Operations Decision

Question One

In the issues of assessing the low-calorie microwavable foods industry, it is clear that the two main players encompass lean cuisine and healthy choice. The society has additionally noted an increase in the spending capacity of the population as more people fall in the middle as well as the upper classes. The superior spending ability in the society implies that it has become possible for more households to purchase such items as microwaves, leading to the increase in the purchase of the microwavable food. In this assessment, the conveniences these microwavable foods have on their users have further increased their purchase, especially about the emergence of the healthy microwavable food in the market. The division of the microwavable foods industry is based on such attributes as psychographic, profile as well as behavior.

There is the suggestion that profile is not a necessary criterion in the evaluation of the market segments although it can be vital in the assessment of the avenues to define the dissimilarities in the market (Hirschey, 2016). It is thus imperative that there is the assessment of the diverse profile variables as economic status and geographic locations in the establishment of the target audience. The assessment of the behavioral attributes, on the other hand, is assessed depending on the various target customer attributes as loyalty to a brand. Psychographic attributes in the assessment of customer segments encompass the evaluation of issues as informing a population lifestyle such as people’s opinions and lifestyle.

Question Two

In the initial assessment of the market, the evaluation of the market structure has seen the firm operating in a perfectly competitive market. The prevailing attribute, however, is that the firms are operating in an imperfect market encompassing a duopoly environment. Several issues could have been responsible for the prevailing changes to the market structure. Among these issues is the assertion that there could have existed one production factors that have been owned by some firms. The implication is the fact that not many firms are in a position to produce the product. Additionally, there remains the likelihood that many firms could have been in existence from the onset in the perfectly competitive market. The chief impact resulting from this change is the fact that the businesses operating in the current environment could be forced to merge and additionally consolidate into a huge firm that will ensure that there is a reduction in the levels of competition in the market (Fisher & Waschick, 2005). Through this strategy, the number of players in the microwavable food industry will have reduced giving the new entity a better control of the prices.

Question Three

The consideration of the short-term assessment makes clear that in a monopolistic form of competition, the price is normally higher than the marginal cost, implying there is a high likelihood that it will not produce profits in the short durations. The fact that the cost function indicates an increasing quantity produced function leads to the assertion that increasing the quantity produced leads to an increase in the production cost. The emergence of new players in the market has led to an increase in the supply, leading to the fall of the equilibrium. The case of Monopolistic competition is characterized by the free movement of products, implying that there is fluctuation in demand as well as a price for the firms that have been operating for an extended duration. The assessment of the long-run operations of the firm implies that the marginal revenue tends to equal the marginal cost (Keat & Young, 2014). It is thus imperative that the firms ensure their prices are higher than the average total cost. In the short run, the firm needs to ensure that they meet the average variable costs while ensuring that they meet the average total costs are met in the long run to ensure they continue operating.

Question Four

There are issues that can warrant the firm to cease its operations. Among these factors include the fact that it is imperative that the firms cease to operate if the total costs in their operations are seen to be higher than the total revenue. The implication of this state of the affair would be that the firm is making constant losses.  Additionally, it would warrant the firm to stop its operations in the situation that their marginal costs are seen to be more than their marginal revenue. In this case, the cost associated with the production of an additional unit is seen as being higher than the costs associated with the selling of the same additional unit (Keat & Young, 2014). In any case that the marginal revenue is found to be zero or less, it is imperative that the firm ceases to operate basing the decision on the law of diminishing marginal revenue which asserts that the revenue resulting from the sale of an additional unit increases to a point whereby any additional unit of input is not going to increase the quantity produced. The assertion, in this case, is that costs are going to be incurred in the course of producing an additional unit although there is not going to be a change in the revenue resulting to the unproductive production phase.

Question Five

The core policy I would suggest to the form for them to be able to maximize their profits is on the marginal cost pricing. It follows the operations involved in the establishment of a product price are similar to the additional cost involved in the production of the extra unit of output. Through the adoption of this policy, the firm will charge for each of the units they sell, with the addition to the total resulting from materials as well as direct labor. It is imperative that the firm established their prices close to the marginal costs on the occasions they are having poor sales (Blajer-Golebiewska & Kozlowski, 2016). The assertion is that for the firm to remain profitable, it is imperative that they ensure that their prices are higher than the average total costs of the highest level of output. The prices established by the company should be enough to cater for the average cost in the short run and at the same time cover the average total costs in the long run.

Overall Revenue: TR= 21,000Q- 0.10Q2

Marginal Revenue: MR =21,100-0.20Q

From this assessment, it is evident that the demand for the low-calorie frozen foods exhibits an inelastic trend, implying that any increase in the price will result in the consequent fall in quantity demanded.

In order to realize the maximize profit MR will be equal to MC

21, 100 -0.20Q = 115.56 + 0.02222Q21

21215.56 = 0.22222Q

Q=95470.97

P=21,100 – 0.10Q

Thus P= 11552.90

Question Six

The fact that the firm is operating in an oligopoly market environment makes it imperative that they adopt the concept of price leadership in their operations. The assertion, in this case, is that it is imperative that the firms are in a position to place itself as a dominant player in the industry by ensuring that they are controlling the prices being established in the market.  It is additionally imperative that the firm puts it as a dominant player especially when it comes to the establishment of prices in the industry whereby it should dictate the prices and let other follows their lead (Keat & Young, 2014). It thus implies that the firm will be able to control the setting of prices in the market, ensuring that they always work to their benefit. The implication of this attribute is that the competitors will not be in a position to maximize their profits unless they are abiding by the prices established by this firm.

Question Seven

There are several recommendations that can be adopted by the firm in their attempt to improve their profitability and the consequent stakeholder value. It follows that the products being sold by the players in this market are greatly homogenous which implies that there is a challenge presented by the resulting competition especially among the buyers, with the prevailing issue being a similar price for all the sellers. It through this attribute that I recommend the firm ensures they can maximize their output (Keat & Young, 2014). Changes in the output of the sellers have a significant impact on the prices of the goods that have been produced. It follows that other players in the industry will be inclined to change their prices in the mode that matches the output, with the higher output implying that the firm will be able to increase their revenues and consequent profits.

Further, making innovation the cornerstone of their products will be vital to increasing their revenues and profitability as it ensures they can stay ahead of their competitors (Png, 2013). By undertaking constant consumer research, the firm will manage always to be ahead of the competition as they will ensure they meet their tastes as well as preferences.

References

Blajer-Golebiewska, A., & Kozlowski, A. (2016). Financial determinants of corporate reputation: A short-term approach. Managerial Economics, 17(2), 179-201.

Fisher, T., & Waschick, R. (2005). Managerial Economics: A Game Theoretic Approach. London : Routledge.

Hirschey, M. (2016). Managerial economics. Cengage Learning..

Keat, P. G., & Young, P. K. (2014). Managerial economics: economic tools for today's decision makers. Macmillan; Maxwell Macmillan Canada; Maxwell Macmillan International.

Png, I. (2013). Managerial economics. Routledge.

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