Question 1
Walmart has risen to become one of the largest retail stores in the US and the larger global market. A wide network of stores and capital endowment are two of the firm’s key resources and capabilities. In 2015, Walmart has a presence in 27 countries where it has set up over 11,000 stores (Soni, 2015). The firm’s capitalization stands at $275 billion. A robust marketing strategy and the low price of its products are other capabilities that Walmart possesses. The pricing strategy and the spread of its stores are two of the strategies that determine Wal-mart’s imitability, transferability and replicability. Market analysts argue that Wal-Mart’s pricing strategy and wide network of stores will disrupt the retail industry (Gustafson, 2016). It is likely that other stores will follow suit and reduce their prices as they open new stores. Other retailers have attempted to imitate Wal-Mart’s strategies. However, the fact that Wal-Mart continues to top the ranking of retailers is clear indication that the company implements these strategies better. For example, its low pricing strategy has enabled the firm to capture the American market (Ferguson, 2017). The continued financial growth that the firm is experiencing at a time when the retail industry is witnessing a slowdown is yet another indication that Wal-Mart is deriving greater benefit from its capabilities and strategies. As it exploits its capabilities, Wal-Mart hopes to achieve a number of key strategies. Staving off competition from such online retailers as Amazon is among these strategies. Wal-Mart’s ability to remain competitive can be attributed to its low-price strategy and widening the scale of its operations (Ferguson, 2017). That the competitive advantage that Wal-Mart has established is sustainable is not in question. This company is embracing such techniques as allowing its customers to place orders online as it seeks to stave off competition from such firms as Amazon (Vena & Fool, 2017). That it is able to take on Amazon and other retailers clearly indicate that it will remain competitive and relevant.
When formulating its strategies, a firm should focus on its capabilities and resources as opposed to the external market. This is because the external market may force the firm to pursue strategies that overwhelm its capabilities and resources. The firm will end up disappointing its customers if it focuses entirely on the external market. In the discussion above, the strategies that Walmart has adopted have been highlighted. These strategies are most likely to be effective in the American market. This is because the retail industry in this market has become fiercely competitive (Vena & Fool, 2017). To remain relevant, Wal-Mart simply needs to keep its prices low and extend its presence.
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Question 2
Price fixing is one of the factors that hinder healthy competition. In most markets, this practice is unlawful. Several companies may collude to set the prices of their products at a certain level. This is called horizontal price fixing (Amadeo, 2016). In the case, it is mentioned that the gas stations in Houston have set identical prices for their products. An argument can be made that this is horizontal price fixing. However, this is not necessarily the case because there are other explanations for prices that are similar. For example, it could be that the gas stations are trying to remain competitive so they match the prices of their competitors. It could also be that the price of gas is fairly constant across different stations.
For the most part, the government allows businesses to operate freely. However, there are cases where the government intervenes to constrain pricing policies using legislation. Establishing price controls is one of the main ways that the government uses legislation to keep prices at acceptable levels “Price Controls, Price Ceilings”, n.d). It is common practice for governments to spell out maximum prices for certain products. The government can also set price floors which are the minimum prices that firms can place on their products (“Price Controls, Price Ceilings”, n.d).
References
Amadeo, K. (2016). Price Fixing: Types, Examples and why it’s Illegal. Retrieved 23 rd September 2017 from https://www.thebalance.com/price-fixing-types-examples-why-it-s-illegal-3305955
Ferguson, E. (2017). Wal-Mart’s Vision, Mission, Generic & Intensive Retrieved 23 rd September 2017 from http://panmore.com/walmart-vision-mission-statement-intensive-generic-strategies
Gustafson, K. (2016). This Wal-Mart Tactic should Send Shivers across Retail. Retrieved 23 rd September 2017 from https://www.cnbc.com/2016/05/19/wal-marts-low-price-commitment-should-send-shivers-across-retail.html
Price Controls, Price Ceilings, and Price Floors. (n.d). Retrieved 23 rd September 2017 from http://www.econlib.org/library/Topics/College/pricecontrols.html
Soni, P. (2015). Analyzing Walmart- the World’s Largest Retailer. Retrieved 23 rd September 2017 from http://marketrealist.com/2015/02/analyzing-walmart-worlds-largest-retailer/
Vena, D. & Fool, M. (2017). Wal-Mart’s Strategy to Compete with Amazon is Paying off. Retrieved 23 rd September 2017 from http://www.businessinsider.com/walmart-strategy-to-compete-with-amazon-is-paying-off-2017-8?IR=T
