MANAGERIAL ECONOMICS

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Signature Assignment 1

Signature Assignment

Week 9

Bruna Martins

Southern States University

BU 506 – Managerial Economics

My business is centered on supply and delivery of fruits and the vegetables that are seen to be ugly from their physical outlook and the producers are isolating them from the best ones and in most cases, they go at waste, but they are nutrients just like the other ones which are taken to the store. One of the core factors that motivated me to settle for supply and delivery of fruits and vegetables was based on prevention of wastage. Most fruit and vegetable farmers have often thrown away groceries that do not have pleasing outlook. Only fresh and high quality fruits and vegetables have often been supplied to potential consumers. My business will have high consumer projection based on the fact that the products will be supplied at low prices. The low price tag on the grocery products will be beneficial to the low income households. Equally, I also intend to integrate door to door delivery as an after sales service. The door to door delivery will save customers the extra cost of transportation towards acquiring the groceries. Customers will opt to buy the “ugly” fruits and vegetables since they have the same nutrient content to the fresh ones.

Price discrimination is one of the common strategies of segmenting customers (Czerny & Zhang, 2015). Price discrimination is a selling strategy that is based on selling products at different prices adopted by other suppliers of the similar product. Price discrimination is majorly dictated by what the seller thinks can persuade the consumers to purchase the goods (Bergemann, Brooks & Morris, 2015). On my business of imperfect fruits and vegetables to involve price discrimination, it would be imperative. The price discrimination strategy that I would adopt for my business in selling the grocery products is the third degree price discrimination. Third degree price discrimination occurs when the seller sells products and services at different prices based on the demographic nature of the consumers.

It is evident on my business of imperfect fruits and vegetables will be supplied to consumers that have different demographics. There will be the need to understand the financial levels of the customers and adopt a unique pricing strategy of achieving high sales. I will ensure that low income families are supplied with the products at extremely low prices. Since the supply strategy will be based on door to door delivery. Interaction with the customers will give me a chance to determine household financial level. Supplying the products at low prices to low level households will be instrumental in creating a wide customer base.

Equally, price tags on institutions will be a little higher. Schools, hospitals and other institution will be supplied at prices that are slightly high. The option is centered on the view that such institutions do not have financial challenges as opposed to individuals. On the other hand, I also intend to supply the imperfect, or “ugly” fruits and vegetables to students in various institutions. The student pricing will be low to ensure that I create a wide customer segment. Students in institution of higher learning depend on the upkeep from their parents and guardians hence a lower price strategy will best suit them.

Economic order quantity (EOQ) refers to the best order amount an organization need to procure to reduce the cost of account related to storage, holding, and order costs assuming that the demand remain constant during the year. Economic Order Quantity is calculated by:

Q = where

Where:

TC = annual total cost of inventory

P = Purchase price per unit

Q = Economic order quantity

D = Annual demand,

K = Ordering Cost

h = carrying cost per unit per annum

Given: TC=PD +K+hQ

Let P be $ 50, D=5500, K = 200 and h =$ 15

The Economic Order Quantity (Q) will be:

Q= Square root (2*5500*200/15)

Q= 382.97 units

The total cost will be:

TC=PD+K+HQ but Total K= D*K/Q, h= Q*H/2

Therefore: P×D + K (D/EOQ) + h (EOQ)/2:

TC= (50*5500) + (200*5500/382.97) + (15*382.97)/2

TC=$ 280,744.28

From the above calculation, the quantity of fruits and vegetables to be ordered in order to keep the related costs minimum is 382.97 units. At this level, the total cost will be $280,744.28

Being engaged in joint venture is one of the crucial steps that would ensure that grocery business is expanded. A joint venture with a foreign firm is more advantageous as it expands the supply chain management of the business in the global dimension. Based on the contract of the joint venture, buying the project in three years will be instrumental in realizing more marginalized sales to the business. Contrary to the benefits that come with activities related to joint venture, the fact that the foreign partner firm has history of bribery is an issue that should worry me most. I will have to be concerned about the bribery allegation of the partner firm since my business may be greatly affected.

The joint venture with the foreign firm is supposed to be executed in the Canadian market. Similar to the United States, Canada is one of the North American countries that have stringent policies on the code of conduct of employees (Epstein, 2018). Bribery in itself is a form of corruption. The fact that the foreign partner company is bribing government official to have economic advantage over other firms is an economic crime. There is the need to be concerned about the bribery allegation and possible withdrawal from the joint venture based on the fact that the reputation of my business will be greatly affected.

Canada has unique business code of ethics that are centered on accountability. Firms that are engaged in unethical practices are often deregistered or slapped with heavy fines (Epstein, 2018). It is therefore imperative that being confortable to be involved in a joint venture with the foreign firm is a decision that may compromise the dignity of my business. Based on the nature of my business, my workforces will majorly be engaged in carrying out door to door delivery of the low quality products. However, consumers may form negative opinions even as they get the information that my business is engaged in joint venture with a foreign firm with questionable practices.

False advertising is one of the common unethical practices in the United States. False advertising refers to the use of misleading and false information in promoting a product. False advertising is a challenge as it may pose negative implications to the consumers. Consumers may be misled to consume products that are harmful. In the United States, false adverting pose adverse implications on a business venture. False advertising may make business lose their customers (Shepard, 2014). Immediately the consumers realize that they are being fed by information that is false, they will likely retaliate by boycotting the products that are being produced by the organization in the false advertising scandal. False advertising may also contribute to financial loses to the business involved. Financial loses can majorly be experienced when the firm is slapped with big fines. The agencies that are tasked with the responsibility of providing oversight of false advertising in the United States include Federal Trade Commission (FTC), and the independent agency of the U.S. federal government.

I will avoid false advertising for my grocery business by ensuring that the information that is relayed to the public is authentic. Equally, I will give room to the oversight agencies to carry out regular inspection to ensure that false advertising is effectively tamed in my business. I will strive to offer training sessions within my organization to ensure that employees are sensitized on the need to prevent chances of false advertising even as they undertake activities that are concerned with the supply chain management of the grocery business. False advertising may contribute to economic implication on my business. Loss of trust from the consumers may contribute to financial implication as the consumers opt to be engaged with other businesses (Danciu, 2014). There is a probability that my organization may receive a ceases and desist order from the federal trade commission which will result to further financial implications.

I would be interested in protecting my business from being copied by others to ensure that I keep off unnecessary competition in the market. New entrants who have copied operational definitions to my business may pose a great challenge to the supply chain management of my business. There is a probability that customers may disregard my grocery products as they opt to purchase products that are being supplied by other firms that have copied my business. Protecting my business from being copied by other businesses is essential in creating strong relationship with my customers. According to Gurajala et al., (2014), customers are often manipulated by better services that are provided by an organization. It is hence imperative that I would lose customers as they start consuming products from the business that have copied my business.

I would also be interested in protecting my business from being copied to make my product brand be unique in the local and the global market. Brand protection is often instrumental in creating a good customer base that last for a very long period of time. I would want to patent my business ideas instead of opting for trade secret. Patent ideas are centered on intellectual properties that give owners legal right that excludes others from making, using and selling an invention (Ahmadpoor & Jones, 2017). I would choose patent instead of keeping trade secrets. Patent is more effective since any competitor who contravenes it may be subjected to legal law suits. Keeping secrets may not be an effective way of protecting the firm’s information.

References

Ahmadpoor, M., & Jones, B. F. (2017). The dual frontier: Patented inventions and prior scientific advance. Science, 357(6351), 583-587.

Bergemann, D., Brooks, B., & Morris, S. (2015). The limits of price discrimination. American Economic Review, 105(3), 921-57.

Czerny, A. I., & Zhang, A. (2015). Third‐degree price discrimination in the presence of congestion externality. Canadian Journal of Economics/Revue canadienne d'économique, 48(4), 1430-1455.

Danciu, V. (2014). Manipulative marketing: persuasion and manipulation of the consumer through advertising. Theoretical and Applied Economics, 21(2), 591.

Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.

Gurajala, R. B., Lott, R. W., Huber, K. D., Flynn, J. J., Mansfield, W. G., Seymour, J. T., ... & Davis, J. P. (2014). U.S. Patent No. 8,743,776. Washington, DC: U.S. Patent and Trademark Office.

Shepard, C. Q. (2014). Natural Food Labeling: False Advertising and the First Amendment. Marq. Benefits & Soc. Welfare L. Rev., 16, 173.