Market Trends for Walmart
a. Market Structure
Walmart is a US
company that operates a chain of large discount department stores. It is a
public corporation which competes with other private companies in the
market. Since its incorporation, the
company has enjoyed protection from the government and this has created
abnormal profits to the company. When the government reduced some of the
barriers for entry into the industry, many firms entered and created a lot of
competition to the company. There are domestic and foreign companies which have
entered the market to share in the profits made by Walmart. To react to the
increasing competition, Walmart has opened a large number of retail stores in
the country and in other countries. It applies low pricing strategy to compete
in the market. Current technology in online retail marketing has been adopted
by the company to capture a large number of customers (Kabel, 2006).
b. Impact of new
companies entering the market
The abnormal
profits which have been enjoyed by the company have attracted many other firms
in the market. Other firms which have entered the market have created a lot of
competition to the company and this will decrease the profits made by the
company. When companies make abnormal
profits, other companies tend to enter the market, on condition that it is a
free market economy. This reduces the profits made by each firm and normal
profits prevail. As more firms enter the market, losses may be made by the
companies due to increase in competition. Walmart has experienced the effect of
other companies penetrating the market. Some of the stores which had been
opened in Germany were closed due to the high competition in the market. Germany practices an oligopoly market
structure and the firms in the market used low price strategy similar to that
of Walmart. This created intense competition and Walmart had to close some of
the stores which had been opened. Walmart has been reported to have poor
customer service delivery. This has been caused by the poor employee motivation
as well as the low remuneration packages rewarded to the employees. This has
caused the employees to perform their duties poorly.
The increase in the number
of companies entering the market will cause the company to improve the quality
of the services delivered to the customers. Employees will have to be motivated
so that they can improve their services to the customers (Kabel, 2006).
c. Prices
Walmart uses low
pricing strategy to attract more customers. This has increased competition in
the market and many similar companies have raised alarm over the low prices
offered by the company. However, the company may be unable to decrease the
prices to a given level to the cost factors of production. With time, other
strategies will have to be adopted to increase competition in the market. When
prices cannot be decreased below a given level, firms use other marketing
strategies to compete in the market (Kabel, 2006). Some of the strategies are
increase customer loyalty, improved brand quality, improvement on the delivery
of the products to customers, changes in the mode of advertisements and product
promotion, and other strategies. In a free market economy, the firms have the
freedom to compete until the market system settles on a certain price-the
equilibrium price. At the equilibrium price, both the customers and suppliers
are satisfied. Any increase or decrease in the price will create market
instability (Knoedler Underwood, 2003).