Everyone has been to Walmart at least once or have heard about them before. Its presence is well known locally as well as internationally- a fact I never knew about until a friend of mine overseas inquired about what the mortar store was like inside.
Walmart's market structure is an interesting one as one can view it as both a monopoly or an oligopoly depending on the angle at which they look at.
It is an oligopoly in which Wal-Mart is competing with other big mortar stores like Target and Costco as they are some of the few firms that are dominating the retail market. On the other hand, Wal-Mart acts like a monopoly in which they tend to drive other retailers out of competition by giving them "the fear of price wars, cost advantages, and a control over supplies".
But by definition, oligopoly market structures are rigid with prices but Wal-Mart gains its advantages over other firms by lowering prices, which in turn raises the sales of its goods which introduces a new thought that Wal-Mart is a combination of two market structures; making it an industry that works in an oligopolistic market structure that acts as a monopoly.
Sources: Wal-Mart and its Monopolistic Market Structure
That is interesting that such a store can take on characteristics of multiple market models. I do agree that at first glance is it an oligopoly, however, the results of their sales act more as a monopoly. Walmart's revenue model of targeting lower income people allows resources to be less scarce financially and also attract those in higher income families to also shop there because of lower prices. This creates competition which plays into the monopolistic attitude you pointed out.
ReplyDeleteKnowing that Walmart may have different market models, I think their most successful model would be the oligopoly. I think the reason that it competes well with places such as Target is simply because of pricing. We all know the feeling of walking into target and buying the whole store even with their higher prices. I think that targetting low-income families and areas is a smart idea because if you place a Walmart in a central low-income neighborhood, you are bound to recieve tons of business. With having produce, clothing, supplies etc. Walmart can easily be the holy grail of any other mortar store.
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