Goal 1: Proving whether Loblaws should shut down its Pharmacy
Methodology
The central concepts that will be utilized in this goal include competitive markets, shut down and exit strategies, and sunk costs. The concepts relate to the goal in that they seek to explain the key factors that must be evaluated before deciding on whether Loblaws should consider shut down its pharmacy permanently or temporarily. The concept of competitive markets refers to a market that is characterized by many buyers and sellers, sellers selling the same product, a constant number of firms in the short run, and free market entry and exit in the long run. An analysis of the type of market that a firm operates in is essential determining whether the market is ideal for the firm to continue conducting its operations.
Further, market analysis is essential in determining the firm’s profitability in the long run, and therefore, it forms a basis for determining whether the pharmacy should be shut down permanently or temporarily. Sunk costs, on the other hand, refer to costs that must be repaid when a firm shuts down. The costs are significant in deciding to shut down since before making the decision; a firm must first establish whether it is in a position to repay the sunk costs. Finally, the exit and shut down strategies are used to evaluate the viability of shutting down a firm both in the long term and short term. For instance, a firm that makes losses but incurs a fixed cost should consider staying in business rather than temporarily shutting down, since it would still incur fixed costs, thus making the incurred losses higher.
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Analysis
The research seeks to test the following hypothesis;
It is not viable for Loblaws to shut down it's pharmacy temporary since it would still be incurring fixed costs
Loblaws should shut down its pharmacy permanently since
According to Sheth and Sisodia (2002), Loblaws operates in a highly competitive market, and continuing with the operations of the pharmacy would contribute to more costs for the company thus lower profitability. However, shutting down the pharmacy temporary is not a suitable strategy since the firm would continue incurring such fixed costs as rent, electricity, as well as employee salaries. Hence, shutting down the pharmacy permanently is the most suitable alternative for the firm. In this case, the goal was achieved; hence, it should not be rejected.
Goal: Establishing whether Loblaws is an Oligopoly
Methodology
The concepts that will be used in the research include the characteristics of an oligopoly, game theory, and the prisoner’s dilemma. The concepts relate to the goal in that they enhance the understanding of the critical features of an oligopoly to allow for an evaluation to determine whether Loblaws is an oligopoly or not. An oligopoly is defined as a market structure comprising of a few seller who provides identical or similar products. Oligopolies are characterized by strategic behavior whereby a firm's decisions regarding price and quantity may affect other firms and make them react. Therefore, when making decisions, a firm considers the reactions of others. Game theory and the Prisoner’s dilemma are the key strategies used to facilitate the understanding of an oligopoly, which involves the interaction of diverse players who behave strategically.
Analysis
The research aims to test the following hypothesis;
Loblaws is an oligopoly since it interacts with other players in the industry and engages in strategic behavior
Loblaws’ characteristics do not match the characteristics of an oligopoly.
According to Daniel and Hernandez (2016) , Loblaws is an oligopoly since it sells similar products to those sold by its close competitors. Further, the company engages in strategic behavior, whereby most of its decisions are based on the activities and decisions of other similar firms in the market. Hence, the goal was achieved, and it should therefore not be rejected.
References
Daniel, C., & Hernandez, T. (2016, February). The Impact of Corporate Concentration on the Canadian Retail Economy. In Geography Research Forum (Vol. 28, pp. 8-20).
Sheth, J. N., & Sisodia, R. S. (2002). Competitive markets and the rule of three. Ivey Business Journal , 67 (1).
