Signature Assignment: Challenges of Expansion to a Foreign Location
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Walmart.docxRunning head: RESEARCH ANALYSIS FOR BUSINESS 2
RESEARCH ANALYSIS FOR BUSINESS 2
Research Analysis for Business
Research Analysis for Business – Walmart Corporation
Walmart Corporation is a public company that operates in a chain of large departmental stores in America. Walmart Corporation is an oligopolistic market structure because the number of firms which operates in USA are very few. Target Corporation and Costco are the only business firms that operates in the retail industry together with Walmart Corporation. Since there are few firms in the industry, the firms have the powers to set the prices and buyers only accepts the prices that have been set by the oligopoly market structure. On the other hand, Walmart Corporation qualifies to be a very large monopolistic market when analyzed from the bricks and mortar store view (Zentes, J., Morschett, D., & Schramm-Klein, H., 2016). The company has a very large and strong market size which drives away small retailers which cannot compete with the strong base of the company which ensures other corporations are run more efficiently. Due to high barriers of other firms into the industry, the company controls over outlets, giving other firms the fear of price wars, cost advantages, and a control over supplies. The company therefore makes supernormal profits.
Current Business Cycle
The current business cycle of USA is on the expansion stage because the current Trump Administration is focused on empowering the US based firms and farmers with the “America First” slogan. The economy is growing and moving towards attaining the stable economy has thereby lower unemployment rates. The stability of stock prices and control of inflation and lending rates ensures that the country’s investments are stable, and expansion is readily reached.
Real Gross Domestic Product (Real GDP)
The real gross domestic products (GDP) for USA has been rising over the years. The Real GDP for US rose by 4.2% on an annual rate for the second quarter of 2018. Similarly, in the first quarter, the Real GDP increased by 2.2% from the previous year. This implies that the company’s real GDP is rising continuously over the past year. Real GPD provides information on the annual production that is carried out in the USA.
Inflation as measured by the consumer price index (CPI)
Inflation rate measures the changes in prices of products in the general market for goods and services. The consumer price index (CPI) measures the average rate of change in prices of goods and services that is paid by consumers. The current inflation rate as measured by CPI is 110.07 as at December 2016. The inflation rate has been rising from the base year 2010.
Source: https://fred.stlouisfed.org/series/CPALTT01USA661S
Unemployment Rate
The unemployment rate in USA has been declining over the year. The unemployment rate currently stands at 4.93% experienced in 2014. In 2013, the unemployment rate was above 7% whereas at for the first quarters of 2018, the rate was below 4%. The national unemployment rate in 2018 stands at 3.9%. The decrease in the unemployment rate implies that more workforce is being taken into the employment thereby increase the productivity.
Source: https://data.bls.gov/pdq/SurveyOutputServlet
Federal Funds Rate
The federal funds rate for the US economy remained below 0.2% since 2013 through November 2015 when the funds rate rose above 0.2%. The rate is beneficial to lending institutions and investors. The current fed rate is 1.91% as at August 2018.
Current USA Prime Rate
The prime rate is usually above the federal funds rate by 3%. The prime rate is what banks use to extend their lending to the investors and businesses. Households are similarly charged the prime rate when borrowing from banking institutions. Therefore, a higher prime rate implies high cost of borrowings hence reduced rate of borrowing. The current prime rate of the USA economy stands at 4.91% making the loans easily affordable to the US households and investors.
Evaluation of the Trends in Demand of Walmart Corporation’s Products and their Impact on the Industry and the Firm
The demand for Walmart’s products is considered high since the company is the leading retail store in USA. The demand for the company’s products is high because the company sells its products at a lower price as compared to its competitors. From the income statement of the company, the annual revenue increased since 2016 through 2018. The annual revenue was $482,130M in 2016, $485,873M in 2017 and $500,343M in 2018 (Walmart Corporation, 2018). It is therefore evident that the increase in annual revenue showed an increase in the sales which implies that the general demand of its products rose.
Based on the industry average, the company supplies most of the market demand requirements hence serving a large portion of the market. The strategy which the firm need to adopt is to increase the level of customer service and product delivery techniques. Customers should be allowed to make orders from their homes and work places and the company deliver the orders to them. This will make the customers increase confidence and loyalty to the company and therefore increase in sales.
Walmart Corporation’s Pricing Strategy and the Availability of Substitutes
The company use a pricing strategy to attract and its current customers and increase its customer profile. The lower pricing strategy employed by the company makes its products cheaper as compared to its competitors. The moderate availability of the substitutes in the retail industry makes it harder to use product differentiation to create a competitive advantage for its product. Price elasticity can be determined by examining the supply and demand of the products (Grundy, 2016). The sensitivity of prices is calculated therefore based on the demand and supply forces of the products.
The Concepts of Variable and Fixed Costs of Walmart Corp. in Informing its Output Decisions
Variable and fixed costs determine the prices which the company will sell its products and get profits from its operations. The moderate to high costs that the company incurs in brand development for the new entrants to the market poses a high threat to the company. The fixed costs are incurred once during initial installation processes (Hicks, M. J., Keil, S. R., & Spector, L. C., 2015). The low-cost pf doing business – variable cost – is advantageous to the firm hence its operations are not costly.
Conclusion
The company should prioritize the threat of entrants into the market as a serious threat to counter competition in the retail industry. Walmart Corporation should continuously improve its capability to ensure that the company remains competitive in the market and hold a large market share. The company should also increase on its expansion strategy and have more retail stores to increase its competitive strategy. The management of human resource and the motivation of employees is key in increasing customer confidence and loyalty. Therefore, Walmart needs to do more to remain competitive and control a larger market share for its products.
References Grundy, T. (2016). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213-229. Hicks, M. J., Keil, S. R., & Spector, L. C. (2015). Mom-and-pops or big box stores: Some evidence of WalMart’s impact on retail trade. Economic Development Quarterly, 26(4), 311-320. Walmart Corporation. (2018). Starbuck Corporation 2016 Annual Report. Zentes, J., Morschett, D., & Schramm-Klein, H. (2016). Strategic Retail Management. Springer.
