The red line denotes marginal cost and this also increases as the production increases. The shaded region is the profits of the firm. The price line is also the marginal revenue and the average revenue for the firm. So, the company earns profit only when marginal cost is less than the marginal revenue (the area denoted by the shaded portion). When marginal cost increases more than the marginal revenue, the firm incurs loss and so production must be reduced. Also, at the point of profit maximizing quantity, the marginal revenue and marginal cost are equal.
This concept helps the firm to decide at what point the production must be increased or decreased. This also brings out the relationship between supply and demand. When the supply (the quantity produced) is less than the quantity demanded, the firm incurs profit and when the supply is more than demand, the firm incurs a…… [Read More]
Profit Maximization: An Actual or Theoretical Objective?
Profits are necessary to day both for the capitalist socialist and any type of economy to survive. Multinationals and giant companies have the profit motive and therefore maximizing profit as the base of their operations. This also goes under a new label namely stock holder gain. This is a form of profits that happens when the profit margins of the company go up and the market reflects these profits. Therefore profit maximization is or rather ought to be actual. To enter the argument therefore it is necessary to examine what profit is and how it is maximized.
Theories of Profit and Profit Maximization:
A firm survives if it can provide for the costs of production, the factors of production and then have a surplus for the entrepreneur. Profits are the foundation of the capitalist economy. Profit is based on the desire for personal…… [Read More]
I do not think it is necessary to have a single-valued objective function. Maximizing firm value is not mutually exclusive to all other objectives, first. Second, that's like saying that human should only seek to maximize his or her net worth -- it's absurd. A corporation is an investment vehicle, yes, but that's not all it is. As for the idea that firm value maximization is the best objective function, that's not entirely true either. It's important -- you wouldn't have a firm in the capitalist sense of the word without some value maximization, but if the firm didn't provide jobs, for example, it would also not exist. Every firm provides a living for at least one person -- and they do that before firm value even enters into the question.
Freeman's stakeholder theory reflects the idea that the firm should be governed by the interests of its…… [Read More]
profit maximization of monopolistic firm and the benefits and disadvantages of a monopoly to a consumer.
The central theory in all of the profit-maximizing outcomes rests on the idea that marginal revenue should equal marginal cost. The same is true in the case of a firm with monopoly power. Before we discuss the profit-maximizing outcomes, it is important to understand what is meant by monopoly and how does it affect revenues and costs.
A firm has a monopoly if it is the only supplier in the industry of that particular product or products. Moreover there are no close substitutes. Therefore the consumers in this market have no choice but to buy from that one firm or not at all. For this reason, the monopolist is known as a price-maker because it has the opportunity to set prices at any desired level (Mankiw, 2000). Monopolies occur largely because of the…… [Read More]
They presented the idea that "business firms maximize profit as a means to maximize the utility of their owners. In a word: businessmen maximize profit as a means to maximizing utility, so profit maximization follows from utility maximization" (Ormazabal). One may observe that this approach is quite similar to that of the new institutionalists a few decades ago, mentioned above. This approach considers that profit maximization does not seem to a primary objective for nowadays companies. Instead, profit maximization derives from utility maximization, being implied by it. Therefore, profit maximization is an implicit objective, not a primary one.
The second approach is opposes the first one and was provided by Scitovsky in his paper "A Note on Profit Maximization and Its Implications." In Scitovsky's opinion, profit is maximized for its own sake, and this fact should be the starting point of any theory of profit. He considered that profit maximization…… [Read More]
He believed that people cannot be trusted to act in their own best interest, and are better governed by a state that usurps the profit motive thought process from the people. He understood the evils of the profit motivator in business, and sought to artificially remove it from the equation. However, he too understood that it is natural to seek profit as the motivation for business, as he acknowledged that the government must actually take steps to cleanse business of the profit motive.
At first glance, the profit motive seems inseparable from business. However, examining Mill and especially Marx, we understand that it is indeed possible to antiseptically remove profit as a motivator and purpose of business, but the question remains, what to replace it with?
Communism was not the answer. It removed profit as a motive, but was not able to substitute any other purpose to business, so business…… [Read More]
It isn't one size fits all anymore, either, thanks to modern computer-design methods that let architects vary the prefab houses the way Lego blocks can be moved around. More than that, though, architects think the new avant-garde looks can win over upscale buyers craving a touch of high design for their abodes" (Jeffrey & Keats 2004). Modular homes are both unique and inexpensive -- a perfect option for new home buyers wishing to keep costs down in an uncertain market yet to amp up the beauty of their structures. They are also good options for seniors, with downsized 'empty nest' dreams who want less home to support, but do not wish to go into a senior community.
Profit pools exist at every juncture of the home industry, from green and customized construction, to improvements and modifications, even to demolitions -- the debris from gutted structures can be recycled to create…… [Read More]
This means that during full agricultural seasons, prices will be lower, while during extra season, prices will increase. The price increase is explained by a lower and more difficult production of fruits and vegetables during winter times and also by the necessity to properly store the goods produced during the full season so that they remain fresh. In all, the retail price has to incorporate the production, transportation and storage costs and also the company's profit.
Currently, the average price promoted by Wokland is of 17 dollars per one kilogram of fruits and 10 dollars per one kilogram of vegetables. The net profit for 2005 was of 1.7 million dollars and the net profit for 2006 was of 1.5 million. In order to reach the desired 2 million dollars profit in 2007, the company has to increase their revenue sales by 33%. The easiest way to achieve increased…… [Read More]
In short, it might be difficult for a small firm to incorporate all of this various evidence from such a large, industry-wide perspective, and to take into consideration the various global implications of even a niche market upon the firm's future strategies. Sometimes, focusing on small improvements might be the more feasible strategy in the short run.
PIMS strengths and weakness is its far-reaching, ambitious, and all encompassing perspective. However, even as more and more firms jockey for position in a market of increased global competitiveness, PIMS continues to be used to evaluate current businesses' market positions because it offers some aid in providing the ability to predict the future when confronted with a seemingly dizzying array of possible strategies, grounded in data analysis from like companies within a similar industry. Also, although the applicability of the strategy may vary somewhat from industry to industry, all from various consumer, industrial…… [Read More]
Market Efficient espect Set Information Impossible Makes Abnormal Profits
In his work, Fama argued that given the massive use of resources by the brokerage firm to conduct studies on trends in the industry, the effects of changes in interest rates on corporate balance sheets and expectations of managers and/or political analysts of the companies should be able to systematically beat a generic portfolio with the same risk characteristics.
Since, according to Fama, professional in every situation, the analyst has a fifty percent chance of beating the market; although its specific capabilities did not exist he would beat a lot of the market. The analyst did "help" the market to be efficient if all the investors, in fact, would hold portfolios composed of stock indices, would open up significant opportunities for professional traders to take advantage of the situation. But the movement of traders to that "new market" would…… [Read More]
Communities are looking for social expenditures by the business to benefit the community (hospitals, stable employment, donations, and investments). Managers face a challenge in making such crucial decisions. Therefore, corporations must be clear on how to make tradeoffs between these often inconsistent and conflicting interests from different stakeholders.
In the Shareholder Wealth Maximization model, three types of maximization exist in a company. They include total stakeholder maximization, shareholder maximization and stakeholder-owner maximization. Shareholder maximization is based on a single stakeholder maximization whereby the sole business owner is taken into account during maximization. The stakeholder owner maximization focuses on desired interests and resources important for shareholders commitment. It is crucial for the overall success of the business venture (Tricker, 2012).
Of all the three-wealth maximization of companies, shareholder wealth maximization is more significant than the other two. While most businesses presume total stakeholder maximization to be the most significant role, it…… [Read More]
Over the last few years, it is evident that the airline industry in the U.S. has been experiencing long standing as well as novel challenges (The American Antitrust Institute, 2012). These includes the increase in the price of fuel, slowing demand for air travel and pressures to expand globally. Consolidation among various airlines across the country is the most common remedy that most of the airline firms are applying.
In April 2012, the U.S. Airways made an announcement to move and take over the American Airlines. American airline is the fourth largest airline in the United States while U.S. Airways is the fifth (Plane Buzz, 2013). This merger, therefore, will make the U.S. Airways- American the largest in the United States with a combined share of more than 21% (The American Antitrust Institute, 2012).
The merger is worth 11 billion U.S. dollars and will turn America into the largest…… [Read More]
Some of the paradoxes are quite complex and can lead to any kind of discussions, including game theory. I am referring, for example, to the network level strategy, with companies in a constant competition with one another, but needing to cooperate in order to maximize their profits. The prisoners' dilemma comes to mind in this sense, applied to the business environment: if you choose to increase your price, for example, your competitor will increase his as well and it is most likely none will win. On the other hand, if your competitor decreases the price in order to attract more customers, you need to be able to take the right decision keeping in mind that of your opponent.
Globalization vs. localization, national vs., global or control vs. chaos are all paradoxes which companies operating in today's business environment find themselves are facing. If we look at the paradoxes presented by…… [Read More]
Business Ethics in an International Environment
Business Be constrained
To what extent should a business be constrained by the moral norms of a society?
A business organization does not exist with the sole purpose of maximizing its profits; it is also supposed to be a socially responsible corporate citizen. Incorporating a sense of respect for social and cultural norms of the society is essential for business organizations if they want to achieve a sustainable future in the industry. Social norms of the society should be followed by every business organization; irrespective of its size, nature of business, type of industry, or geographical location. It becomes even harder for organizations to mold their policies, procedures, and operations according to the cultural, social, and moral norms shared by the members of the society in an international environment.
This paper has been written with a view to discuss the importance of…… [Read More]
multifactor productivity. The basic concept is that MFP calculates output over all inputs. In the example given, the inputs are labor and capital. The MFP formula is used to measure the change in productivity that results from specific changes in the production process. In addition, the importance of firms studying productivity changes is explained. Firms need to understand the implications of changing different inputs, in order that they may seek the path of profit maximization. Sensitivity analysis to different changes can help with that process. In addition, the MFP concept is useful for firms seeking to maximize other variables besides profit. The same principles behind MFP can be applied broadly in business to ensure that the best decisions are being made and that productivity is being maximized.
The basic principle is that MFP is based on the outputs per a combination of labor and capital (Jaxworks, 2010). This is in…… [Read More]
Purchase of any item may be an ordinary activity for most people, but in economic terms, it is probably one of the most significant activities that govern and shape the business cycle and affects the economic conditions of any organization or country. Purchasing is directly connected with the concept of consumption. The more a person purchases, the higher is the rate of consumption and vice versa. But purchasing or consumption, for that matter, doesn't take place in isolation and several different concepts come into operation when a single consumption activity takes place.
Let us illustrate this with the help of an example. Suppose a couple decides to purchase a car. On the surface this might be an ordinary everyday transaction where money goes from one party to another as the result of which ownership changes. The car becomes the property of the consumer while his money becomes addition…… [Read More]
U.S. And Japan economic
I have chosen lifetime employment as the observable feature of Japanese and U.S. economies to be analyzed and described. As we are probably aware, the employment span is quite different in Japan with respect to the United States. In Japan, employees are generally recruited from college or university by the company, usually have a residence period while still in the university and, for the most part, spend their entire life working for the same company. This means that they start their way at the bottom and usually reach higher positions in the company late in their life (over 50 years old anyhow).
In the United States, the procedure is somewhat different. It is quite uncommon for a person to spend more than a few years within a company. If they do so, it is either because they have not found a better position elsewhere (and this…… [Read More]
Marginal analysis is "an examination of the additional benefits of an activity compared to the additional costs of that activity (Investopedia, 2012). The idea is that for the toothpaste division, the company would only produce more if the profits that it gains from producing more outweigh the costs associated with that increased production.
The number of cases needed to maximize profits is calculated as follows:
So 7000 cases is the point of profit maximization.
Based on the assumption that the toothpaste market is in a state of perfect competition, if CPI raised prices, nobody would buy our toothpaste. Demand would fall because our competitor's toothpaste would be cheaper and would be of equivalent quality. In perfection competition, companies do not have any leverage (Heakal, 2012).
If the market price of toothpaste rose to $54 per case, then the point at which profit is maximized would change. The…… [Read More]
Introduction to Situation
This paper is based on a fictional case study in which a young woman is considering becoming a physician. Prior to fully committing to this decision, she desires to attain prudent financial information about its repercussions. Specifically, she is seeking to identify the return on investment that her decision could potentially generate. This involves both qualitative and quantitative factors, the former of which pertains to personal gain derived from aiding people in a much needed professional setting. The latter relates to the finances she can generate from practicing medicine.
This financial data is stratified into a number of different categories corresponding to the market for doctors in terms of supply and demand, elasticity, production costs, pricing, and normal profit. These factors will help her to decide in which state it is beneficial to practice. The focus of this paper, then, is to identify how these factors relate…… [Read More]
Aboriginal people are the Indians who live in Canada. Over the years, they have been characterized by poor living conditions, low social status, poverty, discrimination, and social injustices. Government organizations should be on the front ensuring proper treatment and social justice for the Aboriginal people. ed Cross is an example of non-profit organization, which seeks to improve the status of the Aboriginal people, regardless of their social status and with equal treatment to all, as discussed in the paper.
Non-profit organization aims at providing services to the public, while profit organizations aim at profit maximization. Public interest comes first, for the non-profit organization, rather than their interests. The ed Cross is recognized as the non-profit organization, and it is chartered by the U.S. congress. It provides services worldwide, and the general population during times of disaster and the workforce is predominantly volunteers.
ed Cross society
Nonprofit organizations have to be…… [Read More]
The international context
This paradox is ever more actual in the global world we live in today. Indeed, many of the companies have become global players, on the other hand, many of them continue to have a regional and national role as well. In my opinion, one cannot be only a global player or only a regional/national player. The regional markets, where the company initially operated, probably bring consistent shares of the overall profits as well.
So, again we are in a situation where the company needs to be able to moderately adapt its strategy in order to cover all aspects involved. Global implies or is implied by regional and national, with all responsibilities deriving here from.
In general, we may consider that any rational organization has, as its primordial goal, profit maximization. On the other hand, this strategic goal comes against many of the company's social and…… [Read More]
Regulation of Mergers and Implications of Government Intervention - the Case of a Potential Merger for Blockbuster
When a large firm in a mature industry wants to grow a common strategy will be the seeking of an acquisition or merger. However, large firms in an industry will often be faced with government regulation which may seek to control and limit the way merger activity takes place. For example, if Blockbuster, a major film rental company, wishes to merge with another firm they may face barriers, while these barriers may be seen as good for competitive environment, they may be perceived by Blockbuster as limiting their commercial actions.
It may be argued that government regulation of needed in the markets for a number of reasons. The first may be the role of the government in protecting the market system to ensure that competition remains in a market. Where one firm…… [Read More]
The concept of the multiplier effect is closely related to the concept of marginal propensity to spend and consume. Marginal propensity can be understood as the increase in personal consumer consumption and saving that occurs with an increase in disposable income. When fiscal policy creates more disposable income for a family, the concept of marginal propensity predicts how much more they would be save and spend. Thus marginal propensity predicts the actual impact of fiscal policy when it is enacted and thus it can calculate the multiplier effect.
Prepare an essay describing Keynesian economic theory. Be sure to fully explain what is being critiqued and why. You should also be clear on why you find this particular critique so compelling. (600 words).
Keynesian economic was developed in the 20th century by the British economist John Keynes. Keynesian economics is basically a reinvention of classical economic theory, it focuses upon a…… [Read More]
External Analysis Southwest Airlines
One of United States' most successful airlines in the business is Southwest airlines. The company has been one of the most successful businesses in the economy with no case of worker layoff or strike being recorded in the organization. The company has dedicated its commitment to ensuring it provides a favorable environment for its workers. The company's corporate culture has played a significant role in the success of the company as it recognizes the workers emotions. Positive attitude is influential in the workplace as the workers become more productive. The air transport business is in an industry where profit maximization is a challenge to many players. The struggling economy and the increased number of players in the company make the industry unfavorable for business. The industry is also affected by the increased price of fuel which increases the cost of transportation. The paper conducts environmental analysis…… [Read More]
Marketing Mix in Marketing
Importance of Marketing Mix
Discussing Four P's
Importance of Marketing Mix in Marketing
Need of Marketing Mix in a Business
Need of Marketing Mix in Marketing
Organizations are driven by customers who are the basic revenue generators and give the organizations an opportunity to launch the products and services. Marketing mix is a plan that enables the organizations to convey their presence and offers to the customers. It is to attract customers so that the objective of profit maximization can be fulfilled and businesses can sustain in the market.
Importance of Marketing Mix in Marketing
An important part of the external stimuli, which formulates the perception of the buyer, is the marketing mix part of the marketing plan (Botha, Strydom, Bothma, & Brink, 2006). These are the inputs launched by the marketers to attract the target market. They are commonly known as 4Ps.…… [Read More]
Financial Analysis of Bestwish Limited
Bestwish Limited produces extensive range of quality products such as gift dressing, greetings cards, and plush merchandise of more than 50,000 stocks. The production of different categories of products involve between 2 and 15 processes. The company produces standardized products and custom designed products ordered from customers on contract basis. However, Bestwish Limited is facing challenges to control the costs because of varying production process, reliance on indirect costs and large number of stock keeping units.
Bestwish Limited has just closed the 2010 fiscal year account and the company is finalizing the 2011 budget. Bestwish intends to analyze the 2010 financial statement to present the accurate picture of the company financial performances.
Objective of this report is to analyze 2010 financial statements to assess the viability of Bestwish Limited.
Audit Committee of the Board
Subject: Financial statement Analysis
Date:…… [Read More]
The role of business in the economy
Sustainability of a business and prosperity to an economy go hand in hand. In order to attain profitability, businesses have a number of roles to play. Businesses provide society with products that are necessary to the society and otherwise unavailable Henderson & Affairs, 2004.
Business assist in providing jobs to the local population, mobilization of resources and increase a tax pool for the government with which provision of social services is made possible.
Businesses are a source of wealth creation to a nation through resource utilization. Production undertaken will build a source for export to other countries Henderson & Affairs, 2004.
Businesses assist in technological advancements and increase an economy's technology base.
Comparison and contrasts between the role of for-profit and nonprofit organization in the economy
Profit organizations are identified to by their key objective of profit maximization. Nonprofit organizations are…… [Read More]
You can also examine the variable costs; these would be the costs that move up and down during the manufacturing process (such as raw material costs and labor costs). When a firm reduces their overall costs, this would increase their overall marginal revenues, by increasing the profits that they are making on each unit. The point when costs have been reduced as much as possible is when a firm would be perfectly competitive. Where, they have reduced costs as much as they can to increase profits. For example, an electronics manufacturer is seeing declining marginal revenues and increasing marginal costs by manufacturing their products in the United States. This causes them to move their manufacturing plant to Mexico, where the fixed and variable costs are lower. At which point, their marginal revenues will increase dramatically. This is the point that the firm will be maximizing their profits.
Clearly, for any…… [Read More]
randing Affects the uying Decision
"How Does randing Affect Consumer Purchasing?." Using this research question, analyze the strengths and weaknesses of each research method (qualitative and quantitative) within the scope of the proposed dissertation topic. Identify which method you will select (or state whether you will use a mixed methodology) and explain the reasons for your choice.
DA Qs 1 Answer
The marketing guru Philip Kotler perceives branding as a "name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers." It has also been adopted by the American Marketing Association. Michael Dunn, President and CEO, of Prophet, a strategic professional services firm in San Francisco, states that branding is just a defensive tool against market competition; but acts as "insulation against deteriorating economic conditions."
The essence of a brand is the base upon which the prosperity of the…… [Read More]
social corporate responsibility?
The source of conflict
CS with profitability
Opposing Friedman: The view of others
In the article "the social responsibility of business is to increase its profits" by Milton Friedman, he takes the position that various corporations can never be socially responsible. He believes that it's only the people in the company who have responsibilities. Friedman (1970) suggests that the concept of social responsibility should be taken by corporate executives of various businesses but not by businesses themselves. This is because it is the corporate executive's responsibility to conduct business and steer the business to profitability. The corporate executive's ethical values and those of the corporation owners should interact in a way that creates value in the corporation. They could be divergent but should be geared towards the profitability of the corporation. This paper is a critique of the article. The paper is based on a divergent view…… [Read More]
Marginal revenue = marginal cost
This paper will examine the MR=MC principle, which is one of the guiding economic principles for business. This reflects the relationship between marginal revenue and marginal cost. Marginal revenue is the additional revenue from producing a unit of a good, and marginal cost is the additional cost of producing that unit. In general, businesses prefer to produce only when they can make more selling a unit than it cost to produce, but there are exceptions, and that is where the MR=MC principle relationship becomes interesting.
MR=MC is also known as the profit maximization rule (IE, 2018). The slope of this curve reflects the margin, and how it changes as the company achieves economies of scale. For example, if a company has a slow, manual process for producing widgets that results in a marginal cost of $1.00 per widget, and but because widgets are not differentiated…… [Read More]
[Profit in eal Firms]
Today airlines use the Fleet Assignment Model which assigns aircraft types to an airline timetable in order to generate maximum profits. This is similar to what Continental Airlines practiced and is based on the principles of maximizing profits by calculating marginal revenue and marginal cost. The Fleet Assignment Models have increased profit margins which are constraint to factors such as that each flight in the schedule has to be assigned a particular type of aircraft. The assignment is such that the number of aircrafts cannot exceed the number available in the fleet.
Profit Maximization through the comparison of cost and revenue is now being widely practiced due to its effectiveness in fulfilling the desired goal. Firms and businesses tend to keep records of the cost and revenues in order to study the comparison of the two. The Inland Press Association has been keeping data regarding cost…… [Read More]
Tablet SIM III
The results of the last analysis were promising, but ultimately there are strict limitations as to the usefulness of cost-volume-profit analysis.
With the X5, the results were successful for the most part, and the X6 also sold to saturation. The X7 sold nowhere near saturation, and therefore money was left on the table. This is where the bulk of the analysis will be conducted. A few extra dollars can be squeezed out of the X5, and the X6 has some room for profit enhancement as well.
The strategy that I had formulated was as follows:
The X5 sold out and was highly profitable. The biggest question here is whether or not the X5 will sell out in 2014 at a higher price, from which greater profit can be derived. Using data collected from multiple simulations, the demand curve for 2014 has the following results. At a…… [Read More]
Wal-Mart is America's largest retailer and an epitome of business success. The corporation was founded in the 1960s by Samuel Walton, with a vision of quality products at affordable prices. For most of its existence, the company has been a specialized retailer, centralizing products of virtually any category into a single stop store format.
In recent years however, the company has commenced to create its own products and sell them to customers. This move into the private label sector allows the company to create and retail cost effective products, to attract the cost sensitive consumers, and also to retain them.
Currently, a consideration is being made relative to the corporation's possibility of launching a line of bio bakeries, all baked in-house. In other words, the primary features of the new product line would be that they are private label and ecologic. Still, at this stage, it is necessary to devise…… [Read More]
Production Cost Per Edition Is
TC (Q) =70+0.10Q+0.001Q2
(i) Total Revenue Function
Total Revenue is normally calculated by multiplying the price of the product with the quantity sold.
TR (Q) =P (Q) x Q. where Q. is the quantity of output sold, and P (Q) is the inverse demand function of the price.
Price per unit is
Simplified function 0.90Q2
The profit is calculated by subtracting the production cost from the total revenue
(Q) = TR (Q) - TC (Q)
Production cost =70+0.10Q+0.001Q2
P (Q) x Q -- (70+0.10Q+0.001Q2) where P. Or ? is the price per Unit
Price per copy is
Profit Function = 0.9010 Q2 +0.10Q -70
Marginal Revenue Function
The marginal revenue is the extra revenue that comes from selling 1 additional unit. The change in revenue with respect to a change in quantity must be computed first.
MR (Q)= d…… [Read More]
In a firm, most of the capital source comes from accumulation. This concept of capital accumulation defines how wealth is generated for the company by adding up amount in cash or other forms of asset into the capital account. Capital accumulation is solely for increasing the profits on the possession of the firm and no other aims are attached with it other than bolstering the revenue holdings of the company. Capital accumulation is not connected with increment in labor input or output. It is dependent upon the existing company profits that the firm uses to maximize the existing capital. Assets that are in possession of the firm can be used to increase the capital by appreciating in their value or acquire assets that can be used to create further wealth. Other ways firms bring accumulation of capital into process is through acquiring shares or mutual funds. Capital accumulation…… [Read More]
Price Targeting Industry
Customers usually complain that they purchased the same product or service at higher price than their friends did. This is actually the price targeting technique that sellers use in order to receive maximum profits or revenue. However, if the customers are aware of the actual price and sellers' technique then they can make a better deal.
Price targeting is one of favourite techniques of vendors to earn more profits since they can sell the same product or service at different prices to different customers. y this method, vendors identify point of transaction where consumer decides to purchase the product or service and is ready to pay amount close to the maximum price. Thus, the vendors may capture the consumer surplus.
Retailers make discrimination in prices because consumers also hide the maximum price that they are willing to pay off for the particular product or service.…… [Read More]
Equilibrium and Barriers
Barriers to Entry and Long-Term Equilibrium in Monopolistic Markets: Strategy and Market Forces
Introduction Marginal Equilibrium
Barriers to entry can arise out of natural market forces as well as through careful strategic creation or enhancement by incumbent organizations that have a great deal of control over a given market and/or industry. When a specific organization has established a monopolistic or near-monopolistic control over its market and enjoys a great deal of stability and equilibrium with some price flexibility as well, it can be very much in its interest to erect or encourage barriers to entry that thwart the possibility of other entrants into the market, disrupting this equilibrium. As mentioned, many of these barriers to entry arise on their own out of market forces, but they can also be encouraged by strategic decisions within incumbent organizations that influence the market generally and at times explicitly.
Before examining…… [Read More]
The price of a commodity or service is determined by evaluating how value is fashioned with regards to the customer segments in the market. The management of the organization needs to ensure that the pricing of the product is optimum to guarantee sufficient number of customers thus generate adequate profit. Strategic pricing is one of the elements of marketing mix that a producer needs focus. Product pricing is related to product positioning as different customers may be willing to pay different prices for the same product. Pricing strategy also affect the channels selected by the producer to penetrate the market, and the promotion strategy to be used to create awareness in the competitive market.
Pride determination has no specific formula although several factors need to be considered so as to formulate at a favorable price. One such factor is developing a marketing strategy that will evaluate segmentation, target market…… [Read More]
The country and the company itself present significant challenges that need to be overcome. Our company has invested a significant amount of money and time into the acquisition of this new company and we need to soon show our shareholders that this has been an inspired acquisition. Your mission will need to turn profit soon, but also to create a team of professionals who are motivated at their job and who will produce results in the next years.
The challenges you will encounter include a lack of motivation in their work, no long-term objectives, plans of action or approach and the incapacity to commit to change and accept the non-functionality of their own system. Things are done differently than we are used to here in the U.S. You will need to start by getting to know the team you have and by working out how you can complete your human…… [Read More]
Marketing Consultant Global Instrument Systems Inc.
The situation in which the profits of the firm are falling even though the overall sales volumes have been increasing may be a signal of poor marketing policy and product strategy of the firm and must be taken care of as the increasing sales costs due to increased sales volumes will not be offset by the profit. In order to develop the strategy for profit maximization, a precise and detailed analysis of the available firm operational history must be implemented.
The first vital step would be to carry Cost Driver Analysis and Activity-Based Cost Accounting, which are "tools" for gathering data on your costs of doing business: costs to serve your customers, costs to purchase, carry, and sell your vendors' products and services, and your costs to engage in various "activities" (ordering products, receiving products, selling products, delivering products, etc.)
and thus will put…… [Read More]
Supply and demand are two fundamental aspects of economics. It is the combination of these elements that makes up a market. Therefore, it is paramount to understand both concepts in order to appreciate the mechanisms of economic theory.
Supply is the ability and willingness of merchants to provide commodities for sale. Quantity supplied is a definite amount of goods at established prices. A supply curve depicts the connections between the price and quantity supplied of a good or service within a certain time period.
In order to understand supply curves, one must also comprehend the law of supply, production costs, marginal costs, and profit maximization. The law of supply states that as the price of an item rises the quantity supplied similarly increases. As the price falls, so too does the quantity supplied. In other words, there is a positive relationship between price and quantity supplied.
Another major factor in…… [Read More]
This brings about a certain superiority from all Islamic people, here including the Algerian one. On the other side, the current Algerian government is a laical one, which does not limit the individual creed of the Algerians.
This superior air that may characterize Islamic culture in general may sometimes be considered a weakness if we sustain the idea that underestimating your opponent or your partner may be one of the mistakes that leaders sometimes make and that most often brings their downfall.
riefly referring back to the World ank, we may consider that there are several sub-cultures within this organization. However, in my opinion, this is less an existence of organizational sub-cultures, but more of individual or national cultures that come together and interact within the World ank. I am referring here, for examples, to the officials and civil servants working for the organization, and to the lobby groups that…… [Read More]
company is in a number of businesses, but primarily the overnight courier and the package delivery businesses. FedEx operates around the world.
The first big idea is that 'choices involve tradeoffs'. This applies to FedEx in a few ways. The company is offering a premium service to customers and charges a premium price for that service. There are a number of different services that FedEx offers, and these services compete with UPS and the USPS. The customer must decide what the right combination of price and service is going to be for the shipment. These choices will affect the total demand for FedEx and the type of demand as well. Understanding how consumers make these choices, especially with respect to the price of the different overnight delivery options, is going to be a key success factor for FedEx that allows it to set its prices closer to the point of…… [Read More]
These are simply the strategies that help the sales staff know how it would go about achieving its targets. There is usually more than one strategy at work at any given time. For example Kudler can use direct marketing, door to door selling, fairs and events to promote its products. In many affluent areas, there are large malls that people gather at for fun, shopping and eating out. This is a good place for promotion of Kudler's salad line.
The program must be kept alive and active by consisting sending out mails, letters, and promotional items to all those who matter. This helps in increasing the consumer base as Parinello says: "Send no less than 50 letters of introduction to new prospects each week; make no less than 50 cold calls of introduction to new prospects each week; make no less than 20 face-to-face contacts with new prospects…… [Read More]
Define marginal revenue.
Explain its relationship with total revenue.
Marginal Revenue (MR) is the revenue that is linked to one more additional unit of production. The demand for the product will determine whether it will be higher or lower or even the same as the previous unit of production revenue. MR can be defined therefore as the addition realized revenue to the Total Revenue (TR) by a unit increment in the sales volume of a firm in the market (Economics Concepts, 2011).
For instance if a lime factory sells 100 liters of lime at $4 per liter, the total revenue of the factory would be $400. Incase the factory increases the sales volume from 100 liters to 101 liters, then the total revenue of the factory increases to $404. The increase by $4 in the total revenue by one unit increase in rate of sales per…… [Read More]
The abstract presents a summation of the methodology however, what could be added for greater emphasis is the author's definitive conclusion on why cooperatives are different than investor-owned firms and why they are chosen in agribusiness. The conclusion is of course interesting however, the why which is elucidated in the analysis will compel the reader to read on. The literature review is thorough and sets up a fundamental reason for the author's undertaking of the project; the available research is fragmented and not conclusive in its determination of why cooperatives and investor-owned models are different and why they are used. The author's strength in presentation is not in its subtlety but in its direct statement of fact, rationale, and logic. Citing pages five six, the discussion of profit maximization as the objective of firms is contrasted with evidence that this is not always the case, particularly for cooperatives. In creating…… [Read More]
The financial manager of a firm deals specifically with the acquisition, financing, and management of assets with the overall financial security and profitability of the firm as his goal. Decisions concerning what are the best types of financing, the best financing mix; the appropriate dividend policy and how the funds will be physically acquired are all the responsibility of the financial manager. The financial manager has different degrees of operating responsibility over the firm's assets with a greater emphasis on current asset management rather than fixed asset management.
Responsibilities of the financial manager also include capital budgeting, cash management, credit management, dividend disbursement, financial analysis and planning, pension management, insurance/risk management, and tax analysis and planning through cost accounting, cost management, governmental reporting, internal control, the preparation of financial statements, and preparing budgets and financial forecasts.
The overall goal of the firm is the maximization of shareholder wealth and…… [Read More]
There are a number of factors that go into a firm's pricing strategy. The firm can consider the prices offered by competitors and the firm's own desired competitive position. It can base prices on the cost of production. The firm must consider the price elasticity of the demand for the good. The company can also choose from a number of different strategies, based on this demand curve: revenue maximization, profit maximization, cost leadership, penetration pricing and more. Other strategies include skimming and other forms of price discrimination (NetMBA.com, 2010). For example, if Brooks Brothers priced its goods differently for different marketing channels such as the Internet or a retail channel partner like Nordstrom, this would be a form of price discrimination.
These different pricing strategies are used to achieve different objectives. For a luxury brand like Brooks Brothers, the price will support the luxury brand image. Prices therefore…… [Read More]
Service Demand & Supply
Service Demand and Supply Planning
Planning is considered the most important function of every project and organization (Singla, 2011). Successful organizations spend their more than 60% of the time in the planning process. It is because strong planning makes the subsequent steps easy. If planning is poor, the rest of the activities are bound to fail. It is, therefore, mandatory to spend maximum time and put in the best efforts in the phase of planning so that execution and implementation can be made possible without hassle.
In the context of business organization, the major game to play around is maximizing profitability (Tulsian, 2002). It is the core objective of every commercial organization and the very survival and existence of organization depends upon the ratio of profits it earns. The simple formula of profit calculation is revenue less expense. In order to maximize profits, organizations adopt any…… [Read More]
In contrast, within the firm, the entrepreneur directs production and coordinates without intervention of a price mechanism; but, if production is regulated by price movements, production could be carried on without any organization at all, well might we ask, why is there any organization?" (Coase, 1937, p. 387) In simpler words if markets are so efficient why do firms exist? Coase explains, "the operation of a market costs something [such as the costs of negotiating and concluding a separate contract for each exchange transaction] and by forming an organization and allowing some authority (an "entrepreneur") to direct the resources, certain marketing costs are saved" (Coase, 1937, p. 391). Thus, firms actually present greater efficiency over markets by decreasing such costs.
That being said, if firms are so efficient, why are markets needed? (Coase, 1937). As per Coase, as the firm grows (when the entrepreneur processes additional transactions), decreasing returns to…… [Read More]
With the news of an office supply chain merger of historical proportions making headlines every day, Staples' CEO on Sargent has been forced to publically clarify the company's resource management strategy (Detar, 2003). Combing through his public statements since news of the merger's pending approval was first publicized, it may be possible to refine and improve the firm's future adaptations to such shifting market conditions.
In order to anticipate the multitude to probable threats posed by a merger between its two main competitors, Sargent and the executive management of Staples must engage in a proactive process of risk management. The likelihood of a combined Office Depot/OfficeMax entity slashing prices to force Staples into counterproductive economic strategies should be considered of paramount importance. Adjusting to the market conditions of an oligopoly, as imposed by the planned merger, will require a comprehensive risk management appraisal that includes the formulation of multiple contingencies.…… [Read More]
The author of this report has been asked to review companies that are on either the good or bad end of financial soundness. The author will focus on the bad end and the company that shall be the focus is Delta Airlines. The questions that will be answered as they relate to Delta will include an identification of the company, their "domestic environment," a summary of the company's industry, how long they have been in business, and the attribute that they are least admired for. Further, there will be the identification of a business theorist and the theory that they offer that would or should apply to Delta. The final few points will be how domestic government regulations have affected Delta, what can be done to overcome these regulations, an incorporation of the prior-mentioned theory into that execution and an over offering of critical thought on the matter.…… [Read More]
corporate merger between Delta and Northwest airlines in order to find out the possible reasons why it was necessary. We evaluate the merits associated with corporate mergers and the challenges that might be faced in the process. A recommendation on how mergers should be carried out is also provided
Mergers and acquisitions form a very integral part of the contemporary corporate landscape. Kolker (2010) points out that initial six months of the year 2010 witnessed the total value of global acquisitions increase to 2.7% to a monetary value of $915 billion. This was an increase for the initial six months of 2009. 2010 however was off to a rather slow start as compared to 2006 which recorded an excess of $3.8 trillion in transactions related to acquisitions (Yeary, 2007). It is worth noting that it is never the volume of the deals that matter but their size. Averagely, there were…… [Read More]
The Bible and Financial Concepts
The Bible is quite clear on how one should orient oneself in this life towards Heaven and pursuing the kingdom of God (Matt 6:33). However, in the financial world of today, this orientation can easily be lost as secular goals replace spiritual ones. This paper will address the issue of profit maximization, insider trading, and how to convert a sinner from a Biblical perspective to show why orienting oneself towards the Heaven is so important for one’s spiritual life.
Profit maximization by itself is an inappropriate goal because it is not connected to the moral or spiritual purpose of life, as indicated in Matt. 16:26: “For what is a man profited, if he shall gain the whole world, and lose his own soul? or what shall a man give in exchange for his soul?” One who dedicates his life simply to storing…… [Read More]
environmental, social and governance (ESG) performance and financial performance of companies
Investors are increasingly recognizing the fact that ESG (environmental, social, corporate governance) elements can substantially affect companies' security rates and financial performance. The aforementioned components' contribution to financial markets has been growing with the rise in number of ESG opportunities and risks within the contemporary international economy. Timely and improved organizational policy-related data access and the effect of organizational policy on communities have made it considerably convenient for customers to express their dissatisfaction by simply quitting a brand. When international brands' images are sullied by ESG-related problems, the resultant instantaneous backlash has the capacity of abruptly and negatively impacting income and demand (Eccles, Ioannou & Serafeim, 2014).
Organizations having a poor reputation when it comes to ESG related matters are vulnerable to monetary risks, including a very genuine threat of facing lawsuits in the future, greater remediation and regulatory…… [Read More]
Economics of Alchohol Abuse
Alcohol for consumption is not a necessary food item, but for some has become a standard part of adult culture. Increasing the level of alcohol consumption, however, moves from an economic paradigm to a social issue due to the ancillary health and behavioral effects from alcohol abuse. In turn, this becomes part of economics in that it requires fiscal resources to treat societal issues caused by alcoholism: domestic abuse, crime, traffic or driving issues, etc. The economic effects of alcohol are undebatable, and are pervasive in the overt and covert areas of the economy (short- and long-term) (Fogarty, 2006).
In the economic sphere of political and social policy, alcohol, like tobacco and gambling, are considered a "sin" tax that is ostensibly designed to reduce transactions for issues society considers dangerous or undesirable. However, when it comes to alcohol, many see that this type of a sumptuary…… [Read More]
Firm, Labor Markets, and Imperfect Information
Perfect Competition and Monopolistic Competition
A perfectly competitive market does not have barriers to entry or exit and is characterized by many producers and many consumers, all of whom are price takers -- a term that means the suppliers and the buyers cannot effect the price as they do not have market power ("Competitive Markets," 2014). Monopolistic competitive markets are do have some barriers to entry and exit. Consumers can find substitutes for all of the goods in a competitive market, whereas high product differentiation is seen in a monopolistic competitive market ("Competitive Markets," 2014). Indeed, one of the reasons that a firm can achieve a monopoly for a product is that the business has been successful in its efforts to differentiate a product, as perceived by its customers. The ability of a business to make profits in the long-run is referred to…… [Read More]
One set of concepts from each area was utilized to explain how the situation at Grand Bois may have come about. The end goal of the authors was to "provide business practitioners, ethics teachers, and readers interested in corporate conduct with insights useful in understanding why managers may act the way they do."
It could be argued, according to Hamilton and Berken (2005), that Exxon managers had made a sound business judgment, based on facts that were not known, at the time. The industry still contends that the majority of exploration and production waste contains no harmful compounds, and that for this reason the disposal techniques that are used at the Grand Bois facility were not only cost effective, but also environmentally safe.
Just because the exemption of this waste for hazardous materials was brought about by political lobbying does not mean that it is not scientifically or justified.
Oftentimes,…… [Read More]
Thus, the authors do not advocate an ethical free for all, for they acknowledge certain ethical broaches can result in corporate legal costs, thus resulting in executives violating the ethics of their profession -- but this is a more important ethical standard than either laws or social responsibility, stress the authors.
The authors also acknowledge that in the current environment, government regulations must be obeyed by businesses, else they face the costs of litigation. But Macham and Chester also question whether this is a good, namely if too many regulations exist and ultimately hamper corporate profits. In fact, they believe that in the ideal business environment, other than protecting property, the government should not regulate business at all, and rather internal ethical systems should govern the organization, ideally in a Friedman-like utilitarian fashion, taking into consideration the fate of stakeholders only so much as need be, for the organization to…… [Read More]