ECO600 Economics And Finance For Business - Market Structure And Competitive Strategies - Growth And Pricing Strategies - Economics Assessment Answer

ECO600 Economics And Finance For Business - Growth And Pricing Strategies - Economics Assessment Answer 

Assessment Task:

Objective

To conduct an analysis of rival businesses in an industry of your choice.

Learning goal

To train you to understand how businesses operate in a dynamic, real-life setting so that you can
(i) analyse competition in the industry, decide whether to enter it and how to compete
(ii) determine whether there is scope for growth and how to create growth
(iii) evaluate pricing and non-pricing strategies used in the industry
(iv) craft creative and realistic strategies for competing, growing and pricing which you can propose to a client, your boss or which you can use for your own firm

Topics

• Market structure and competitive strategies – what is the state of competition in this industry and how do you outcompete rivals?
• Growth strategies – how do I expand my customer base/revenue by enlarging my firm?
• Pricing and non-pricing strategies – how can I use these to give my business an edge over my rivals?

Task

1. Select two nearby businesses in the same industry that are considered competitors. Location: Manly or in the city, preferably in the CBD area. They should be competing directly with each other.

Examples: two leading cafes (for example, Starbucks and Max Brenner), restaurants (Thai or Japanese, poke-bowl shops, Hungry Jacks and McDonalds, Hugos and The Bavarian), organic food shops, big clothing retailers (Uniqlo and H&M), pharmacies.

2. Carry out two types of research: primary research (field research) and secondary research. Use the data to analyse the market and the businesses. Also, using what you’ve learnt, craft strategies for one of the businesses.

Field research is to be carried out in groups: observe and collect information about the pricing of the product or services offered (in menus and/or the price boards) and the non-pricing strategies. Optional: you may also speak to store owners, managers or knowledgeable employees to inquire further about pricing, non-pricing, competitive and growth learn about the state of competition in their industries, how they try to grow their businesses, and how they might compete in terms of pricing and non-pricing strategies, and so on. Your sources of information: reputable newspaper articles accessed via the Internet; books, journal articles or working papers; company, government or industry reports. Avoid blogs whose information might be unreliable.

3. Using the information you gathered, compose a report individually that addresses the questions below. It will involve creative thinking: you will advise one of the two companies on strategies to improve its business with the aim of outcompeting its rival. Any calculations or creative ideas you generate for this report should be entirely your product— not group work.

Questions

1. Market structure and competitive strategies 

(i) What is the market structure in the industry? Perfect competition, monopolistic competition, monopolistic or oligopolistic? Why do you say that? How many competitors? What’s happening in the industry? Anything in the news that’s interesting?
(ii) Who are the other notable competitors? Are there new entrants or anyone new trying to enter this market?
(iii) What are the barriers to entry in this market, in your opinion?
(iv) What market share might each of the many competitors in the location you’ve chosen have? Use your judgement to make a rough estimate (for example, in Manly, Starbucks 50%, Gloria Jeans, 20%, Charlie’s Coffee and Chappati, 1%...). Can you generate a Herfindahl-Hirschman Index with those market shares? What does it tell you?

(v) What competitive strategies are the rivals you are investigating using?
(vi) Business advice component. Select one of the two companies. The advice it on the specific competitive strategies it can use to get a competitive edge in the market. Imagine the company has hired you as its consultant. Be creative, but also be realistic.

2. Growth strategies

(i) Are businesses focusing on their ‘core competencies’? Or are they also branching out to provide other products or services?
(ii) Business advice component. Do you think that the company you chose earlier should expand/grow? Advise it. If yes, why, and in what way: organic growth, horizontal growth, vertical growth, or differentiation? How, specifically? Or if you believe the company should not grow, justify why sufficiently.

3. Pricing and non-pricing strategies 

(i) What pricing and non-pricing strategies are the two businesses using? Summarise in a table/diagram and discuss them below in (ii).

(ii) How are their prices/pricing or non-pricing strategies different (or the same) and why? Why might they be using certain strategies and not others, including when compared with the ones their rival is using?

(iii) Business advice component. If you were advising the same business as before, how would you modify their existing pricing and non-pricing strategies or develop new ones to give the company an edge over its rival? Justify your answer— that is, provide arguments why you decided to do that or balance it with a critical opinion (for example, “this would be a good strategy to implement because... but the drawback could be (or “there are no drawbacks”) because...”)

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