Drugstore Wars and Structural Balance
In February 2016, Target began converting its in-store pharmacies nation-wide to CVS pharmacies, effectively allowing one of its former competitors to directly nest under its nose. At first glance, this merger might seem counter-intuitive: Target was not in any apparent and significant financial crisis, so why did Target choose to let CVS operate its pharmacies without having to build or acquire its own stores?
According to this article, this $1.9 billion merger deal from December 2015 actually benefits both Target and CVS. Target, with its smaller customer base compare to other pharmacies like CVS and Walgreen’s, naturally had weaker negotiation power in the pharmaceutical world and wanted to redirect its expenditures on pharmacy to retail, which is its main focus. CVS, by acquiring Target’s pharmacies, was able to expand its market by 20%. This merger would put the CVS/Target combination directly competing against the pending Walgreen’s and Rite Aid merger announced in October 2015 and expected to be closed by the end of this year, effectively turning most of the pharmacy competition into a two major party race.
These completed and pending mergers demonstrate that an unbalanced network with members that are mutually antagonistic to each other drives the members to form positive relationships to compete against other members.
