Demand Estimation For Low-Calorie Microwavable Food Processi

Demand Estimation Low-Calorie Microwavable Food Processing Company

This company is involved in making low-calorie microwavable food. The company wants to ensure they maintain a continuous good performance in the market. Therefore, it is essential to estimate its demand, elasticity, and project future performance. The following is a demand equation for the product and a table of its performance in 26 supermarkets nationwide. Demand equation: p=0.5q+70

Table 1: Demand, Price and Elasticity in the 26 Supermarkets, assume initial price and demand was 130 and 30 respectively. The figures above depict the dominance of inelastic demand. They give an impression of small change in demand in spite of an observable change in price. Calculations were done according to the formula provided above. I would recommend that this firm should not cut the price to increase its market shares as according to the elasticities figures, there is relatively a small change in demand as a result of change in price (Barber, 2010).

Assume that the price changes are 100, 200, 300, 400, 500, 600 dollars. Supply function Q = 5200 + 45P with the same prices. The demand and supply curves intersect at an equilibrium point where the equilibrium quantity is 560 units, and equilibrium price is 350 dollars. Factors affecting supply and demand include price changes, population growth, consumer tastes, substitutes, economic conditions such as recession, technology, and cultural shifts (Starr, 2011; Palmer & Ontario, 2006).

Short-term market fluctuations are often seasonal and driven by temporary changes in consumer preferences or supply chain disruptions. Long-term trends involve technological innovations, cultural shifts, and economic cycles that fundamentally alter demand and supply dynamics. For example, technological advancements may replace traditional low-calorie microwave foods with newer solutions, decreasing demand. Conversely, rising incomes or increased health consciousness tend to shift demand and supply curves rightward. Understanding these factors allows the company to adapt strategies effectively (Palmer & Ontario, 2006; Starr, 2011).

Paper For Above instruction

The market structure within which the low-calorie microwavable food company operates significantly influences its strategic decisions, pricing, production, and competitive dynamics. Based on the demand estimation and industry analysis, it can be inferred that the company operates within an oligopolistic market—characterized by few large competitors, high entry barriers, product differentiation, and strategic interdependence.

To evaluate the effectiveness of this market structure, a comprehensive plan involves analyzing market concentration ratios, barriers to entry, firm conduct, and consumer behavior. Market concentration ratios, such as the Herfindahl-Hirschman Index (HHI), assess industry competitiveness. A high HHI indicates oligopoly, where a few firms dominate. Additionally, analyzing the pricing strategies of competitors such as Amy's Kitchen and Lean Cuisine reveals acceptance of price leadership and non-price competition tactics, implying oligopoly characteristics (Khew, 2018).

The first factor likely to alter the current market structure is technological innovation. If a new technology reduces production costs or introduces a superior product, it could lead to increased competition and shift the market toward monopolistic competition or even perfect competition over time. The second factor is policy or regulatory changes, such as health regulations or tariffs, which could either entrench existing firms or facilitate new entrants, thereby altering market dynamics.

The shift towards increased health consciousness and consumer preferences for organic and natural foods is also a significant driver reshaping the industry landscape. Such shifts necessitate innovation in product offerings and marketing approaches, impacting cost structures and competitive strategies (Khew, 2018).

Analyzing the major short-run and long-run production and cost functions provides insights into optimal decision-making. In the short run, fixed costs and marginal costs influence output and pricing. The company should maximize profits where marginal cost equals marginal revenue, considering inelastic demand suggests that raising prices could increase total revenue without significantly reducing demand. In the long run, economies of scale and technological improvements can lower average costs, making more aggressive expansion feasible. Strategic resource allocation, capacity planning, and R&D investments are critical to leverage long-term cost advantages (Varian, 2014).

Discontinuation of operations might be considered under circumstances where persistent losses occur despite strategic adjustments, technological obsolescence, or drastic shifts in consumer preferences. In such cases, management should evaluate alternatives such as product diversification, exit strategies, or restructuring operations. Key actions include assessing financial health, exploring new markets, and investing in innovation to adapt to changing conditions (Porter, 2008).

A pricing policy to maximize profits should incorporate value-based and dynamic pricing strategies. For instance, implementing tiered pricing that reflects consumer segments' willingness to pay can enhance profitability. Additionally, price discrimination—charging different prices based on location or customer type—can capture consumer surplus more effectively, provided market conditions allow (Nagle & Müller, 2017).

Financial performance evaluation involves tracking metrics like profit margins, return on investment, market share, and cost efficiency. Employing dashboards and balanced scorecards helps managers monitor short-term profitability and long-term sustainability. Regular financial analysis guides strategic decisions such as pricing, investment, and cost reduction initiatives (Kaplan & Norton, 1992).

To improve profitability and stakeholder value, the company should focus on innovation and marketing. First, investing in R&D to develop new healthier product variants can meet evolving consumer preferences. Second, expanding distribution channels, including online platforms and international markets, can increase reach and sales volume. Implementing targeted marketing campaigns emphasizing health benefits and sustainability can strengthen brand loyalty and market position.

Overall, these strategic actions, grounded in industry analysis and financial insights, will better position the company to navigate market uncertainties and enhance long-term profitability.

References

• Kaplan, R. S., & Norton, D. P. (1992). The Balanced Scorecard—Measures That Drive Performance. Harvard Business Review, 70(1), 71–79.
• Khew, C. H. (2018). Market Structure and Competition in the Food Industry. Journal of Industry Economics, 66(3), 589–610.
• Nagle, T. T., & Müller, G. (2017). The Strategy and Tactics of Pricing: A Guide to Growing More Profitably. Routledge.
• Palmer, J., & Ontario, F. (2006). Supply and Demand Dynamics. Princeton University Press.
• Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review, 86(1), 78–93.
• Starr, R. M. (2011). General Equilibrium Theory: An Introduction. Cambridge University Press.
• Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach (9th ed.). W. W. Norton & Company.