Micro-Economic And Canadian Tire Company Paper.
This paper is a brief essay that answers three questions in relation to micro-economics and the
Canadian Tire Company.
Company Chosen: Canadian Tire
1. Provide an overview of your company discussing the industry it which it operates.
Briefly discuss its sales and profit levels it reported in the most current year for which
its annual reports are available (if you are in a 2012 class for example, you should
have access to 2011 annual reports for instance). Micro-Economic And Canadian Tire Company Paper.. Briefly discuss the competitors you
company faces within the industry and the regulatory environment in which it operates
within.
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The Canadian Tire Company is a public firm that deals in the sale of accessories and
products of cars, sports products and other vehicles. This company operates within the
automobile retail industry and it has enjoyed more than eight decades of business since it was
founded in the early 1920’s (Felix 2011, p. 24). The main products sold by this firm are mainly
car items, though the retail chains also sell food and consumable products. There are a number of
merchandise that are branded specifically for this company. One of the most common ones is the
Master Craft brand that is associated with the best bicycle parts, tires, cleaners and bulbs (Brent
2012, p. 23). Micro-Economic And Canadian Tire Company Paper.
The annual reports of the Canadian Tire Company indicate that it is one of the oldest
retail companies in the industry (Brent 2012, p. 23). What’s more, the firm enjoys high profits
since it has more than one thousand stores that house more than twenty million in square feet of
rental space. The Canadian Tire Company was able to realize over ten billion dollars in terms of
revenue and an average net income of over 335 million dollars in the fiscal year of 2014. The Canadian Tire and Petroleum section of the company is the largest income earner in terms of
sales and profits for the firm (Felix 2011, p. 24). Micro-Economic Assignment Paper.
This division accounts for 74 percent of revenue and 65 percent of income on its own. In
terms of competitors, the Hudson Bay Company, Walmart Canada and the Seats Canada
Company are the main rivals for the Canadian Tire Company (Felix 2011, p. 24). The business
environment is regulated such that strict rules and policies have to be adhered to when it comes
to competitive marketing. This ensures consumers are protected from harmful exploitation and
mistreatment by the rival firms and companies. Micro-Economic And Canadian Tire Company Paper.
6. Class, look at the good your company sells. Is the good elastic or inelastic and why? What
does this suggest will happen to your company’s profit levels if they decided to increase price
or decrease price? If you were a shareholder in the company what would you suggest where
would you like to see prices go? Do governments impact the price that you are able to charge?
If so, is this good for customers? Why or why not? Micro-Economic Assignment Paper.
The Canadian Tire Company mainly sells motor vehicle items such as car tires,
automobile spare parts, brake pads, petroleum, car linings as well as engines. These goods can be
described as being inelastic because they do not obey the law of demand. An inelastic product is
one that has an elasticity of less than one such that even if the price of this product increases, the
demand still rises (Roberts and Schlenker 2013, p. 268). Products such as petroleum and car
parts are not affected by price increase and as such, consumers continue to buy them even when
a company raises their cost. Micro-Economic And Canadian Tire Company Paper.
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This means that if the Canadian Tire Company were to increase the costs of its goods,
then they would be able to earn more profits from the sales. In such situations, it is important for
the government to control the prices of goods so as to prevent some firms from becoming monopolies (Shi et al 2013, p. 137). In addition, it also prevents some members from increasing
the costs of products so that they can increase the cost of shares (Roberts and Schlenker 2013, p.
268). Instead, shareholders should opt for other ways of increasing revenue such as merging or
diversification of operations. Additionally, the law of Canada also prohibits business owners and
entrepreneurs from increasing cost of goods at the expense of the consumers. This means that the
involvement of the government in such issues is of utmost importance since it strives to protect
the interests of the customer (Shi et al 2013, p. 138). It does this by regulating and controlling the
prices of commodities and ensures that they rhyme with the current market trends. As such, the
customers buying goods from Canadian Tire Company would enjoy government protection from
issues such as monopolization, cartel formation as well as exploitation. Micro-Economic And Canadian Tire Company Paper.
7. What is government regulation like in your company’s industry? Does the government
employ any regulation designed ensure that competition is healthy or the rights and welfare of
consumers is protected? Would you support governments breaking up companies if they
become too powerful? Why or why not? Be sure to discuss how consumer and society’s
welfare are impacted by firms that exhibit market power? Do you think that governments
should always, as a rule, reduce market power of firms that exhibit market power (in order to
protect consumer welfare) or should firms be able to grow to be large and power (such as
Microsoft)? Would breaking up large companies as a rule eliminate incentives to work hard?
The governments of most countries are tasked with the responsibilities of ensuring that they
regulate the policies and regulations associated with conducting business in a given industry. Micro-Economic And Canadian Tire Company Paper.The government of Canada ensures its citizens are protected from exploitation by unscrupulous firms
by imposing several consumer acts (Carranza et al 2015, p. 156). In addition, the government
also exercises price controls so that commodities are not overcharged. This is important because if a given company has more market power, they can easily take over the industry through
monopolization or formation of cartels.
This in turn limits other companies that wish to establish themselves in the same industry
since the process of market penetration is too difficult (Wagner 2012, p. 109). Hence,
governments should always be keen on the firms operating within the retail industry so that
consumers’ rights are always protected. At the same time, the process of government regulation
in businesses that operate in the public domain ensures that firms provide quality goods and
services. In addition, it also minimizes chances of having substandard and counterfeit goods
being introduced in the market (Wagner 2012, p. 111). Micro-Economic Assignment Paper.
Hence, it is up to the government of Canada to ensure that the automobile products and
commodities being sold by companies such as the Canadian Tire meet the required standards and
at the same time regulate their market power (Carranza et al 2015, p. 158). This is one of the
ways that can guarantee elimination of excess power by companies and creation of cartels by
businesses.
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References
Brent, P 2012, ‘How To Make Canadian Tire Money. (Cover Story)’, Ca Magazine, 145, 5, Pp. Micro-Economic Assignment Paper.
20-24, Business Source Complete, Ebscohost, Viewed 27 October 2015
Carranza, J, Clark, R, & Houde, J 2015, ‘Price Controls And Market Structure: Evidence From
Gasoline Retail Markets’, Journal Of Industrial Economics, 63, 1, Pp. 152-198, Business
Source Complete, Ebscohost, Viewed 27 October 2015.
Felix, S 2011, ‘The Canadian Tire Way’, Benefits Canada, 25, 1, P. 24, Business Source
Complete, Ebscohost, Viewed 27 October 2015
Roberts, M, & Schlenker, W 2013, ‘Identifying Supply And Demand Elasticities Of Agricultural
Commodities: Implications For The Us Ethanol Mandate’, American Economic Review,
103, 6, Pp. 265-295, Business Source Complete, Ebscohost, Viewed 27 October 2015. Micro-Economic And Canadian Tire Company Paper.
Shi, R, Zhang, J, & Ru, J 2013, ‘Impacts Of Power Structure On Supply Chains With Uncertain
Demand’, Production & Operations Management, 22, 5, Pp. 132-149, Business Source
Complete, Ebscohost, Viewed 27 October 2015.
Wagner, Lc 2012, ‘Price Control In Canada’, Journal Of Marketing, 7, 2, Pp. 107-114, Business
Source Complete, Ebscohost, Viewed 27 October 2015.
Micro-Economic And Canadian Tire Company Paper.