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Introduction
As the company for analysis, Walmart has been selected, the largest retail organization providing retail and wholesale services. In addition to goods coming from suppliers, the company is also a manufacturer of its own products. As a product for evaluation, the Walmart-branded Equate pharmacy and beauty product line will be assessed from a microeconomic perspective. By using its technological base and raw materials, the organization sells these products, which, in turn, meet the interests of consumers and are in demand due to a different target audience and a wide assortment ( Quality care begins here, 2020).
To manufacture Equate products, Walmart utilizes cosmetic compositions and pharmacological ingredients as the materials to help address diseases with various symptoms, including allergies, headaches, and other health problems ( Quality care begins here, 2020). This activity requires costs that relate not only to production processes but also other conventions associated with obtaining the right to distribute pharmacological products to consumers.
The mix of inputs used to manufacture Equate products depends on specific factors. Firstly, licenses for the manufacture and sale of pharmacological goods are required. Secondly, maintaining partnerships with suppliers of raw materials is essential. Thirdly, the demand for the given products determines the share of production. Walmart benefits from economies of scale because the affordability and sustained consumer interest in Equate products keep the market for similar products high and provide for consistent sales ( Quality care begins here, 2020). As the sources of economies of scale, one can highlight large sales volumes, active marketing practices, an advanced technological base, and the preparedness of management personnel. As a result, this category of goods is profitable for Walmart and allows the company to expand its sphere of influence.
Supply, Demand, and Market Equilibrium
Pharmacological and cosmetic products Equate under the brand of Walmart are the object of analysis. These goods will be evaluated from the perspectives of price, supply, and demand sensitivity. As the assessment and forecasting tools, the concepts of elasticity and market equilibrium will be applied to reveal how the products in question respond to specific changes. Equate manufacturing and distribution rely heavily on the current pricing policy, and in case of a shift, supply and demand will be sensitive.
Sensitivity of Supply and Demand to Pricing Changes
In case Walmarts management revises the current pricing policy for the distribution of Equate products, this will affect both demand and supply. According to Simonsen et al. (2016), in the pharmaceutical industry, price elasticity plays an essential role due to the stable demand for healthcare goods. However, one of the key features of Equate products is their affordable cost. If Walmart increases the price of these products, the demand will decrease since consumers will choose products of this type from nearby pharmacies. Consequently, the supply will increase as the company will have to sell more products. Thus, the price elasticity of supply or demand for the products in question is low.
Impacts of Non-Price Factors on the Demand
Non-price factors are those that affect the quantities of supply and demand without being tied to a specific cost of production. To assess the impact of such variables on demand for Equate products, one can provide examples of quality and diversity. As Benkovskis and Wörz (2018) note, these factors are frequent determinants of consumer interest. For Equate products, quality is an essential criterion that retains the target audience and ensures stable sales. Diversity is also a factor that allows expanding the sphere of influence and attracting more potential buyers.
Impacts of Non-Price Factors on the Supply
Individual non-price factors can influence the supply of Equate and determine the proportion of products supplied to the market. Wang et al. (2016) remark that these criteria largely affect the competitiveness and sustainability of a business. For Equate products, the level of technological base and tax rates can be presented as non-price factors. The more advanced is the equipment for the production of cosmetics and pharmacological goods, the higher is the speed of production and, consequently, the sales. The amount of taxes, in turn, determines the profit directly and can be an incentive to increase prices for brand products because the manufacturer needs to recoup the business. Therefore, these criteria can influence the supply indicators and explain specific changes.
Industry and Market Equilibrium
The market of Equate products is in demand due to not only a wide range of goods offered to consumers but also their importance. Since the brand manufacturers cosmetic and pharmacological health care products, different categories of the population are the target audience. In addition, while analyzing the status of Equate, one can note that the brand has an advantageous and competitive market position since its goods are manufactured and distributed by Walmart, the internationally renowned retailer. According to Lei (2015), in such business models where supply and demand are high, determining market equilibrium is a simple task. If no fluctuations in the supply and demand occur, this will keep the balance and help not use any third-party approaches or practices to coordinate certain aspects of the trade.
Effect of Changes in Supply and Demand on the Market Equilibrium
In case the demand for Equate products is higher than the supply, the cost of goods will increase without the intervention of third parties, and the balance will be maintained. At the same time, if the supply exceeds the demand, this will affect the price in the opposite direction. To maintain a strong competitive position, Walmart will need to keep the value of Equate products, which will satisfy a larger number of loyal customers. Accordingly, the price, as a dynamic component of trade, reacts to changes in supply and demand. Therefore, market equilibrium is such as long as both these factors are stable.
Potential Decisions Related to Supply and Demand
For Walmart to maintain a steady demand for Equate products, the company needs to monitor price fluctuations in the target market and control the indicators of consumer interest. As an additional measure, running active marketing campaigns may be considered because product promotion can help retain loyal clients and attract new customers. Partnerships with other companies specializing in the sale of cosmetic and pharmacological products are undesirable since Walmart will lose a share of profits. Thus, control and adequate marketing are effective mechanisms to maintain market equilibrium from a supply and demand perspective.
Conclusion
The pricing policy of Walmart in relation to Equate pricing is heavily influenced by its supply and demand features. Assessing market equilibrium and price elasticity allows identifying specific correlations between the parameters of supply and demand and making predictions regarding changes. To prevent the loss of the target audiences interest and maintain a sufficient share of the supply, market control and relevant promotion projects are the effective tools of influence.
Reference
Quality care begins here. (2020). Walmart. Web.
Benkovskis, K., & Wörz, J. (2018). What drives the market share changes? Price versus non-price factors. Structural Change and Economic Dynamics, 45, 9-29.
Lei, J. (2015). Market equilibrium and social welfare when considering different costs. International Journal of Economics Research, 6(2), 60-77.
Simonsen, M., Skipper, L., & Skipper, N. (2016). Price sensitivity of demand for prescription drugs: Exploiting a regression kink design. Journal of Applied Econometrics, 31(2), 320-337.Â
Wang, H., Gurnani, H., & Erkoc, M. (2016). Entry deterrence of capacitated competition using price and nonprice strategies. Production and Operations Management, 25(4), 719-735.Â
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