. Do you detect any problems with the decision-maker?

The decision-maker is often an authority figure within the organization. In this instance, she is the own with a business degree. I do detect problems in her financial acumen. As the case indicates, she is uncertain as to what costs to take into account, her pricing methodology, or how the market will react to a price change. Many of these concerns are warranted given the overall market and competitive behaviors. However, I believe Karen should be more confident in her overall market analysis.

To begin, Karen has a small competitive advantage as her shop is located in a prime location with a captive audience. Her building is located next to a small plaza where customers can easily access her products. In a addition, she is somewhat insulated from the pricing pressures of competitors in the market. As the case indicates, grocery stores tend to sale a generic product that is predicated on price. The taste and quality are both subpar as compared with Karens products, which gives her a distinct advantage in the marketplace. This advantage does create a problem for Karen as she is indecisive on her actions. She first, does not properly forecast the input costs of her product due to uncertainty. This is somewhat alarming as Karen can easily hedge the input costs of her product through forward and futures contracts. Although her business is small, Karen is concerned about the future price volatility of commodity prices. This a particular concern given the low interest rate environment and investor willingness to use commodities as a store of wealth, thus bidding the price up. To properly combat this issue Karen should enter into futures and forward contracts to essentially lock-in the price of the raw materials of her product (Mari?,, 2009).

Karen also seems to be unsure of the pricing structure of her business which is alarming. According to the case, she is having trouble forecasting both variable and fixed costs in her company. This shows a problem in both business and financial acumen. Karen would be well served hiring a finance and accounting professional to handle these issues for her. By doing so, Karen can free up critical management time for activities that are more connected to her passion of bread making. This would also give her professional expertise to run her business more efficiently. As indicated...

As a result, market saturation and competition are both very high. Karen will need to better differentiate her product in order to properly compete with the financial stable competitors.

Finally, Karens business acumen is lacking as compared to her competitors. From the case study, her competitors know their strengths and intend to compete based on them. The grocery stores are competing based on price. The smaller shops are competing based on quality and convivence. Based on the case, it appears Karen is not entirely sure of her competitive position in the marketspace (Suas, 2006).

6. Assess the risks to the...

…from one product to the next without any ramifications or switching costs. In addition, consumers have many dining options to choose from which creates a negative element for the overall pricing behavior of the business. Consumers, in the current market are now becoming much more health conscious. A shift towards more healthier options and away from breads could also increase the risk in the overall business (Seorans, 2003)

An economic downturn can also significantly impact the recommended business model. The current business model is predicated on high quality breads which consumers are willing to pay premium prices for. A severe economic contraction can not only strain the financial resources of the business but its customers as well. As bread is a highly discretionary expense, consumers will likely diminish their consumption of bread during adverse economic circumstances. Other consumers may elect to trade down and purchase cheaper products in an effort to conserve their money. As a result, the profitability and overall success of the business will be impacted.

Finally, a competitor who offers similar products at a lower price can significantly impact the business model. As a small business Karens ability and resources are limited. A well-capitalized competitor could potentially offer a very similar product at a much lower price. A fierce competitor could also enter the market and sell similar products at a loss with the sole purpose of putting Karen out of business. As a small business she may be unable to withstand a fierce pricing strategy without a shift in her business model…