business

Product life-cycle

Product life-cycle

Definition: The product life-cycle (PLC) refers to the different stages a product goes through from introduction to withdrawal. The product life-cycle refers to a likely pathway a product may take. It has implications for the marketing strategy of a firm as it seeks to introduce, grow and maintain market share. In this case, the product has four stages: Introduction – when the product is introduced and struggles to gain brand recognition Growth – advertising and word of mouth helps the product to increase sales….

importance-of-profit

The Role of Profit in an Economy

Profit is the surplus revenue after a firm has paid all its costs. Profit can be seen as the monetary reward to shareholders and owners of a business. In a capitalist economy, profit plays an important role in creating incentives for business and entrepreneurs. For an incumbent firm, the reward of higher profit will encourage them to try and cut costs and develop new products. If an industry is profitable, it will encourage new firms to enter. If a firm becomes unprofitable, it will either have to adapt and…

Benefits and costs of Sainsbury – Asda meger

Benefits and costs of Sainsbury – Asda meger

Sainsburys and Asda have announced a plan for a merger. They argue it will lead to lower prices for customers, no job losses and is necessary to deal with the threat of new discounters like Lidl and Aldi and the impending arrival of Amazon. Others are more cautious arguing that the new firm will have 31% of market share – effectively creating a powerful duopoly with Tesco that has around 30% of market share. In 2003, the Competition authorities in the UK blocked the takeover of Safeway by Asda and Sainsbury’s…

Problem of declining industries

Problem of declining industries

Economies are constantly evolving. Industries which once employed thousands of people can later become uncompetitive and unprofitable. The UK has seen the rise and fall of many manufacturing industries. Industries such as cotton, wool, coal and ship-building were once key aspects of the UK economy, employing thousands of people in dense areas, but over time they lost their former dominance and now are just shadows of their former selves. 20 years ago, the record industry was very profitable, but in a short space of time, people stopped buying…

Student discounts – charity or good business?

Student discounts – charity or good business?

Companies often offer student discounts – from 10% to 50% off. What is the logic behind this student discount – is it compassionate pricing for hard-up students or is there good economic logic to increase profits for firms? Charging different prices to different groups of consumers is known as price discrimination. The idea is that if different segments of the market have different price elasticities of demand, then the profit maximising price will be different for the alternative groups. Students typically will be more sensitive to prices. This is because…

What happens in a recession?

What happens in a recession?

A recession is a period of negative economic growth. In a recession, we see falling real GDP, falling average incomes and rising unemployment. This graph shows US economic growth 2001-2016. The period 2008-09 shows the deep recession, where real GDP fell sharply. Other things we are likely to see in a recession 1. Unemployment The rise in unemployment 2008-09 mirrors the fall in real…

Are Android and iPhone close substitutes?

Are Android and iPhone close substitutes?

Substitute goods are two goods which can be used for a similar purpose – they provide different alternatives to consumers. In the case of Android and the iPhone, they offer similar functionality and form, but to some consumers there is a big differential in terms of brand loyalty, meaning for certain types of consumers they are very weak substitutes. First-time consumer Suppose your grandmother has never had a smartphone, and you persuade her to buy one. To your grandmother, the two phones will…

Should we tax robots?

Should we tax robots?

Automation and AI have been called the fourth industrial revolution. Robots replacing the jobs of human labour will increase efficiency and enables higher economic growth But, others are concerned that rapid automation can create unequal outcomes, with some losing their job and struggling to gain new forms of employment. A robot tax would, in theory, make the winners from automation pay towards compensating the ‘losers’ of automation. However, critics of a robot tax argue that it will stifle innovation and encourage…