Differentiating Between Market Structures
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Differentiating Between Market Structures
Wal-Mart has been shaking things up in America through micro economics ever since Sam Walton opened his first store. Wal-Marts market structure is similar to most large corporations in that they are an oligopoly. According to Colander (2010), “An oligopoly is a market structure in which there are only a few firms and these firms explicitly take other firms likely response into account when making decisions.” Being there are only a few Oligopolistic firms, they are co-dependent of one other and can be either collusive or noncollusive. Their co-dependency is what differentiates them as an oligopoly rather than a competitive monopoly.
Stores like Costco and Target are seen as the competition for Wal-Mart because they have similar products and offer similar services to the consumer. Most enthusiastic consumers will compare quality and the price and will pay for the item that offers us the best quality for the price. A result of this competition is what is also referred to as sticky prices.
Sticky prices are the outcome of an informal collusion behavior and compares to a kinked demand curve as to why companies do not lower prices to sell more than their competition. Their competition will meet their price by either increasing or decreasing their price, which will eventually trigger a kink in the demand curve. This kink causes the marginal revenue curve to have a gap and is resultant from the theory of sticky prices (Colander, 2010).
If Wal-Mart would increase their retail locations internationally and limit the retail locations they open nationally they would increase their profits. Wal-Marts balance sheet indicates their international development has played an important role to generating profits during difficult economic situations. Most countries cost of living is lower than what Wal-Mart is used to. Operating cost and decreased salaries abroad boost up sales while increasing revenue.
By data mining sales to determine the market share for any given location, Wal-Mart could increase their profits in the long run. The data would be used to arrange a display of products for sale at a location while increasing the amount of sold items. For the short term, this approach would cost Wal-Mart time and money but in the long run it would produce more sales increase customer satisfaction.
Wal-Mart can also support in maximizing revenue. This approach involves the stability of the labor market in all the locations where they operate and shifting where the labor market stability would require modifications to the supply and demand of labor. Market stability cannot exist without supply or demand. If Wal-Mart takes advantage of adjusting the variables by expanding open locations into super stores and shutting down other specific locations, they lower operating cost and raise market share. This approach would eventually