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Essay on Wal Mart: Economic Analysis
The pricing behavior of firms reflects the structure of the market in which they operate. Market structure is defined with reference to:
• the number of buyers and sellers operating in a market the barriers, which exist to prevent new, firms from entering the market (or prevent existing companies from leaving it)
• the extent to which the supply of goods and services is concentrated in the hands of a small number of buyers (or, less frequently, the extent to which purchases are concentrated in the hands of a few buyers)
• the degree of collusion which occurs between buyers and/or sellers in the market.
Economists have developed a number of labels to describe different types of market structure. At one theoretical extreme is the model of perfect competition and at the other is pure monopoly. In practice, examples of the extremes are very rare, and most markets are referred to as being in a state of imperfect competition.
Before analyzing Wal-Mart’s corporate strategy, it is important to decide what business it is in. For example, if Wal-Mart is in the business of selling consumer goods such as TV’s, sheets, clothes, etc then it is pursuing a concentric strategy by entering the food business. However, this changes depending on how you analyze what business Wal-Mart is in. Wal-Mart is in the business of selling everything customers needed in their everyday lives.
This includes the consumer goods listed above as well as food-service items. Even still, Wal-Mart pursues multiple strategies. Concerning concentration, Wal-Mart continually finds more consumer goods to sell at its stores, which can take money from competitors. Additionally, when Wal-Mart entered into the food market, it quickly consolidated and held to good, saleable products. Wal-Mart never forays too far into a market and only sells what will make it a profit....
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