Competitor Product's Market a Short History of Essay

Excerpt from Essay :

Competitor Product's Market

A short history of the organization and a description of their product

Hostess Brands, Inc. is a company set up in 1930 under the name Interstate Bakeries that later changed to Hostess Brands Inc. In November 2009. The company is located in the United States with its headquarters in Irving Texas. It has an operation centre in Kansas City, Missouri. The company works as a distributor and wholesale baker of snacks in the United States. It owns many brands such as Nature's Pride, Wonder Bread, Bakers Inn, Drake's and Dolly Madison. The company makes and sells cakes, loaves, snacks and rolls under different bakery brands (Smith, 2012).

These brands also make blue berry muffins, cheese Danishes, food cake donuts, honey buns and bear claws among others. Hostess gets revenue through selling of baked goods to mass marketers, supermarkets and stores in the U.S. The privately held bread and snack food producers also sell to consumers online and directly through their bakery outlets. The company along with its partners filed an appeal for reorganisation on January 11, 2012 in the United States bankruptcy court under chapter 11 (Smith, 2012).

Factors that affect demand, supply, and equilibrium prices in the market in which the competitor organization operates

Demand

According to data from Independent market research and Information Resources Incorporated, Hostess has experienced a significant decline in the demand for their bread products and sweet goods. Demand is the key factor in the production of any marketing product and Hostess's brands holds a significant demand. However, there have been factors in the recent times that have led to a consumer sluggish demand for their products. The company has experienced a series of bankruptcy within a decade, and it is currently facing a final liquidation. It is also struggling from a high structure cost and these factors affect its performance that in turn has an effect on consumer demand. This confluence of negative events including competitive pressures and rising commodity costs affects their demand level (Welch & Welch 2009).

Supply

Factors outside the control of individual producers affect the supply of commodities. One key factor is the cost of input of the company. This entails labour and capital. Hostess has had a series of bankruptcy, and this has a direct impact on their supply since it affects their capital. Also with the emergence of other companies producing the same products, there may be a change in consumer preference and in the price of such commodities. Competition from other companies such as Flowers Foods that just expanded its borrowing competence is another factor affecting supply (Welch & Welch 2009).

Equilibrium prices

Equilibrium prices arise when there is an imbalance between the company's supply of goods and the consumer's demand of the same commodity. According to the law of demand and supply, the price of a commodity in a competitive market will be at equilibrium depending on the available demand of that particular commodity. The fact that Hostess is on its way to liquidate has affected its equilibrium prices since this will lead to shortage of supply. Example before Hostess announced that it was going out of business, a box of Twinkies sold for a couple bucks. Currently their supply has stopped, and the price of the same box of Twinkies has increased (Welch & Welch 2009).

Definition of the market for the chosen product, including an analysis of its competitors, potential customers, or potential buyers

The U.S. cookie market has declined recently due to the increase of consumer interest in healthy eating. There is a high consumer demand for cookies that have high fibre, low fat, high protein level and low sugar varieties. To curb this increasing demand, the company has come up with cookies that will meet the consumer's needs that create a substantial opening to broaden their offerings. The high demand will enable Hostess to increase it supply and get high profits (Welch & Welch 2009).

Analysis of its competitors

Hostess will meet competition from other leading brands such as Kraft foods' Nabisco and Keebler Food Co that have emerged successful in the production of cookies. Kraft Foods Nabisco has remained the market leader with a steady of 36% of the market. Others include Pepperidge farm, which registered a raise in its market share (Welch & Welch 2009).

Potential customers

The company targets every segment of the population from young adults, parents, people who like snacking and older people. By creating a market segment, that is largely homogenous and physically good cookies, the company anticipates having a success in the market. This is a powerful factor of getting potential customers to acquire this new product (Welch & Welch 2009).

Issues or opportunities the industry faces that affect its competitiveness and long-term profitability with regard to the product

Price elasticity demand

This measures the receptiveness of consumer demand following a change in price. Various factors affect price elasticity of demand including the number of close substitutes, and the degree of necessity. If a commodity has a large quantity of substitutes, it becomes more elastic, and this will have a large impact on quantity demand. This will be a useful indicator to the company as it shows the company how a change in the product's price affects the consumer's demand. It will be crucial to know the price elasticity before changing the price (Blythe & Zimmerman, 2005).

Technological innovation

Technology competitiveness and innovation promote the growth of dynamic companies. Technology will be necessary for the development of the company since successful firms are part of wide networks within which they compete, learn, collaborate, share public inputs and gain critical mass in order to create a unique mark in the market. Through innovation system, the company will be able to foster its competitiveness and upgrade its productive capabilities. It will be able to access to markets through ICT programmes and will be able to monitor its development, which is essential for the growth of the company (Blythe & Zimmerman, 2005).

The relationship between the amount of labour & capital employed and the law of diminishing marginal productivity

When the marginal product of labour is greater than the average product of labour, each additional unit of labour will lead to more productivity than the average of the previous unit. Adding labour will lead to an overall average and increase the correlation between the marginal cost and the marginal product of labour. This will enable the company determine whether it is valuable to produce extra products. A decrease in the marginal cost of labour leads to an increase in the marginal cost. If the company pays, a worker more money compared to with the amount of product that worker makes, the company's labour cost for each item will increase and its cost for making of each commodity becomes higher (McEachern, 2012).

Cost structure

This is the expenditure that a company must consider when manufacturing a product. The company can only improve its margin when it increases its sales prices or reduce its cost. Improving the cost of structure means, the company will reduce the input costs and processes through efficiencies, savings and chase the sales prices down to avoid giving their gains away. The company focus on its margin but not its capacity and volume utilisation. The company will have to consider a radical overhaul of business models, which are necessary to attain a real and constant margin development from existing product policies (McEachern, 2012).

Factors affecting variable costs, including productivity and others that change the supply of and demand for labour

Variable expenses include things such as inventory packaging, raw materials and sales commission. Sales and production are the primary factors that affect the variable expense. Other factors that affect the level of variable expense include transportation cost and changes in input…

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