business

mobile-phone-subscriptions

Mobile Phone – Product Life Cycle

When did you get your first mobile phone? I got mine in 1999, which it turns out was the year of most rapid growth in mobile phone use. Mobile phones look to have the classic product life cycle of introduction, growth and maturity. Introduction A long slow period of introduction from 1985 to 1997. I remember at this time that a mobile phone was considered to be the preserve of fancy ‘yuppies’ (Young…

sale-discount

Pricing strategies

A look at different pricing strategies a firm may use to try and increase profitability, market share and gain greater brand loyalty. Types of pricing strategies General strategies Profit maximisation. One strategy is to ignore market share and try to work out the price for profit maximisation. In theory, this occurs at a price where MR=MC. In practice, it can be difficult to work this out precisely. Sales maximisation. Aiming to maximise sales whilst making normal profit. This involves selling at…

Effect of the exchange rate on business

Effect of the exchange rate on business

Readers Question: What are the effects of the exchange rate on UK businesses? The exchange rate will play an important role for firms who export goods and import raw materials. Essentially: A depreciation (devaluation) will make exports cheaper and exporting firms will benefit. However, firms importing raw materials will face higher costs of imports. An appreciation makes exports more expensive and reduces the competitiveness of exporting firms. However, at least raw materials (e.g. oil) will be cheaper following an appreciation. Effect of depreciation in the exchange rate If there is a depreciation…

Examples of Price Discrimination

Examples of Price Discrimination

Price discrimination occurs when firms sell the same good to different groups of consumers at different prices. There are often different types of price discrimination offered. Often they are categorised in the following way: 1st-degree price discrimination – charging the maximum price consumers are willing to pay. 2nd-degree price discrimination – charging different prices depending on the quantity consumed. 3rd-degree price discrimination – charging different prices depending on a particular market segment, e.g. age profile, income group, time of use. 4th-degree price discrimination – when prices to consumers are…

business-objectives

Profit v Revenue Objectives for Firms

Readers Question: Is it better to sell more services/products with less profit, than sell less with high profits? What are the pros and cons to the employer, worker, and customer? i.e. high revenue low profit, vs low revenue high profit. Classical economic theory suggests firms will seek to maximise profits. The benefits of maximising profit include: Profit can be used to pay higher wages to owners and workers. (though if firm has monopsony power, the profit may not be shared equally amongst workers) Profit can be used to invest in…

The problem of rejected / misshaped vegetables

The problem of rejected / misshaped vegetables

Supermarkets have strict criteria for the cosmetic appearance of fresh fruit and vegetables. The result of these criteria is that a high percentage (10-40%) of a farmers harvest can be rejected because the vegetables do not meet these standard rules of conformity. This problem of rejected vegetables was highlighted on a recent BBC programme ‘War on Waste‘ The programme highlighted a parsnip farm which was struggling to make a profit. Part of the problem was 40% of harvest was routinely rejected because it didn’t meet cosmetic specifications. I have grown vegetables…

Evaluate methods to avoid product failure?

Evaluate methods to avoid product failure?

Product failure is when a new product is launched but fails to gain sufficient sales and market sales, resulting in a net loss for a firm. To understand product failure, it is good to look at a few examples of product failure. (Top 20 product failure here) Some of these examples, give very simple methods to avoid product failure. Colgate frozen foods – Lesson: Don’t mix brands Colgate is one of the strongest brands of toothpaste. The simple logo is indelibly associated with brushing…

Running empty coach services

Running empty coach services

Readers Question: Why may it still make economic sense for the company to put on a coach for just one or two passengers, rather than turning them away? Recently I again had to travel to London by coach and discovered that it was a good idea to book early in case the coach was full! Was the coach company being more sensible now? If a bus has a capacity of 80 seats. It might need an average of say 30 customers per…