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Applications of Game Theory and Advanced Topics in Business Strategy to Wal-Mart, Inc.
Classifying the market structure for Wal-Mart Stores, Inc. is not a straight forward task.
Entering any store it’s clear that the company competes in a variety of markets including home
goods, apparel, hardlines, health & wellness, entertainment, and the grocery market. However,
since 56% of Walmart’s sales is reported to be comprised of groceries (Peterson), this paper will
refer to Walmart and its market structure as a grocer in the U.S. food retail sector. Although
grocery stores in the U.S. operate under a variety of names (Albertsons, Vons, Ralphs, etc), the
market share of U.S. food and beverage purchases is mainly dominated by Walmart, Kroger,
Safeway, and Costco. These are the only four firms to capture at least 5% of the market share for
this sector in 2016 (Statista). Therefore, Walmart can be classified as competing in an
oligopolistic food retail market.
Competing in an oligopolistic market, Walmart faces mutual interdependence among
firms in the industry and must make its strategic business decisions accordingly. As stated in the
8th edition of Managerial Economics and Business Strategy, mutual interdependence in
oligopolies occur because when one firm “changes its price or marketing strategy, not only its
own profits but the profits of the other firms in the industry are affected” (Baye, 265). Thus when
Walmart makes business decisions, it must consider how other firms will react as these firms’
response could potentially affect Walmart’s profits either positively or negatively. Thus it is
likely that the managers within Walmart understand and implement many Game Theory concepts
discussed in chapter 10 and Advanced Topics in Business Strategy concepts discussed in chapter
11 of Michael Baye’s textbook.
There are numerous game theory frameworks for a variety of situations, many of which
