Economics IB HL

“Who’s Afraid of Wal-Mart?”

This article explains how Wal-Mart is trying to enter the market in India. There are various stakeholders, some who are for the idea and some who are against.

  • Market type: oligopoly (few large firms, very high barriers to entry/exit)
  • Product type: some goods are elastic (unnecessary but “nice” items to have), some are inelastic (essentials such as food and water)
  • Competitors: other supermarkets that sell similar goods, eg. Target, Tesco

Stakeholders – For

  • Walmart: advantageous to expand to India
  • Other supermarkets (Target, Tesco): benefit because Wal-Mart’s entry into India could mean their entry in the future
  • Indian consumers: benefit from being able to buy high quality products for relatively low prices
  • Indian farmers: benefit from being able to earn more (up to 60% more) by selling their crops to large supermarkets like Wal-Mart compared to local shops

Stakeholders – Against

  • Indian retailers and the Indian government: they fear Wal-Mart will take over the economy and local “kirana” shops will have to shut down, but this is not entirely true as the local shops will still control 85% of the retail market and Wal-Mart will provide job opportunities, which contributes to the economy 

Diagrams

  • SRAC, LRAC – Economies and Diseconomies of Scale (the effect of expanding and increasing the number of Wal-Mart stores to India)
  • Kinked demand curve
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