Wal-Mart was incorporated in 1969 and started trading publicly at the New York Stock Exchange from 1972. Wal-Mart has its headquarters in Bentonville, Arkansas. It is ranked as the biggest American grocery retailer and private employer today. In the year 2009, it had over a half of the $258 billion sales within the U.S. from its grocery business. In addition to the stores, the company owns Sam’s Club Retail Warehouses found in North America (Hitt & Hoskisson, 2009).
Supply and Demand
The impact on consumers in perfect competition is good. Perfect competition may be a fantastic concept. However, theoretically, following the laws of supply and demand, it follows typical consumer behavior. For example, if the products are priced high, the consumer demand will decrease and vice versa. The price elasticity of demand is high here. On the other hand, in monopolistic competition, the game is about the perception of the price (Lynch, 2009). With less visible differences between the products, consumer’s choice of products in the market depends greatly on the ‘perceived’ differences in the products. Firms may alter prices as long as the customers perceive value in the higher priced product or service. In addition, here, consumers can have a great advantage when competition intensifies (Hausman & Leibtag 2005). Lastly, in an oligopolistic competitive environment, the case is similar to the monopolistic competition’s ramifications for the customers. However, differences occur due to the lack of competitors and the presence of greater financial value attached with the products. Consumers thus, display a more involved behavior and their perceptions have an even bigger impact on the purchase. Here, the difference in price may be starkly high.
Economies of scale
Wal-Mart having become so large determines the policies that suppliers will be subjected to when supplying to them. This is when business is so big and they can dominate how others work. Countervailing power back then would be perhaps termed Ida Tarbell and the Trust-busting policies as a result that the media exacted about on the Industry for its excesses. In societies today, anti-trust laws ensure that such situations do not arise. If Wal-Mart for instance were found guilty of abusing their power and subverting natural economy, they too would be curtailed by the heightened social consciousness of this age.
The margins on consumable good are half or less than half that of the margins on consumable goods. Additionally the buyers of consumable goods often end up buying something that belongs to the consumer sector. Scale has been a driving factor for profits, but it is also to be divided to include the power of scale while securing good buys in terms of merchandise from producers. Wal-Mart and other stores may have higher volumes of branded merchandise but in an increasingly bargain conscious market it is inevitable that the Wal-Mart will have an upper hand on its competitively priced consumer merchandise (Wal-Mart Corporate, 2008).
Additional growth in terms of geographic expanse while eliminating badly performing stores is the right way to go as Perdue argues, however a diversification of the product lines could perhaps help resuscitate flagging stores. An analysis of competitors in these areas may throw light on why the sales have dropped, after, which a decision as to whether a change in product line, or shutting shop, is the most viable option. Cash checking and wire transfer can be a too dramatic change of product mix for the Wal-Mart; the presence of bigger names in the industry with considerable expertise and social standing in the market may hinder the profitability of such a move. In line with the family centric orientation of the Wal-Mart, it is perhaps wiser to diversify product range within the confines of merchandise; one effective measure would be to include higher end luxury goods to offset the competitions. Acquiring production of merchandise to be sold may be a redundant move because good purchasing power can still command economy of scale. International expansion may be a great move in line with consolidating market presence and profitability but will require extensive market analysis and expertise in arriving at a mix most suited to the target market (Ferrell & Hartline, 2008).
Wal-Mart’s international is growing. The company is renowned for its low prices compared to other retail outlets where its warehouses are. It uses this low price strategy to win many customers and as a way of overcoming competition in the market. Wal-Mart is not necessarily the cheapest retail store. However, it has managed to portray an image of the place to get the best bargains. For this reason, it has managed to be among the global leaders in retail marketing even during hard economic times. Wal-Mart is among the largest companies because of its large network of branches in many places globally. Apart from the sale of its products, employment rate and employee motivation at Wal-Mart is also much advanced compared to many other chain stores in its industry (Marquard & Birchard, 2007).
Wal-Mart’s international strategic approach is that of consolidation which remains as an aggressive expansion generally. Expense control is also pursued at all times and in all branches and subsidiaries. Nevertheless, several challenges remain in its international strategy, chief of which are distribution, merchandise, operations, competition and seasonality of its international operations. Wal-Mart mitigates these challenges through a culture of total quality. Through this, it enables to deliver quality and commitment through the low operational costs. This is in addition to ensuring that the costs of its products always remain far below those of its competitors. Even so, recruitment challenges such as discriminatory recruitment of child labor and health insurance inadequacy for its employees remain.
Ferrell, O. & Hartline, M. (2008). Marketing strategy. New Jersey: Cengage Learning.
Hausman, J., & Leibtag, E. (2005). Consumer benefits from increased competition in shopping outlets: Measuring the effect of Wal-Mart. Web.
Hitt, M. & Hoskisson, R. (2009). Strategic management: Competitiveness and globalization. (8 ed.) Westport: Greenwood Press.
Lynch, M.C. (2009). Hoover’s handbook of world business 2009. (16th ed.) Austin, Texas: Hoover’s Business Press.
Marquard, W. & Birchard, B. (2007). WAL-Smart: What it really takes to Profit in a Wal-Mart World. New York: McGraw-Hill.
Wal-Mart Corporate. (2008). Fact Sheets. Web.