The Wal-Mart Effect Research Paper Example | Topics and Well Written Essays - 2250 words

The Wal-Mart Effect - Research Paper Example Thought Wal-Mart does not manufacture its products, it attains economies of scope because it has lower average cost in selling one or more products together than separately, thereby offering competitive low-priced products. Some mom-and-pop stores, on the opposite, focus on one type of brand or product alone, which reduces their economies of scope, and they cannot lower their prices without affecting their margins. Moreover, Wal-Mart has large and numerous stores with different product types and brands that allow it to shape critical economic factors that can affect purchasing behaviors. Fishman (2006) depicted the swift expansion of Wal-Mart: â€Å"Ten years later, by the end of 2000, Wal-Mart had opened 888 Supercenters, an average of seven new Supercenters per month, 120 months in a row† (p.8). The more shops that Wal-Mart opens, the more it is able to keep its prices lower due to product and sales volume. Hence, economies of scope is a large advantage that small shops cann ot easily beat; hence, they can die or have died due to lower competitiveness in pricing and variety.Aside from economies of scope, large companies can gain economies of scope. Wal-Mart and other firms generate cost savings because of their size in the industry. Wal-Mart has economies of scale because the average cost of selling falls as the volume of products sold increases. It can negotiate with, though some critics would call it â€Å"force,† suppliers to sell goods to them at a lower price since they can purchase larger volumes.