Eco/561 Business Proposal
Ira Johnson, Jr.
November 19, 2012
Dr. Caryn Callahan
In an effort to better serve the CVS Pharmacy consumer base, the need to offer a wider variety of prescription medication selections and options system-wide. In this proposal, assumptions about the elasticity of demand and the market structure for these medications and expanded services will be included. Additionally, how the expansion will increase revenues will be explained. Further, a rationale for determining the profit-maximizing quantity will be provided.
Decisions will be made by using the concepts of marginal costs and marginal revenue to maximize profit. A mix of pricing and non-pricing strategies will be …show more content…
Barriers to Entry
The major barrier to entry in the retail pharmacy industry is cost. As an incumbent, economies of scale allow CVS to purchase large quantities at low rates because of long relationships with suppliers and because they are buying in bulk. This benefit gives CVS leeway to lower prices while