Market Analysis Report (2)

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School

Southern New Hampshire University *

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20042

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Economics

Date

Apr 3, 2024

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pdf

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Uploaded by JudgeFire13374

Nia Thompson Purpose: In this report, we will delve into the market structure of the city's restaurant industry and its online presence. By examining key factors such as market concentration, entry barriers, and digital strategies, we aim to provide a comprehensive analysis of this dynamic market. Through this analysis, we seek to uncover valuable insights that can inform strategic decision-making and drive growth in these sectors. Part 1: Restaurants ● Short-Run Analyzing the market data depicted in the graph reveals an average quantity of 500 units sold at a price of $8 each. To determine the profit per unit, subtract the cost of production per unit from the revenue per unit. The graph indicates a revenue per unit of $8 and a total cost per unit of $7, resulting in a profit of $1 per unit. In the Short-Run Equilibrium depicted in the graph, the equilibrium quantity is 500 units, and the price is $2. Calculating the economic profit involves subtracting total costs from total revenue. Thus, $8 (revenue) - $7 (average total cost) = $1 x 500 units = $500 economic profit. ● Economic Downfall As competitors realize the profit, there will be more of them, more substitutes, and a decline in demand, resulting in a long-term equilibrium where no economic profit is made (SNHU A11y Remediated Videos, 2018). ● Long-Run

In the dynamic landscape of competitive markets, the pursuit of profit drives the proliferation of competitors, leading to an influx of substitutes and ultimately settling into a long-term equilibrium devoid of economic profit (SNHU A11y Remediated Videos, 2018). While the entry of new players doesn't alter the average total cost, the growing number of restaurants heightens competition, causing a decline in demand. Consequently, existing firms see their demand curves shift leftward, making them more price-sensitive and reducing their profits. The addition of ten more restaurants further exacerbates the situation, as the cost per unit exceeds the selling price, resulting in economic losses for these ventures. This equilibrium discourages both individual restaurants and the industry as a whole from seeking entry or exit strategies (SNHU A11y Remediated Videos, 2018). Despite the fiercely competitive nature of the restaurant sector, characterized by numerous distinct establishments and easy entry and exit, each restaurant boasts a unique offering, fostering differentiation. Consequently, in monopolistic competition, the prospect of long-term economic profits fades (SNHU A11y Remediated Videos, 2018). ● Strategic Approaches In the realm of imperfect competition, exemplified by the restaurant industry, businesses deploy a range of strategies to thrive amidst competition (Perfect Competition and Why It Matters (Article) | Khan Academy, n.d.). Restaurants distinguish themselves through diverse menus, distinctive ambiance, and memorable customer experiences, aiming to captivate patrons and carve out a unique identity in a bustling market. Strategic pricing initiatives, such as daily specials, happy hour deals, or prix fixe menus, afford restaurants the flexibility to target different customer segments and maximize revenue potential. Moreover, businesses innovate by developing products with unique features or integrating cutting-edge technology to set themselves apart from rivals. By offering something distinctive, establishments attract customers seeking novel or superior functionalities. Furthermore, providing customizable options or personalized experiences allows businesses to cater to individual customer preferences, fostering loyalty and enhancing customer satisfaction. ● What to do - Program Existing restaurants can implement loyalty rewards programs to engage and retain customers. These programs not only cultivate loyalty but also incentivize referrals, thus fostering growth. Whether through digital apps or physical stamp cards, offering discounts on future purchases encourages repeat business while attracting new customers (11.2 Monopolistic Competition: Competition Among Many | Principles Of Microeconomics, n.d.). ● Customer Insight

Understanding the demographics and preferences of the local customer base is crucial for new entrants to tailor their offerings and marketing strategies effectively. By actively soliciting feedback and engaging with patrons, restaurants can create personalized experiences that resonate with customers, fostering loyalty and repeat business. To introduce unfamiliar offerings to customers, restaurants can utilize various marketing tactics and channels. One approach is to leverage social media platforms or email newsletters to showcase new menu items, special promotions, or events to potential customers. Additionally, hosting tasting events or pop-up dinners provides an opportunity for customers to sample unfamiliar dishes in a low-pressure setting, allowing them to explore new culinary experiences. Furthermore, interacting with customers during their dining experience is essential. Restaurants should inquire about the service and food quality, encouraging patrons to share their opinions and feedback. This engagement not only enhances the customer experience but also fosters a sense of belonging and community, strengthening customer loyalty and satisfaction. Part 2: Internet ● Current Market Structure The existing structure of the internet market resembles a monopoly, characterizing it as an imperfect competition. With a monopoly, there is very little competition, so it sets its own prices and is shielded from competitors by barriers to entry and exit. As a result, it is likely to produce less and charge more for what it makes (Khan Academy, 2019a). Due to limited competition, the dominant internet providers wield significant pricing power, enabling them to set higher service prices. Moreover, their bundled service offerings compel consumers to purchase additional services, regardless of necessity, thus further escalating costs and consumer dissatisfaction. This limited competition has led to a reduced quantity of services compared to a more competitive market and there are no close substitutes for the service, making the demand high. There is no significant competition in the city the internet provider can set its own price, in relevance to the customer’s demand. Unlike perfectly competitive firms, which act as price takers, monopolies have some control over the market price (Greenlaw, Shapiro, MacDonald, et al., 2022). In this context, the city's internet companies face substantial barriers to entry, as highlighted in the internet provider overview, indicating the government's push for broadband expansion. Given the limited competition and high entry barriers, the current internet provider lacks motivation to improve quality, increase quantity, or lower prices. Despite suboptimal service, consumers still rely on it as internet access is essential for both business and daily activities. ● Implications

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