rewriting work ECO Week 3

The current flow of the economy can have a significant effect on any type of business, whether big or small. In this paper, the analyzation of the Walmart Stores Corporation will be conducted; there will be an analysis of the economic data and business data to explain how the core economic principles impact the sustainability of the firm and what actions the firm can take to ensure success. Additionally, there will be an explanation of the trends in current macroeconomic indicators for last three years of information available. There will be an evaluation of these trends in demand and a review of their impact on the industry and the Walmart Stores Corporation.

Walmart

Walmart was established in 1962. Walmart is known for helping people around the world save money and live better – anytime and anywhere – in retail stores and through eCommerce. Each week, Walmart serves close to 270 million customers who shops in one of Walmart’s stores. As of today, Walmart has over 11,700 stores and several websites under 65 banners in 28 countries.

Walmart’s strategy is to lead on price, invest to differentiate on access, be competitive on assortment and deliver a great experience. Walmart operates worldwide and under a monopolistic market structure.

Walmart ranks in the top three in e-commerce sales in the United States. Amazon was first and Apple was second. Walmart’s biggest competitors here in America are Amazon, Target, and dollar tree. According to the latest report of the NASDAQ on June 11, 2018 Walmart stock price was at $84.51 per share. while the Amazon was over Walmart at $1693.075.

Trends in Current Macroeconomic Indicators

The real GDP of the United States has been on the rise. According to FRED Analysis (2018), In 2015 the GDP was at $16471.51; in 2016, the GDP came in at $16,716.16 billion and then in 2017, came in at $17,096.17 billion. (FRED, 2018)

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. As of June 2018, we are at 2.5%.

According to the Bureau of Labor Statistics (2017), the trend of employment has been falling considerably. As of June 2018, the unemployment rate has dropped to 3.8%. With regards to current events, even though the unemployment rate is low, the country’s federal funds rate has been increasing. In 2015, it was 0.13%, increased to 0.4% in 2016 and 2017 it was increased to 1.0%. The current American interest rates FED are maintained at 1.75%. The prime rate is maintained at 4.75%. (FRED, 2018)

(United States Department of Labor, 2018)

Trends in Demand (2015-2018)

There was an increase from previous year to 2015 which brought it to 3.5% which then in 2016 dropped to 1.7%. In 2017, there was another increase which brought it up to 2.4%. The goal for 2018 has been projected to rise to 3.0% at the end of 2018. An increase in the rate of demand would result to an increase in demand for goods and services offered by the retail industry. This increase the demand of the goods which would be sold by Walmart Stores

Price Elasticity

Price elasticity of demand expresses the responses of the responses of the quantity demanded of a product to price. It is calculated using the following formula: PED which stands for (% Change in Quantity Demanded) (%Change in Price). The price of elasticity of demand could be calculated by looking at two different prices of the same product, and the amount of a product bought as the varying prices. This would help to indicate the percentage by which quantity demanded changed when the prices of the same products are changed. Price elasticity of demand has significant effect on pricing of a product. A high price elasticity of demand implies that a small change in price result to a big change in quantity demanded. In the big idea of it all, charging higher prices would reduce sales and overall revenue.

Concept of Variable and Fixed Cost

The level of output depends on the cost involved in the production, in the Walmart stores, the variable cost is high compared to the fixed cost. These costs include the labor force, which reduces the amount of money that can be used for procurement and expansion. Additionally, the cost of the products from the various suppliers also affects the amount of the goods to be bought and sold. If the product is more expensive, then the less the company is to purchase it, which means less stocks to make profit in the stores.

Conclusion

There are several recommendations that could be made to Walmart Stores. The company operates in a monopolistic market, which makes the price elasticity of demand usually elastic. My recommendations for Walmart would be to continue to set have their prices lower than their competitors as well as matching their competitors’ prices. The higher sales would recover the lower prices charged. To prepare for the future, Walmart should take advantage of the economics of each demographic the store is located. Maintaining relationships with trusting suppliers and continuing to develop customer loyalty will always be a huge asset. To sustain its success, Walmart should also set periodical budgets and objectives, which should involve maintaining and improving its market share, social responsibility, quality products.

Unemployment Rate

Walmart Annual Sales

Years

annual revenue milion dollars