Archive forprofit maximization

Competitive Holiday Season Looms Ahead

Walmart is the world’s largest retailer. Despite this, the company still has fierce competition with other firms such as Kohls and Target. Though Walmart reported a quarterly upturn in sales when matched against comparable firms, it still has much to worry about. More so than ever, Walmart is feeling the effects of online shopping. There is an intense rivalry between Walmart and online firms such as Amazon. This worry is increasing as we approach the holiday season, a season in which sales are at their peak. To combat this threat, Walmart is instituting a price match feature at all 4,300 U.S. stores. Essentially, if shoppers can find a product for a cheaper price online, Walmart will match the price in stores. Sales in stores have been rising, but the increase has been primarily limited to home goods, health, and apparel departments. Many of the objects that are true luxuries are being bough online, and Walmart wishes to change this before the holiday season is upon us. So far this method seems to be working. Walmart’s total revenue has increased by 2.9%, bringing it to a total of $119 billion for the 13 week quarter. In comparison, similar firms only experienced an average increase of 0.5%.

This is a great example of a competitive market. Though it is not for a specific product necessarily, these ‘super stores’ as a whole can be directly compared. They are in constant competition and utilize the strategies of other firms to increase their own profits. I find it very interesting how the online market has a direct impact on the sales in physical stores, and what various firms are doing to counter the loss of sales. It will be interesting to look at the numbers after the holiday season and see if this strategy truly works. From a consumer standpoint, it seems like a good deal. You can buy a product for the same price as online without paying and waiting for shipping. I am excited to see if Amazon and other online retailers bring about a new deal to counter Walmart’s latest move.

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Consumers’ market power

Collectively consumers can influence market outcomes by making consumption choices based on factors other than price. If you are informed about the working conditions of people who make your jeans, you can choose to purchase jeans from those companies that provide safer working conditions. Partly in response to such informed buying, Levi Strauss & Co is providing lost cost capital to its suppliers helping them improving working conditions and environmental performance.

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Assuming profit maximization

This article on Taylor Swift’s decision to withdraw her music from Spotify focuses on profit maximization as a primary motive for Taylor Swift’s decision. The article raises issues of equity as Spotify requires all artists to include their music in both the paid and free tiers, against Taylor Swift’s request that her music be included only  in the paid tier. It also provides an example of price discrimination: through Spotify, you have access to music with adverts for free but without adverts for a fee.