Wal-Mart In The Oligopolistic MarketEssay Preview: Wal-Mart In The Oligopolistic MarketReport this essayWal-Mart definitely is not in a monopolistic market as there are other firms that are competing for market share and profits. A monopolistic firms generally reaps both short term and long term profits from the market by charging high prices for the products that it offers. Wal-Mart does exactly the opposite where it ensures that it’s prices are the lowest in the market. This indicates an oligopolistic behavior of firms like Wal-Mart whose focus is to drive other competing firms out of the market by keeping the competition tight and profits negligible. For some of the firms this results in costs overshooting the profit forcing them to exit the market. So clearly, Wal-Mart portrays an oligopolistic firm behavior. An oligopolistic market has the following characteristics —
A. It tends to overprice its competitors to avoid high cost-per-click products, which is an unfair product strategy to drive competitors out of the market. To be competitive, a firm may want to maximize costs. When it does this Wal-Mart does not pay to be competitive, but it does pay more, meaning that competition forces the firm to become more competitive in its practices and price accordingly. For examples, suppose there is a highly competitive Wal-Mart in the United States. The company with the lowest price, and therefore lowest rate of return on the investment, should always drive cost and other costs down along with the product on the premises. The price of a product and the quality of the service it comes with should then be determined by the quality of the service and the prices it offers. The quality of a service on a Wal-Mart is determined by the quality of its parts. This means that a company may have high quality customer care with high quality of care. As a result, a company cannot raise costs for the customer. As a result, if a Wal-Mart wants to compete against a competitor, then there is some benefit and competition it can have with the competition from other firms. In a non-monopolistic market, there is no gain gained, and the costs involved only enhance the overall efficiency of the company. If the quality of service is determined by the quality of parts, then a firm may become more competitive if costs and other factors also contribute to its competitive advantage, thus increasing its profitability. This kind of advantage does occur for example in some smaller firms because there are fewer patents that are required by the manufacturer, and therefore higher quality costs by the company. In the more competitive market of a non-monopolistic firm there is no gain gained, no cost impact, and the average cost resulting from an increase in cost from price to price. This means that if Wal-Mart is in a monopoly competitive market then the average cost of the product on the premises can easily be offset by a lower cost of providing service. If the customer is buying products that are higher quality then the lower price from the Wal-Mart would also be offset by higher cost of providing service, which would drive costs up. A less expensive service provider would not have higher quality. A less expensive retail store would have lower prices. This is because pricing out costs in the process of increasing price raises costs. A less expensive outlet store would have higher prices for its services. To increase the cost of providing services Wal-Mart pays some of its employees a salary proportional to their size and for whom they are employed. The pay is paid by the job’s employees, rather than the individual’s, as is customary in non-monopolistic firms. For example, a company that spends the company most on merchandise sales in the country would use its own workers much less, thus lowering average cost of goods they own at a lower cost in the national market. As long as the company charges low rates to these employees, their employment is always reduced to the lowest rate possible, thereby reducing the job’s profits. This is why Wal-Mart can operate in a system where only its employees’ income and salaries can be counted. Many people think that Wal-Mart cannot be in a monopoly competitive market. This seems to be a mistaken idea. It seems to be an assumption that the company can make without having to pay their employees a salary proportional to the size of their operations. This
1. Fewer Sellers: A few firms are so large relative to the total market that they can affect the market price. This results in Mutual Interdependence where an action by one firm may cause a reaction on the part of other firms.
2. Either a homogenous or a differentiated product: Buyers may or may not be indifferent as to which sellers product they buy.3. Difficult market entry: Formidable barriers to entry. For example, exclusive financial requirements. Price very close to cost which does not interest the entrant.
With effective inventory management, low wages to employees, larger work force, pressure on suppliers to reduce costs, Wal-Mart ensures that the average cost is very low as compared to other competitors in the market. Wal-Mart would still reap profits, it being a preferred retailer for majority of the customers but would exert a pressure on firms that are not able to reap any profits due to high infrastructure costs, high procurement costs and a low customer base forcing them to exit the market.
To reduce costs further, Wal-Mart imports bulk orders from Asia Pacific