Based on the Jay Barney of “Gaining and Sustaining Competitive Advantage”, a company can have the same product or service, but at a different price due to:
(1) size differences and economies of scale
(2) size differences and dis-economies of scale
(3) learning-curve economies
(4) differential access to factors of production or
(5) technological advantages independent of scale
The reason why Rite Aid is still in the pharmacy business is because of the size differences as it is the 3rd/4th biggest pharmacy within the pharmacy world after Walgreens and CVS. Even though, size does not matter in most market as it can increase the overhead cost and liabilities, as long as there are a lot of stores to cover each region, by meeting a certain quota every day, for example dispensing 100 prescriptions, might be able to cover the cost of labor. In addition, as indicated in my last blogs, ever since Walgreens have bought out half of Rite Aid’s asset, there was an agreement that allow Rtie Aid to use their distributor’s contract of allowing them to purchase their prescription drugs at a reduce price, lowering their cost.
Any new companies or individual pharmacies wants to enter into the pharmacy business might have a problem due to the increase cost of prescription medication and decrease reimbursements from insurance companies. If these pharmacies can be successful in producing or generating some what similar services at a substantially lower cost or find ways to decrease the labor cost in the pharmacy than Rite Aid, then the competitive rivalry between all the pharmacies will increases and will force Rite Aid to make changes within their company in order to stay competitive in the pharmacy world.
Alan's Perspective 