the current biggest organic food supplier in the market. The market reputation of Wal-Mart has been slightly affected by these criticisms because when some competitor firms like Whole Foods and Organic Valley examined the procedures and facilities at the diary farm they dubbed them “unacceptable”. However, since then Wal-Mart has their dairy farms examined by independent inspectors and gotten a satisfactory result.

This has made the market position of Wal-Mart a little stringer in the organic sector because according to market surveys, Wal-Mart’s milk was found to be 8% to 35% cheaper than other brands and even local milk sellers.4. Do you think an inter-play of supply and demand set the price your organization paid for whatever?There is no proper figure for the exact price that Wal-Mart paid Aurora to make it its supplier, but it is expected to be huge because Wal-Mart also laid down many criteria’s to fulfill in its deal.

Other than that, the price was also large because of the firm want of a huge and steady supply of milk which takes time to be produced, being organic. As there is a shortfall of organic milk in the market already, there is another reason for the price to shoot up for Wal-Mart.5. Did you learn any lessons from this experience about how to assess supply and demand for large purchases? Do you think your organization was satisfied with the price paid for whatever?Yes, this particular case has taught Wal-Mart to sometimes be a little patient.

This is because in its blindness of providing organic milk to the people at a cheaper price, they started cutting corners after sometime. Immediately this was taken into consideration and a lawsuit was filed against Wal-Mart and Aurora. No matter if the price paid for introduction of cheaper organic milk might be high, the management and complexity involving organic products are something which big corporate clients like Wal-Mart do not understand. Production of organic food cannot be completely streamlined and there is no way a company can bear the initial cost of gaining so much land to produce a product to meet its demand.

Organic production is always on a small scale and takes up time and natural techniques which Wal-Mart does not understand, maybe because they are too busy reaching their breakeven for this project.Works Cited1Parija Bhatnagar. Wal-Marts next conquest: Organics. Wal-mart targets the organic market. 2006. 7 April 2008 http://money.cnn.com/2006/05/01/news/companies/walmart_organics/Melanie Warner. A Milk War Over More Than Price. 2006. 7 April 2008 http://www.nytimes.com/2006/09/16/business/16milk.html?ex=1316059200&en=6858feb404e7581a&ei=5088&partner=rssnyt&emc=rss