October 20, 2015
Dr. Jerry King
Business Proposal – Part I
With the number of overweight and obese children growing over the past decades, the need to support healthy eating in children has never been greater. Poor eating habits, including inadequate intake of vegetables, fruit, and milk, and eating too many high-calorie snacks, play a role in childhood obesity. There are too many unhealthy food options available more conveniently than the healthier ones which is one of the primary concerns of parents in the U.S. In the recent years, parents and caregivers are becoming more aware of the healthy choices they need to make for the children and ...view middle of the document...
The interdependence with competition and the concentration ratio determines pricing strategy in an oligopoly. Concentration ratio is the total percentage of output produced by the industry's largest firms (Spaulding, 2015). BeGreen needs to strategize its self-interest behavior towards mutual interdependence such that business profits will depend on the combination of price, sales strategies of its own and that of the other businesses. BeGreen can consider a collusive agreement with the existing competitors in the market as one option to help it take advantage of the lack of more competition in the short run.
In the long run, the oligopolist market may not be sustained for too long as there is no large capital expenditure involved in the business model. In other words, the economies of scale are not restrictive as it is in jet engine, automobile, commercial aircraft, and petroleum-refining industries. There are no high set up and R&D costs involved, therefore, the market structure is expected to develop from an oligopoly to a monopolistic competition rapidly.
Price elasticity of product
In the current market structure, the oligopolist enjoys the advantage of an inelastic demand being the price maker. According to Kokemuller (2015), “Inelastic demand means you have some breathing room to raise prices without a significant, relative drop-off in demand” (para 1). Inelasticity allows for greater flexibility in adjusting prices such that they meet current economic conditions and the cost of the business. In other words, price is optimized based on estimated marginal cost and the elasticity of demand. If optimal price is greater than the actual price, price should be increased or vice versa. If the current price is equal to this optimal price, the price remains unchanged. Therefore, it can be inferred that when customers are willing to accept higher prices, BeGreen can implement profit-maximizing objectives.
Be Green must also bear in mind that within an oligopolistic market structure, when the business aims at boosting production, however the marginal revenue will decrease because the price will need to be reduced to boost sales. Therefore, it must develop non-price strategies in order to maintain the competitive edge in the market. Considering seasonal promotions can boost sales in a competitive market. Advertising heavily to create a strong brand that initiates customer loyalty is a clear option for BeGreen.
Business Proposal – Part II
BeGreen Inc. needs to be aware of the current global economic conditions that affect its socio-political environment, which can influence the business growth plan. The U.S. average for real GDP growth continues to show upward revisions which means it is still in an expansionary stage (The Conference Board, 2015). However, the pace will vary depending on the net impact of declining oil prices and exchange rate depreciations. Real interest rate helps to determine the trend of investment in an...