Microeconomic Effects on Wal-Mart

1. Players Involved

Wal-Mart stores were incorporated in 1962 as Wal-Mart Inc and later become public in 1970. This monetary resource gave Wal-Mart the ability to launch a ten year long growth that led to the opening of over three thousand stores by the end of2005.  Sam’s Club warehouse and Wal-Mart International are organizations that function under the Wal-Mart Corporation. Growth of Wal-Mart stores has increased speedily recently by addition of new stores every time.  By 2007, the Wal-Mart Corporation’s entire retail stores were over six thousand units count all over the world. The growth of Wal-Mart stores has increased sales of the company. On the other hand, the growth of the business brought in a lot of controversies and conflicts. The company has attracted a lot of charges and lawsuits that have resulted into huge fines.

Some of the accusations that have affected Wal-Mart stores include environmental violations, child labor law violations, the use of illegal immigrants by subcontractors, and also poor working conditions for employees. The accusations have caused several side effects, such as Anti-Wal-Mart press. Other effects include communities rejecting expansion of Wal-Mart stores.  This kind of reputation issues has costed the corporation a lot of money throughout all their business segments.

The major trend associated with Wal-Mart stores is subsidized prices. Wal-Mart succeeds in the US market basically by selling products at low cost. According to investigations, there are other factors that have contributed to the success of the corporation. These are pricing strategies where Wal-Mart’s marketing strategy is to guarantee everyday low prices. This is meant to attract clientele. Wal-Mart has come up as an industry and market leader because it has been better at containing its costs. This has permitted Wal-Mart to pass on savings to its customers.  Wal-Mart has become a competence player with low wages products suppliers. Wal-Mart has benefited greatly, while still offering low prices to its customers.  Through the utilization of the world labor market, Wal-Mart found the least luxurious, most credulous conditions, with little worker security or rules to make massive profits.

2.0 Objectives and constraints

Even though Wal-Mart Corporation has benefited very much, it has also turned out to be the center of political issues. These are issues associated to trade, health care, the environment, discrimination, worker pay, and general business mal practice sentiment.  Many activists assert that Wal-Mart has broken antitrust regulations by use of power to micro control the market. The corporation has achieved this by carefully coordinating the actions of many of firms for a position above the market.  Officials at all levels have gained opposition against the company concerning Wal-Mart’s handling of hazardous waste.  On top of that U S political figures are pouring out against the Wal-Mart Corporation.  The company’s political action committees assistance to candidates has been sent in the past, a sign of objection.  This feeling has not only been developing countrywide, but in the vicinity as well.  Wal-Mart’s expansion in the past had had been hampered because of the bad reputation. This was as a result of their poor business practices (Barth, Caprio, & Levine, 2005).

The corporation has also been part of class action lawsuits.  For instance, lawyers alleged that Wal-Mart did not offer meal and rest breaks in agreement with California law.  A panel of judges ruled in goodwill of the plaintiffs. The jury gave them a total of 198 million dollars.  Female workforce in all of Wal-Mart’s trade stores and store clubs blamed Wal-Mart of involvement in a pattern and practice of grievance against women in job promotions, pay, training, and job assignments.  All of those accusation and lawsuits present ammunition for Wal-Mart’s antagonism to entail ongoing reputation damage (Davis, 2009).

3.0 Existence of Economic Players on the Constraints

While Wal-Mart is the principal company in the retailing industry, it faces powerful rivalry from other discount stores, such as Target and Costco.  Additionally Wal-Mart competes with local drug stores, assortment and specialty supermarkets, abundant of which are US chains.  Wal-Mart also rivals with internet based retailers and catalog businesses such as J.C. Penny.  Wal-Mart’s segments have strong competition from other wholesale club operators, catalog business, internet based and other suppliers. Wal-Mart Company is faced by major deliberate issues that must be correct in order to counteract its antagonism, add to future growth and in general increase in competitive advantage. Wal-Mart has turned out into the poster corporation of political issues.  The disadvantages Wal-Mart faces today are in fact not much diverse from what they have been in the past.

Although Wal-Mart is the country’s principal clothing retailer, it could be doing much better.  The company has not been able to encourage the American consumer that Wal-Mart is the place to get informal fashions.  It also has not been able to counterbalance its powerful antagonism alongside its competitors. Another of the corporation’s gainsays may be to stop growing nearly identical sets of developments each year.  The incessant challenges emerge as stuck in a constant pattern.  The complicatedness of increasing in local market is mainly because of community antagonism or geographic infiltration is also a necessary deliberate issue that must be corrected.  The firm’s recent plummet in sales revenue in the local market is a major tactical issue constrictive Wal-Mart’s monetary growth (Levine, 2005). 

Wal-Mart has to find an approach to draw the middle earnings shopper to step into Wal-Mart. It has to find a way that can achieve this without turning away its low-income shoppers in the process.  Wal-Mart is undoubtedly the principal retailer in the US.  It time and again puts the opposition out of business.  Consecutively, to diminish working costs and uphold low prices, Wal-Mart owns allotment and extensive information system. In addition, it has a well great customer service, and minimal costs arrangement.  Although Wal-Mart has great reward, Wal-Mart desires to progress in their associate manager association in order to keep on being the major and most influential retailer in the world (Levine, 2005). 

In the course of the realization and effectual implementation of marketing principles, Wal-Mart can decrease their off-putting image within local and national press, state and confined government and ecological campaigners.  The alteration from being an association with a bad status to one that has a first-rate standing can also help in the attraction of middle income shoppers to buy goods at their stores.  Investigation shows that Wal-Mart should begin a redesigning venture.  Wal-Mart should start the restructuring project by contribution of an inducement for central point income shoppers to draw them to their locations.  Wal-Mart can also bring a coffee succession with a style alike to that of Starbuck’s, present no cost internet service and also cater to customer needs.  Wal-Mart should also reserve their racks with clothing that will demand to the middle revenue consumer. This should be done while keeping inventory for little income shoppers as well.  That mix and expansion will be a high-quality beginning for Wal-Mart to redesign their image.The firm’s consumer service is might to the company. Therefore, Wal-Mart should try to advance it on a continuing basis.  This will produce customer loyalty and draw even more customers to buy products at their stores and perhaps at all other business areas as well. These methods reveal easy microeconomic decisions. This shows that when demand declines for speedy deliveries of goods, the company will not be affected.

Microeconomic theory holds that, for a firm to compete, a price decrease should augment demand. If the price of a firm's product is reduced to less than what competitors are selling for, then hypothetically, the firm's products would sell more than the competitors. It's rational to suppose that these are the factors of discussion at the uppermost organization levels of the company. When the executives of the firm meet to make a decision on this issue they should consider all the microeconomic effects that will affect the company. Another decision to be made is the quantity of the products to be produced and the price tag they will assume in the market. The sales executive in charge of marketing and advertisings should be able to answer the questions such as what will happen if the firm increased its marketing and advertising budget. The officer should know effect on the increase in marketing and advertising of the products. This will enhance the firm’s ability to meet or beat the competition. Microeconomic research data has shown that in some cases a dynamic advertisement campaign is often a successful way to win the competition.

Another important factor that should be put into consideration is the nature of the economy that will eventually impact on performance of Wal-Mart stores.  If the economy is good at the moment, but chief economic indicators forecast a fall in future large percentage at the time of a company’s yearly sales occur. When the economy starts to slide during the low season, there should be plans to ensure the company sells the products at a lower price than the rivalry, maintaining a benefit that would be lower than the prior year, and attempt to reorganize its debt at an additional constructive term (Shleifer & Vishny, 1998).

Even though the economy in general is colligated by macroeconomics, its effects on the micro economy must often be taken into consideration in the decision making procedure. Some variables and other unknown factors that will impact on Wal-Mart may include a consumer aspiration for something new in the market. They may curiously tire of currently available products and prefer other products. This will cause some dead stock and surplus for the Wal-Mart stores and can be easily rectified by market research and keeping up to date with customer preferences (Shleifer & Vishny, 1998).

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