Research Analysis-Walmart

Walmart, a multinational retailer, operates in an oligopolistic market. Some of the key characteristics of an oligopolistic market, according to Mazzeo (2012), are, a market with a few but large firms, the firms sell identical or differentiated products and the industry has significant barriers to entry. Walmart has worthy competitors both in the US and abroad. In the U.S. the competitors include, Costco, Target, Sam’s, Dollar General Corp, Dollarama (US and Canada) among others. Abroad, Walmart competes with Don Quijote Holdings in Japan. Tesco in Europe, Carrefour in France and global online retailers who are in competition for the same markets. 

The main barriers to entry to Walmart is competition from local retailers, need for economies of scale, high capital requirements, need for a dedicated and precise distribution system. Retail clients look for low prices and standard quality hence making the business avoid high end products. 

According to the The World Bank (2017), the US economy is on the expansion phase. GDP is growing as well as job opportunities. Figure 1 can illustrate. 

Figure 1: Economic Indicators

	2014	2015	2016
GDP	$17.39 Trillion	18.57 Trillion	18.57 Trillion
Inflation Rate	1.6%	0.1%	1.3%
Unemployment Rate	6.2%	5.3%	4.9%
Federal Funds Rate	0.12%	0.24%	0.54%
Prime Rate	3.25%	3.5%	3.75%

                                                                                                    Source, World Bank\

From Figure 1 above, we can see that there was an improvement in the macroenvironment factors. The GDP is seen to be moving upwards though at a relatively slow pace. The fiscal policies seem to be in control of inflation and as thus, the economy is generating jobs at an increasing rate. The federal funds rates are on the upward trend probably as a means to control inflation. From the macroenvironment factors, it can be said that the economy is in a predictable mood and investments can be nurtured and grown in this kind of calm and stable environment. 

Sales data from Walmart (Figure 2, Figure 3 and Figure 7) show a stable purchasing pattern. The sales range from $117 Billion to $131 Billion for the periods starting 2014 until 2017. Such stagnant sales are most likely caused by maintaining the status quo in terms of marketing, and frozen penetration of markets as well as lack of threatening competition. Annual sales for 2015, 2016, and 2017 were $482.23 billion, $478.81 billion, and 481.32 respectively. These sales show 2015 as a superior year with which Walmart should aim to outdo in the near future. 

From the analysis of Walmart’s sales data, it can be concluded that the giant has almost hit the roof with the existing markets. That means that the markets it is currently serving have no significant potential left. To exploit more potential, I would suggest that the giant approaches other markets. One strong recommendation is the Sub-Saharan Africa. The region is experiencing steady growth leave for some drawbacks like draught and skirmishes in some countries (The World Bank, 2017). According to the IMF (2017), Sub-Sahara Africa has the potential to sustain economic growth rates of more than 6% as shown in Figure 4 and Figure 6 below. Other economies like India and other Asian economies can be scouted for opportunities`

Prices are not as easy to manipulate for retailers since the prices are set by the manufacturers. It is therefore difficult for retailers to determine their price elasticities. Walmart has entrenched its strategy of high volumes low prices and standard quality. This leaves Walmart with very little room for manipulating prices.

Variable costs and fixed costs is something that Walmart needs to have an eye on. The most common fixed costs in Walmart are labor and rent. Rent prices are minimized by the strategy Walmart adopts. It strategically places its store in suburbs where competition for space by commercial set ups is not big as it is in CBDs. The most common variable cost is purchase of inventory. To control the cots, Walmart is known to be notorious for negotiating for low costs with its suppliers. This serves two purposes. First, it reduces the variable costs and it is used for marketing purposes since products are offered at low prices. 

In conclusion, Walmart has managed to put up a good fight with competition and as such, it has remained on top of the game for quite some time. With the exhaustion of traditional markets, and increased urge and need to grow the company, adoption of new strategies in approaching unexploited grounds. Some of such places include the Sub-Saharan Africa and Asia where markets are young. The company can move in with its financial muscle and set the pace before other international players take notice. The company should ride on the stability of the home market and aim at developing other markets with proceeds from home. In the home turf, the company should continue being competitive and innovative especially with online sales. 

References

Mazzeo, M. J. (2002). Product choice and oligopoly market structure. RAND Journal of Economics, 221-242.

IMF. (2017, May 9). Sub-Saharan Africa: Restarting the Growth Engine. Retrieved from IMF Website: https://www.imf.org/en/News/Articles/2017/05/05/na050917-sub-saharan-africa-restarting-the-growth-engine

The World Bank. (2017). GDP Growth Rates . Retrieved from World Bank Website: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2016&locations=US&name_desc=true&start=1961&view=chart

Appendix

Figure 2: Sales Revenues 

Year	Quarter	Revenue in Billions
2014	1	129.71
	2	114.96
	3	120.12
	4	199
2015	5	131.56
	6	114.83
	7	120.23
	8	117.41
2016	9	129.67
	10	115.9
	11	120.85
	12	118.18
2017	13	130.94
	14	117.54
	15	123.36
	16	123.18

Figure 3: Sales Revenues Data

Figure 4: IMF Sub-Saharan Africa Growth Rates

Figure 6 GDP Trends in Sub-Saharan Africa

Figure 7: Sales Data-Walmart