In general, it is important for an organization to need to understand its potential market and economic status in order to thrive and succeed. Organizations currently are implementing ways to maximize their profits with reduced cost of production. Further, they have introduced a new product and service attached to low cost and high profitability. The intention of this product is to meet the demand of customers and inject the new products. The organization should conduct an evaluation to determine the key players in the market and what their strategies. The firm needs to evaluate the product, its profitability, growth pattern, marketing objectives cost structures, and the strength and weaknesses. The history of the organization and the growth covers the influence on demand, supply and the equilibrium prices of the product. Organizations have to focus much on meeting the market expectations, with the adoption of the efficient market structure. An organization offering a standard product and sell at relatively lower prices compared to their competitors. Currently, cement organization is contending with another contender in the restaurant industry, bakery. For prosperity in business for new product ideas and innovation are embraced to take advantage of untapped market opportunities.
Market structure
The organization should focus on oligopoly and monopolistic competitor markets. Oligopoly is termed as a market with few competitors that when one makes a move, it influences others within the same industry (colander, 2013). The market is characterized by interdependence among the firms.
Delegate your assignment to our experts and they will do the rest.
On another level, monopolistic competitors host descriptions of competitors in this category. According to a colander (2010), markets are characterized by many sellers, differentiated products, multiple dimension of competitors, and easy entry of new firms in the long run. In this market, competitors regulate themselves and are profit determinants. The organization should brand the product to seem like a different item with differentiated flavors in the eye of the consumers. For instance, in case of bakery producing industry, the organization will determine its profit-maximizing level of output , therefore, it will determine the profit-maximizing quantity to produce by considering its marginal revenues and the marginal costs. If the firm produces a quantity of output where the marginal revenue exceeds the marginal cost, the firm should expand the production since each marginal unit added is increasing profit by bringing, more revenue than it costs. Therefore, for the maximization of profit, the organization will produce quantity level where MR=MC.
In this market with maximized profit, it attracts other new competitors in the market, with the intention to enjoy the economic profit, thus reducing the original firms demand and marginal revenue. With the new entrance of new firm, the economic profit reduces and this may lead to some exiting the market since they will fear losing money while their perception was to enjoy the economic, resulting to increase of demand of a particular product and consequently lowers losses.
Factors affecting demand supply and the equilibrium prices
Organization, need to consider the factor that affects the demand, supply, and equilibrium. Understanding of the relationship between the three aspect firm need to focus in the quantity demanded in the market relies on the prices, price relation of other commodities, income, and consumers taste and preferences, and season like Christmas season, the agricultural season. Prices are constant with the quantity demanded to hold other factors constant. Increase in the demanded quantity is a result of a decrease in the market price. The higher the income of the consumer the more quantity demand from the market. The timely plan is essential for the company to increase the productivity so to meet such demand. When the taste and preferences of the consumers are favorable toward the product, they demand more thus will affect the production quantity. Moreover, if the prices of other related commodities are higher than what the firm is producing then, the customer will demand more as there have more purchase power.
The decrease in demand produces a reduction in equilibrium price and a decrease in demand produces excess supply that causes a price fall. An increase in demand will bring an increase in equilibrium price and the quantity of the goods to sell as goods sold increases, the output is increased. Changes in supply cause the equilibrium price and output to change causing a reduction in the equilibrium price and the quantity. As the supply of baked product increases, it develops excess, which causes the price to fall and the quantity demand increase. With an understanding of demand-supply interaction , the organization can analyze the efficiency of demand and supply curves. If the market is limited, it will reduce the quantity, as prices rise, individuals buy less, producing excess, promoting a decrease in prices and subsequent demand. Therefore while the organization joins the market with new product, over time, the price elasticity of demand would need to be monitored because the competitors have the similar products, the customers will need to be influenced by price.
Labor, capital, costs and, the law of diminishing marginal productivity
With available resources, capital, and labor, the combination helps maximizes the profit with reducing cost. For example, if the firm produces 100 thousand plates per year with the combination of capital and labor units (K and L units), the at k1 and l1 in the curve below the firm will correspond to total cost TC1 thus reducing total cost of the firm reducing 100 thousand plates.
TC2= Wl2+rk2 K2 TC (Q)
B
TC1=WL1+rk2 K1 A New productivity per year
Initial productivity per year
Capital service per year TC1 TC2
Labor services per year
The curves show how the cost minimization changes the output of the firm. When the output increases, the minimized cost increases from TC1 to TC2 and in the long run show the relationship between the volume of output and the minimum level of the total cost the firm can attain when it produces that output ( Baldwin, 2017).
TC2=Wl2+rK2 and TC1=WL1+rK1 represents the minimized cost so as to maximize productivity
When the organization introduces new product derived from baked cake it is relatively easy. However, if the product has no relation to baked cake thing changes completely for example alcohol. The firm will need to increase the labor and capital, to ensure the facilitation of new product launching. Also, the s tore need to be added and the staffs. The cost associated with a new product like licenses and permit cost and fixed cost. Fixed cost is the cost that spent and cannot be changed in the period un der consideration (colander, 2013). In addition, variables cost contributes to every unit sold. Injecting new product, the new management is required to evaluate labor, productivity and cost of labor due to increase in skills of the newly employed personnel to promote the new product.
Comparative advantages
Furthermore, the comparative advantages refer to economic abilities to produce goods and services at a lower possible cost compared to competitors ( Baumol and Blinder, 2015 ). This enables the organization to produce and supply more in the market. Such factors may influence the market price as a result of relatively low production cost. This could be possible because of technology advancement, cheap and professional workers. According to Ricardo, what good and services a firm produce should be as a result of the specialization and allocation of the scarce available resources. Also, they should have a comparative cost advantage the firm that focuses on principles of comparative advantages in the economy. The produced output that if they were with another partner they would allocating all available resources.
Conclusion
The market behavior relies on strategy organization adopts to inject new product and the market. An organization may experience competition in the new market but with a good strategy, this enables them to gain a competitive edge in the market. Firm adopts comparative advantage effect of the market and low opportunity cost which increases the profit margin. Understanding the price mechanism, and the main determinant of prices help the firm to be influential to the customer in the market.
Reference
Baldwin, R. (2017). 7 Ricardo’s comparative advantage has been denationalized. Cloth for Wine? 53.
Baumol, W. J., & Blinder, A. S. (2015). Microeconomics: Principles and policy . Nelson Education.
Matsumura, T., & Okamura, M. (2015). Competition and privatization policies revisited: the payoff interdependence approach. Journal of Economics , 116 (2), 137-150
