Discussion on Loblaw and Wal-Mart Essay Example | Topics and Well Written Essays - 2500 words

Discussion on Loblaw and Wal-Mart - Essay Example To fit in market competition the Wal-Mart decided to reduce the cost of their product. This turned to great threat to the Loblaw Company (Financial post 2006). In 2006, the Loblaw Company lost completely its market to Wal-Mart stores. During this year the Loblaw reported a loss of 219 Canadian dollars due to increased competition (Ian 2007, P. 1). To counter the competition raised by Wal- Mart the company introduced new products in the market. After that Loblaw utilized the strategy of constructing large superstores in its effort to pre-empt Wal-Mart in the market. For instance, Loblaw Company limited has more than one thousand and fifty stores located in various locations in Canada such as Fortino, Loblaw and Zehrs (Marina 2010). In 2002, it constructed a large superstore with the label Real Canadian Superstore (RCSS) acting as the company’s competitive strategy. In addition to that, in 2004 the company constructed 13 stores and similarly in 2005 it was supposed to construct seven more stores. On the contrary, since 2002, Wal-Mart Company limited has not constructed any megastores apart from its â€Å"5 Sum Stores† situated in Ontario (David, David, Mark S., and Scort., 2006, p. 226). However, through utilization of adequate competitive strategies, Wal-Mart can effectively compete with Loblaw and deter entry and exits into their market arenas. The importance of entry and exit barriers and strategies that firms can use to deter entry Entry and exit barriers are significant for firms that are competing. In that case, firms such as Loblaw and Wal-Mart should develop strategies that will help them in entry deterring. Entry barriers are extremely essential because they are crucial in many cases of competition. It is thus important for company’s president’s to consider barriers to entry while assessing dominance and in their determination whether unilateral conduct might discourage new entrants from taking part in the market. Most importa ntly, barriers to entry might dampen, retard or nullify the usual market mechanism utilized in checking market power in terms of arrival and attraction of new rivalry. Additionally, substantial barriers to entry are essential in proving that the existence of a high level of market share translates into a superior market in abuse or monopolization of dominance cases (Turut and Ofek, 2000, p. 576). Over decades, various arguments have existed among economists on how to define entry barriers. Generally, the term refers to an obstruction that makes it extremely difficult for firms to get into a market. A hot debate has persisted on which hindrances should qualify to be termed as barriers to entry.