4

Economicsof the Firm

Economicsof the Firm

Wal-Martis one of the largest retailers in the modern world. Over the years,the company has established itself as the most respected and valuableAmerican brand. Consequently, it is the largest employer globally,with over 2.2 million employees and thousands of retail stores,majority of which are located in the United States (Baines, 2014).Although there are other giant retailers in the market, Wal-Mart hasbeen the dominant player. Based on the arguments in the article“Wal-Mart’s power trajectory: a contribution to the politicaleconomy of the firm” by Joseph Baines, the retailer in whichWal-Mart operates can be considered to be an oligopoly.

Accordingto Baines (2014), Wal-Mart is the largest corporation in the world. Thus, the company has immense resources that are invested marketingand the supply chain. Consequently, smaller retailers are unable tocompete with the few giant chain stores creating an oligopoly marketstructure. These sentiments are supported by Marcilla (2014), whoillustrated that due to the nature of the giant retailers and theirfinancial power, small retailers are finding it difficult to competein the market. Their economic power allows them to saturate themarket with retail outlets. I agree with the fact that the massiveresources of the big retailers can lock-out potential competitors.

Thesecond point by Baines (2014), which indicates that Wal-Mart’smarket is an oligopoly, is its control over the suppliers. Forexample, the retailer can squeeze the manufacturers and manipulatethem due to its economies of scale. The assertion is supported byJack (2011) who argues that due to the scale of its operations,Wal-Mart has evolved into a market regulator. I agree with thisassertion because Wal-Mart buys in bulk, which has an influence onthe operations of its suppliers. Consequently, it has a higherbargaining power on prices, quality and supply schedules.

Thethird point by Baines (2014) is that Wal-Mart has been able toacquire significant market in the United States and other parts ofthe world. It is estimated that 96 percent and 65 percent of theAmerican population lives within twenty and five miles, respectively,from a Wal-Mart outlet. The point is supported by Arli et al. (2013)who argue that Wal-Mart success as a retailer has made it popularamong Americans, making it one of the greatest American brands. Iagree with the fact that Wal-Mart has a huge influence on theAmerican retail market.

Theretail market in which Wal-Mart operates can be considered to be anoligopoly. I am in agreement with Baines (2014) arguments. Over theyears, few major players have accumulated enough resources thatenable them to control the marketplace. Consequently, smallcompetitors find it difficult to complete in these markets.

References

Arli,V. et al (2013). Woolworths Australia and Wal-Mart Us: Best PracticesIn Supply Chain Collaboration. Journalof Economics, Business, and Accountancy Ventura,16(1), pp. 27-46.http://s3.amazonaws.com/academia.edu.documents/36714762/scm_kolaborasi.pdf?AWSAccessKeyId=AKIAJ56TQJRTWSMTNPEA&ampExpires=1467645101&ampSignature=Ovvus4r%2Fr%2BlbjuCQaLx5xOToCZM%3D&ampresponse-content-disposition=inline%3B%20filename%3DScm_kolaborasi.pdf

Baines,J. (2014). Wal-Mart’s Power Trajectory: A Contribution to thePolitical Economy of the Firm, Reviewof Capital as Power,1(1), pp.79-109.

http://lha.uow.edu.au/content/groups/public/@web/@lha/@hasi/documents/doc/uow168108.pdf

Jack,N. (2011). The real Walmart effect? Retailer is de facto regulator ofmarket. AdvertisingAge,82 (10), pp. 1

http://connection.ebscohost.com/c/articles/59228433/real-walmart-effect-retailer-de-facto-regulator-market

Marcilla,L. (2014). Businessanalysis for Wal-Mart, a grocery retail chain, and improvementproposals.Southeast Missouri State University.https://riunet.upv.es/bitstream/handle/10251/44289/Business%20analysis%20for%20Walmart%20FINAL%20TFC%20Laura%20Barber%C3%A1%20Marcilla.pdf?sequence=1