The Automatic Data Processing Inc. (ADP) offers services in human capital management such as benefits administration, payroll services human capital management, and payment services through the employer service segment. Additionally, ADP provides benefits solutions and outsourcing services for human resource. Importantly, the business service accounted for close to 81% of the total revenue of the organization in 2015 while the professional employer organization segment accounted for 19%. Moreover, the two division of the organization operates in a very competitive environment that has diversified companies and other smaller group that offer the same services. Primarily, the firm has four major division that ensures quality services to the customer, and they include global view, ADP smart compliance, ADP mobile solutions, and human resource outsourcing. The global view deals with the integrated payroll system benefit solution, human talent resource, and time for global organizations. Similarly, the ADP smart compliance integrates the services and process with the technology to relieve the people or staff members from administrative work. The four divisions work hand in hand to ensure that the consumer receives high-quality services and that the market is working and making sure the completion is healthy.
The market structure
ADP firmly operates in a competitive market ( Dunne, Klimek, Roberts, & Xu, 2013 ). This is backed by the several characteristics of a competitive market that are found in the economy that ADP operates in. Firstly, various firms have that offer similar services as ADP. This means that there are competitors. The main competitors of ADP include Workday, Ultimate Software group, Oracle, Paychex, Insperity, and TriNet Group. These organizations offer similar services and products as ADP hence the completion is healthy and is based on the quality of service provided to the customer. Secondly, the products provided by the firms are homogeneous. All the companies of operating in the markets provide services in human resource outsource, payroll. Benefits management, and financial management services.
Delegate your assignment to our experts and they will do the rest.
Additionally, the exit of a single firm from the market does not affect the pricing of goods and commodities. In a competitive market, the price of goods and services is determined by the market forces such as demand and supply rather than a single firm as its is possible in a monopoly market. Primarily, if a single company such as TriNet Group or Insperity decides to leave the market or stop offering their services, their exit will not affect the prices of products and services as many firms are offering the same services ( Dunne, Klimek, Roberts, & Xu, 2013 ). Fourthly, the knowledge is available to everybody. The market has a high chance of attracting new investors because everyone has an understanding of what goes on in the economy. Importantly, the information is available with no time lags or failure. Moreover, the information is gotten from earlier investors hence the existence of many competitors in the market.
Elasticity of demand
The elasticity of goods and services varies among the products as some products are more relevant to the consumer that others. Importantly, the products that the customer considers necessities are thought to be sensitive to price changes because the user is likely to continue buying the goods and services despite the price changes. Additionally, a price increase of a product or a service that is not a necessity is likely to deter the consumers at a higher rate because the opportunity cost of purchasing the service or product will increase ( Foxall, Yan, Oliveira-Castro, & Wells, 2013 ). Therefore, a good or a service is mainly considered to be highly elastic if a small change in the price results in as sharp modifies the quantity that is supplied or demanded. Consequently, inelastic goods and services are the ones that experience only a modest shift in the quantity supplied or demanded if any occurs. Primarily they tend to be things that are necessities to the consumer. The main factors that affect the elasticity of demand are the availability of substitutes, the amount of income an individual has to spend on a particular good, and time.
How pricing relates to elasticity of demand for competing models
Because the firm in a competitive market produces similar output that prices of the products is mainly determined by the market forces such as demand and supply. Importantly, the factors of elasticity of the request like time, the income available, and availability of substitutes mainly influence the pricing of the goods hence having a hand on the elastic demand of the product. These three factors are important in determining the price of the goods as the demand of the product affects the product ( Pierson, Allon, & Federgruen, 2013 ). For instance, the availability of substitutes influences the elasticity demand of the products. Importantly, the more the elasticity demand of the goods the higher the substitutes will be, and the price will change. Consequently, the income available is another determinant factor as when the prices of a commodity go up, and the price remains the same the elasticity demand of the product drops.
Changes in the quantity supplied
When the company decides to either increase or reduce the price of its products, it affects the marginal cost, marginal revenue, and the market share. For instance, reducing the amount the company will increase the marginal cost as the marginal. This is because the reduced price will attract more customers and in a competitive market the marginal cost increase with the increase in the quantity supplied ( Shapiro& Varian, 2013 ). Similarly, the marginal revenue will decrease, as the company will be selling its products at a reduced price than before. Furthermore, the market share of the company will increase because the company sells its products at a reduced price. Importantly, other producers in the market will try to change their prices to match the ADP prices as the competition in the market is high.
The strategies that the company might use to develop product differentiation and market segmentation include the basic needs such as time delivery and price, the expected needs which include level of service and quantity, desired needs, and what the customer expects to receive. The non-pricing strategies that the company can use include advertising, extended warranties, longer opening hours, and enhanced service quality ( Shapiro& Varian, 2013 ). Consequently, the non-pricing strategies that ADP can use to prevent barriers to entry include branding, consumer education, and quality improvement.
The price of a product is one of the factors that can hurt the distribution and use of a good or service. Producers play with the different variable and fixed cost to alter the price of a commodity. For instance, labor is a variable cost ( Dunne, Klimek, Roberts, & Xu, 2013 ). Producers, try as much as possible to reduce the employees so that they can bring down the prices of the good and distribute more. Consequently, security surveillance is a fixed cost and does not change much with the production cost ( Iveroth, Westelius, Petri, Olve, Cöster, & Nilsson, 2013) ). However, the fixed cost are important in determining the prices of a product as higher production will results to higher profits at the same fixed cost.
References
Dunne, T., Klimek, S. D., Roberts, M. J., & Xu, D. Y. (2013). Entry, exit, and the determinants of market structure. The RAND Journal of Economics , 44 (3), 462-487.
Foxall, G. R., Yan, J., Oliveira-Castro, J. M., & Wells, V. K. (2013). Brand-related and situational influences on demand elasticity. Journal of Business Research , 66 (1), 73-81.
Iveroth, E., Westelius, A., Petri, C. J., Olve, N. G., Cöster, M., & Nilsson, F. (2013). How to differentiate by price: Proposal for a five-dimensional model. European Management Journal , 31 (2), 109-123.
Pierson, M. P., Allon, G., & Federgruen, A. (2013). Price Competition Under Mixed Multinomial Logit Demand Functions. Management Science , 59 , 8.
Shapiro, C., & Varian, H. R. (2013). Information rules: a strategic guide to the network economy . Harvard Business Press.
