ECO/365

Topics: Supply and demand, Cost, Monopoly Pages: 10 (2046 words) Published: August 25, 2014


Current Market Conditions Paper
ECO 365
University of Phoenix

Introduction
In a society that has seen such a drastic downturn in the economy, people are searching for the best possible bargains they can find. People across the United States are looking for ways to save money; thus, searching for stores that will provide them with everything they need at a lower cost. Companies all over the United States are fighting to stay competitive and are seeking ways to restructure their company and still provide for consumers the best possible prices. Companies such as Wal-Mart do not have to change their structure to fit the demands of consumers because it already offers its customers brand name items at lower prices. Wal-Mart’s basic structure has helped make it a powerful retail business, and a place consumer’s love. Market Structure

Wal-Mart Stores Inc. opened its first discount store in 1962, Sam Walton had no idea his business would be the success that it is today. The reason for Wal-Mart’s success is their ability to create a basic structure for their business. Wal-Mart offers a variety of well-known brands and sells them at about 5-10% cheaper than other retailers. This makes Wal-Mart a powerful force in the retail business. Wal-Mart Stores is considered an oligopoly market structure. Colander (2008) defines oligopoly as a market condition in which sellers are so few that the actions of any one of them will materially affect price and have a measurable impact on competitors. With their continued success, Wal-Mart’s market structure could also be considered a monopolistic competitive structure. Wal-Mart has all the characteristics of a monopolistic competitive structure as described by Colander (2008), they have many sellers, offer differentiated products, and they exhibit multiple dimensions of competition. Wal-Mart’s success lies in their product differentiation through advertising. Although advertising has a wide range of costs and benefits, it is common with differentiated consumer products. There are various forms of advertising, such as, television, radio, direct mail, billboards, etc. Wal-Mart’s ability to advertise their products with minimal cost has increased their longevity in the world’s market. Wal-Mart uses advertising to foster competition by giving more information on pricing and availability. Wal-Marts’ advertising strategies reveal a signal of quality; because their willingness to spend money to advertise products is a sign that Wal-Mart has confidence in its quality. This makes it easier for consumers to purchase products from Wal-Mart even if the content of its ads is minimal. Impact of New Companies Entering the Market

Currently, there are over 7,800 Wal-Mart stores worldwide and they are in 16 different markets throughout the world. Throughout the company, Wal-Mart employs over 2 million people and serves over 100 million customers a year. Any new company who wants to enter in the same market as Wal-Mart needs to be careful. With the reputation that Wal-Mart has established, they take much of the business away from other companies. As for those other companies having an impact on entering the same market, it will be minimal or non-existent unless the new company is specialized in something that Wal-Market does not offer. Now that Wal-Mart is branching out into other areas of the market, such as groceries, it is going to have a bigger impact on smaller local grocery stores that are in the same area. Prices

Wal-Mart consistently advertises their low prices. When consumers visit Wal-Mart’s website or the store in person, they do find the prices at Wal-Mart to be more competitive. An advantage of Wal-Mart’s low prices is that it helps to keep the prices low of other competitors in the market. Consumers also find this store to be very convenient. Since many of Wal-Mart’s locations are becoming super centers, people can do most of their shopping...
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