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Given the change in the market structure they we be a need to view the pricing structure so as to maximize profits. Finally, will proposes two (2) course of actions that the company should take to increase profitability and maximize shareholder’s value. 1. The effectiveness of the market structure the company is operating. Every company in a pure competitive market is a price taker; the equilibrium price and industry output are is a direct result of demand and supply. He market for low-calorie microwavable food” shows how demand and supply in the market for low calorie foods, produced under conditions of perfect competition, determine the total output and price consumers are willing o pay. The equilibrium price is 407. 65 cents; the equilibrium quantity is 24,335. Q 65,100 -loop Sq = -7909. 89 +79. IPPP. Firm operating in a pure competitive selling environment has no direct say on what the firm charges on its product, however, the firm can control the quantity supply to the market.
According to Slack & Lewis, success or failure depends in a pure competitive market lies in how a company controls production cost and portrays its brand (2008). In pick out the capacity of output, one significant concern is the income the firm will gain by manufacturing the products. The organization… Today, life has become very fast. In today’s fast living world, the value of time has increased a lot. Most of the people are working and hardly find any time to cook for themselves.
In this busy schedule, the introduction of low calorie microwavable food has lives of people much more easier. These products are easily consumable and hence have become very popular. As discussed in assignment 1, the market structure (or selling environment) was perfectly competitive. In a perfectly competitive market there are a large number of buyers and sellers. The products sold in this market are perfectly homogeneous. Examples of perfect competition are vegetable market, market for cereals etc. In a real world situation, there are many sellers of low calorie microwavable food.
If we observe the demand side, we can also find a large number of buyers in the market. With large number of buyers and sellers, if we examine the nature of the product, then we can see that the products are almost homogeneous. The main characteristics of perfect competition are: i. Many buyers and sellers ii. Free entry and exit iii. Information is perfect iv. Homogeneous product Now, firms under perfect competition have no market power and hence cannot effect the market price. They are bound to sell at the ongoing market price.
But recently, it has been observed that the characteristics of the market are changing. Since the tastes of people are different, there is a lot of scope for product differentiation in this market. The sellers are also taking the advantage of this taste differentiation and are differentiating their product. Thus the sellers of the microwavable food industry are trying to outperform each other. Due to product differentiation, the products no more remain homogeneous. Now, in a monopolistic competitive environment, advertisement plays an…