Assignment3 ECO Essay example

Submitted By bucketjude
Words: 2043
Pages: 9

Long-Term Investment Decision

ECO 550
Managerial Economics and Globalization

Long-Term Investment Decision Pricing is one element of marketing. Pricing strategies are important for companies who wish to achieve success by finding the price point where sales and profits are maximized. Companies often use a number of pricing strategies for products, such as a cost plus method, or calculate production and advertising costs then add a percentage to their unit costs, which is called full cost pricing. Often firms will use price skimming or penetration pricing strategies to increase revenue. Price skimming typically set prices high versus competitive products. Benefits to price skimming is that it quickly recoups product and advertising costs. Firms using penetration pricing strategies usually price products lower than their competitors. A benefit to this type of pricing strategy is that it quickly increases market share; the firm owner will deliberately price products low to achieve a high business volume. (www.smallbusiness.chron.com). The competitor of the low calorie frozen microwaveable food is proven to be a close substitute in previous assignments determining the market structure of the firm to be an oligopoly. In an oligopoly market structure the number of firms is small that the actions of any one firm are likely to have a noticeable impacts on the performance of the other firms in the industry. (McGuigan, 2014) In other words, if one firm in the low calorie frozen microwaveable industry increased price the competitor will most likely do nothing because they will gain customers automatically but if we cut prices the competitor will also cut prices so no firm will lose profits. A common issue for the firm is how to increase prices without increasing costs to the firm; moving toward a less elastic price. A solution to this dilemma is to invest money into strategies that can increase the demand for the product. (www.smallbusiness.chron.com) Some of these strategies include increasing brand distinction and/or increase perception of quality or improvements in quality. Brand distinction can be changing the look of the packaging; such as color, shape, or size. Increasing quality perception is adjusting the menu or recipe; a change in ingredients to a higher quality ingredient. With a steep demand curve a firm can raise prices and still maximize profits when increasing brand loyalty or increasing the perception of value or quality. However, other factors can shift the demand and require additional fixed costs. Targeting cities with higher per capita income will increase sales as well as increasing advertising expenditures. Advertising elasticity can affect the quantity sold. The more money a firm spends on developing effective advertising the more products consumers will buy. Therefore, increasing demand through advertising can cancel out a decrease in consumer demand due to a price increase. (www.smallbusiness.chron.com) The U.S. government has set many business regulations in place to protect employees' rights, protect the environment and hold corporations accountable for the amount of power they have in this business-driven society. Some of these regulations stand out more significantly than the others because of their relevance to every U.S. employee and consumer. Laws pertaining to minimum wages, benefits, safety and health compliance, work for non-U.S. citizens, working conditions, equal opportunity employment, and privacy regulations--and cover the largest area of subjects of all the business regulations. (www.smallbusiness.chron.com) The Fair Labor Standards Act, applied by the Wage and Hour Division, set the minimum wage for workers in the United States. As of 2010, decisions made by the division affect more than 130 million workers, according to the Department of Labor. The Employee Retirement Income Security Act ensures that employees receive the…