Question

Pick a small company (ice-cream shop, restaurant, bookstore, parking structure or ...) and write a short history about the company, major products, and location. Determine the factors that will influence demand for their products (be specific) Determine the factors that will influence supply of their products (be specific) Pick one of their products andeither calculate or speculate about the price elasticity of demand and the income elasticity of demand for that product. Justify your guess about how elastic the demand is with things you know about the product (for example, the demand for a product is likely to be very price elastic if there are many substitutes). Based on your estimate of price elasticity of demand what would you recommend as far as raising or lowering the price to enhance sales? (TR test). Finally, identify some complements and substitutes for the product. How strong do you think the cross-price elasticities are likely to be? Based on what you have written, if you were selling this product, what measures, prices, or data would you try to keep track of if you wanted to predict how your sales might change over time? Explain the nature of cost, fixed and variable, explicit and implicit and sunk cost for your business. Calculate alternative measures of industry structure, conduct, and performance Classify the type of business as competitive, monopolistic, oligopolistic or monopolistic competition. Explain your answer based on the characteristics of each market. As a manager which decision variables are relevant to make more profits for the firm? Is there any particular pricing strategy being used by this Company? ( Like price discrimination, bundling, coupons.)

Answer 1

The name of my company is Yummy ice cream shop, it was first opend in Mumbai, India in the year 2012, its been 8 years since then. The company is government certified.We have launched over 80 flavors till now from which it offers 20 flavors throughout the year and flavors like litchi, watermelon, etc. are offered seasonally. We are focused on traditional Indian market by offering range of flavors according to the taste and preferences of Indian consumers. The company's pricing is much focused on value for money.

The factors that will influence demand for our product are as follows:

Climate/season change - In winter and raniy season usaually the demand of the product is less compared to the demand of product in summer or spring.

Advertising: A successful advertising campaign will increase demand for a product.

Health : Change in life style, if people become more health concious the demand of the product will decline.

The factors that will influence supply :

Environment :This can play a very important role in the supply of product as milk is the raw material if and if anything happens to the cattle production of ice cream will affect

Transportation : We have to maintain the utmost care with the logistics of the product end to end or else it will easily get spoiled.

Technological: The main problem in ice cream industry has always been in Cold Storage Facilities. Because of this the rural penetration is very low. Also when it comes to natural ice creams Perishability becomes another main problem.

The price elasticity of demand is relatively elastic because small changes in price of ice cream cause relatively large changes in quantity. In other words, quantity is very responsive to price.

Ice cream is considered as a luxury product so the income elasticity is more than 1.

Depending upon the economy of the market i will increase or decrease the price, the standard of living will be the bench mark for my price speculation

Ice cream has a negative cross-price elasticity of demand, as the price of milk goes up the demand for ice cream will go down because eventually the finished product will be costly.

Factors taking in to consideration for sell of product are as follows :

Social: People have become health conscious and there is a belief that ice creams give lot of calories making people consume less ice cream than they actually want to so i will provide them with low fat ice creams. Also natural and gourmet flavors in the ice cream have become very popular because of the health reasons.

Technologica: I will make sure the product reaches the customer before expiry and also the SCM is all through cold storage which is expensive, thanks to new technology that is making

Supplier’s Power: The ingredients here is ice cream chemicals, raw fruits and milk. They are available items with multiple sources. However the importance of quality, timely availability and price is quite high. Because based on them only the quality of ice cream and cost of production depends. Hence the Bargaining power is moderate.

Buyer’s Power: In Indian Ice cream market the availability of unorganized and private labels is high. In addition
to that hotels also nowadays provide their own ice creams. This in turn provide more choices to customer.Apart from this, here there is no switching cost thereby making the flexibility to switch is quite more. However the uniqueness is
very less in market. Thereby giving lesser option to our targeted health conscious youngsters.
Hence the Bargaining power of buyer is moderate.

Price:
We believe in value for pricing model and have showcased the same in pricing their ice creams. The ice creams are priced at very reasonable rates although they are higher than the prices of its competitors.

Structure

Segmentation:The market is segmented based on geography, income and age as follows.
Geography – Urban and Rural, Income – Upper, Middle and Lower class, Age – Older generation, Youngsters and Kids

Targeting: We have targeted the urban middle class youngster who loves fresh fruits and milk.Thus they opened store outlets only in tier 1 and tier 2 cities of India.

The market is competative:

Entry into ice cream industry is quite easy and less requirement of capital. But however, the power of brand is quite good and increasing nowadays. Also natural ingredient versioned ice creams are quite costly in productions at lower quantity and also requires special arrangements for storing the fruits and milk ingredients.