Intermediaries -Walmart

Hello Class- This is my blog post on Intermediaries and how they, in this case Wal-mart, tries to use its power to block competition from gaining access to sell to consumers. Wal-mart tries to use low pricing strategies and it tries to take advantage of this strategy which is an unfair advantage in the market place. Officials call this “Predatory Pricing”. Predatory Pricing is “pricing goods below cost with an intent to drive competitors out of the market (ilsr.org). Ilsr.org also states “The company intended to force other stores out of business, gain a monopoly in local markets, and ultimately recoup its losses through higher prices.” Wal-mart is an intermediary in the marketplace. Since Walmart connects distributors to buyers, it makes money from setting prices in its store as a mark up on the items. Over the years, Wal-mart has has been succesful and has created many locations. Because they have so many locations, they can afford to lower their prices. This type of pricing is a monopolistic type of pricing and is seen as an unfair advantage in the market place. It is the same reason why the government wont allow certain types of companies to merge as they may become a monopoly. Because Wal-mart is an intermediary, and is in a powerful position between the distributors and consumers, it is able to set low prices because of their “middleman” position in the market. This article reminds me of what we learned in class on how the positions of certain nodes, the “middlemen”, the traders, set prices and thus had power. It is nice to see that our teachings in class apply to real world scenarios.

http://ilsr.org/walmart-charged-predatory-pricing/

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One thought on “Intermediaries -Walmart”

  1. This is an interesting way to look at Wal-mart’s business model, framing them as an intermediary between distributors and consumers. I suppose that all stores technically play this role, but I feel that because of the size and low prices of Wal-mart its role as an intermediary is made more important, particularly because it offers an extremely wide variety of goods, attracting consumers by offering competitive prices and convenience (all goods under one roof). Pointing out Wal-mart’s powerful middleman position is important to understand exactly why Wal-mart continues to grow at the pace it does, forcing small independently owned businesses to close, by offering the prices that it does (that only it is able to offer).

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