Question

Assume you have recently been hired as a new manager of EyeTech Company, an innovative company that sells specialized eye care treatment equipment to Ophthalmologists, Optometrists, clinics, and hospitals. Over the course of your first year, you will face 4 challenges as set forth below: 1. March 2. June 3. September 4. December. Respond to each and every challenge one at a time with insights you have gained from your study of the material presented in modules 1 through 5.

You must use at least 2 different resources (the textbook can be one of the resources) to support each of your responses.  

All of the resources you use for each response must be cited as specific references in accordance with APA formatting requirements . To assist your efforts, access the link to APA Formatting by clicking onto the Course Syllabus tab in the Course Menu, and then scroll down to APA Formatting.

Place your references used for each specific challenge at the end of your response to each specific challenge.  Do not include a separate reference page at the end of all of your work.

1.March

The company’s finance department has recently concluded some research regarding the elasticity of demand for the company’s primary products. The results show that the company’s primary products now face an elastic demand that is likely to continue for many months.  

1. Explain in detail the basic meaning of elastic demand, and then explain in detail the basic meaning of inelastic demand.

2a. Next, based on the information provided by the company’s finance department, set forth whether you will recommend to the company CEO either a price increase or price decrease of your primary products, and explain why. Note that one or the other must be chosen because the prices must either be increased or decreased. Keeping the current prices is Not an option.

2b. Also set forth what is likely to happen if the CEO ignores your advice and does the opposite of what you recommend, and explain why.

2. June

As manager, you have decided that it's time for some price discrimination to benefit EyeTech Company. There are typically three different "degrees" of price discrimination to choose from: First Degree, Second Degree, and Third Degree.

1. Explain in detail the basic meaning of First Degree Price Discrimination, Second Degree Price
Discrimination, and Third Degree Price Discrimination.

2. Assume that each degree (including the typically impractical first degree form) can be successfully
implemented by EyeTech Company. Select the degree of price discrimination you would recommend
for EyeTech Company that you believe will be the most successful in improving sales, and explain
why. (Note that you can only select one specific degree. Do not select more than one degree or a
combination of degrees.)  

3. September

Assume the year is 2025. The CEO and Board of Directors of EyeTech Company have decided to expand the company's operations into a foreign country, and they have narrowed it down to three countries to choose from: Freedonia, Verpaly, and New Bazoga. Data collected regarding the three countries for the past three years is as follows (note that bil = billions in US dollars):

Freedonia Verpaly   New Bazoga

Years   2022   2023   2024 2022   2023   2024 2022   2023   2024

GDP 20 bil 22 bil 23 bil 15 bil 18 bil 20 bil   17 bil 14 bil 16 bil

Unemployment 7% 7% 6% 9% 8% 9% 5% 5% 4%

Inflation 3% 4% 5% 2% 3% 2% 5% 6% 3%

____________________________________________________________________________________________________________

The company now calls on you as the business manager to analyze the data and provide recommendations to the board regarding the three countries. Be sure to take into account the changes from one year to the next in your analysis to avoid looking only at the data from 2024 and making your recommendations based on that year alone.

1. Based only on GDP, identify the country you would recommend be chosen by the board, and explain why.

2. Based only on Unemployment, identify the country you would recommend be chosen by the board, and explain why.

3. Based only on Inflation, identify the country you would recommend be chosen by the board, and explain why.

4. Lastly, based on all of the data, which country would you recommend be chosen by the board, and explain why.

4. December

The word has gotten out that EyeTech Company and other companies selling similar products are quite successful, so many groups of wealthy investors are in the process of putting together more companies to compete directly against EyeTech Company and others. Because of the additional competition, you are tasked with coming up with several strategies to help EyeTech Company maintain its competitive advantages.

1. With respect to pricing, you have three basic choices: lower the prices, raise the prices, or maintain current prices. Explain the pros and cons of each option in the face of the new competition.

2. How would you approach any of your customers that have been consistent buyers of EyeTech Company's products over many years, but they advise you that they like what the newcomers are offering, and they are also offering to sell their products at lower prices that EyeTech Company cannot match? What would you do to try to keep the customers loyal to EyeTech Company?

3. You soon discover that the new competition is offering equipment that is more advanced than EyeTech Company's equipment. Two options present themselves to you: A. Immediately invest in and offer the same quality of equipment to your buyers so you can compete more equally with the new competition, or B. Invest the same amount of money into researching even more advanced equipment to more than likely enjoy a competitive advantage over all of your competitors. However, this will take some two to three years to develop and offer on the market, plus the costs will be significant and could diminish your overall profits for many years. Also note that if you go with option A, the investment cost would be such that EyeTech Company will not be in a position to develop new equipment for at least 4 years.

Select the option you believe will work best for EyeTech Company, and explain why you believe that option is the best one. Then explain why you believe the option you selected is a better option than the option you did not select.

Answer 1

1 MARCH

(1) The basic meaning of elastic demand is that quantity demanded for a product is highly sensitive to changes in its price . If price of good increases(decreases),then it leads to proportionately more decrease(increase) in its quantity demanded.

While meaning of inelastic demand is that quantity demanded for a product is highly insensitive to changes in its price. If price of a good increases(decreases),then it leads to proportionately less decrease(increase) in its quantity demanded.

(2a) I would recommend a price decrease for the primary products as the demand for the primary products is elastic. Therefore, a price decrease will result in large increase in the quantity demanded.

(2b) If CEO does the opposite and increases the prices ,then there will be a huge decline in quantity demanded due to elastic demand. THis might result in loss for the company.

2 JUNE

(1) First Degree Price Discrimination is a type of pricing strategy where each customer is charged that much price which he/she is willing to pay thus,eliminating all the consumer surplus and increasing the sellers profits. Thus, here every customer pays a different price,therefore there is complete discrimination but it is the most difficult form of price discrimination.

Second Degree Price Discrimination is a type of pricing strategy where customers are differentiated according to their buying preferece. For examole some consumers purchase in bulk while some purchase a single quantity,thus making it easier to divide customers in different groups and charge them accordingly. This pricing startegy is most useful in warehouse retailing.

Third Degree Price Discrimination is a type of pricing strategy where customers are broadly divided into different market segments having different demographics with varying price elasticity of demand.

(2) For eyetech company ,i think Third Degree Price Discrimination would be the best as its customers are opthalmologists,optometrists,clinics and hospitals.Thus, customers can be differentiated according to their broad characteristics and subsets can be created based on differing price elasticity of demand. this pricing strategy will help increase the sales of eyetech.

3 SEPTEMBER

(1)Based on data on GDP ,Verpaly will be the best location as here GDP Is Rising and comparatively at a higher rate. Also here ,inflation is low thus making real GDP also high. Higher GDP will mean greater purchasing power and greater demand for the company'"s products.

(2) Based on data on Unemployment,Verpaly will be the best location as here unemployment is more therefore bargaining power will be in the hands of company,as a result labour cost would be low . Also more labour could be employed which will lead to rise in GDP which in turn would profit the company.

(3) Based on data on inflation,again Verpaly will be the best location as here inflation is low which will lead to lower material and operational cost.

(4) Based on all the data, Verpaly is the best location as discussed above.

4 DECEMBER

(1) In such a competitive market best solution is to maintain the current prices because if we lower the prices then others will retaliate and a price war will start which will result in price to be marke at the marginal cost leading to no profit no loss situataion. Whereas ,if we increase our price,then if others don't then we will lose our market ,making it diificult for us to sustain.

(2) In order to keep the customers loyal to the Eyetech company,we can adopt price discrimination strategy where we can adopt some sales promotional measures like quantity discounts and loyalty programs to provide benefits to the regular and loyal customers while keeping the price same.

(3) For Eyetech option B(investing the same amount of money into researching even more advanced equipment) would be the best option because though we will be loosing sales of that product for the next 2-3 years till the time new product is developed, but after that we will get huge benefit of that advanced product, which may lead to increase in sales of that product manifold. Moreover developing the current product would mean that there would be competition with the competitor and the sales would be divided between the two, but developing the advanced product would mean sort of monopoly for some years till the time some more advanced product is developed.

Moreover, if we launch similar product right away, and lets say that product become obsolete in next 2-3 years, than we would be out of competition for that product as we would not be able to develop a new product for next 4-5 years due to lack of funds.