1. Suppose that there are only three people that live in a (very) small town: Eric, Greg, and Katie. The town is thinking of building a park which you can assume is a public good for these three individuals in the town. Based on the individuals’ demand schedules for the park, which are given below, calculate and graph the social marginal benefit curve for the park.

b. Assume that the supply curve for the park is shown in the following chart. Graph this supply curve on your graph from part b. What is the socially optimal size of the park (in acres)?

Walmart has an interest in monitoring the average back-to-school spending for grade-school students year to year. Every year the back-to-school spending data is published by the National Retail Federation. The following table shows the average back-to-school spending of households randomly sampled in 2016 and 2017 along with the population standard deviations and sample sizes for each sample.
2016 2017
Sample mean $606.40 $655.27
Sample size 35 38
Population standard deviation $160 $173
a. State the correct null and alternative hypotheses.



b. Perform a hypothesis test using α = 0.10 to determine if the average household back-to-school spending in 2016 was different than it was in 2017.







c. Use Confidence Interval to test this hypotheses

Walmart has an interest in monitoring the average back-to-school spending for grade-school students year to year. Every year the back-to-school spending data is published by the National Retail Federation. The following table shows the average back-to-school spending of households randomly sampled in 2016 and 2017 along with the population standard deviations and sample sizes for each sample.
2016 2017
Sample mean $606.40 $655.27
Sample size 35 38
Population standard deviation $160 $173
a. State the correct null and alternative hypotheses.



b. Perform a hypothesis test using α = 0.10 to determine if the average household back-to-school spending in 2016 was different than it was in 2017.







c. Use Confidence Interval to test this hypotheses

Walmart has an interest in monitoring the average back-to-school spending for grade-school students year to year. Every year the back-to-school spending data is published by the National Retail Federation. The following table shows the average back-to-school spending of households randomly sampled in 2016 and 2017 along with the population standard deviations and sample sizes for each sample. 2016 2017 Sample mean $606.40 $655.27 Sample size 35 38 Population standard deviation $160 $173 a. State the correct null and alternative hypotheses. b. Perform a hypothesis test using α = 0.10 to determine if the average household back-to-school spending in 2016 was different than it was in 2017. c. Use Confidence Interval to test this hypotheses

Assume you have several years of student-level longitudinal data on math test scores, demographic characteristics, and what school each student enrolls in each year.

a. What would be the problem with simply comparing the math test scores of students attending a traditional public school with the outcomes of students who attend a charter school, even controlling for student demographic characteristics? Would this comparison yield the causal effect of attending a charter school on math test scores?

b. Some charter schools are oversubscribed, and by law they are required to admit people by lottery. How would you use the lottery data to overcome selection problems? Would this method tell you how an average charter school affects math test scores?

Monetary policy in Japan since the early 1990s has had limited effectiveness even though the Bank of Japan lowered  

Case Study-1

In 1990s Nestlé faced significant challenges in its market growth. Despite of the stagnant population in western countries the balance of power was increasing from large scale manufacturers like Nestlé, toward supermarkets and discounted chain stores. In result, Nestlé decided to lessen its focus on developed markets like North America and its home based market in Switzerland to emerging market like India and China. The driving force behind the decision of expanding its market share in emerging market is simple, as the population grows and government decisions favoring market economies brings attractive business opportunities for public living at intermediate income.

Although many of the counties are still living under poverty line, even living on $1 per day shows optimistic signs for the future markets. For example: as the current economic forecasts continues, there will be 9 billion people living on this planet as compare to today’s population of $7 billion today, and coincidently the increase in population is all in developing countries. Nestlé uses the strategy which correlates the ratio of increase in income to use of branded food products, which means as a person earns more and has less time for making food in his/her home, they will automatically substitute for branded products.

In general the company’s strategy has been to enter emerging markets early before its competitors and build a substantial customer base by selling products which suit the local population such as infant formula, milk, and noodles. Nestlé narrows down its market share to many small niche markets, as opposed to general or one for all strategies. Nestlé keeps the goal of commanding the niche markets by gaining at least 85% of market share in every food product it launches. For example, by pursuing such a strategy, Nestlé has taken as much as 85 percent of the market for instant coffee in Mexico, 66 percent of the market for powdered milk in the Philippines, and 70 percent of the market for soups in Chile. As the income level rises in each niche market, Nestlé introduces an upscale version of the same brand to increase its profit level. Although Nestlé has become a global brand, it uses local identity to gain exposure in local markets. The company owns 8500 brands but only 750 of them are known internationally.

Customization is the key to Nestlé’s global brand identity rather than universalism, which means Nestlé, uses global brand identity but, from the internal point of view, it uses local ingredients and other technologies that resonate with the local environment and brand name that is known globally. The customization of Nestlé’s products causes many hindrances in carrying out its distribution of products from local farmers to factories. For example, in Nigeria the infrastructure placed is crumbling, trucks are old and political conditions are not suitable to carry out the processes successfully, so Nestlé adopted a new strategy to deliver its products to local warehouses which are Loco convenient to local farmers for milk production. Although this might

seem as an expensive solution, the local farmers have tripled their milk production and the supply of milk, which Nestlé has calculated as beneficent for the long term growth.

The execution of the strategy matches the planning of the strategy which is to plan globally and implement locally. Nestlé gives autonomy to its local branches based in different countries to make pricing decisions, and distribution decisions. Nestlé has expanded its growth by diversifying its product base to tomato ketchup and wheat base products such as noodle and tofu. Nestlé has expanded into 5 countries and expects to supply all food products throughout the regions namely, Turkey, Egypt, Syria, Dubai and Saudi Arabia.

Nestlé is also buying local companies in China and adapting its own portfolio for the Chinese market. Since many Chinese find coffee too bitter for their liking, Nestlé is working on a new “formula” to offer Smoovlatte, a coffee drink that tastes like melted ice cream. The company wants to be seen as a company that makes healthy food. As Janet Voûte, Nestlé’s global head of public affairs, said “it is a core business strategy”.

Nestlé has used its brand name as strength to generate sales and to expand its market share, which includes it customization of products to fit its target market’s profile. Although Nestlé has not always started from scratch, the company has used acquisition as a penetration strategy to expand and penetrate new international markets, which eliminates any local barriers to its competition. A few weaknesses which are related to the company’s quality measure resulting in product recalls. The company has decentralized its strategy units into 7 subunits in charge for different product lines, for instance, one – for coffee and beverages; another one focuses on ice cream and milk products. Nestlé brings its management level employees all around the world for 2-3 week training in its headquarters in Switzerland to familiarize them with their global culture, strategy and given them access to the company’s top management.

Answer the below questions:

1) Based on the case study, elaborate the strategies adopted by Nestle in establishing global    brand identity in the local markets of various countries.

Case Study-1

In 1990s Nestlé faced significant challenges in its market growth. Despite of the stagnant population in western countries the balance of power was increasing from large scale manufacturers like Nestlé, toward supermarkets and discounted chain stores. In result, Nestlé decided to lessen its focus on developed markets like North America and its home based market in Switzerland to emerging market like India and China. The driving force behind the decision of expanding its market share in emerging market is simple, as the population grows and government decisions favoring market economies brings attractive business opportunities for public living at intermediate income.

Although many of the counties are still living under poverty line, even living on $1 per day shows optimistic signs for the future markets. For example: as the current economic forecasts continues, there will be 9 billion people living on this planet as compare to today’s population of $7 billion today, and coincidently the increase in population is all in developing countries. Nestlé uses the strategy which correlates the ratio of increase in income to use of branded food products, which means as a person earns more and has less time for making food in his/her home, they will automatically substitute for branded products.

In general the company’s strategy has been to enter emerging markets early before its competitors and build a substantial customer base by selling products which suit the local population such as infant formula, milk, and noodles. Nestlé narrows down its market share to many small niche markets, as opposed to general or one for all strategies. Nestlé keeps the goal of commanding the niche markets by gaining at least 85% of market share in every food product it launches. For example, by pursuing such a strategy, Nestlé has taken as much as 85 percent of the market for instant coffee in Mexico, 66 percent of the market for powdered milk in the Philippines, and 70 percent of the market for soups in Chile. As the income level rises in each niche market, Nestlé introduces an upscale version of the same brand to increase its profit level. Although Nestlé has become a global brand, it uses local identity to gain exposure in local markets. The company owns 8500 brands but only 750 of them are known internationally.

Customization is the key to Nestlé’s global brand identity rather than universalism, which means Nestlé, uses global brand identity but, from the internal point of view, it uses local ingredients and other technologies that resonate with the local environment and brand name that is known globally. The customization of Nestlé’s products causes many hindrances in carrying out its distribution of products from local farmers to factories. For example, in Nigeria the infrastructure placed is crumbling, trucks are old and political conditions are not suitable to carry out the processes successfully, so Nestlé adopted a new strategy to deliver its products to local warehouses which are Loco convenient to local farmers for milk production. Although this might

seem as an expensive solution, the local farmers have tripled their milk production and the supply of milk, which Nestlé has calculated as beneficent for the long term growth.

The execution of the strategy matches the planning of the strategy which is to plan globally and implement locally. Nestlé gives autonomy to its local branches based in different countries to make pricing decisions, and distribution decisions. Nestlé has expanded its growth by diversifying its product base to tomato ketchup and wheat base products such as noodle and tofu. Nestlé has expanded into 5 countries and expects to supply all food products throughout the regions namely, Turkey, Egypt, Syria, Dubai and Saudi Arabia.

Nestlé is also buying local companies in China and adapting its own portfolio for the Chinese market. Since many Chinese find coffee too bitter for their liking, Nestlé is working on a new “formula” to offer Smoovlatte, a coffee drink that tastes like melted ice cream. The company wants to be seen as a company that makes healthy food. As Janet Voûte, Nestlé’s global head of public affairs, said “it is a core business strategy”.

Nestlé has used its brand name as strength to generate sales and to expand its market share, which includes it customization of products to fit its target market’s profile. Although Nestlé has not always started from scratch, the company has used acquisition as a penetration strategy to expand and penetrate new international markets, which eliminates any local barriers to its competition. A few weaknesses which are related to the company’s quality measure resulting in product recalls. The company has decentralized its strategy units into 7 subunits in charge for different product lines, for instance, one – for coffee and beverages; another one focuses on ice cream and milk products. Nestlé brings its management level employees all around the world for 2-3 week training in its headquarters in Switzerland to familiarize them with their global culture, strategy and given them access to the company’s top management.

Answer the below questions:

1) Explain the modes of entry adopted by Nestle to enter the international market

Case Study-1

In 1990s Nestlé faced significant challenges in its market growth. Despite of the stagnant population in western countries the balance of power was increasing from large scale manufacturers like Nestlé, toward supermarkets and discounted chain stores. In result, Nestlé decided to lessen its focus on developed markets like North America and its home based market in Switzerland to emerging market like India and China. The driving force behind the decision of expanding its market share in emerging market is simple, as the population grows and government decisions favoring market economies brings attractive business opportunities for public living at intermediate income.

Although many of the counties are still living under poverty line, even living on $1 per day shows optimistic signs for the future markets. For example: as the current economic forecasts continues, there will be 9 billion people living on this planet as compare to today’s population of $7 billion today, and coincidently the increase in population is all in developing countries. Nestlé uses the strategy which correlates the ratio of increase in income to use of branded food products, which means as a person earns more and has less time for making food in his/her home, they will automatically substitute for branded products.

In general the company’s strategy has been to enter emerging markets early before its competitors and build a substantial customer base by selling products which suit the local population such as infant formula, milk, and noodles. Nestlé narrows down its market share to many small niche markets, as opposed to general or one for all strategies. Nestlé keeps the goal of commanding the niche markets by gaining at least 85% of market share in every food product it launches. For example, by pursuing such a strategy, Nestlé has taken as much as 85 percent of the market for instant coffee in Mexico, 66 percent of the market for powdered milk in the Philippines, and 70 percent of the market for soups in Chile. As the income level rises in each niche market, Nestlé introduces an upscale version of the same brand to increase its profit level. Although Nestlé has become a global brand, it uses local identity to gain exposure in local markets. The company owns 8500 brands but only 750 of them are known internationally.

Customization is the key to Nestlé’s global brand identity rather than universalism, which means Nestlé, uses global brand identity but, from the internal point of view, it uses local ingredients and other technologies that resonate with the local environment and brand name that is known globally. The customization of Nestlé’s products causes many hindrances in carrying out its distribution of products from local farmers to factories. For example, in Nigeria the infrastructure placed is crumbling, trucks are old and political conditions are not suitable to carry out the processes successfully, so Nestlé adopted a new strategy to deliver its products to local warehouses which are Loco convenient to local farmers for milk production. Although this might

seem as an expensive solution, the local farmers have tripled their milk production and the supply of milk, which Nestlé has calculated as beneficent for the long term growth.

The execution of the strategy matches the planning of the strategy which is to plan globally and implement locally. Nestlé gives autonomy to its local branches based in different countries to make pricing decisions, and distribution decisions. Nestlé has expanded its growth by diversifying its product base to tomato ketchup and wheat base products such as noodle and tofu. Nestlé has expanded into 5 countries and expects to supply all food products throughout the regions namely, Turkey, Egypt, Syria, Dubai and Saudi Arabia.

Nestlé is also buying local companies in China and adapting its own portfolio for the Chinese market. Since many Chinese find coffee too bitter for their liking, Nestlé is working on a new “formula” to offer Smoovlatte, a coffee drink that tastes like melted ice cream. The company wants to be seen as a company that makes healthy food. As Janet Voûte, Nestlé’s global head of public affairs, said “it is a core business strategy”.

Nestlé has used its brand name as strength to generate sales and to expand its market share, which includes it customization of products to fit its target market’s profile. Although Nestlé has not always started from scratch, the company has used acquisition as a penetration strategy to expand and penetrate new international markets, which eliminates any local barriers to its competition. A few weaknesses which are related to the company’s quality measure resulting in product recalls. The company has decentralized its strategy units into 7 subunits in charge for different product lines, for instance, one – for coffee and beverages; another one focuses on ice cream and milk products. Nestlé brings its management level employees all around the world for 2-3 week training in its headquarters in Switzerland to familiarize them with their global culture, strategy and given them access to the company’s top management.

Answer the below questions:

Question 01: Based on the case study, elaborate the strategies adopted by Nestle in establishing global    brand identity in the local markets of various countries.

Case 3

In the 1980s and early 1990s, U.S. domestic automobile manufacturers, especially General Motors, were in turmoil. Dire headlines in business newspapers and magazines predicted a gloomy future: "Can GM Remodel Itself?" "May We Help You Kick the Tires," "Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors," "GM Is Spreading the Gospel According to Toyota," "War, Recession, Gas Hikes . . . GM's Turnaround Will Have to Wait," "General Motors: What Went Wrong?" and "Can GM Fix Itself?" The list is endless. According to John F. Smith, Jr., chief executive officer and president of General Motors, "All of the well-publicized difficulties we faced in the past few years were in a sense the overdue wake-up call. GM's success had made it easy to ignore the significance of change and the signs of potential future problems." To try to solve its problems and increase competitiveness, in 1984 GM created a new division that focused on larger luxury cars-the Buicks, Oldsmobiles, and Cadillacs. The result was that by 1987 all the cars produced by this division began to look alike and buyers grew wary of GM's products. Cadillac buyers did not know why they were paying more for a car that looked just like GM's other less expensive models, like Buicks, and sales of Cadillacs plummeted. Realizing their mistake, GM's top management reorganized the company to give control of engineering and design back to the separate divisions. The Cadillac division benefited the most from this restructuring. To turn the division around, Cadillac was granted its own engineering team in 1988 and moved quickly to create a new identity for the line. Once again in control of its decision making, Cadillac managers lengthened the cars two inches, totally restyled them, increased advertising, and used direct mail to promote test drives. By 1990 Cadillac had gross profit margins of 40 to 50 percent, compared to 30 percent for the rest of GM's divisions. The Cadillac division had become very successful, launching redesigned models in 1991, 1992, and 1993. Their sales have been growing steadily, especially as the rising value of the yen has made Japanese luxury cars like the Lexus and Infiniti relatively expensive. In 1990 GM's Cadillac division won the prestigious 1990 Malcolm Baldrige Quality Award. According to David A. Garvin and Robert and Jane Cizik, professors of business administration at the Harvard Business School, the award "has become the most important catalyst for transforming American business." In 1992 GM introduced the very successful Cadillac Seville STS and successfully marketed the model against Toyota's Lexus and Germany's Mercedes. Even after all the improvements, however, the plant that produced the Cadillac Seville STS still ran at only 50 percent capacity. But Cadillac continued its leadership of the luxury car market for the forty-fifth year with 1993 sales again exceeding 200,000 units. What follows is the summary of remarks made by John Grettenberger, vice president and general manager of GM's Cadillac Motor Division, to the shareholders who attended the annual meeting on May 20, 1994. Our Cadillac team has come a long way, and we are now stronger than ever. We have been spending the last six years transforming our product to prepare for the challenges of the twenty-first century. Our quality and reliability have been recognized by customers and industry analysts. Recently Cadillac was named number one in vehicle dependability by J. D. Power & Associates, the industry analysts. It is the first time that a domestic car has topped that list. In a five-year ownership rating, Cadillac holds the number-1 ranking among the luxury cars. Cadillac was the only company in the industry to redesign its entire product line. Eight all-new models hit the market in just three years. The 1992 Seville and the Eldorado were first of the new generation to reach dealers, and 1992 Seville STS won the most prestigious awards in the industry, including the Motor Trend Car of the Year. In the following year, GM introduced the Northstar system to the Seville Touring Sedan and the Eldorado Touring Coupe, and the car won another fifteen editorial awards. The Northstar system has established Cadillac's tradition for innovation and technological leadership. Customers know the Northstar system by name and use it as a benchmark when comparison shopping. The year 1995 marked the eightieth anniversary of the first Cadillac V8, and eighty years later it is still setting the industry standards in power-train technology. Cadillac's world-class vehicle systems are the key to the sales success of the Seville and the Eldorado, and the model year sales have improved over 110 percent between 1991 and 1993. Continued improvement is expected for the 1994 model year. The Cadillac division has successfully attracted new buyers to Cadillac. The division made major inroads with young, affluent buyers who tend to prefer imports. The average age of buyers is decreasing. These young buyers, both male and female, are import-oriented and prefer sporty, contemporary cars with a feel-of-the-road handling. Two important new groups of Cadillac buyers are affluent women and African Americans. Cadillac is setting new standards for the capability, competency, and overall balance of the large luxury sedan with the introduction of the all-new 1994 Cadillac DeVille Concours. The DeVille Concours is a fully equipped, six-passenger sedan with Cadillac's exclusive Northstar system. The 270-horsepower Northstar V8 engine establishes the DeVille Concours as the most powerful front-wheel-drive, six-passenger sedan in the world. The DeVille Concours is newly designed, with comprehensive climate controls, precision instrumentation, ergonomically designed leather seating areas, and an all-new, eleven-speaker Delco Electronics Active Audio System. The base price? $37,990.

Questions:

1. Why was the U.S. automobile industry in a tailspin during the 1980s and the early 1990s?
2. What was GM's focus in 1984 to solve its problems? What were the results?