Assignment

Team assignment - Knowledge Deficiencies Statement

In the problem statement, we chose an industry and analyzed the effect that would follow once the firm chooses to focus on organic produce. In this paper, we will further work on the problem we still need to address. Earlier we mentioned that our firm could be the monopoly in the market. To delve deeper into this we will discuss a formula given by Bindra (2018), “Improving 7/10 is far better than improving 3/10". He focuses on paying more attention to the area of the organization that is its core and also competent instead of trying to improve the parts that are not that productive. This model could be applied to our firm. Hence, for our firm to really become monopolistic it needs to improve its organic produce section rather than focusing on the other products. This way the organization can establish new strengths.

Additionally, it should be added that various studies have shown that organic produce is more profitable than regular produce. As there is more demand for it the price for organic produce is more. A very important point to note that is related to the economics of organic produce is that organic produce is less dependent on fossil fuels. This makes our firm unique as not being dependent on fossil fuel makes it less vulnerable to financial market fluctuations (West, 2017).

The previously stated problem statement missed some quantitative data that we will discuss now. In 2018, of all the fruits and vegetable sales, organic fruits and vegetables accounted for 15% of that. Compared to 2018, organic food sales rose 5.9% more in 2019. We can use all this data while analyzing the industry and the effects it is going to have. The future of organic produce can also be considered such as by 2020 the global market for organic food market is expected to rise to $375.98 billion (Slabakova, 2020).

A possible scenario could be of monopolistic competition. We briefly touched on this in the problem statement. We will explain it further to cover any points we may have missed. This is an important scenario to consider while discussing monopolies. In monopolistic competition, many different companies produce somewhat similar products but these products are also differentiated from one another. These companies may differ from others by making the quality and marketing unique. Here, innovation and creativeness are essential. Organizations that are a part of the monopolistic competition do end up making economic profits in the short run but the situation looks different in the long run. Marginal cost and marginal revenue can be equal in the long run if the organizations produce at that level. However, this leads to other companies entering the completion. This leads to reduced demand and thus, lower economic profits in the long run. However, monopolistic completion has limitations. The companies that will have a higher quality of products and better branding will always make economic profits (CFI team, 2022).

To truly have our firm turn into a monopoly we must discuss the advantages and disadvantages of a monopoly. Some advantages are that firms can exploit economies of scale and this can lead to lower average costs. Innovations follow monopolies as they must differentiate their products. Monopolies are also known to be very efficient and dynamic. Some disadvantages of monopolies are that they make less effort as they already stand out. Monopolies can be regulated by governments. Additionally, they create less choice for customers and could result in a decline in customer surplus (Pettinger, 2020).

References:

Bindra, V. (2018, March 13). How to Create Monopoly in the Market. Entrepreneur. https://www.entrepreneur.com/article/310287

Corporate Finance Institute. (2022, May 7). Monopolistic Competition. https://corporatefinanceinstitute.com/resources/knowledge/economics/monopolistic-competition-2/

Slabakova, B. W. (2020, June 27). Organic Food Statistics About the 2020 Market (Infographic). HealthCareers. https://healthcareers.co/organic-food-statistics/

Pettinger, T. (2021, September 23). Advantages and disadvantages of monopolies. Economics Help. https://www.economicshelp.org/blog/265/economics/are-monopolies-always-bad/

West, S. (2021, August 15). The Economics of Organic Farming. Nature’s Path. https://www.naturespath.com/en-us/blog/the-economics-of-organic-farming/