Question

Imagine a scenario where you decide to start a firm in a specific industry. Please detail how your firm will evolve from creation towards the long run. Do so in the context of the 4 time frames we learned about in this class. You can use hypothetical numbers to illustrate any points you wish. Also, it would help to be specific about the type of industry you are in and think about the evolution of your firm within that specific industry.

Answer 1

Looking at the market requirement I want to establish a biodegradable packaging bag, cover for a different type of product, which is a substitute for the plastic. the price difference between plastic packaging bags and my product will be $0.01. The government had declared recently for the plastic ban from the market. so my industry will be the one among a few establishing newly to fulfill the market requirements.

first stage: Introduction

in the introductory part, it will be a slow process to get incepted in the market. it will be difficult to get all the required resources along with skilled labor. so the initial segment of my production the production could not be high, where it is a time taking process to get the production start in full fledge. here the cost of my product for a dozen packaging bags costs $1 and yearly my sale is 100,00000 units. The cost of production for a dozen is $0.07+other tax$0.1=$0.8

second stage: Growth

In this stage, the production of my product will start with economies of scale, which means labor got skilled as well as the supplier are ready to supply resources up to the required level. in this stage, the market inception will be prior . as my product is the one its kind, and government restriction enforces them to go for my product which is the only option for them. if they try to get it from outside it will cost more due to transportation cost. so they are enforced to purchase my product. in this phase, I will be enjoying monopoly profit. in this stage demand for my product increases and my cost of production decreased to $0.5 with all tax. and my selling price is $0.9. as other competitor forms started newly so their cost of production is higher than mine. so I earn extra monopoly profit.

Third stage: Maturity

after one year of production and dominating the market now my product got its optimum production and a few more similar types of industry been set up in the same zone. so in this period i have got the highest production and sell. so the establishment cost and other costs been recovered. after 5 years the production of similar type of products is very common in that zone. in this stage, my cost of production is $0.5 where my selling price is $0.7. other market competitors have lower prices.

Fourth stage:Decline:

In this stage my competitors they come off with new advanced and low cos replaceable product so now my product demand is decreasing and if I will not go for some kind of product differentiation and price adjustment I may face loss in the market and I have to quit the market.