MGMT1401 Final Project: Economic Analysis of Walmart

This project provides an economic analysis of Walmart, commencing with a brief history of the firm and an overview of its operational scope. It delves into the factors of production, elucidating how Walmart utilizes land, labor, capital, and entrepreneurship to deliver goods and services. The analysis examines self-interest, social interest, and allocative efficiency, alongside an evaluation of elasticity and cross-elasticity of demand. Walmart's market structure, classified as oligopoly, is discussed, and its strategic moves, including e-commerce expansion, are assessed. The project further explores Walmart's production possibility frontier, positive and negative externalities, and the impact of globalization on its business model, including its expansion through acquisitions like Flipkart. The analysis concludes with a look at how e-commerce will shape Walmart's future.

WALMART

Brief history of the firm – Walmart
 Wal-Mart is an American company started in 1962
by its founder Sam Walton. Its headquarter is
located in Arkansas, USA (Annual Report, 2018).
 It is primarily a hypermarket retail shopping chain
spread over 27 countries and continuously
expanding day by day. (Annual Report, 2018).

Factors of Production - what, how, and for whom
 Walmart Inc. is an American multinational retail
chain corporation.
 It operates as a chain of hypermarkets, discount
department stores, and grocery stores across the
world.
 Wal-Mart sources its product from as many as 100
countries or more than that (Annual Report, 2018).
 It provide services and products with the help of
land, labour, capital and entrepreneurship.
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Factors of Production - what, how, and for whom
• Walmart’s goods and services are meant for all
types of people.
• It can be by any type of people who can afford to live
his or her life as per its given economic condition or
choices.
• Factors of production (FoP) earn their remuneration
after rendering their services to the firm.
• FoP get land- rent, labour-wages, capital-interest
and entrepreneur.

 When resources are used efficiently and distributions
are done in fair manner among various stakeholder
and individuals, it is said to promoting social interest,
because it is taking care of whole society’s interest,
besides self interest.
 When you think that this is the best choice which is
available for you is consider to be in your self interest
also.
 Maximum net benefit is said to be occurred, when,
Maximum Net Benefit = Benefit – Cost and
Marginal Benefit = Marginal Cost.
Self Interest & Social interest, Allocative Efficiency
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 Allocative efficiency is consider to achieve, when the
Prices of goods or services = Marginal cost of production.
 Individual cost and benefit equilibrium help in deciding
allocative efficiency for society as well as individual as a
whole.
 Walmart has both comparative as well as absolute
advantage.
Self Interest & Social interest, Allocative Efficiency

 If consumers goods were analysed for explaining
elasticity of demand.
 Elasticity of demand for its consumer good is very
high.
 For example, if prices of wheat increases by 10%
its demand may fall more than 10%.
 Consumers Goods is used by general public and it
is not a luxury goods.
 Increase in it prices reduced it consumption by its
consumer and shift to other more affordable
product.
Elasticity of Demand, Cross Elasticity of Demand
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Cross elasticity of demand is said to occurred when
demand of one good changes due to change in price
of another goods. There are many goods one can find
in the hypermarket of Walmart, like, changes in
prices of Tea increase the demand of coffee more
than it change in price, this is called cross elasticity
of demand.
Elasticity of Demand, Cross Elasticity of Demand

 Walmart is expanding it operation in new areas
through acquisition of new company in new
geography.
 For example Walmart recently acquired a company in
India called Flipkart, which is a very popular
ecommerce company in India (Shao, 2018).
 Flipkart’s reach in India spread every corner and
capture the market of 1.3 billion consumer across
India.
 Walmart has also a plan to offer its products through
online and give stiff competition to Amazon.com
(Shao, 2018).
Walmart operational Efficiency

 Walmart can be classified under the market
structure of Oligopoly (Hahn, 2018).
 Player like, KMART, Target are already under this
market structure.
 Firm in oligopolistic market remains rigid to price
through their oligopolistic characteristic of
interdependence.
Market Structure of Walmart

 Wal-Mart's recent strategy to change online
market dynamics, through it entry in e-commerce
medium.
 Expands its business through online process.
 Reduce its cost and compete with competitor like
Amazon and enhance it revenue target.
Walmart - Production Possibility Frontier
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 Walmart motto of lesser price with customer’s full
satisfaction has enabled it to reach upto this level.
 Walmart like to take advantage of growing
business of online retail and its market share.
 This initiative would further push the PPP frontier
for Walmart to upward right direction.
Walmart - Production Possibility Frontier