Page 23 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 1, 2014, pp. 4-25

their stocks, because there is lack of a space in these stores for keeping goods stock. That’s why

retail-stores require timely delivery of goods from storehouses.

A necessary coordination between stores and storehouses may be achieved through

different ways. The same enterprise may own both stores and storehouses, while other alternative

enterprises may have only storehouses they may lease to stores. These stores also in turn will

undertake operations on storehouses. Independent enterprises owning and governing the

storehouses are the third option. Stores merely purchase goods from a warehouse owner acting as

a wholesale foodstuffs broker. Choice among these three (and more) options is based upon

consideration of provisions of the contractual law and opportunities for making large-scale

changes on ensuring the foodstuffs are kept in storehouses.

If the contractual la is not perfect and the store is not sure if it abides by the conditions of

the contract, then the store should own its private warehouse which it can manage independently.

As the enterprise “X” owns only a part of storehouses in the town, this will have no major impact

on the level of competition in goods storage. In another case, if the contractual law is not perfect,

but there are a lot of foodstuffs brokers in the town, the store can purchase goods directly from

brokers. If one of brokers fails to abide by the terms and conditions of the contract, the store may

purchase goods from another broker. A real risk of losing customers may make brokers to keep

to contractual obligations.

If there are large enterprises storing foodstuffs at lower prices while storehouses serve for

several retail-stores, then two models of mutual relationships are possible: retail-stores independently

purchase products from brokers or are grouped by a trade chain. In the first option foodstuffs brokers

are very large and may use large storehouses and a sharp competition may occur among them. This

competition changes benefit enjoyed by the reduction of goods storage cost to retail stores.

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