Walmart Oligopoly Research Paper
Wal-Mart is an American public corporation that runs a chain of large discount department stores. Wal-Mart is the larges public corporation by revenue according to the Fortune Global 500. The company was founded by Sam Walton in 1962 and to this date, Wal-Mart employs approximately 2.1 million people.
Now, somewhere down the line you might be wondering why I am not referring to Wal-Mart as an oligopoly. Wal-Mart is indeed an oligopoly because there are only a few firms in the United States that dominate the retailing business. The other firms like Wal-Mart are Target and CostCo .When looking at Wal-Mart from this perspective, it is an oligopoly.
If you take Wal-Mart and look at it from the perspective of a mom and pop or brick and mortar store,
Wal-Mart is a giant monopolist. Wal-Mart’s incredible size makes the company very powerful. It has driven smaller retailers out of business, forced manufacturers to be more efficient, often leading to suppliers sending jobs overseas.
Wal-Mart’s monopolizing effect is so strong that whenever one Wal-Mart store opens in an area, three other retailers close within two years and four close up shop within five years. Within the span of five years, the areas where Wal-Mart opens, around 250 jobs are lost.
The reason why Wal-Mart is so effective is because of the high barriers to entry into the market once Wal-Mart penetrates a market. Wal-Mart has control over outlets, they give other retailers the fear of price wars, cost advantages, and a control over supplies.
With this, Wal-Mart gains abnormal profits in the short term and long term which you can see in the diagram below:
Now, somewhere down the line you might be wondering why I am not referring to Wal-Mart as an oligopoly. Wal-Mart is indeed an oligopoly because there are only a few firms in the United States that dominate the retailing business. The other firms like Wal-Mart are Target and CostCo .When looking at Wal-Mart from this perspective, it is an oligopoly.
If you take Wal-Mart and look at it from the perspective of a mom and pop or brick and mortar store,
Wal-Mart is a giant monopolist. Wal-Mart’s incredible size makes the company very powerful. It has driven smaller retailers out of business, forced manufacturers to be more efficient, often leading to suppliers sending jobs overseas.
Wal-Mart’s monopolizing effect is so strong that whenever one Wal-Mart store opens in an area, three other retailers close within two years and four close up shop within five years. Within the span of five years, the areas where Wal-Mart opens, around 250 jobs are lost.
The reason why Wal-Mart is so effective is because of the high barriers to entry into the market once Wal-Mart penetrates a market. Wal-Mart has control over outlets, they give other retailers the fear of price wars, cost advantages, and a control over supplies.
With this, Wal-Mart gains abnormal profits in the short term and long term which you can see in the diagram below: