ECO week 6 -- rewriting work -- 1750 words (excluding reference)

10/15/2018

Dr Callahan

The status of an economy always has a profound impact on business operations. The current of an economy does not discriminate between small and big business enterprises. The paper will focus on the analysis of Wal-Mart stores corporations. The analysis will entail a focus on business as well as economic data, an analysis of core economic tenets on the sustainability of the business, and also the various actions that can be taken to ensure future success for the business. Moreover, the paper will also make a presentation on the various trends in relation to macroeconomic indicators within a period of three years. An evaluation of these trends and their impact on the Wal-Mart enterprise will be discussed.

Wal-Mart stores corporation

It was founded in 1962 by Sam Walton. It deals with operating a chain of hypermarkets, grocery stores as well as department stores. These stores are usually discounted, and therefore the business provides customers with an opportunity to enjoy quality products and services at affordable prices. It is argued that each of the company’s stress serves approximately 270 million customers per week. The organization has about 11, 700 stores across the world. The company also boasts of several websites. Wal-Mart capitalizes on pricing strategy. It focuses on being a world leader through offering quality services at competitive prices. It has adopted a monopolistic market structure, and through this, it was able to rank at position three according to the e-commerce sales in the U.S. The most significant competitors of Wal-Mart include Amazon and Apple. In the United States of America, the company faces stiff competition from dollar tree, Amazon as well as Target. Based on a 2018 report by NASDAQ, Wal-Mart’s stock was estimated at $84.51 per share while that of Amazon was $1693.075.

Trends in Current Macroeconomic Indicators

The Gross Domestic Product of the United States of America has been registering positive growth. Based on FRED analysis (2018), the estimated GDP in 2015 was $16471.51, $16,716.16 billion in 2016 and $17,096.17 billion in 2017. There has been a growth in GPD In the three consecutive years (FRED, 2018).

The consumer price index is also a concept that is used to measure the economy. It measures the estimated change over time on the prices as displayed by consumers in an urban setting for every basket of consumption services as well as goods. The CPI was estimated at 2.5 % in June 2018.

Based on the Bureau of Labor Statistics (2018), there has been a considerable fall in the rate of unemployment. This could be closely linked to the fact that there has also been a considerable growth in the economy. The implication is that a growth in economy presents more employment opportunities since the consumption rate and also production rate are high. Reports indicate that there was a 3.8% decline in the unemployment rate (2018). There has also been an increase in the federal funds with the reduced rate of unemployment. According to a 2015 report there was a 0.13 % increase in the federal funds, in 2016 it was registered at 0.4 %, and in 2017 the rate was at 1.0%. According to (fedprimerate, 2018)), interest rates in America are kept at 1.75% while the maintenance of prime rates is at 4.75%.

(United States Department of Labor, 2018)

Trends in Demand (2015-2018)

There has been considerable fluctuation in the rate of demand from 2015. In 2015, the rate of demand was registered at 3.5%, which dropped to 1.7% in 2016. In 2017, there was a 0.7% increase in demand rate. The implication of this is that it was 2.4%. There is a projection of approximately 3.0% by the close of 2018. An increase in the demand rate is a good indication for economic growth because it shows that there is more consumption of goods and services. The production will, therefore, go up to cater to the increase rate of demand. Wal-Mart Stores will consequently benefit from the increase in demand for goods and services.

Price Elasticity

Price elasticity is a concept that defines the change in the number of products and services demanded in relation to the change in prices. In calculating price elasticity, different products of the same product could be used in relation to the quantity demanded at those different prices. The different prices will give the price change while different quantity in demand will give the change in demand. The price elasticity of demand has a profound impact on the pricing strategy to be adopted in pricing goods and services. The high the price elasticity of demand the small the price change and the high the demand of the product. The implication is that high prices lead to low demand hence reduced revenue.

The concept of Variable and Fixed Cost

The cost of production plays a critical role in determining the level of output. In Wal-Mart, fixed costs of production are usually lower than the variable costs. There are also other costs such as the purchase of raw material also impacts on the number of products and also the sales. When the prices for raw materials for production are high, the company cannot make high profits due to the small size of the stock.

Recommendations and Conclusion

Wal-Mart has adopted a monopolistic market structure. This affects the elasticity of prices hence the volumes of sales made. One of the recommendations to the company is to maintain the low but competitive pricing techniques it has always utilized. Low prices will enable it to attract many customers hence many sales and high-profit margins. In preparation for the future, establish good relations with the local communities and also the suppliers will guarantee smooth operations.

References

fedprimerate. (2018). United States Prime Rate. Retrieved from http://www.fedprimerate.com

Unemployment Rate

Walmart Annual Sales

Years

annual revenue milion dollars