Muscling Manufacturers

Wal-Mart's power and influence are awesome," Smith says. "By figuring out how to exploit two powerful forces that converged in the 1990s -- the rise of information technology and the explosion of the global economy -- Wal-Mart has dramatically changed the balance of power in the world of business. Retailers are now more powerful than manufacturers, and they are forcing the decision to move production offshore."

"Wal-Mart has reversed a hundred-year history that had the retailer dependent on the manufacturer," explains Nelson Lichtenstein, a professor at the University of California Santa Barbara. "Now the retailer is the center, the power, and the manufacturer becomes the serf, the vassal, the underling who has to do the bidding of the retailer. That's a new thing."

To understand the secret of Wal-Mart's success, Smith travels from the company's headquarters in Bentonville, Ark., to their global procurement center in Shenzhen, China, where several hundred employees work to keep the company's import pipeline running smoothly. Of Wal-Mart's 6,000 global suppliers, experts estimate that as many as 80 percent are based in China.

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