Regression analysis was done in the previous assignments and the results were able to show that the product has an inelastic type of demand. The market has a total of twenty six companies where each of the companies tries to operate as monopolists in the markets. It means that each Company tries to control a small portion of the market through which it can determine the prices of the goods. The monopolists do not wait for the forces of demand and supply to determine the price levels of the products. Instead it is the monopolists’ that makes the final decisions regarding the price settings. The market of the calorie food company is designed in such a way that the products produced are similar in nature. However, the products have very minor differentiations that distinguish from one another.
Leading competitors in the Microwavable food Industry
The market of low-calorie microwavable foods is currently crowded and that leaves the consumers with quite a good number of options from which to choose from. Furthermore, the industry has had a change due to the fact that the current crops of employees have a high level of disposable income. Therefore, the high income gives them the opportunity to enjoy good lifestyles at affordable prices. The change in lifestyles has seen a majority of people change from the traditional methods of cooking to the modern methods of using microwaves. As a result of the introduction of microwaves, people also became innovative enough to the extent of innovating new products that can be prepared using the microwaves. Most of the new products are in the category of junk foods that are normally easy to prepare and warm. Besides, people have reverted to the consumption of foods that have low levels of calories because health experts have proved that it is good for human health. A good option of low calorie food is expected to contain fiber of not less than three grams. Additionally, the food should contain sodium not exceeding 600 milligrams (Zelman, (n.d).
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Some of the competitors in the market include organizations such as Healthy Choice and Lean Cuisine. Moreover, the operations of Lean Cuisine have grown over the years since its establishment way back in 1981. It currently operates in countries such as Canada, Australia and the United States. Its expansion was orchestrated by the fact that most consumers preferred its food products, and that made the organization to increase its earnings over a short period. Moreover, it s currently ranked as the best option for the provision of low-calorie frozen food. The organization is under the ownership of one Nestle who has led it through periods of success over the years.
On the other hand, healthy choice is also another choice of food product that is preferred by a majority of consumers. The product is manufactured by ConAgra; an institution specialized in the production of food products that contain low levels of calorie. Furthermore, Healthy choice is considered to be the biggest rivals of Cuisine Company. Competition between the firms makes the market be segmented in terms of the behavioral and psychographic characteristics exhibited by the consumers.
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The behavioral patterns of the consumers can be determined from the bundles purchased by the consumers. Additionally, it can be determined from the quantity of the goods and the frequency with which the goods are purchased. If the products are frequently purchased by the consumers, then the products can be said to be the favorite choice of the consumers. Additionally, if the consumers purchase the products in large quantities, then that becomes a good indicator of the fact that the consumers have a taste for the product. On the other hand, the psychographic purchasing pattern is related to the social class of the consumers. For instance, if the product manufactured by Cuisine is marketed in a population of low income earners, the consumers might not purchase the product. However, if the am product is taken to a market comprised of high income earners, the stock might clear up within a few days. Therefore, the products are marketed and sold based on the social economic status of the consumers.
Another important aspect of choosing the market in which to market products is the idea of profiling the consumers. That would help in knowing the geographical areas in which certain products ought to be marketed and sold. The markets can be determined based on the socio-economic status of end users or it can as well be disintegrated based on the consumer preferences and tastes. In essence, profiling is a way of studying and knowing the targeted audience.
It is important for anyone who wants to venture in the food industry to first of all know the targeted audience in that specific market. That would help the investor in coming up with the appropriate products that meet the demands and tastes of the consumers. Secondly, it would be appropriate for the investors to take a look at the financial performance of the whole industry within a certain period of may be five to eight years. From that analysis, the investors would be able to have a clear knowledge of the financial performance of the industry he is putting his money. Conducting a financial analysis is important because it helps one have a prior knowledge of whether to expect a financial gain or loss in the course of conducting business in that industry (Baron, 2000). Apart from that, an investor is supposed to have both a short term and long term objectives of his or her company. The objectives should state what the Company intends to achieve within the projected period. One of the expected objectives for any Company is to achieve growth within certain period of time. Besides that, the Company need to have an operation plan where it states the market it wants to venture into in terms of local and international markets. Most organizations begin as small local business ventures ut with time they grow to become international business Companies.
The growth of the food industry has been experiencing tremendous growth over the past years especially in the United States. The growth has primarily been attributed to thye growth of the populations over the years. The analogy is that as the population increases, the demand for food products also goes up. In relation to that, the lifestyles of the current growing population also changes from the traditional styles to the modern lifestyles. As a result, more people prefer to use modern equipments such as microwaves to warm their food. Consequently, the numbers of microwaves that have been on sale have been on the rise for the past one decade. Increase in number of microwaves sold out is a significant idea that implies that the industry is growing. The selling prices of most microwaves are relatively high; therefore increase in quantity purchased means that the disposal income of the consumers is also on the rise. It can also be deduced that the increase in quantity purchased is an implication of the fact that there is an increase in the number of those getting in to employment brackets.
An increase in the number of microwave users will automatically result in an increase in a situation where the frozen gets a high demand. Additionally the educational backgrounds of the consumers are also another fact that influences the demand of frozen food. When the demand goes up, then the sales will automatically be on the rise. The educational backgrounds of consumers plays a role in that the choices made on the foods purchased is different from those made by uneducated fellows. The educated consumers do know it is important for them to consume foods that are low in calories. It is therefore the responsibilities of the suppliers and manufacturers to know the needs and requirements of their target markets.
Analyzing effectiveness of market structure
The market is designed in such a way that an increase in demand of the product will result in a rise in the quantity of sales. Consequently, a rise in the quantity of sales directly translates to a rise in revenue collection. It is also worth noting that the demand for microwavable food products has been proved to be inelastic, therefore even if the prices were to be increased, the change in demand would be very insignificant. If for example the prices of the food products were to be increased by ten percent, the demand would drop by maybe say two percent. The implication is that the demand drops by a less than proportionate as compared to the rise in prices. According to Nicholson (2012), he proposes that increase in sales does not only depend on the drop in prices but also on the advertisement policies and strategies employed by the companies.
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In order for the companies to increase their sales, they can use the concept of cross elasticity where a rise in the price of substitute good results in an increase in demand for the other substitute good. Let us take an example of frozen foods and vegetables which are in this case assumed to be substitute goods. A situation can arise where the prices of the fresh vegetables increases while on the other hand the prices of the frozen food remains constant. In such a case, the demand for the vegetables will decrease while the demand for the frozen food will increase simply because the two are substitute goods. However, such a scenario and assumption can be true in case that all market conditions remain constant.
Factors of change
If it assumed that prices of the microwaves reduce, then the number of consumers who will be in demand of them will definitely rise. Consequently if more of the microwaves are demanded, it means that the demand for the frozen foods will also be on the rise. However, the rise in demand for the frozen foods will also depend to a large extent on the prices of substitute goods. If the prices are considered to be favorable by the consumers then they might end up achieving higher sales than the frozen foods. The scenario can also arise as a result of an introduction of a new firm that produces identical products. If that happens, then most of the companies will try hard to improve on the quality of their products. The improvements on the quality of the goods and services are an important aspect since it gives the Companies a competitive advantage over their rivals.
The production costs of a Company entails the amount used from the time it purchases raw materials, facilitate the transportation of the goods to the area of manufacturing upto the time the goods become end products. Additionally, the costs of hiring and using labor in the course of production also fall in the category of production costs. The costs incurred in the course of production can either be ranked as short term costs or long term costs. The difference between the two is that the long term costs have got no fixed factors. On the contrary, the short run costs have a number of variables and factors that create a significant impact in the production process. The long run costs can be well managed to the extent that they result in the production of final goods at a low cost.
Pricing policies for maximizing profits
Any Company that desires to attract a large number of customers must always have the correct pricing strategy. It is difficult to get a correct pricing strategy but with a correct marketing analysis, the best prices can be achieved in the market. Additionally, factors such as the demand and cost f production will also play out in coming up with the best pricing strategy in the market
In maximization of profits, the Company should ensure that it uses the best and modern technology in the production process while at the same time reducing the costs of production (Starr and Miller, 1960). Additionally, it should come up with pricing strategies that can be beat the prices of the rival companies.
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