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Wal Mart Application Question

Consider Wal Mart as a competitive firm operating in the US economic system. Utilize your knowledge of microeconomics, to answer the following questions:

1. How would you describe Wal-Mart in terms of the market structure in which it operates?
2. Given this market structure, how does it profit maximize? In other words, what strategies does it employ?
3. What control does it have over prices? Explain.
4. What are its fixed and variable costs? What strategies can they employ to reduce costs?
5. What role does marketing play in the Wal Mart competitive strategy?
6. Can Wal Mart maintain long-run profitability? Why/how?

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

Using Wal-Mart as example, describe where on the best practice frontier Wal-Mart would lie and why.

See example below and write on Wal-Mart

PepsiCo- Diversify

Top of Form

PepsiCo, Inc. is a global food and beverage leader with net revenues of more than $5 billion and a product portfolio that includes 22 brands that generate more than $1 billion each in annual retail sales. It engages in the manufacture, marketing, distribution, and sale of beverages, foods, and snacks. It operates through the following segments: Frito-Lay North America; Quaker Foods North America; North America Beverages; Latin America; Europe Sub-Saharan Africa; and Asia, Middle East, and North Africa. The Frito-Lay North America segment markets, distributes, and sells snack foods under the Lay’s, Doritos, Cheetos, Tostitos, Fritos, Ruffles, and Santitas brands.

The best practice frontier represents the efficient use of resources regardless of what a firm’s strategy may be. At PepsiCo, it is integrating sustainability into its business strategy, leaving a positive imprint on society and the environment. PepsiCo calls this Performance with Purpose. It focuses on three pillars of sustainability: Human, Environmental, and Talent. These elements give PepsiCo a competitive advantage. PepsiCo is working to improve the nutritional profile of its products and offer a wider selection of nutritious foods and beverages in response to growing consumer demand. It also works to clearly label what is in its products. It is striving to reduce its impact on the environment by conserving energy and water and reducing packaging volume. It creates a safe, healthy, diverse, and inclusive workplace that reflects the global communities in which the company operates. PepsiCo’s strategy displays Porter’s five forces accounting for a company’s success.

PepsiCo’s water stewardship is amazing. It conserved nearly 16 billion liters of water through the application of water-saving equipment and technologies, creative recycling and re-use, and by deploying a water management system throughout its manufacturing facilities. PepsiCo reduced water and energy related costs by more than $45 million in 2011. PepsiCo is one of the largest agricultural companies and many of its products depend on agricultural raw materials. It globally grows or sources several million tons of fruits and vegetables: 4 million tons of potatoes for its Lays brand; 3 million tons of oranges and other fruits and vegetables for Tropicana, Naked Juice and SoBe brands, and 600,000 tons of oats for Quaker. PepsiCo is working with suppliers — especially farmers — to help them manage and reduce their energy and water use and emissions. As it continues to expand in markets and regions, sustainable agriculture will continue to play an important role in its business model. Hence, PepsiCo’s three pillars of sustainability give it “market power” with respect to customers and suppliers.

In addition, as one of North America’s largest fleet operators, PepsiCo utilizes all-electric and hybrid trucks, and uses alternative fuels to increase efficiency and cut emissions. Overall, PepsiCo’s expertise, size, and engagement with stakeholders around the world position it to make a meaningful difference in some of today’s most pressing issues, creating efficiencies and positive changes in areas where the company works. Moreover, it effectively manages the interrelationship between agriculture, climate change, energy, and water in seeking long-term businesses growth.

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Can I get answers about these questions??

These questions are about Chapter 16-22 in Principles of Microecnomics sixth editon.


Monopolistic competition

· What makes a market monopolistically competitive?

· How do monopolistically competitive firms decide how much to produce and what price to set?

· How to monopolistically competitive firms make short-run and long-run choices?

· What is the role of advertising?

Oligopoly and Game Theory

· What is the prisoner’s dilemma and what are some applications?

· What is collusion and why is it difficult? What are some things that can make it harder or easier to collude?

· What is a dominant strategy?

· How can you find a Nash equilibrium in a game where a player has a dominant strategy?

Markets for Factors of Production

· How do profit maximizing firms decide how much of a factor of production (such as labor) to use? In other words what is the demand for factors of production?

· What changes the demand for factors of production?

· What determines the supply for labor? Supply for other factors of production?

· How are the rental prices and wages determined in a competitive market for factors of production?

Earnings and Discrimination

· What are some reasons why different people have different labor earnings?

· What are some difficulties in measuring discrimination?

· Why might firms that discriminate have difficulty competing?

· Why might a firm find it profitable to discriminate?

Income Inequality and Poverty

· What are some political philosophies regarding what the government should do to decrease poverty or income inequality?

· What are some policies that can reduce poverty? What are the strengths and weaknesses of these policies?

Consumer Choice

· What is the consumers budget constraint?

· How does a consumer choose how much of different goods to consume?

· What are the income and substitution effects?

· How does the demand curve relate to the consumer choice problem?

· How does the consumer choice problem relate to labor supply and borrowing/lending behavior?

Asymmetric Information and Healthcare

· What is moral hazard?

· What is adverse selection?

· How do these two concepts relate to the market for insurance and healthcare?

· How do insurance companies try to deal with adverse selection and moral hazard?

View the video transcript below and share your thoughts on the economic concepts that you believe are applicable.

Question# 1. Why does a firm have to posses market power in order to raise prices.

How to Raise Prices Without Losing Customers

JJ RAMBERG, anchor:

With gas prices soaring and the economy tightening, you may think it’s not possible to charge your customers more. But, it turns out you can successfully raise prices without driving those customers away. Bob Prosen runs the consulting company, Prosen Center for Business. He’s helped business leaders rapidly increase performance, productivity and profits, and he’s also author of the book, “Kiss Theory Goodbye: Five Proven Ways to Get Extraordinary Results in Any Company.” Bob, welcome.

Mr. BOB PROSEN: Thank you. RAMBERG: So, if you’re going to raise prices on your customers, one of the things you say is don’t surprise them. So, how do you give them warning?

Mr. PROSEN: Well, our customers are very important to us, lets not surprise them. Let’s let them know in advance that prices will increase. But, it’s important to explain to them in their language as to why prices are increasing. For instance, if its fuel surcharges, they’ll understand that. But its important we put it in their language so that they, in turn, can pass that along and plan for it in their own business.

RAMBERG: So, a lot of times when people are paying more, they expect to get more. So, you should communicate increased value I assume. But is saying, um--gas prices are going up for me, is that uh--the same as saying, you’re going to get more for your money?

Mr. PROSEN: No, definitely it’s not. In fact, the equation for value is benefits plus price. So, if prices are going to go up we have to have increased benefits for our customers. So, we can do things like under promise and over deliver. Give them a little bit more. Understand their customer’s customer. So that when we provide our services to them, they’re customized for our customers. They see more value, we understand their business, and therefore they’ll be more appreciative of what we do and less sensitive to price increases.

RAMBERG: That seems to--to follow into your next point, or go right into your next point, which is, track the quality of your products.

Mr. PROSEN: This is absolutely critical, and we can track the quality of our products many ways. Customers call us, complaints, warranty, rework. If we’ll deal with that, capture that, and inside of “Kiss Theory Goodbye” I teach business people how to reduce these problem occurrences and increase the quality of their product. You do it for two reasons: One, customers like us a lot more when things work the way they’re supposed to; and our cost structure goes down therefore maybe we don’t have to increase our prices as much and we can be more competitive.

RAMBERG: And then, also, relationships matter.

Mr. PROSEN: Oh this…

RAMBERG: So, if you have a good relationship, you can do more within that relationship.

Mr. PROSEN: Oh, definitely. People like to do business with people they like. So, lets make sure we stay in touch with our clients. Customize what we touch them with. You know, for instance, when I travel and I deal with business people, I always carry thank you notes in my briefcase. When I’m finished, I send them a note. It’s a rarity these days to even get a thank you note.

RAMBERG: Yeah, it absolutely is. So, about how much can you raise prices by? Can you suddenly figure out that your costs are gone up so much because of energy prices, or food prices, or gas prices, whatever it is, um--and raise it by 50%? Should you do it incrementally? Should you do it all at once? How does it work?

Mr. PROSEN: Yeah, that’s a great question. It depends on what industry you’re in. It depends on what you customers are doing. It depends on a number of things that determine how much, and when, and the frequency of our ability to raise prices. Therefore, what I always recommend to business leaders is work on your cost structure; make sure you’re efficient and effective. Keep your costs as low as you can. Therefore, you can be more competitive on your pricing. Sometimes, you have to pass along the price. Other times, try to absorb what you can through improved efficiencies.

RAMBERG: Should you be looking at your competitors and how much they’re charging?

Mr. PROSEN: Yes, you should absolutely be looking at your competitors. We always want to know what they’re charging. And by the way, we want to differentiate our products and services from our competitors. And, if we can prove a higher value by dealing with us versus our competitor we should be able to articulate that, and we do it based on facts because we know what’s going on in the industry.

RAMBERG: Alright, Bob I know a lot of people are thinking about raising prices so thanks for giving them some tips on how to actually do it.

Mr. PROSEN: My pleasure.

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