Managerial Economics
Whether it is important for a company to achieve cost leadership is dependent on the generic strategy that the company has chosen to pursue. The two basic forms of generic strategy are differentiated and cost leadership. Companies pursuing a differentiated strategy do not need to pursue cost leadership. They seek to maximize profits by building brand power to the point where they can charge premium prices for their goods. Thus, the strategy is fundamentally different from cost leadership, and is perfectly valid. Many firms have successfully pursued a differentiated strategy, and indeed, the differentiated strategy is a hallmark of firms in monopolistic competition. Each seeks to achieve a measure of differentiation that will attract customers. There are many different ways to achieve this differentiation, and cost leadership is just one among them.
For firms that wish to pursue cost leadership as a means of winning market share in a state of monopolistic competition, attaining cost leadership is critical. In most industries, it can reasonably be expected that multiple firms will pursue a cost leadership strategy, and the bulk of the success will go to the firm that is able to achieve this strategy successfully. The cost leader must be just that -- the firm that offers the lowest cost product or service to the customer. In order for that to happen, the cost leader must adopt this strategy in all aspects of the business.
Firms can lower their production costs in a number of different ways. These include utilizing cheaper inputs, using less labor, lowering overhead costs and minimizing the costs associated with distribution and financing. Wal-Mart is a leader in minimizing distribution costs with its cross-docking techniques and sophisticated inventory tracking systems. Costco is a leader in reducing its financing costs because it is able to turn goods over so fast that it sells most goods before it needs to pay its suppliers for them. This leaves the firm with almost no inventory on hand. Both of these retailers are cost leaders because they have taken approaches such as this to minimize the costs associated with all aspects of bringing goods…
Price: The customer will be able to choose from a wide variety of prices, starting with $15 and ending with $2,000. The average retail price is of $100.00 a bottle of specialty wine, with an average fixed cost per bottle of $50. The $50 difference allows me to reduce the retail price if I find this is necessary to attract customers. I could also implement various pricing strategies, such as
Managerial Economics Telecommunications has changed dramatically in recent years and continues to show signs of future change. The introduction of the smart phone has shifted technology away from communication via telephone. New applications allow users to use their phone as a walkie-talkie, way to access social-networks such as Facebook, a way to access email, skype and texting within applications. This changes the way customers approach buying a plan. There is less
Managerial Economics Get the financial data for a company or organization for five years. From the balance sheet and the income statement for the company or organization develop regression line formulae for each line item and predict those line item revenues and costs over the next five years. Don't do prediction for any item in the statement less than 10% of the total sales on the incomes statement or 10% of
Managerial Economics Question Set The demand function for Good X is defined as Qx = 75-2Px - 1.5Py, where Py is the price of Good Y. Calculate the price elasticity of demand using the point formula for Px = 20 and Py = 10. Determine whether demand is elastic, inelastic, or unit elastic with respect to its own price and whether Good Y is a substitute or a complement with respect
Economics Course Economics impacts on many areas of life subsequently it will impact on many areas of professional life. Reflecting on the lessons learned, including the knowledge and skills gained, the real value is in the way that economics concepts can be applied to the real world; not only to explain event that are seen in the macro-environment, but to guide the way personal decisions will be made with that knowledge. The
(Png; Lehman, 2007) As far as supply is concerned, if one were to assume that all the firms within an industry, like for example, in a government holding, are identical, then a market supply curve would be made up of the supply curves of all the supply curves of the individual producers in the country. (Adams; Periton, 2006) the elasticity of demand therefore measures the responsiveness of the demand to
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