Question

You are a product manager for a firm selling sunbeds and you know that competition in sunbeds is mainly on price. Your friend works for a company selling parasols (large sun umbrellas) and knows that competition in the parasol market is also in prices. Are the prices for sunbeds and parasols strategic complements or strategic substitutes? Explain your answer. 300 words

Answer 1

Complementary goods are the goods which complement each other and are used together to satisfy a given want. Substitute goods are the goods that are substitutes for each other that can be used in place of each other. Both sunbeds are parasols demand varies based on price. It has an indirect relationship: if the price of a particular company's sunbeds is low, its demand will be high, and if the price is high, demand will be low. Similar is the case with parasols. Yes, parasols and sunbeds are complementary goods that are used together to satisfy a given want. As the price of both parasols and sunbeds will fall, their demand will be high, and if their price rises,their demand will below. The price of even one good increase will lead to a rise in cost, and frequent use will become expensive. Hence they both are strategic complements. Whereas if the price of even one good fall, their demand will rise, ending in profits. Strategies are fundamental in any working of the organization. Strategies only help in the smooth flow of working of the company. To reduce the price of the product the company should follow many strategies such as the use of direct chains of exports and imports, taking high-quality products and using coat efficient technologies and tools which end up in high profits and low costs of the product and makes the joint use a little cheaper than others. There are many other options that the company can adopt, such as not taking any intermediate company in between, it can directly take international orders on its own and remove all the middleman from in between. Also, using direct chains of management can help in expanding business and reducing costs of the product. Also, use and collaboration can prove to be a big hit. Collaborative actions can also prove cost-efficient. The company can fund or hire many small equipment companies under it, which can also reduce the costs of the product sold and, hence, increase demand. Hence, compliment use becomes a little less expensive.

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