The proposal by a discount retailer chain, Poundland to take over its closest rival, 99p Stores in February 2015 has finally been approved by the Competition and Market Authority in September the same year. During the inquiry process, there had been a heavy speculation on how the takeover would affect the consumers especially those participating in the discount sector.
Reported in 2015 by the source from the government website under CMA department, the main concerns of this merger were reduction in quality, fewer promotions and closure of stores which will directly and indirectly affect the consumers. According to the latest official report from Poundland Corporate website, poundlandcorporate.com, “In addition to the 450 incumbent branches, …show more content…
To acquire a maximised profit, Poundland will be supplying their products at the output level where marginal revenue is equal to marginal output. The price will be set depending on the demand curve as shown in the diagram above hence acquiring supernormal profit in the short run. But in the long run, due to relatively low or no barriers to entry into the market, the firm will acquire just a normal profit. This is because it has to compete with other new firms in the market using pricing (i.e. lowering prices) and non-pricing strategy (e.g. more products differentiation) thus reducing the volume of the …show more content…
Comes together this prosperity, a threat of diseconomies of scale for Poundland could force the business to raise their price to cover the falling return to output. Quoted from Reuters’ report on November 2015, “British single price retailer Poundland on Thursday reported a 26 percent fall in first-half profit, hurt by higher store opening costs…” After the corporate amalgamation, firm will have to cover the cost of restructuring the management team, compensation to the workers who were going to be made redundant, cost of stores’ redesigning and the list goes on. With an endless short-run cost to be covered and if the sales revenue did not pick up quickly, in a way this will adversely affect the consumers if some of the stores will be have to
Reported in 2015 by the source from the government website under CMA department, the main concerns of this merger were reduction in quality, fewer promotions and closure of stores which will directly and indirectly affect the consumers. According to the latest official report from Poundland Corporate website, poundlandcorporate.com, “In addition to the 450 incumbent branches, …show more content…
To acquire a maximised profit, Poundland will be supplying their products at the output level where marginal revenue is equal to marginal output. The price will be set depending on the demand curve as shown in the diagram above hence acquiring supernormal profit in the short run. But in the long run, due to relatively low or no barriers to entry into the market, the firm will acquire just a normal profit. This is because it has to compete with other new firms in the market using pricing (i.e. lowering prices) and non-pricing strategy (e.g. more products differentiation) thus reducing the volume of the …show more content…
Comes together this prosperity, a threat of diseconomies of scale for Poundland could force the business to raise their price to cover the falling return to output. Quoted from Reuters’ report on November 2015, “British single price retailer Poundland on Thursday reported a 26 percent fall in first-half profit, hurt by higher store opening costs…” After the corporate amalgamation, firm will have to cover the cost of restructuring the management team, compensation to the workers who were going to be made redundant, cost of stores’ redesigning and the list goes on. With an endless short-run cost to be covered and if the sales revenue did not pick up quickly, in a way this will adversely affect the consumers if some of the stores will be have to