Financial analysis of wal mart
Document Type:Research Paper
The company must analyze the elasticity of the demand for their products and the elasticity of the supply of raw materials. The business must also put into consideration the role of the suppliers and the cost of producing the products. This paper analyzes Nike’s microeconomic environment in a bid to provide the necessary information for strategic decision making. The paper analyzes the demand and supply factors of the organization products and inputs respectively. The paper also analyzes the cost of production and the issue of scarcity in relation to the company’s manufacturing lines. A good example is the Jordan Brand that focuses on the Basketball sports line. The company also operates through subsidiary brands like Converse and Hurley (Nike, 2018).
Regarding employees, the company employs 73100 people in different parts of the world. Its marketing strategy is diverse with smaller strategies aiming at specific markets and populations of customers. The company operates stores and differentiates them on the basis of the product and the target market. But this law only holds for normal goods. However, the case for sportswear, apparel, and equipment may differ in different markets. For example, in markets where sportswear products are luxury goods, the law of demand may not hold. In other words, as the price increases, the demand for the product may increase. Such a situation may signify that these products are luxury goods in that specific market. The company also has many customers and potential customers across the globe.
With globalization, the company has a big number of customers further reducing the bargaining power of buyers significantly. Through pricing, the company can capture customers in different market segments. Through differentiation, the customer can establish different prices for different markets. But it is through the understanding of the microeconomic factor of scarcity that the company can capitalize and increase profit. The law of supply dictates that ceteris paribus, an increase in the price of inputs increases the supply and the opposite is true. This law holds only for normal goods. Assuming that Nike’s inputs have the properties of a normal good, an increase in the price of inputs leads to a decrease in the supply of that particular input. The main inputs in Nike’s production line are footwear and apparel.
If one of the inputs increases in price, its supply will consequently increase. With such a large supplier list, the bargaining power of suppliers is very low. Hence, Nike has considerable bargaining power for its inputs. The company can capitalize on the bargaining power to keep the cost of production low. By forcing the suppliers to compete for the supply market, the company can maintain low cost but high-quality products. The company should always push for the lowest price possible but the highest quality. There are several major competitors controlling a large share of the market. However, the competitors deal with different products that vary in quality and composition. However, the main competitors compete heavily and engage in advertising wars. Some of the products are similar and the brands are highly regarded in the market.
Though the threat of new entrants is high, the company’s compete for unique customer populations. In a competitive pricing, the company sets the price relative to the competitors’ prices. However, before any choice of the pricing strategy, Nike must analyze the forces of demand and supply to establish the most reasonable price for each product. Pricing using market forces is as follows: Price Supply Curve Pq Demand Curve Quantity Q When the demand and the supply curves meet, the forces set the market price at Pq. This price level is the real market price for the company’s product. Once the company establishes this market price level, the choice of the marketing pricing strategy follows. Subsidiary products often have volatile prices whose changes have adverse effects on quantity demanded.
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