Eco 365 Economic Market Structure - Differentiating Between Market Structures

Differentiating Between Market Structures

Craig E. Henry I.

ECO/365  

March 7, 2016

 Lori Geddes

Differentiating Between Market Structures

In the industry of retail trade, manufacturing, and sales distribution, companies that understand the consumer market and competitive market will be able to adapt and ensure their businesses' vitality in the midst of competition. Wal-Mart is currently identified under NAICS Codes 452112 as a Department Store firm that relies on the sale of their revolutionary one-stop shopping model (Wal-Mart Stores (wmt), 2016). Fajardo (2010) “Wal-Mart is an American public corporation that runs a chain of large discount department stores. Wal-Mart is the largest public company by revenue according to the Fortune Global 500. The company was founded in 1962 and employs approximately 2.1 million people” (para. 1). Currently, they are one of the leaders in business retail and consumer sales by utilizing many technological innovations and savvy business evaluations to catapult themselves in the commercial market. Through their growth and development, Wal-Mart has several elements that influence retail stores’ market structure and strategies.

This paper shall discuss and identify microeconomics concepts linked to Wal-Marts’ competitive strategies. Explain Wal-Marts’ market structure in which they compete, and review the level of competition they face if they engage in oligopoly, perfect competition, monopoly, and monopolistic competition market structure. Next, discuss several competitive strategies, and evaluate the effectiveness of Wal-Mart’ strategies in their current market structure. Finally, create and provide recommendation relate to their strategies to maximize maximizing profits and organizational value in the market.

Wal-Mart and Level of Competition in each Market Structure

The rise of large retail chain businesses like Wal-Mart, Target, Costco, and so forth has transformed and evolved the way people shop for products and services. Some small business retail stores are becoming irrelevant in this current economy, due to one-stop shop discount retailer giant stores (Newman & Kane, 2014). Wal-Mart market structure is identified as an oligopoly market structure. To further understand why Wal-Mart would receive this oligopoly market structure classification, let’s review some features of an oligopolistic market structure. Oligopoly markets structures are comprised of several firms that compete in the same market industry, but there are a few companies that can earn a profit over or above in a more competitive industry (Ruffin 2009). Wal-mart is also a capital-intensive retail discount store industry which has the tendencies or characteristics of being oligopoly market structure. As it relates to the barriers to entering this market, barriers to entry are limited due to information cost, patents, franchises, and economy scales (Ruffin 2009). These sorts of entry barriers to entry impede and inhibit new competitors from entering the market.  Wal-Mart's only real competitor in their market are Target, Big Lots, Dollar General, Costco Wholesale Corporation, Best Buy, Game-Stops, Sears Corporation, Coulomb Technologies, Apple Inc., Netflix, Publix Super Markets, and Kroger’s.  Primarily, these are competitors because of their demographic accessibility for consumers and specialty product concentration. Although Wal-Mart has competition, the industries’ competitors are not diversified with multiple goods and service, which limits competitors.