Question

A friend tells you that he plans to open a business in which he will entertain children at birthday parties. He says he will offer a new entertainment in which he dresses up like a dinosaur, something many children love.

What do you advise him about the possible future of his business? In your answer use the concepts of economies of scale, barriers to entry, and monopolistic competition.

Answer 1

while considering the present scenario there is a quite possibility that there would be immense competition among this kind of businesses.

friend would have to continue to introduce various innovative plays and idea in the show to create an unique impression towards the audience.

let's first talk about the barriers to enter

when friend would enter in the market of this kind of business then he would have to face the competition with the already established market leader who dominates the market and thus have to sustain on cost to cost profit.

1. to find a new market
2. to create a goodwill
3. to do demo shows
4. break even level of profit
5. the problem of imitation of new ideas.

now talk about the economies of scale-

1. before getting into direct competition with the market leaders i would suggest my friend to work under them because it would lead him to learn how to deal in the market, how to prepare strategies .various benefits can be classified as economies of scale
2. knowledge about the market potential
3. gaining from the experience of others.
4. friend could utilize catering services, consultant and other parties to get him side by side business.
5. increasing market share and sound business relations.
6. if friend will be able to decline the show rate and maximize the market share it would be beneficial for him to increase the market share and in future he would be less affected by the competition in the market.

in long run friend can enjoy various economics of scale both internally as well as externally.

in concern with the monopolistic competition friend can gain the benefit of advertisement and providing discount quality shows and gaining much of the market share.if the season is at peak then he can offer many discounts and if the season is at off then he can do shows at a lower prices and can get shows by paying commissions to the consultants.