Paul Kahler, Dawn Smith, Sean McClintock, Danny Truong
University of Phoenix
ECO365/Principles of Microeconomics
October 25, 2010
Wal-Mart: Current Market Conditions
Market trends in the retail market are not difficult to track. “Any major initiative Wal-Mart undertakes has enormous supply chain implications worldwide” (ThomasNet News, 2010). The analysis for this paper is to look at the approach of Wal-Mart in a very competitive industry and examine how Wal-Mart is so successful. Some of the areas that will be examined are the Market Structure, the impact of new companies entering the market, prices, productivity, and cost structure, price elasticity of demand, competitors, supply and demand analysis, and impact of government regulations. When locating new stores, Wal-Mart tends to first look at more rural areas where there is less population, a higher income and where consumers are less likely to travel to larger cities. This may be due to the economics of the region or the size of city in which they propose to occupy. The company’s market is the same market as Target and K-Mart. The company’s growth will in all likelihood cause other smaller retail businesses to fail. New firms entering the market will continue to drive Wal-Mart’s prices lower. The impact of new companies entering this market would affect pricing indifference between companies. “Wal-Mart is the world's largest retailer and second largest corporation. It is the largest private employer in the United States and Mexico. Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, and the largest toy seller in the United States, with an estimated 45% of the retail toy business, having surpassed Toys "R" Us in the late 1990s. Wal-Mart has 1,929 stores which as of 2005 sales figures totaled about $155 bilion in sales. Wal-Mart’s revenue as of 2006 was an estimated $315 billion USD, net income $11.231billion USD, and employs more than 1.8 million employees” (Information Food Source, 2006). Wal-Mart’s major competitors in the grocery market are the Kroger co. #2 in annual sales, Albertsons' Inc. #3, Safeway, Inc. #4, and Costco Wholesale Group #5. Now even though Wal-Mart is leading the way in total sales the #2 and #3 businesses lead the way with total # of stores. The Kroger Co. has 3,302 with Albertsons at 2,476 stores nationwide. Wal-Mart’s total sales for that year alone were beating its 2nd place competition alone by more than 80 billion dollars. Wal-Mart’s major competitors in low-end general merchandise department would include Sears Holding Corporation', the slowly diminishing K-Mart chain, and Target whose trying different approaches including building Super Target stores to compete with the Super Wal-Mart. With Wal-Mart moving into the grocery business it has put a strain on grocery retailers also including: H-E-B, Kroger, Albertson's, Publix, Giant Eagle, Safeway, Winn Dixie, Food Lion and Save-A-Lot. Wal-Mart’s CEO Lee Scott in 2005 embarked on an energetic campaign to revive the company’s image. He installed Eduardo Castro-Wright to overhaul operations in America. Who remodeled 1,300 shops, modified merchandise and cut prices. Wal-Mart has had a number of suits filed against if for unfairly paying the female employee’s, not promoting the female employee’s fairly, placing them into positions where they can not advance, and paying them less than their male counterparts. Wal-Mart, Wally World or what ever the public wants to call wants to call it does not change what it is: A corporate machine that has made a major and horrific impact on the global economy. Wal-Mart has been accused of denying benefits, working employees off the clock, and denying them rightly earned over time pay. They also have exploited suppliers and been associated with monopolies. These are reasons that Wal-Mart,...