Assignment 2 Operations Decision Due Week 6 And Worth 689837

Assignment 2 Operations Decisiondue Week 6 And Worth 300 Points

Using the regression results and the other computations from Assignment 1, determine the market structure in which this frozen, low-calorie microwavable food company now operates. [In assignment #1, the company estimated a demand curve and used a marginal cost curve as its supply curve. You determined the equilibrium in the market where P =MC [or Qs = Qd]. You calculated the various elasticities using the estimated demand at its current price of 500 cents. While not required, if you look at the own price elasticity at the equilibrium price and quantity solved for in Assignment #1 you will notice a problem for the firm if it thinks it is operating in a competitive market.] Now that you know that the firm faces a downward sloping demand curve and that it has pricing power, you are being asked to rethink how the firm should behave in the market as it actually used its pricing power to determine the profit maximizing price and output in this assignment. Use the Internet to research two (2) leading competitors in the low-calorie microwavable food industry, and take note of their pricing strategies, profitability, and their relationships within this industry (within the USA and worldwide). Use the IBIS Report for the Frozen Food Production Industry (SIC Code 31141) to be provided by your instructor. Write a six (6) pages paper in which you: 1. Outline a plan that will assess the impact of the market structure/cost data based on the activity in the first assignment for the company’s operations. Use a supply curve of the following form to reexamine your conclusions from the first assignment: Qs = -7909.89 +79.0989P [OR MC = 100 + 0.01264Q]. This new supply curve gives you the same equilibrium price and quantity as before, but is based on the firm’s marginal cost curve and its behavior in Assignment #1. Further assume that the estimate of the firm’s AVC = 100 + 0.009Q and that VC/TC =0.71 always [implying that FC/TC = 0.289]. These are the industry average estimates from the IBIS report for this industry. 2. Suppose the business operations have now changed from the market structure analyzed in the activities required for the first assignment due to this new data about costs. Determine two (2) likely factors that might have caused the changed behavior. Predict the primary manner in which this change would likely impact business decisions in the new market environment. 3. Analyze the major short-run and long-run production and cost functions implied by this new cost data for the frozen, low-calorie microwaveable food company. Use the information contained in the IBIS report. Suggest substantive ways in which the frozen, low-calorie food company may use this information in order to make decisions in both the short-run and the long run. 4. Determine the possible circumstances under which the company should discontinue operations. While no specific fixed or total cost data are provided, use the newly provided cost data above and your knowledge from the textbook on the relation of fixed and variable costs to revenue to develop estimates that might suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response. 5. Suggest one (1) pricing policy that will enable your frozen, low-calorie microwavable food company to maximize profits. Provide a rationale for your suggestion that will involve comparison of the first assignments two possible price and quantity pairs with the new optimum presented here in Assignment #2 6. Outline a plan, [based on the original information provided in the first assignment along with the IBIS report industry cost data for the firm], that the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions. 7. Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders in line with the recent history and forecast future behavior for the Frozen Food Production Industry [SIC Code 31141] as outlined in the IBIS report. Outline, in brief, a plan to implement your recommendations. 8. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource. Your assignment must follow these formatting requirements: · Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. · Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

Paper For Above instruction

The examination of market structure and cost data for the frozen, low-calorie microwavable food company reveals critical insights into its current operational status and strategic positioning within the industry. Building upon the regression analysis and demand estimations from Assignment 1, it is evident that the firm operates under an imperfectly competitive market characterized by a downward-sloping demand curve and significant pricing power. This realization necessitates a comprehensive reassessment of strategic behaviors, production decisions, and industry positioning informed by recent cost data, competitive analyses, and industry-wide benchmarks.

Assessing Market Structure and Cost Impact

To analyze the market structure, the firm must develop a nuanced understanding of its demand elasticity and cost behavior. The revised supply curve, Qs = -7909.89 + 79.0989P, aligns with the earlier equilibrium points but is anchored in the firm’s marginal cost curve derived in Assignment 1. Assuming average variable costs (AVC) at 100 + 0.009Q, industry-wide estimates suggest that the firm’s costs are relatively stable, with variable costs constituting approximately 71% of total costs, and fixed costs comprising 28.9%. These cost structures imply a monopolistic or oligopolistic market where the firm has some degree of price-setting power but must consider market elasticity and competitive pressures.

Factors Leading to Cost-Driven Changes in Behavior

Two primary factors are likely responsible for changes in business behavior relative to the initial analysis. First, economies of scale may have been achieved or lost due to shifts in production volume, influencing unit cost reductions or increases. Second, entry or exit of competitors, driven by industry profitability and cost competitiveness, likely alters the strategic landscape. These dynamics can result in strategic shifts such as price adjustments, product differentiation, or innovation efforts. The primary impact on decision-making involves balancing profit maximization with market share preservation, especially in a context where competitors’ pricing strategies significantly influence consumer choice.

Production and Cost Function Analysis

Short-run cost functions highlight the importance of fixed and variable costs in shaping production decisions. Given the industry estimates, the firm’s short-run average total cost (ATC) curve includes fixed costs (FC) and variable costs (VC) which are partly influenced by economies or diseconomies of scale. Long-run cost functions suggest that with sufficient time, the firm can optimize scale and scope to minimize average costs, offering avenues for expansion or diversification. Strategic implications include leveraging economies of scale through capacity expansion or technological improvements and adjusting output levels based on demand elasticity assessments.

Operational Discontinuation Considerations

Discontinuation of operations should be contemplated if revenues fail to cover variable costs over a sustained period, especially when fixed costs are high. Using the cost data, management should develop thresholds for shutdown decisions—specifically, when price falls below AVC or when expected profits are negative after covering variable costs. Rationale indicates that maintaining operations in such circumstances would exacerbate losses and hinder resource allocation efficiency.

Pricing Policy for Profit Maximization

Implementing a targeted price discrimination or markup strategy based on elasticity estimates can optimize profits. For example, setting a price above marginal cost, reflecting the firm’s pricing power, and adjusting output accordingly can improve margins. Comparing initial equilibrium strategies with the optimal profit-maximizing price derived from the current cost structure suggests that the firm should consider marginal revenue management, adjusting prices dynamically to capture consumer surplus without sacrificing demand excessively.

Performance Evaluation and Financial Monitoring

Developing a comprehensive performance evaluation plan involves monitoring key indicators like profit margins, break-even points, and cost control measures. Incorporating industry benchmarks from IBIS reports enables comparative analyses over time and guides strategic reorientations. Regular financial assessments should be coupled with market trend analysis, particularly price elasticity shifts, to enable proactive decision-making, capacity adjustments, and cost management.

Strategies for Enhancing Profitability and Stakeholder Value

Two actionable strategies include innovation in product differentiation—such as introducing new low-calorie flavors or packaging—and expanding distribution channels to access broader markets. Implementation plans entail investments in marketing, R&D, and supply chain optimization. These efforts aim to increase consumer value, strengthen market positioning, and improve overall profitability in an increasingly competitive environment.

Conclusion

In sum, analyzing cost structures, market dynamics, and competitive positioning indicates that the frozen low-calorie food company can enhance profitability by refining pricing strategies, optimizing scale, and innovating product offerings. Strategic decision-making grounded in detailed industry data and cost analysis is essential for navigating the complex landscape increasingly shaped by competitive pressures and consumer health trends.

References

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• IBISWorld. (2023). Frozen Food Production Industry Report (SIC Code 31141). Retrieved from https://www.ibisworld.com
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