Business Proposal Final
ECO 561

In today’s busy society, we have adopted a fast paced, no waste, and constantly moving lifestyle. Our relentless need to move and accomplish mores tasks has filled our time and exhausted our energy. Mobileboost Energy Company has developed a new Energy Shot that will satisfy customers’ need for more energy on the go, while outpacing any competition in product affordability and product quality. Our newest product is a coffee substitution drink, a natural energy enhancement made from all natural ingredients that provides the same caffeine boost without the added calories from sugar and additives. Along with a wide variety of flavors, we have added an innovative lid that is used as a measuring cup and allows the consumer to measure out the exact amount of energy needed. Mobileboost Energy Company has added its new product named “Mobile-Energy” and promises its users that they will taste the difference and feel the amount of natural energy our product contains without missing a beat in today’s fast paced society.
Elasticity of Demand
Mobileboost Energy Company is among the industry leaders for energy drinks and has proved, each year, to be highest grossing company on the market. Despite holding the number one seat in market share, the demand for energy drinks is extremely elastic. There are two key factors of price elasticity of demand for monopolistic competitor organizations, “the number of rivals and the degree of product differentiation” ” (McConnell, et.al., 2009).
The elasticity of demand results from the abundance of companies that bring new drinks to the industry each year. The market is often flooded with new flavors, new portions, and lower costs from various companies, each promising to provide the customers what their competitor cannot. Along with competition, other costs are constantly evaluated and calculated into the final profit, including labor, packaging, promotions, marketing, and storage space.
Market Structure
Mobileboost Energy Company is classified under a monopolistic competition. We define monopolistic competition as “a market structure in which there are many firms selling differentiated products and few barriers to entry”. In the energy drink industry, many producers and consumers exist, the goods and services are mixed, but firms are still able to differentiate their product. Mobileboost Energy Company would be considered a strong example of a monopolistically competitive firm: the market contains many sellers with low barriers to entry; products have slight product differentiation for the energy drink market. “Monopolistic competition is distinguished by product differentiation in which firms turn out variations of a particular product they produce with slightly different physical characteristics, offer varying degrees of customer service, provide varying amounts of locational convenience, or proclaim special qualities, real or imagined, for their products” (McConnell, et.al., 2009).
Increasing Revenue & Profit Maximizing
In 2015, Mobileboost Energy Company had slightly over nearly 1.0 billion annual sales with a majority of their products with retail prices hovering from $2.50 to $5.00. With the market average at $3.75, Mobileboost Energy Company is directly in the middle. For each new product, the company has performed extensive research in determining how to minimize cost and increase profit. Mobileboost has determined that its new product doesn’t need to focus on reducing the price, as consumers will pay on the higher side for the “all natural flavors” but place emphasis on reducing manufacturing costs, shorten lead times, and developing a JIT system for the distributions centers across the country. Since profits are maximized when marginal revenue equals marginal cost, a business needs to know how much it costs to produce one more unit of a service. A business can also use Total Revenue (TR) - Total Cost (TC) method (McConnell, et.al., 2009). Profit is maximized when the TR and TC curves are farthest apart.
Calculating PED
Elasticity is a measurement that calculates the responsiveness of a dependent variable, ie.. supply or demand, to a change in an independent variable, like price or income. The responsiveness is measured as the price elasticity of demand (PED). The price elasticity of demand coefficient Ed is therefore calculated by using the following formula: [PED = percentage change in quantity demanded of product X ]. So, if (PED > 1), then the demand is price elastic and if (PED < 1), then the demand is price inelastic. For our product “Mobile-Energy”, Price elasticity is calculated at 0.60 with price changing from $3.75 to $1.75 (price decrease) and Quantity from 20,000 units to 30,000 units (quantity increase). Demand is Price Inelastic (PED < 1) | Product | (PED) | Mobile-Energy | 0.60 |

Calculation (q1 | - | q0) | / | (q1 | + | q0) | | q1 | 30000 | (p1 | - | p0) | / | (p1 | + | p0) | | q0 | 20000 | | | | | | | | | p1 | $1.75 | | | | | | | | | p0 | $3.75 | PED = | -0.6 | | | | | | | | | | | | | |

Pricing and Non Pricing Strategies
In a monopolistic competition, the demand is more elastic due to the number of competitors that sell similar products. Our firm as well as others in a monopolistic competition market must continuously renovate our product features, brand, and price to assure quality meets price. Since a number of substitutions are in the market, consumers have little control over the pricing of products. In a perfect competition markets, consumers have more control over the pricing of products due to the vast amount of substitutions in the market.
The price strategy for Mobileboost items ranges from $2.50 to $5.00 per item. These prices reflect the retail aspect of the business which factors in to roughly 75% of total sales. The other 20% falls under wholesale in which the total cost in roughly cut in half. There are other factors which can determine price like cost to manufacture, packaging, research, and distribution. Each and every product has a different mixture of these and Mobileboost relies on the correct formula to result in high profits. The non-pricing strategies that Mobileboost utilizes include methods like more efficient advertising, product giveaways, sports promotions, membership clubs, coupons, extravagant store displays, and the most effective being sports celebrities promoting the product.

Barriers to Entry
“The factors that prohibit firms from entering an industry are called barriers to entry” (McConnell, et.al., 2009). “Even if a firm is not protected from entry by, say, extensive economies of scale or ownership of essential resources, en-try may effectively be blocked by the way the monopolist responds to attempts by rivals to enter the industry” (McConnell, et.al., 2009). Mobileboost has tried to use its majority market share and its popular products to set precedence in the ability of creating such barriers. Mobileboost relies heavily on its effective advertisements and promotional sales that make it hard for new companies to match. New companies often have to take a major hit in profit for several months while trying to gain market momentum but often dig a hole too deep to climb out.
Product Differentiation Mobileboost understands that it is imperative to be proactive on ways to increase product differentiation based on market structure. Mobileboost is going to focus on quality of product. Quality includes the ingredients in which our new product is made. Our latest investigation has determined our competition is producing a product that contains a low level of quality but still retains market share due to lower cost. By knowing this information, Mobileboost can differentiation our product based on this data. Another great strategy to differentiate our product from our competitors is features. Our product is introducing a new cap that serves as a measuring device. No other competitor is offering this feature and Mobileboost has a pending patent on the design.
Current Global Economic Conditions
Mobileboost understands that our current economy is often categorized “rough” and “volatile” and makes a credible effort to improve the economy. Mobileboost is becoming international recognized and naturally its manufacture and distribution needs vitality and thus causes an environmental impact. Mobileboost efforts begin with our container, made from 100% recycled material. Whether through increasing implementation of overseas production or modernizing of its supply chain, Mobileboost sets itself ambitious targets to further minimize its environmental impact and energy use. In the last year, several major international sites have closed down due to poor performance and disregard for safety regulations. Plans are anticipated in opening smaller stores internationally. One way the business has decided to cut costs and keep good in stock is to use some of the larger stores as distribution center for smaller stores. Reducing our overall carbon footprint is always on the table when talking about economic efficiency.
Local Economy's Stage in the Business Cycle
Mobileboost understands the four stages of the business cycle including..
1. Contraction – A market caused by economical slow down.
2. Trough – In this stage the economy contracts. This is the first indicator of a recession which can last for years until the economy reaches the expansion stage.
3. Expansion – A bull market when the economy begins to come up again.
4. Peak – In this stage economic growth is at its highest and inflation increases prices.
For a company like Mobileboost to introduce a new line of product the expansion stage of the business cycle is favorable. During this stage the economy is growing and consumers tend to spend more as GDP increases. Consumers in turn, feel the need for more energy and want to spend their money on a “natural” and genuine product such as Mobile-Energy.

Conclusion
Mobileboost Energy Company has developed an all-natural Energy Shot that will satisfy customers’ energy needs while outperforming the competition in product affordability and product quality. We feel confident that our new product will have the highest quality and will be able to stand the competition by providing our consumers with a low cost, high flavor product that they will continue to enjoy for many years to come.

References
McConnell, Campbell R., Brue, Stanley L., & Flynn, Sean M. (2009) Economics: Principles, Problems, and

Policies. 18th Edition. McGraw-Hill Irwin. Retrieved from https://phoenix.vitalsource.com