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Market Structure

Market Structure. It is difficult to interpret the market structure of Wal-Mart. In terms of vast products offers, it is fairly unique. There are competing firms who can offer a wide variety of products, but none as effectively as Wal-Mart.

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Market Structure

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  1. Market Structure • It is difficult to interpret the market structure of Wal-Mart. • In terms of vast products offers, it is fairly unique. There are competing firms who can offer a wide variety of products, but none as effectively as Wal-Mart. • In short, Wal-Mart might be considered to be operating in a monopoly. However, to look at Wal-Mart that way would be unfair, and far to simplified. To truly understand how Wal-Mart operates in the market, it would be best to look at the services offered individually, and analyze them as a whole.

  2. Groceries • The grocery store market has developed over recent years. • What was once clearly monopolistic competition, has really become and oligopoly, with most of the market power being divided up between, Kroger, Albertsons, Safeway, Winn Dixie, and Ahold. • There is an argument, that Wal-Mart has forced this to happen. The larger firms in have joined together through acquisitions, partly because of Wal-Mart’s fairly recent entry, and dominance in the grocery chain market.

  3. Pharmacy • Similar arguments can be made for pharmacies. In the past, local pharmacies were able to compete as individuals, mainly by non-price competition (i.e. personal service). • As drug stores have expanded to offer many more products, mom and pop stores, unable to compete, have been forced out. • Enter Wal-Mart into the market, and suddenly a monopolistically competitive market becomes an oligopoly between big firms like Walgreens, CVS, and Rite Aid.

  4. Toys • “The toy business -- which once consisted of scores of manufacturers, hundreds of wholesalers and tens of thousands of 'mom-and-pop' toy stores -- has compressed itself down into a thin layer of giant producers and a small cadre of superstores, led by Toys 'R Us and Wal-Mart, which together account for almost two-thirds of all the toys sold in America.“ • There are other competitors in the market, but the true power in the market, is held by as few as 5 firms.

  5. Oligopoly • It is safe to say from those examples that Wal-Mart operates in the structure of an oligopoly. It is unique in that it is a part of several different oligopolies, but it is certainly not in a monopoly of its own. There are other companies who are able to corner more than one segment of the market. It just appears that Wal-Mart has been successful in more markets.

  6. Sources • http://www.strom.clemson.edu/teams/ced/econ/8-4No30.pdf • http://qando.net/archives/002793.htm • http://www.oligopolywatch.com/2003/05/31.html • http://www.oligopolywatch.com/2003/07/19.html • http://www.oligopolywatch.com/2003/09/16.html

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