Question

Question:

For each scenario, please complete the following:

●     Explain in writing using economic terms what is happening in the market.

●     Provide a graphical analysis of market activity.

For each firm, please provide in writing a strategic plan.

Firm 1: Grocery store

Scenario 1: I am having quite a few issues throughout the various departments of my store, and I am hoping you can give me your expert advice. For several weeks, our grape shipments have been consistently low. Can you tell me why this might be happening and what I should do?

Scenario 2: Now over on aisle 14, I cannot seem to move jars of peanut butter? I have not changed the price of peanut butter so I am perplexed! What is happening?

Firm 2: Superstore

Scenario 1: Our line of store-brand items is in trouble and we need your help. A few months ago, our store-brand appeared to be doing very well. Recently though sales are down on everything from food items and paper goods to our line of clothing. We have not changed our price points which leaves us perplexed? Can you explain to us what is happening and offer any suggestions to improve our brand's performance?

Answer 1

Grocery Shop

Scenario 1 : The lower shipments can be due to two reasons:

a) Production : The yield of grapes might be lower which results in low shipments, also as the production or availability is less those who ship grapes might incur higher transportation cost.

b) Higher cost : The cost of grapes is high in the market which has led to fall of demand for grapes.

Solution: We cannot assure the yield but you should decrease the price of grapes, so that demand rises and there is more shipment.

Scenario 2

The price of the peanut butter might not have changed but may be the price of procuring input such as butter, peanuts might have increased, or the complementary goods like milk and bread have had a rise in their prices. As we know that when price of complementary good rises, there is fall in demand of the goods in question, which is the peanut butter in the scenario.

Superstore

Scenario 1 : There can be multiple reasons for the brand performance diminishing

• New competitors : The entry of new competitors who provide more variety or new additions in the product line are benefiting and the brand loyalty of your customers are shifting.
• Change in taste and preference : The change in taste of the consumers have been inversely proportional to the product that you have been selling.
• Price factor: There might be better substitute of the products sold by you with lower prices by other superstores.

Solution : See the price of other sellers and accordingly adjust the price difference. New technological advancement can also be incorporates. Be consistence and conduct a proper market research to understand the new trends.