Suppose HEB considers expanding the capacity of its fresh, equipment at its stores at the corner of SPID (south padre Island drive) & Staples and at the corner of SPID & Waldron. It can do so in one of two ways: (1) HEB can purchase fungible, general-purpose equipment that can be resold at close to its original value. Or (2) HEB can invest in highly specialized equipment which, once in place, has virtually no salvage value. Assuming that each choice results in the same production costs once installed, under which choice is the HEB likely to encounter greater likelihood of entry into fresh sushi-making by Walmart and other potential competitors, and why?
The first choice allows for HEB to exit the decision very quickly if it does not pay off. Being as HEB has many other areas of focus this would be the least costly and best choice for them.
The second choice allows for HEB to have great equipment but again runs the risk of not being worth the investment and then occurring a sunk cost virtually but very low resale value.
The first choice will allow other competitors easier entry into the fresh sushi making market and the price to enter is low and the exit costs are also low seeing as the return will be more substantial than the second option of investing much more money into an operation that can be done for way less costs
Suppose HEB considers expanding the capacity of its fresh, equipment at its stores at the corner...