Industry Analysis

Economics for Managers

Assignment: Company Industry Analysis

Learning Objectives There are many potential learning objectives that depend upon which path is taken in the analysis. These include the following objectives.

• Describe the economic factors that influence the decisions made by firms in a specific market. • Predict and/or explain the factors influencing market prices and quantities. • Describe the type of market structure. • Describe the closeness of substitutes. • Examine the impact of government regulation on the market.

Due Date Please submit your assignment through the assignment drop box located in the Table of Contents -> Learning Modules -> Week 7 area of D2L by Sunday, April 25th at 11:59pm (AZ time).

Assignment Overview Critical Analysis of Market for Good or Service (60 points) Consider the company where you work or a company that you know well. Pick a key product or service provided by that company and analyze the market for that product or service using the tools we have been developing in the economics course. The text of the analysis should be around 900-1000 words. You can also include up to two exhibits (Figures or Tables) but do not include them unless you write about them in the text of the analysis. Write the analysis for me and the people in the class who know the economic concepts that we have been discussing. So don’t spend time defining the concepts. Show that you know the concepts by how you use them. Teach me something about the issue that I cannot easily find out.

When you make a statement about how the market works, support the statement with actual data, quotes, or narratives that you cite. For example, “The rise in price and quantity sold for Dell computers has been driven by increases in income. Between 2001 and 2004 surveys have shown that average per capita incomes in the U.S. rose by 6 percent, while the quantity of Dell computers sold has risen 4 percent” (Smith, 2007, 5). [Then have a reference list that includes Smith, Adam. “P&G Market analysis.” Fortune. August 5, 2007.]

There are many issues that you might address, pick one or two and go into depth about those issues. You are teaching me and your colleagues about this company, so the quality of what you tell us and your use of the economic concepts will determine your score. I should be getting the third or fourth draft not the first draft of what you write.

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How would you define the market for this product (or service); who are the leading competitors producing reasonably close substitutes for this product? How much market power does your firm have in this market? What are the sources of the market power if present or why does the firm have little market power? For example, are there some types of barriers to new entry or to imitation that allow your firm to earn higher than average profits? Are the competitors producing exactly the same product or are they finding ways to differentiate their products from each other? Describe the nature of the way they compete in depth.

What are the 2 most important factors that influence the market demand for this product and how have they changed over the past few years? You might see if there are elasticities estimated already for these products. If not, make reasoned arguments as to the rough size of the elasticities. Collect some data on price and quantity changes and factors that might have caused shifts in supply and demand and perform your own estimation. Or take the data and talk about the dominant shifts of supply and demand and document these changes with the data. Don’t waste space drawing generic supply and demand graphs with shifts. You can describe the shifts more effectively in words. Don’t just tell us a factor shifts the demand or supply. Tell us how much it shifts.

What is your company’s cost structure for the product or service and how does it compare with other firms? For example, how important are fixed and variable costs? What are the components of fixed and variable costs? Are there economies of scale in the long run? Do you have cost advantage over your competitors? What is the source of the advantage? Try to get ideas of the numbers involved. Lay out a spreadsheet that shows the cost structure for a specific product. Put real numbers in where you can and fill out the rest of the spreadsheet with educated guesses. Explain and defend your estimates, or give a range of possible outcomes based on different scenarios.

What are the specific costs and benefits of a key decision that your company is making in this market or industry? Perform a cost-benefit analysis of the benefits and costs from your project. If you are recommending a specific course of action, use a spreadsheet and walk us through the costs of the course of action and the anticipated benefits. Explain whether your recommended course of action is consistent with your company’s current strategy or will require a change in strategy. Try to quantify costs and benefits with real numbers and educated guesses. How profitable will this course of action be? Explain and defend your estimates, or give a range of possible outcomes based on different scenarios.

Is your firm able to price discriminate? Be careful to sort out price differences that arise due to differences in costs of providing the service or item as compared with price differences that arise from attempts to extract consumer surplus. If the firm can price discriminate, how do they meet the conditions needed to do so? Are there ways that you could find to increase your company’s ability to price discriminate? What are the opportunities for collaboration/cooperation with other firms? Do you rely on other firms to manufacture key components of your product or to distribute the product through certain channels? Do you (or, could you) collaborate with other firms on a technology standard for your product?

Does government policy influence the markets? If so, how. Think in terms of tariffs, regulations, licenses, minimum wages, sales taxes, environmental issues, and other policies. Be specific about the nature of the government activity. For example, if it is a regulation, describe the precise features of the regulation and how they specifically affect your business or market. Give us data or estimates of how much impact the regulation has on prices, costs, employment etc. If you can find well done studies that give estimates that will be great. Make sure to cite them if you use them.

I am going to repeat the key points here. Don’t try to answer all of these questions. Pick one or two topics and go into depth. Provide supporting evidence that you can find that will make me believe that you are right.

A sample paper is available in the Table of Contents -> Company Industry Analysis area of D2L.

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Evaluation Criteria and Grading Rubric The assignment is worth 60 points toward your homework assignment grades. An A paper (57-60) points is well organized, well-written goes into depth on one or two topics, provides good information that backs up your statements and analysis, and performs a correct economic analysis in a way that shows your understand the concepts. A B paper (54-56) has weaknesses in one or two of these dimensions. A C paper (51-53) has weaknesses in three to four categories or is very weak in one or two of these dimensions. As the paper gets weaker across the dimensions that grade can fall further.

Criteria

A-level qualities

B-level qualities

C-level qualities

E-level qualities

Score

Points (57-60) (54-56) (51-53) (Below 50)

Depth

14.25-15 pts. Goes into

depth on one or two topics. Teaches us something new by

providing information in support of

arguments that requires strong

knowledge of the industry or market.

13.5-14 pts. Addresses the

issues and provides useful

information about the topic that

shows that the person has

collected good information on the

topic that ties in with their

statements.

12.75-13.25 pts. Provides some depth on the

issue and decent information but the information is easily found

with a quick search.

0-12.5 pts. Incomplete in most respects; does not show

much knowledge of the market studied. Just

skims the surface of the issues.

Understanding of Economic concepts

14.25-15 pts. Demonstrates full

understanding of the Economic concepts

involved.

13.5-14 pts. Makes one or two minor mistakes in

using the economics involved.

12.75-13.25 pts. Makes one significant

mistake in using the economic

concepts or makes several

minor mistakes.

0-12.5 pts. Demonstrates an

inadequate understanding of the topic(s) and

issue(s).

Research

14.25-15 pts. Incorporates into

analysis relevant and extensive research

into the present situation of the

company; clearly and thoroughly

documents all sources of

information.

13.5-14 pts. Incorporates into analysis relevant research into the present situation of the company;

documents all sources of

information.

12.75-13.25 pts. Incorporates into analysis

limited research into the present situation of the

company; provides limited documentation

of sources consulted.

0-12.5 pts. Incomplete

research and documentation.

Writing mechanics

14.25-15 pts. Writing demonstrates a sophisticated clarity,

conciseness, and correctness; includes thorough details and

relevant data and information;

extremely well- organized.

13.5-14 pts. Writing is

accomplished in terms of clarity and

conciseness and contains only a few

errors; includes sufficient details

and relevant data and information; well- organized.

12.75-13.25 pts. Writing lacks

clarity or conciseness and

contains numerous errors; gives insufficient

detail and relevant data and

information; lacks

organization.

0-12.5 pts. Writing is

unfocused, rambling, or

contains serious errors; lacks detail and relevant data and information; poorly organized.

Total Score

Assignment Rules These are individual homework problems. You are allowed to work together with other members in your class, however, you must write up the homework analysis separately and in your own words. On the first page of the write-up you should mention with whom you worked on the homework assignment. When working on this assignment, focus on the tools that you have learned in this course. If you use a source, make sure that you provide the proper citations to your use of the ideas. If you quote something, make sure you have the proper citation.

Assignment Submission Instructions Save your assignment as a WORD (.doc or .docx) file. When your file is ready, please consider verifying the Turnitin similarity percentage following the instructions at https://help.d2l.arizona.edu/content/students-assignments-turnitincheck-your-work so you can make any adjustments before submitting your work. Include your name in the title of the electronic file for identification purposes, for example "SmytheMaryCompanyIndustryAnalysis" and do NOT use any spaces, punctuation, or special characters in the file name.

When your file is ready, submit it for grading to the appropriate assignment drop box as indicated below.

• Navigate to the Table of Contents -> Learning Modules -> Week 7 area of D2L. • Click on the Company Industry Analysis assignment drop box title. • Click on the Add a File button. • Find the file you would like to upload. If you are using the most current version of your internet browser,

you can drag and drop the file into the target area of the Add a File window. You can also use the Upload button to browse for and select the file you would like to add.

• Once you have selected your file(s), click the Add button in the bottom, left corner of the window. • Click on the Submit button to complete the file submission. • Upon successful assignment submission, you will receive a confirmation email.

For further details on submitting assignments, please refer to the http://www.help.d2l.arizona.edu/content/students-assignmentssubmit web site.

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Please note: If you make a mistake (such as leaving out part of the assignment, send the wrong files, etc.) and the Assignment tool won’t let you submit, then you must contact the instructor and describe what happened.

Assignment Feedback

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