Often a firm begins using sales promotions to differentiate its product or service from the competition. If the promotion is successful and leads to a differential advantage (or even appears to do so), competitors may quickly copy it. When all the competitors are using sales promotions, this not only lowers profit margins for each firm but also makes it difficult for any one firm to hop off the promotional bandwagon. Percy (2008) on the other hand contend that there are costs associated with promotion, and when a promotion is too successful, the unexpected increased costs can have a
a. In a highly competitive firm, many buyers and many sellers allow “buyers to expect to find consistently low prices and a wide availability of the good that they want.” Many buyers and many sellers also allows it to where no single firm can influence the market price. Many buyers and many sellers are important because it creates a highly completive market where the price and quantity sold are determined by the conditions of the market rather than by just one firm. b. In a highly competitive firm, similar products allow buyers to find consistently low prices and a wide availability of the good that they want.
The product of a firm is close, but not perfect substitute of other firm. Buyers are therefore willing to pay different prices from the same product that is produced by different firms, giving the individual to influence the market price of its product. 3. Selling costs: Under monopolistic competition, products are differentiated and these differences are made known to the buyers through selling costs. Due to this reason, selling costs constitute a integral part of the total cost under monopolistic
This allows producers to study the demand and decide what will sell and generate the most income instead of waiting for the government to tell them what to make. Also producers in a free market economy price goods and services reasonably allowing consumers to afford more. This causes competition which helps to ensure that the best goods and services are offered at lower
This added value is understood through the labor needed to produce the resource or good, which increases the value of the item above its original cost. Karl Marx also believed that individual workers and their productivity is what really determined the value of consumer goods or services. The amount of labor used to produce a good or service. Marx believed that profit could be accumulated in the economy. The concept of surplus value used by Karl Marx declared that workers not only create economic value through the wages paid to them but also through the more value of transforming economic resources into valuable products.
Economic efficiency can be attained by determining the desirable level of wealth inequality that will motive people to be more productive. Income includes wages, salaries, rental income, dividends, welfare payments and profits from businesses. Wealth on the other hand includes ownership of assets, savings, wealth held in insurance policies and that held in bonds. The living standards are reliant on the distribution of resources and the level of economic activity. The proportion of national income going to different groups and the share of society that lives below the official poverty line can be used to measure
Stryker likely gets their raw materials from multiple suppliers and if they are dominate enough, the suppliers can reduce the marginal earnings of the company. Stryker can reduce this risk by experimenting with new product design, having an efficient chain of suppliers, and seeking out suppliers whose business depends more on Stryker than vice versa. Buyer Power Buyers can put pressure on Stryker because they search for the best quality materials, yet they want to pay the least amount they can for it. This causes difficulty in sustaining profitability over a long period of time. Luckily, Stryker can reduce the bargaining power of buyers by creating a large customer base.
70. It is a practice of charging different prices to different consumers for a homogenous product. These differences are caused due to difference in production cost while producing/processing goods and the willingness and ability of the consumers to pay. It is a strategy through which the producers can gain every single penny that a consumer can pay for the products. This leads to companies earning abnormal profits instead of
Economic value is the difference of the perceived benefits received by the customers from the company’s economic cost. Although there are various ways of gaining competitive advantage without being the best in all aspects, there should be superiority in value creation (Peteraf and Barney, 2003). Amazon successfully identified the right resources and developed its capabilities in key target
For example, non for profit firms can be expected to meet the increased demand more slowly or to make use their inputs less efficiently than the for profit firms. However, it is reasonable that the discipline of the market is in a lot of situations, to an certain point, weak so that the efficiency losses to be expected from for-profit producers can be considerably larger than those to be expected from non for profit producers. It has frequently been argued, however, that government and nonprofit organizations lack the incentive to be efficient (a consequence of nondistribution and soft-budget constraints), and so they may fail to set optimal incentives for managers (Alchian and Demsetz, 1972). The profit motive encourages efficient production. The non for profit enterprises can be a reasonable response to some kind of "market failure," specifically the inability to protect producers by ordinary contractual devices, which is a "contract failure."