...ay Price Wars Summary: Price wars have plagued industry after industry in recent years. Indeed, price wars must be avoided like the plague! More often than not, there are no winners, only losers. The effects of price wars are not only severe but also enduring. Price wars can lead to a severe erosion of profits. Unless there is a significant cost advantage, for the company introducing the price cut, a price reduction will lead to retaliation by competitors. So dropping prices normally does not lead to an increase in market share. Instead it leads to a sharp drop in profits. Price wars also shape customer expectations. Research indicates that the lowest price people pay for a product or service is remembered longest, and becomes their reference point. Driving down prices to unreasonable levels, has a dramatic influence on a customer's perception of what is a "reasonable" price long after the war ends. Price wars also divert the attention of customers away from product benefits towards price. That is usually bad for the industry. Many of the justifications given by managers for entering a price war are untenable. The claim that weak competitors can be knocked out through a price war is weak. Indeed, there is sufficient empirical evidence to indicate that price wars are not guided by any logic. They tend to get emotional and continue long after it has become economically unviable to offer these products at such low prices. As Robert A. Garda and Michael V. Marn, point out,...
Words: 1091 - Pages: 5
...SUMMARY OF REPORT I. Introduction to Four Market Structure II. Comparative Characteristics of Four Market Structures III. Four Market Structures a. Pure Competition i. Characteristics ii. Demand Curve iii. Examples iv. Summary b. Pure Monopoly v. Characteristics vi. Demand Curve vii. Examples viii. Summary c. Oligopoly ix. Characteristics x. Demand Curve xi. Examples xii. Summary d. Monopolistic Competition xiii. Characteristics xiv. Demand Curve xv. Examples xvi. Summary FOUR MARKET STRUCTURES Market structure is the selling environment in which a firm produces and sells its product The preceding chapter on the theory of production and cost made us understand the behavior of producer towards an efficient use of productive inputs because the use of inputs is associated with economic cost be it explicit or implicit cost. Efficient use of resources means proper identification of the use of the land, labor, capital and entrepreneur. These should not be underused as in 1st stage production or overused as in the 3rd stage of production, so that the cost associated to the production level can be minimized. This chapter examines a broad range of markets and explains how the pricing and output decisions of firms depend on market structure and the behavior of competitors. To determine...
Words: 1481 - Pages: 6
...condition and airline price wars Meghan Busse∗ A firm that knows that cutting price may trigger a price war must weigh present versus future gains and losses when considering such a move. The firm’s financial situation can affect how it values such tradeoffs. Using data on 14 major airlines between 1985 and 1992, I test the hypothesis that firms in worse financial condition are more likely to start price wars. Empirical results suggest that this is true, particularly for highly leveraged firms. The article also explores which firms join existing price wars and finds that a firm is more likely to enter a price war the greater the share of its traffic on routes served by the price-war leader. 1. Introduction Economists’ explanations for price wars differ from those of other observers of the airline industry. Most economic models of price wars, which apply more generally than to the airline industry alone, have emphasized the role of fluctuations in demand. Changes in demand alter the expected profitability of undercutting a tacitly collusive equilibrium; depending on the assumptions made, the models predict that price wars occur either when demand booms or when it slumps. Industry insiders, meanwhile, identify the financial troubles of an individual carrier as an important motivation in initiating the fare cuts that trigger price wars. For example: [Mark Daugherty, airline industry analyst for Dean Witter] said weaker airlines are willing to risk losses with low ticket prices in order to raise...
Words: 12544 - Pages: 51
...my impression of the films Blood Diamond and Lord of War, the illegal act of trading arms for diamonds seems like business as usual. It’s not until you look at, where the diamonds come from, how they are mined and who controls/owns the gems, that you begin to understand why these precious stones are called “Blood Diamonds”. Most diamonds on the market come from expensive mining operations run by large corporations, who drill into large bodies of volcanic rock containing diamond deposits, known as kimberlites. Sources like these are not easily accessible to anyone and in the case of Africa, “conflict diamonds come primarily from places where rivers have washed over kimberlites and spread their wealth down river in thick deposits of mud and gravel”. (stemming the flow) In west Africa, there are many well known regions which contain some of the world’s largest diamond deposits. INTRODUCTION The link between diamonds and armed conflict in Sierra Leone is obvious, and has been exposed, investigated, and deplored by humanitarians, journalists, politicians, and diamond industry leaders. Less obvious are the complex, entrenched relationships between exploitative systems of financial intermediation and resource management, poverty, and the spectacular, mysterious wealth of the diamond trade. Diamonds have facilitated, not caused, and armed conflict. Pre-war economic and social injustice, which developed during the war into the illegal, and finally criminal, behavior common...
Words: 436 - Pages: 2
...GEOG 545 Paper Review | A Review of “Food Insecurity in Pakistan: Causes and Policy Response” | By Mohammad Aslam Khan / Akhtar Ali Shah | | CASEY CALLAGHAN | 2/20/2012 | [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] | Food insecurity has been a long lasting issue in Pakistan – a country where about half its populations suffers from malnutrition to some extent. There is a wide range of causes for this problem, and there are also many solutions – some more effective than others. In this response to the article “Food Insecurity in Pakistan: Causes and Policy Response,” I will attempt to summarize these causes and policy responses, as well as give some of my personal input. There are many causes of food insecurity in Pakistan, the main one, in my opinion, is the ever growing gap between the demand for food and the actual food supply. Although the Pakistan’s food supply has been steadily increasing over the past decades, the population seems to be increasing at a much faster rate. In other words, the increase in the demand has been outweighing the increase in supply, leaving more and more citizens with inadequate food supplies and improper nutrition. This passage from the article shows just how rapidly Pakistan’s population has grown over the past sixty years, “Pakistan’s population...
Words: 1070 - Pages: 5
...SUMMARY OF CHAPTER 12 IN HISTORY OF AMERICAN ECONOMIC: CHAPTER 12 – MONEY AND BANKING IN THE DEVELOPING ECONOMY I. What is money, and what do banks do? 1. Money is a current medium of exchange (value of goods/ services) in the form of gold, silver, coins, bank note, and special exchange paper (for example: dollar bill). 2. The Bank: • Assist the government by acting as a depository of government funds, making transfers of funds from one part of the country to another, serving as a tax collection agency, and simply by lending to the government. • It would cement the relationship between the fledgling government and the leading men of business. II. Discuss the creation and expiration of the First and Second Banks of the United States. 1. First Banks of the United States: • Robert Morris established and organized the first American bank in 1781, with Congress’s approval, to help finance the Revolutionary war and provide financial organization in those troubled times. However, we usually think of the nation’s first central bank as being established 10 years later. • The bank’s charter expired in 1811. • Compared with the difficulties before 1791, the money problems of the 1790s and early 1800s were insignificant. • The decisive votes were cast against the Bank as a result of personal antagonism toward Albert Gallatin, who, although having served as Jefferson’s secretary of the treasury, was a champion of the Bank. • In the House, consideration of the bill for renewal...
Words: 609 - Pages: 3
...http://news.cnet.com/8301-1035_3-57618080-94/price-war-cuts-roaming-fees-for-french-mobile-customers/?part=rss&subj=news&tag=2547-1_3-0-20 by Stephen Shankland January 30, 2014 9:46 AM PST Price war cuts roaming fees for French mobile customers Orange CEO Stephane Richard, shown here speaking at the LeWeb conference in 2013, has brought his company into a price war that's giving French mobile subscribers lower roaming rates elsewhere in Europe. Three French carriers -- Orange, Bouygues, and Iliad's Free Mobile -- have begun competing for customers by cutting the roaming fees that can spook travelers and tourists from using mobile phones when abroad. The price war is good news for people in Europe, where a fragmented mobile-network market means it's common to worry about the extra costs for making calls and downloading data while traveling outside one's home country. But it's likely the carriers aren't just motivated by the urge to woo customers: they're also likely angling for a better bargaining position for talks about proposed European legislation that would scrap roaming fees completely. Neelie Kroes, the European Commission vice president overseeing the region's digital agenda, has been strongly pushing for a unified telecommunications market that would make it easier for carriers to span multiple countries and for individual customers to cross borders. One tenet of proposed legislation is an end to roaming fees by 2016. Kroes wants Europe to reclaim...
Words: 1414 - Pages: 6
...the main cause for the Great Depression? A. Plan of the Investigation 1 B. Summary of Evidence 1 C. Evaluation of Sources 3 D. Analysis 5 E. Conclusion 7 F. Bibliography 8 A. Plan of the investigation The investigation considers the extent to which the Wall Street Crash was the main cause for the Great Depression that hit the Unites States throughout the 1930s, whose effects were spread worldwide. For this purpose the investigation assesses the significance of the crash in the stock market in relation to other factors that were also relevant. Through the selection and summary of relevant written sources, the investigation examines the 1920’s the domestic and international problems during the “prosperous” years that triggered the crisis. In order to reach a conclusion two of the sources: The Great Depression by Lionel Robbins and The Great Depression and The New Deal by Robert F. Himmelberg are evaluated for their origin, purpose, values and limitations. Word count: 120 B. Summary of evidence By the time the United States entered the First World War in 1917, the USA was the world’s biggest economic power[1]. Its role in providing extra equipment and a supply of fresh soldiers was instrumental in the final Allied victory[2]. The artificial prosperity of the war years was followed by an inevitable collapse[3]. After a short recession between 1920 and 1922, the...
Words: 2701 - Pages: 11
...9/8/2015 PGDM/MBA Material: Case Study- Cola Wars Continue: Coke and Pepsi in the Twenty-First Century www.mbapgdmstuff.blogspot.com Home Human Resource Marketing Information system management Images You are visitor # Case Study- Cola Wars Continue: Coke and Pepsi in the Twenty-First Century 110,588 Search This Blog Translate Select Language ▼ Category Assignment Business Communication Business Environment Business Law Case Study Compensation MAnagement E- Business Summary: "Cola Wars Continue: Coke and Pepsi in the 21st Century” explains the economics of the soft drink industry and its relation with profits, taking into account all stages of the value chain of the soft drink industry. By focusing on the war between Coca‐Cola and PepsiCo as market leaders in this industry – with a 90% market share in carbonated beverages – the study analyses the different stages of the value chain (concentrate producers, bottlers, retail channels, suppliers) and the impact of the modern times and globalization on competition and interaction in the industry. Analysis: It is quite clear that there was a “war" between Coca‐Cola and PepsiCo: not only have they been rivals for entrepreneurship For your Information Formates Human Resource Management Human Resource Mangement Human resource Planning Indian Labour Law Industrial Relation Information system Management International Marketing ...
Words: 1069 - Pages: 5
...CLASS OR MASS CASE ANALYSIS A. Executive Summary: Neptune Gourmet Seafood is having issues with what appears to be a temporary problem of excess inventory. Due to new coastal laws, investments in new freezer trawlers and fishing technology, Neptune has increased their average catch size. The demand in high-end market hasn’t been able to catch up with the increasing supply, and Neptune has been struggling with making a decision on how to deplete excess inventory (60 days) of their “Gold Label” branding. My recommendation is to launch a new mass-market product under a different product name to deplete the excess inventory for the short-run, and to capture more of the North American seafood market share in the long-run. Finally, in the future Neptune’s management should better analyze the growth in market demand when making such heavy investments in production. B. Situation Analysis Summary: Currently Neptune Gourmet Seafood is North America’s third largest seafood producer with 4.1% in market share (See Appendix F1) . Known for their high quality, Neptune has a reputation to uphold and caters to offering the best product possible to keep their customers satisfied. Neptune currently markets its product to a variety of customers bringing in revenue from different channels: * 30% of revenue from grocery chains * 33% of revenue from wholesalers * 33% of revenue from suppliers & cruise lines within 250 miles of Fort Lauderdale’s headquarter * 4% of revenue from...
Words: 3215 - Pages: 13
...services that much of the world comes from Saudi Arabia, Kuwait, and other Middle East Country that which included in the monopoly. Monopoly is one of the market structures that a firm is a sole seller of product without close substitute. When some event (usually political in origin) reduces the supply of the crude oil flowing from the region, the prices of oil rises around the world. Because they think that it would be much profitable to them. But since the U.S is much affected to the inflation of the oil it is not favourable for them. U.S. firms that produce gasoline, tires, and many other products experience rising cost, and they find it less profitable to supply their output of goods and services at any given price level. The result is a leftward shift in the aggregate-supply curve, which in turn leads t stagflation. The countries with large oil reserves got together as member of OPEC, the Organizational of Petroleum Exporting Countries. OPEC is a cartel—a group of sellers that attempts to thwart competition and reduce production to raise prices. And indeed, oil prices rose substantially. From 1973 to 1975, oil approximately doubled in prices. Oil importing countries around the world experienced simultaneously inflation and recession. The U.S. inflation rate as measured by the CPI exceeds 10 percent for the first time in decades. Unemployment rose from 4.9 percent in 1973 to 8.5 percent in 1975. Almost the same thing happened a few years later. In the late 1970s, the OPEC countries...
Words: 1679 - Pages: 7
...Elasticities of Demand and Supply Summary Sheet Type of Elasticity | Price Elasticity of Demand (PED) | Income Elasticity of Demand (YED) | Definition | The degree of responsiveness of quantity demanded to a change in price of the good itself, ceteris paribus. | The degree of responsiveness of demand to change in income, ceteris paribus. | Formula | PED = %∆ Qdd / %∆ Price | YED = %∆ Qdd / %∆ Income | Initial change | Price | Income | Effect | Quantity Demanded | Demand | Sign(Significance of the sign) | Negative (Inverse Relationship) | Negative(Inferior Goods) | Positive(Normal Goods) | Range of values | PED>1 | PED<1 | YED<0 | 0 < YED < 1(Basic Necessities) | YED > 1(Luxury Goods) | Elastic/inelastic | Price Elastic | Price Inelastic | - | Income Inelastic | Income Elastic | Factors | * Availability and Closeness of Substitutes * Nature of demand (Luxury, addictive, necessity) * Time Period under consideration * Percentage of income spent on good | * Quality of good * Nature of good e.g. luxury, inferior | Application(Consider application to producers and the government) | * Producers: To increase total revenue * ** Split consumer groups, each have different PED. * Producers should increase price of good if good is price inelastic (no close substitutes). * Producers should decrease price of good or refine its quality if good is price elastic. (many close substitutes). * E.g. The increase in revenue due to the increase...
Words: 809 - Pages: 4
...| | A "Low cost “ Supermarket | Claire David, P113979 23/01/2012 | Table of Contents Executive summary 3 Introduction 4 Business level strategy 4 Competitive advantage 5 Competitive strategy 6 Strategy clock 7 Hybrid strategy 8 Porters five forces 10 Advantages to using a Hybrid strategy 11 Threat of new entrants: 11 Bargaining power of suppliers: 11 Bargaining power of buyer: 11 Disadvantages to using a Hybrid strategy 12 Threat of substitutes: 12 Threat of rivalry with competitors: 12 Difficulty in sustaining: 12 Conclusion 13 Recommendations 14 Cost reduction that don’t affect quality 14 Deter from price wars 14 Differentiate 14 References 15 Executive summary This report aims to discuss the Hybrid strategy utilised by Asda, this report will be based on the following objectives: * Identify the strategy employed by ASDA in order to achieve competitive advantage * Critically evaluate the strategy identified * Provide recommendations for continued success and sustainability A collection of secondary information and data was gathered in order to obtain appropriate and information. Asda are a subsidiary of Wal-Mart, therefore it is assumed that the strategies used by Wal-Mart are also used by Asda in the same way. Introduction Asda are a well known organisation which started to operate in the 1920’s In June 1999, now a successful company once more, Asda was bought by Wal-Mart Stores Inc. and became...
Words: 2781 - Pages: 12
...To: Starbucks’ Management Fr: HKU Consultancy Team (HK, March 10, 2012) Executive Summary Starbucks was established in 1971 as a single store in Seattle’s Pike Place Market, US. Howard Schultz, who was at that time the director of retail operations and marketing brought in the concept of espresso bars from Milan to Seattle in 1983. He as the current CEO had carried out the turnaround engineering in 2008 to improve its financials. It is suggested to use Porter’s Five Forces framework to understand which area poses biggest threat to Starbucks. (1) Bargaining power of buyers and (2) suppliers: Low impact. It is because spending threshold of coffee beverage is relatively small to consumer’s income, and individual consumers have limited bargaining power to force prices down. Also, it is wise to keep existing purchasing practice of coffee beans from numerous individual suppliers with no trade union reducing the risk of raising price or quality issue of coffee beans. (3) Threat of substitutes: Medium impact. Specialty coffee from cafés can be regarded as one subcategory in beverage industry where different substitutes are widely available, including other forms of coffee, such as canned coffee combining quality with convenience, e.g. Georgia from Coca-Cola; or other specialty beverage venues, such as teahouses which offer similar ambience as Starbucks. Lastly there are (4) Potential new entrants and (5) Competitive Rivalry: High impact which should be focused...
Words: 681 - Pages: 3
...Contributors Dr. Seema Srivastava Ms. Meenakshi Yadav Mr.Bharat Thakur Technical Support Mr.V.K.Sodhi Ms.Sapna Yadav Ms.Radha Ms.Garima Ms.Ritu Class – XII Teaching -Learning Material for PGT (Economics) Based on “Week- Wise Distribution of Syllabus 2011 -2012” For the Month of July: Unit-IV (18.07.2011 – 25.07.2011) 7 days (25.07.2011-30.07.2011) 6days Abstract Present unit deals with the Concept of Market Structure which comprises of different market conditions under which the firms produce and sell products in the market. The unit also elaborates upon various Forms of Market Structure such as Perfect Market and * Imperfect Market (*Monopoly, Monopolistic Competition and Oligopoly). The conditions and determination of price under various Forms of Market Structure have been discussed. The content based classroom activity has been suggested at the end. It will help in developing Critical Thinking & Analytical ability among students which is the demand of this subject. Questions based on the content to check the progress have been included. Different types of Questions such as Very Short Answer Type, Short...
Words: 3978 - Pages: 16
