Abstract
This is a research paper that aims at performing economic analysis of the Walmart Incorporation. There is exclusive consideration of various conditions that make the company the best retailer around the world. Walmart is a company with exclusively strategic abilities to fetch massive benefits. The company executes retail services in different parts of the world. There is extensive evaluation on the strategies that the company uses to ensure it remains significant in the industry. The forces in the industry are very useful in defining the ability of the company to withstand pressure and act accordingly. The economic forces of demand and supply are critical as they define the direction of operations in the company. Competition and products of operations are considered vital in the analysis as they help in explaining various situations that are core for excellent economic findings. In conclusion, recommendations will be evaluated to define the extensive changes that would define success of the company in the highly competitive industry.
Introduction
Walmart is a multinational corporation from the United States running chains of large discount department and warehouse stores. In 2014, the company was recognized by the Fortune Global 500 as the largest public corporation in the world. The company is also the biggest employer as well as the largest retailer in the globe. Sam Walton founded the company in 1962. In 969, the company was incorporated while it began its public trade on the New York Stock Exchange in 1972. The headquarters of the company are in Bentonville, Arkansas (Lusper, 2012).
WalMart engages in a variety of activities. The success of the company mainly lies on its exposure to exclusive success on the chain of supermarkets it operates. It has different sizes of super markets from mini-supermarkets to mega supermarkets. Walmart operates approximately 1100o stores in 27 countries. According to the Fortune Global 500, the company owns the largest grocery store around the world. The company gets into dealership with various companies within its operations’ regions. It becomes the main retailer of the company’s products. The company likes to trade in popular products. Trading with the popular products makes it easier for the company to pursue and obtain exclusive share in the competitive retail market (Lusper, 2012).
Its retail trade is not only for a specific group of products. Instead, the company deals with a range of products. Through this strategy, the company succeeds in acquiring a wide market since there are more people in consumption of the goods of the company. A wide customer base is an assurance of exclusive performance. This is the main reason why Walmart remains the most competitive player in the retail industry (Lusper, 2012).
Walmart is a crucial player in the global retail business. Therefore, its operations are critical among different people. The first critical elements are demand and supply. The two business concepts go hand in hand. They influence the status of each other. Lately, there were concerns over lower supply than demand. The number of locations within which the company operates has been major cause of the extensive demand that does not match the supply. This is an extremely discouraging moment since it becomes difficult to satisfy customers who the most critical asset of a company. The company is becoming famous around the world from time to time. This is confirmation that demand will continue to grow and the company will have to undertake all the necessary initiative to suit the high demands (Lusper, 2012). The company trades the most popular products, which further dictates that the company has high demand.
In line with the company operating with the most popular products in the market, the supply of the products may be at stake. In most cases, some of these most common or famous products are rare to get. They require exclusive efforts and they may demand more time and money to satisfy. An organization does to have adequate strategy to obtain them at the right time. Traders gamble on ensuring that these products are available for the business. As a result, there is exclusive decrease in supply levels in the company. The suppliers have become unable to meet the high demand for company’s products (Lusper, 2012). This is major imbalance in trade for the company. This is among the main challenges that the company tries to eliminate.
Elasticity of demand
Walmart operate in an extremely competitive market and it requires exclusive measures to influence the decisions made by different customers. This means that there should be excellent strategies to tackle the issue of demand. The company has to define proper ways of attracting customers and sustaining them in the line of business. The price of a commodity is an essentially critical element and it must be taken care of accordingly.
The company mainly operates in perfect price elasticity of demand. This is a point where the demand of the products mainly depends on the price of the commodities in trade. Walmart is a company that is exceedingly friendly to the employees. It believes in charging low prices for its products in exchange for high number of sales. The company has a succeeded in this strategy and it has fetched exclusive sales and profits in the trade (University Alliance, 2013).
In the past, there have been allegations that the company operates in inferior goods but that has not been the case. The company has exclusive respect for the needs of the customers and trades in high quality goods that suit the needs for the customers. Despite being the most success retailer around the world, Walmart does not overcharge its customers. Instead, it charges favorable prices to sustain the customers and attract others who may wish to enjoy their superb services (University Alliance, 2013). This makes the company to remain successful in its operation. Perfect price elasticity is useful tool to any company that wishes to succeed in the given field.
Costs of operation
Walmart is not a manufacturing company. Therefore, it may not necessarily incur production costs. Its costs of production may go to the retail business that it engages. The company does not produce the goods that it sells. Instead, it acquires them from the producers for sale. At this point, the company has to pose exclusive challenges in negotiation for excellent prices that will reduce the cost of its operations (University Alliance, 2013). This is the main formula it uses in fighting for extremely low prices.
With low prices for the products that it aims to sell, the company will be able to meet the high costs that will be in place. The company also pushes for allowances that will ensure that they do not incur costs such as carriage and holding costs. They prefer a situation where the business partner issues such services or delivers the goods to Walmart’s premises and carries out the necessary arrangements to ensure Walmart is relieved off any burden (University Alliance, 2013).
However, the company cannot evade cost completely. It must incur some expenses that will count in its cost accounting activities. For example, the company has to incur the cost of offloading once the supplier delivers the goods to its premises. This is a major cost and it must be considered critical in the cost analysis of the company. Also, the company incurs the storage cost which is another very high and critical cost. It defines the stock that the company operates in. the company has to ensure proper recording of these costs since they may be highly cumulative in the long run. Also, while in the stores, the company incurs costs of insurance, which are supposed to ensure the safety of the goods (University Alliance, 2013). Under proper storage, and insurance the company will have taken care of the massive risks, which may be highly expensive to the company if they were left unattended.
Competitive advantages
For the company to edge competition from its competitors, it has to fashion excellent measures, which act as the competitive advantages of the company. There are strongholds within which the company operates and they remain unique to the company in bid of its activities.
The first competitive advantage of Walmart is operation in exceedingly many regions around the world. This is a strategic move and advantageous for the company compared to the competitors. To risk analysts, this strategy may refer to the spread of risks. The company enjoys the economic status of different countries thus; the poor status of one economy cannot affect the status of the other giving massive returns on economically friendly regions. Many companies find it expensive to operate in different parts of the world (University Alliance, 2013). It is an expensive move and may require a lot of money to operate.
Also, the company operates through the price elasticity demand. The company has perfect system that ensures that its products are favorably lower. This is encouraging to consumers and they will always flock in the business premises. Customers will always look at the points where they are saving, which is the case for Walmart. The company ensures that the prices that it charges are friendly and correspond to the quality of the product (Meeks & Chen, 2011).
Walmart, sells the products of the highest quality. The company believes in total satisfaction of the customer, which will occur once he or she obtains quality goods. While looking for suppliers, the company goes for highly competitive suppliers who will always give quality products. Therefore, companies have to remain attached to the merits of the company (Meeks & Chen, 2011). This extends the success of the company in the highly competitive industry.
Entry barriers
The industry within which Walmart operates is highly competitive. It requires massive effort to operate in and every player has to be extensively strategic to carry the day during operations. Since it is a highly profitable industry, many investors would wish to invest in it. However, it is not always easy to command excessive operations since certain conditions have to be met (Meeks & Chen, 2011).
The first barrier is the quality of goods. The industry emphasizes on high quality goods. This being a consumer industry, the quality of the goods that are sold to the consumers have to be of high quality. They must be healthy for human consumption. Therefore, whenever a company seeks to operate in the industry has to show the willingness to trade in quality goods that match the needs of the customers (Meeks & Chen, 2011).
In addition, the industry has to ensure the existence of proper pricing strategy. The company charges prices within the given range by this technique. The industry offers an outstanding range within which companies should frame their prices. This is a major barrier for companies that may be willing to gain entry to the industry with the idea of exploiting the customers with exorbitant prices. This is an assurance of success for companies that are willing to comply with the given prices (Lusper, 2012).
Barriers may also be because of the regions within which one seeks to operate his or her business. Countries have different barriers based on the kind of business. There are barriers in terms of ethical standards, cultural practices, and licensing activities. Companies have to show respect for the rules of different nations as they may act as barriers to their entry (Meeks & Chen, 2011).
Substitute goods and services
Since Walmart is not a manufacturing company, it would be hard to talk of substitutes. However, there may be discussions on the kind of services it offers, and how competitors may substitute them. The company offers retailing services, which have gained exclusive fame around the globe. However, the company may prefer other services, which would prove to be of better gain than the current ones. There have to be exclusivity in derivation of significance of certain goods or services (Lusper, 2012).
The company may choose to operate on wholesale services. This is a substitute service for the company. However, the substitute does not count on exclusivity in service delivery. Through this form of service, the company is unlikely to reach most of its retail customers. Since this is the base of the success of the company, it will have to lose the ground and focus (Lusper, 2012).
Also, the company operates grocery retail points. As a substitute to the business, the company may begin operating cereal outlets. This is exclusive challenge and may pose threat to the success of the business. The company has set many grocery outlets in the United States and other parts of the world (University Alliance, 2013). The success of the business would be void if the system of grocery changes to a system of cereals.
Market share for firms in the industry
This is useful in defining the economic rank of the companies in the industry. It is also the perfect definition of the main competitors of Walmart. It is recognizable that Walmart is the best retailer in the world according to the Fortune 500. The company has sustained its position following its skillfulness in defining the attractive performance. Although, the company offers extensive services in retail business, it faces tremendous competition from companies, which show their prowess in a bid for excellence in the industry (Meeks & Chen, 2011).
The second best company in the United States in terms of trade is Target Incorporation. The company is the main competitor of Walmart. However, according to the Fortune 500, Target is 33rd best retail company in the world. The company operates a chain of stores, which do not match the current position of Walmart. This is an extensively competitive company to Walmart since it offers similar products. However, more effort would be required to match the performance of Walmart. The company went abroad in 2011, showing the massive efforts it has to undertake to suit competition of Walmart around the globe (Lusper, 2012).
The other company, which is the third best in the United States, is Dollar General. Although, this company operates in the supermarket industry, it is critical in fashioning competition to Walmart Company (Lusper, 2012).
Market structure
The company operates in a perfect market structure. This market structure defines easy entry and exit to the industry. A closer view to the operations of the industry, there no extensive barriers that would prevent entry of other companies to the industry (Lusper, 2012).
This market structure allows free flow of information among the competitors. This indicates that Walmart and its competitors have equal opportunities through access of information that would be vital for their operations. Information is a major asset for any company and there must be the willingness to enjoy the available information (Lusper, 2012).
The other character that is evident in this market structure is existence of homogenous products in the industry. It has been observed that Walmart and Target companies operate with homogenous products. This is perfect representation of what happens in the industry.
In addition, a large number of buyers and sellers are observable as unique characteristics of perfect competition. This is verifiable through the ability of Walmart Company to operate an exclusively wide retail market (Lusper, 2012).
Recommendations
Although, Walmart is the best company in the retail trade massive efforts must be undertaken to ensure the company remains relevant. There must be exclusive efforts to extend the lead in the industry. There must be significant difference between the company and its competitors.
One of the suggestions that would be exclusively fundamental to the company is to hire highly competitive managers for the different branches of its operations. This way the company will be sure of efficiency, and success will be a guarantee. The company will be able to monitor perfection through employment of excellent skills to evaluate situations.
Also, the company would consider mergers as a solution to extensive competition. This will help the company enjoy a wide market share and may give ample ground for dictating activities of the industry. Through mergers, the company would be able to operate in an exclusively wide range of activities that may help it towards excellence.
For the company to dictate the industry, it needs to consider manufacturing processes. This will help the company have some of the products at slightly lower prices since no massive costs are involved. This is an outstanding strategy to edge competition in the industry.
Conclusion
Walmart is the best retail trader in the world. The success of the company is because of the exclusively reliable system set aside for it. The company edges its competitors through possession of exclusive competitive advantages. This possession of exclusive merits compared to the competitors. The main competitors of the company are the Target Company and the Dollar General Company. The companies have fashioned exclusive competition that is significant to the performance of Walmart. The company operates in a perfect competition market, where there are reasonable entry condition, numerous buyers and sellers, and existence of homogenous products. However, the operation of the company may be improved through consideration of recommendations such as mergers, and hiring of professionals.
References
Lusper, G. (2012). WalMart Analysis.WalMart Analysis. Retrieved June 14, 2014, from http://www.slideshare.net/lpmontesa/walmart-analysis
Meeks, M., & Chen, R. J. (2011). Can Walmart Integrate Values with Value?: From Sustainability to Sustainable Business. Journal of Sustainable Development, 4(5), 35-46.
