Q2. Technology and Costs (II) (L2)

Under capitalism, firms are always looking for economic rents made by degrees of monopoly power, through institutionalising innovation. Consider Walmart, founded in 1962, now one of the largest retail firms in the US. In recent times, Walmart is relying on automated micro-fulfillment centres to gain a competitive advantage over Amazon, according to these five articles (listed in reverse chronological order):

1.Verdon, Joan (2021) "Why Amazon Should Be Worried About Walmart's Micro-Fulfillment Centers", Forbes, February 28th, available:https://www.forbes.com/sites/joanverdon/2021/02/28/why-amazon-should-be-worried-about-walmarts-micro-fulfillment-centers/

2.Brownell, Blaine (2021) The Pandemic Package Boom Will Change Design, Architect Magazine, February 24th, available: https://www.architectmagazine.com/technology/the-pandemic-package-boom-will-change-design_o

3.Repko, Melissa (2021) "Walmart bets bigger on online grocery as it ramps up automated fulfillment at stores", CNBC, January 27th, available:https://www.cnbc.com/2021/01/27/walmart-to-ramp-up-automated-fulfillment-at-its-stores-as-online-grocery-grows.html

4.CB Insights (2020) "The Next Shipping & Delivery Battleground: Why Amazon, Walmart, & Smaller Retailers Are Betting On Micro-Fulfillment", CB Insights, July 21st, available: https://www.cbinsights.com/research/micro-fulfillment-tech-shipping-retail/

5.Bain, Marc (2020) "Covid-19 is helping Walmart make up ground against Amazon", Quartz, May 20th available: https://qz.com/1858747/covid-19-is-helping-walmart-make-up-ground-against-amazon/

Your tasks for Q2 are as follows:

Based on this discussion and economic theory, draw an appropriate diagram using relevant isocost lines to illustrate and explain in some technical detail how Walmart's business model is receiving Schumpeterian (innovation) rents over Amazon during the years of 2019 to 2021. Use hypothetical data (rough guesses) relying on intuition. To support your analysis, refer to key sentences and ideas from the articles where relevant.