Business Proposal Example
If Tiresome decided to bring in a product that would cause curly and/or frizzy hair to dry straight, the company would have to consider the market structure, elasticity of the product, he pricing in relation to elasticity, pricing decisions and nonpaying strategies, and fixed and variable costs. Market Structure Tiresome Is part of a monopolistic competition market structure. A monopolistic competition market structure Is “… Characterized by a relatively large number of sellers producing differentiated products… ” (McConnell, Bruce, & Flynn, 2009, p. 77). There Is a large number of hair care Industries selling shampoo, conditioner, hair styling products, and products that renew hair’s health. However, if Tiresome decided to introduce a new product that would cause curly or frizzy hair to dry trait, it would be a new product in the industry. There are several products that are used to help protect hair when straightening it or to help it become straight quicker each time you use it. However, there is no product that can be sprayed on hair to cause the hair to dry straight with no extra products needed.
Elasticity of Demand and Pricing “The responsiveness (or sensitivity) of consumers to a price change is measured by a
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Individuals who consider a product that straightens their hair a necessity may not pay a lot of attention to the price of the product if it changes, but an individual that may not consider a product that straightens their hair a necessity will pay more attention to the prices. If Tiresome introduced a new straightening product it would e elastic because there are several companies that sell hair care products and consumers could choose a deferent company if the price was too high. Marginal Cost and Marginal Revenue Marginal cost Is “… He added cost of producing one more unit of output” (McConnell, Bruce, & Flynn, 2009, p. 51). In the case of Trireme’s new product for straightening hair, It may be best to start with a lower number of unit output. This Is because It Is a new product and it is unknown how the consumers are going to react to the product. Product not to sell well and then money will be wasted as a result. Marginal revenue is the change in total revenue (or the extra revenue) that results from selling one more unit of output” (McConnell, Bruce, & Flynn, 2009, p. 178). The marginal revenue is going to be based on the marginal cost.
However, as stated before, if Tiresome starts with a smaller marginal cost because the product is new that is also going to lead to a smaller marginal revenue. It may be important to start by introducing the product to see how consumers are going to react before mass producing the product. The best way to maximize pricing for Tiresome is to increase revenue while decreasing cost. In order to increase cost the quantity of sales will need to be increased, up sell products to existing customers, sell more diverse products, and revise price in order to produce a balance between price and cost.
In order to decrease cost overhead needs to be analyzed, buy in bulk and negotiate for cheaper prices, make manufacturing more efficient, and buy equipment instead of leasing. Outsourcing is another great way to cut costs (Philips, 2014). Nonpaying Strategies Nonpaying strategies are strategies that can be used to increase barriers to entry. Barriers to entry are “The factors that prohibit firms from entering an industry… ” (McConnell, Bruce, & Flynn, 2009, p. 202).
The best way to identify market barriers to entrants is to review the company’s history at start up and then identify which barriers presented themselves to the business as it grew. Then figure out which barriers are still in place now for new entrants. Tiresome could purchase a patent for its new product making it more difficult for other industries to enter the market. Next, the company should check its business plan. “Barriers to entry can exist in supplies (including qualified workers), financing, pricing, lack of profitability, legal constraints, size, brand strength, and customer loyalty’ (Marking, 2014, Para 2).
After looking at the business plan, the company can look at the marketing strategy to see where barriers to market entrants can be increased. Then competitors’ strengths and weaknesses need to be evaluated. By taking these steps, Tiresome can take the barriers that they were faced with and add additional barriers that were found in the marketing strategies and business plan to make it more difficult for others to enter he market (Marking, 2014). Additional nonpaying strategies that businesses can use include warranties for products, advertising, and enhancing service qualities.
Nonpaying strategies appear to be most important in oligopolies business, however, are also important in a monopolistic competitive business. Tiresome can have extended warranties on products such as blow dryers and hair straightens. Tiresome uses advertising such as commercials and magazine ad’s to promote their products. Fixed and Variable Costs Fixed costs are costs that are always there regardless of how much the company ells. Fixed costs include salaries, rent, and other business related expenses. Variable costs are those that rise when sales increase and decrease when sales decrease.
Variable costs include extra labor costs, raw material costs, and transportation costs. “When you set a price, it must be higher than the variable cost of producing your product or service. Each sale will then make a contribution towards covering your fixed costs – and making profits” (Price your product, 2014, Para 11). When Tiresome not be enough to cover the fixed and variable costs. Trireme’s new product has to e introduced at a price that is not too high or too low. Tiresome has to decide on what price will be perfect for the product.
Economic Conditions, Macroeconomic Indicators, and Business Cycle As of November 2013 it could be seen that the economy was continuing to expand at a modest to moderate pace. Manufacturing activity has continued to grow and several manufactures have expressed optimism about growth prospects. Tiresome products are considered retail items, and reports from November 2013 show that retail spending is positive. Employment in Dallas, Philadelphia, SST. Louis, Richmond, and Minneapolis showed a modest increase, but the other districts remained unchanged. Price inflation is contained, with phrases such as “minimal,” “no change,” and “stable” being common across most Districts” (Federal Reserve District, 2013, p. 11). The top 10 macroeconomic indicators are: real GAP, MM, ICP, PI, consumer confidence survey, current employment statistics, retail trade sales and food service sales, housing starts, manufacturing and trade inventories and sales, and the S 500 (The top, 2014). According to the most cent statistics it appears that the macroeconomic indicators are being affected positively.
The economy appears to be in the expansion stage of the business cycle. The expansion state is “… A period in which real GAP, income, and employment rise” (McConnell, Bruce, & Flynn, 2009, p. 521). Employment appears to be doing well in half of the districts. Tiresome is a retail product and retail productivity is showing positive improvements. Current Credit Market “During the current credit crisis, borrowing under lines of credit has been an important source of corporate liquidity, according to company regulatory lings” dames, 2009, Para 1).
Many business have concerns about capital market conditions which has caused several businesses to draw on credit lines. As of 2009, 77. 6% of loans were made with approximately the same percentage rate as before the credit crisis began. It does not appear that the current credit market will have an impact on Tiresome. The percentage rate of the loans are still about the same as they were before the crisis began so Tiresome will not pay back a larger amount due to the credit crisis dames, 2009). Conclusion Existing industries bring new products into the market every day.