The article personally made me realize that the term ‘market control’ or ‘market power’ have been so wrongly interpreted by me. It actually is the market in power and the market in control of the organizations; without customers these organizations are nowhere. Those who wish to keep a ‘control’ over the customers have to lose out in other ways because a trade off is always involved. Wal-Mart is good for America in my opinion. Summary Wal-Mart is one of the biggest retailers in the United States of America with the highest market share at the moment.
It is one of the chains and brands that keep growing with currently 2000 stores and 1000 more under implementation. Wal-Mart has the highest market share because of one of the choices it made to keep prices low. In a market full of retailers, the target is the customers; for retailers, customers are their scarce resources. Bringing in the economics concept here, scarcity necessitates choice; that is, resources have to be allocated amongst competing needs or alternative uses.
This choice is usually made by economic agents such as individuals, firms and governments; and in this case, it is between individuals who are the customers who either make or break the retailer. Each choice involves a trade off; that is, as you go to choose more of one thing, you have to choose the less of another. Economists use the term opportunity cost to refer to cost expressed in terms of foregone alternatives; it is the benefit lost from the next best alternative. So the foregone alternative for Wal-Mart is the extra revenue generated from higher prices.
However, in case of Wal-Mart that was a smart decision because lower prices are bringing in more customers and in return increasing the overall revenue. This works on the simple principle of demand: The factor that influences demand the foremost along with others is naturally the price level; this leads to the law of demand. The higher the price, the lower the demand; this is because higher prices reduces the purchasing power of a buyer by reducing the income level. Therefore, the lower the price, the higher the quantity demanded.
The fact that Wal-Mart kept its prices low because of the fact that customers buy more in that case shows that the power is actually with the customers and not the producers because here also the producer is amending and making such a big decision of selling at lower than normal prices. Therefore, this ‘market power’ is actually nothing that Wal-Mart is creating; it is simply because of the way people are working, and that has little to do with what Wal-Mart is doing; they can shop from where ever they want.
However, if we see it rationally, it is a vicious cycle; Wal-Mart, by keeping low prices in a way is controlling the customers, and the customers are controlling Wal-Mart because of which it is keeping low prices. This article also talks about other retailer stores which were as big as Wal-Mart, for example A&P and now today nobody knows about them (Sowell, 2003). So basically, anything can happen any time and the tables can turn around in a matter of years.
However, if Wal-Mart wants to stay, it needs to make smart decisions and any unwise step like A&P can ruin the entire market ruling. Whether Wal-Mart is good or not for America depends on how customers keep it flowing; they should not become slave to Wal-Mart and its prices and products. At the same time, Wal-Mart is good because it gives reasonable prices to customers and that keeps them happy and the production businesses flourishing.
References Thomas Sowell, 2003, “Is Wal-Mart Good for America? ”