Friday 19 October 2012

Blogging about Market Structures

In this final blog entry, market structures have been compared. By comparing the market structures we can see economically which structure makes the most sense to help both consumer and producer. Here are my findings:


 
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
Number of firms
Lots
Several
Very few
One
Freedom of entry
Unrestricted
Unrestricted
Restricted
Completely restricted
Nature of product
Undifferentiated
Differentiated
Both differentiated and undifferentiated
Unique
Implications for demand curve
Horizontal slope
Downward sloping but still elastic
Downward sloping and inelastic
Downward sloping, most inelastic
Average size of firms
Smaller firms
Small-Medium
Larger firms
Very large; only 1 firm
Possible consumer demand
Products with high demand
High demand
Low consumer demand for Oligopoly
Very low consumer demand for Monopoly’s
Profit making possibility
Slightly smaller due to #of firms
More possible, fewer firms
With very few firms, possibility of profit is high
Very high
Government Intervention
Low
Low
Medium-High
High
Possible performance of firms
Many firms can succeed since demand is high
Still allows for more firms to succeed
Possibility of largest firm to perform well is high
As long as government intervention doesn’t take possibility away, the firm can perform extremely well.

I have added the row "possibility of performance of firms" as I think it is important to compare which market allows for the most firms to be successful.

Blogging about Elasticity and Revenue

For this blog I'd like touch on the issue of smoking, and how the elasticity of the product effects the total revenue. In this editorial response I used as my source; not only does is speak on the trends in smokers getting younger and younger (and how this is a bad thing) but also how that effects the price and demand.

The younger the smoker, the higher the damand for the product; they have to have their fix, although they may not be willing to pay the higher price. Yet the prices may be lower, the total revenue increases as the damnd is high.

In my graph of totally made up figures, it states that as the price stays more reasonable, the product is more elastic. The unitary elasticity is set at 25. The product becoomes inelastic as prices are higher climbing toward $100 a pack.

The total revenue climbs as the prices are more reasonalble and demand is still high (even among those older smokers trying to quit who still smoke on occasion). Total Revenue falls as prices are raised.









Link to my article:
http://search.proquest.com.libresources1.sait.ab.ca/canadiannews/docview/351846053/1394ADFE2344D10617E/3?accountid=13652

Monday 8 October 2012

Blogging about Game Theory

Game theory. It's quite a concept, it's interesting to think about-it makes you think not only about business and how people think, but also about people in general. The main ideas behind game theory are that individuals live life as a game, only focused on their own self interest-trying to win the game. Every person for themselves, since it would be mathmatically impossible for each person to get what they want if it was up to the government. "Individuals want to maximize thier own pleasure." Game theory introduced a dark vision of the human race-everyone for themselves and not trusting of anyone else.

John Neumann and Oskar Morgenstern developed the theory by looking at it like a poker game. Every person in the game constantly thinking, guessing the next move and focusing on themselves, and only themselves to make the most money. The theory doesn't allow trust, in fact it assumes that nobody is trustworthy, much like the bluff in poker.

A short comic strip reguarding a basic principal of Game Theory
There is evidence of game theory in the current market, currently not to the extent as it seemed to be in the early 90's. In business, however I believe there will always be signs of game theory. A business will always want to thrive, always wants to make money. Businesses do this by ensuring they produce what consumers want, scanning the market constantly thinking in terms of the future, like a poker player. Obviously businesses are looking out for themselves, that's how they make money; sometimes that includes putting others' out of business, it can seem ruthless; but it is not illegal, so it's just something that happens. I don't see evidence of each business or business person being distrustful towards everyone...I think that's why we're starting to see more company's merge now too, or help eachother out, such as Starbucks and Pepsi selling eachothers' products.

The payoff matrix is used to determine the best possible action (for a company) while taking into consideration the possible reaction of any rival companies The matrix works by having each cell broken down into 2 options: one company cheats, or doesn't cheat. Also it produces a winner- what will happen if one company does cheat, or also what happens if one company doesn't cheat, or what happens if both cheat. It's tough to put into words.
Here is a payoff matrix between 2 large, recognized companies, Target and Wal-Mart.


Collusive actions occur when firms decide they don't want to be in competition with eachother, but rather take equal parts of the market, either geographically, who has more existing clients or agreeing on a fixed price. The term "cartel" is the term that describes the formal agreement of cooperation among the firms involved.


References
http://wps.prenhall.com/wps/media/objects/6814/6978492/Esntls_ISG_Fig8.gif

http://static.environmentalgraffiti.com/sites/default/files/images/Game-theory-2.jpg

Wednesday 3 October 2012

Blogging about Monopolistic Competition


Monopolistic Competitive Companies

Size:
Small Company
Medium Company
Large Company
 
Features:
 
 
 
 
Differentiated products
 
Lucky Lager co. 
Ben & Jerry's Ice cream 
Wal-Mart 
Control over price
 
Dollar Store 
 Co-Op
The Brick 
Mass advertising
 
 Local car dealerships
Tim Horton's 
 MacDonalds
Brand name goods
 
 Joe Fresh (superstore)
 Old Navy
 Nike
Product Distribution
 
 Kijiji
Amazon 
 Apple
Other feature ??
 
 
 
 
Other feature ??
 
 
 
 


Lucky Lager cans                    

I've tried to keep most company names recognizable. Lucky Lager co, is a much smaller beer company. Like all beer, the product is slightly different but basically the same. Lucky differs from most companies in price and look.
Joe Fresh, which is superstore's clothing line is still a brand name...but on a much smaller scale than the 2 other company's in that row.
Product distribution is one I added. While there are of course still many, many stores that offer goods, the online "store shoppers" are a big market. Those websites are all distributers that are only online and have small shares in a very large market.
I've left 2 rows blank, tell me what you think.

Monopolistic Competition: An imperfect market structure wherin there are a large number of firms, but each firm is relatively small compated to the market. The market allows for many similar products/companies that are not identical. Monopolistic competition market encourages only competitive firms.
-Christian Makowski

Differentiation plays a large role in this type of market structure. The slight differentiation is the only thing separating monopolistic competition from monopoly. The differentiation of products is what determines perhaps a lower price of one good, or a feature that makes a product better, or the materials that make a better quality product. Without this product differentiation, the monopolistic company wins and we pay what they want us to pay; we buy what the want us to buy. All of our consumer power would be gone.

References:

http://www.facebook.com/luckybeer
http://www.concretemoose.ca/wp-content/uploads/2010/06/kijiji-logo1.png

I'm not sure how many of you were in a place that showed U.S. commercials during the Olympics this summer. I was, and this commercial is why I put McDonalds under mass advertisements. This ad was on so many times I can't bare to watch it anymore (though I'll admit the first couple hundred times it was on I enjoyed it).










Monday 1 October 2012

Blogging about Competing as Starbucks

starbucks coffee logo
Starbucks logo

It's funny, in all my courses so far at SAIT, I've had to report on Starbucks in some way. They're such a large and popular company, so I understand why they make the news so much but I have to admit, it's often for the wrong reasons. According to our textbook the term perfect competition is: a market it which all buyers and sellers are price takers. What exactly is a price taker? A price taker is a(n):firm that can alter its rate of production and sales without significantly affecting the market price of its product.
Read more: http://www.investopedia.com/terms/p/pricetaker.asp#ixzz284JSJ8c4

Starbucks would be considered a part of a perfect competition market because their main product is coffee, coffee has a very large profit margin. No matter how many coffee's they sell in a day, the price of each coffee stays the same; without affecting the market price.

What I read in the articles made it clear to me that it was time for Starbucks to realign their business practice. I call it the "Starbucks Complex" it's where there is just too many stores, Starbucks has managed to saturate their market... with their own stores! Starbucks should focus less on expansion (that would help with store closeurs) and refocus on being the best store they can be, make the best coffee in the most efficient way, while being great at customer service. They've had to close so many stores because of poor planning. They didn't think enough in long term, they just wanted fast expansion in a poor economy. Also they didn't seem to think that too many stores could be a bad thing, well obviously it can be. The main reason for Starbucks having to close so many stores comes down to very poor long-term thinking.

Starbucks Japan

I'm not one who frequents coffee shops much, for me it's just not worth it. Starbucks is quite expensive. The reason: prestige pricing. By pricing their product(s) just a little higher than the competiton, it gives the illusion that their product is superior, therefore, they can charge a higher price. Starbucks gets away with these prices because they have been in the market so long that people are dependant on their coffee now and will pay what they have to to get it, they're almost addicted. Wheather they lower their prices or not, I'm not sure what happens, but one thing is fore sure; if they focused on being the best coffee chain, rather than the largest, they could increase profits and have much fewer store closeurs in the future.



References:
http://www.yourlogoresources.com/starbucks-logo/ Starbucks logo

http://www.databaseanswers.org/tutorial4_getting_started_with_db_design/index.htm Menu Picture

http://inventorspot.com/articles/starbucks_japan_grows_while_american_stores_close_15672 Store Picture
http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html
http://www.cbc.ca/money/story/2008/07/01/starbucks-closures.html)
http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html

The above links are links given to the class, articles used in my research.