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Pick a small company (ice-cream shop, restaurant, bookstore, parking structure or ...) and write a short history about the company, major products, and location. The company I am going to introduce is a home business. The owner runs a website. She does the business by herself. Her website is active. She started the business three years ago.

She buys different makeup products from all over the world. She buys the cheapest products and sells them on her website. Determine the factors that will influence demand for her products (be specific). Most of the time, she buys products that her customers ask for. For example, if her customers ask whether she can get an Estée Lauder skincare product, she compares prices at different stores. Then she purchases and mails the product to the customer. Her demand increases when limited editions are released, which she then buys and sells. During holidays, demand rises due to discounts and special offers.

Determine the factors that influence the supply of her products (be specific). Factors include customs duty, since she sources abroad, which affects her supply; if she orders too many products from a website simultaneously, the website may cancel her orders.

Explain the nature of costs for her business: fixed costs, variable costs, explicit and implicit costs, and sunk costs. The sunk cost includes transportation charges. Because she buys products from abroad, she needs a transportation company, with costs starting at $6 per 500 grams. Variable costs include the free samples she receives with purchases, which she sells for extra profit. Most of her profit comes from selling these samples. She adds 2% of the product’s regular price as her markup.

Paper For Above instruction

The small home-based business specializing in online makeup product sales exemplifies a modern entrepreneurial venture navigating various economic factors. Established three years ago, the owner’s primary activity involves purchasing affordable makeup products from different countries and reselling them through her website. This business model highlights the significance of demand and supply factors, cost structures, and market strategies in a small entrepreneurial setting.

Understanding the demand dynamics is essential for her success. The demand for her products is influenced by several specific factors. Firstly, customer preferences significantly impact demand. Since her business is driven by customer inquiries—such as requests for specific brands like Estée Lauder—her ability to respond effectively determines sales volume. When a popular or limited-edition product is released, demand surges, reflecting consumer interest in exclusivity and timely availability. Additionally, seasonal variations like holidays boost demand due to discounts and promotional campaigns, making holiday periods lucrative for her sales.

Another critical factor is pricing attractiveness. Since she compares prices across stores before purchasing, her supply decisions are closely linked to market competition and price volatility. Scarcity also elevates demand; limited editions or popular products incentivize quick purchasing, thus increasing her sales volume during these periods. Customer loyalty and trust, cultivated through consistent service and product variety, further influence demand stability and growth.

Regarding supply influences, her sourcing decisions are shaped by external and internal factors. Customs duties are a notable external factor, as purchasing from different countries incurs tariffs that impact her costs and supply availability. Fluctuations in customs policies or tariffs can either increase costs or delay shipments, affecting her ability to meet customer demand promptly. Additionally, her supply chains could be disrupted if her orders become too large for suppliers or online platforms to fulfill, leading to cancellations or delays, which can hinder her ability to satisfy her customers.

The costs associated with her business encompass fixed costs such as website hosting fees and transportation charges, which are necessary regardless of sales volume. Variable costs primarily include the purchase price of makeup products, with a starting rate of $6 per 500 grams, and costs related to transaction fees or shipping. An explicit cost is the actual payment for products and transportation, while implicit costs could include her time or opportunity costs of running the business alone. The sunk costs, which are unavoidable expenses, include transportation charges paid upfront once shipments are dispatched.

Her cost structure influences her pricing strategy. She adds 2% markup over the wholesale price, aiming to cover her expenses and generate profit margins. Selling free samples she receives contributes to her variable costs and provides additional profit streams. To optimize profitability, she monitors costs closely and adapts her pricing in response to market changes and demand fluctuations.

In analyzing her business's supply and demand, price elasticity of demand is a key concept. For instance, the demand for popular limited-edition products tends to be inelastic because consumers are willing to pay premium prices for exclusivity. Conversely, for more generic or widely available products, demand is more elastic; a small price increase might significantly reduce sales volume. Income elasticity is also relevant; luxury makeup products tend to have high income elasticity, as demand increases with consumer income levels. During economic growth, demand for such products tends to rise; during downturns, demand falls.

Speculating on price elasticity, if she raises prices modestly on inelastic products, sales volume may not decline significantly, increasing total revenue. However, for elastic products, higher prices could substantially reduce sales, so lowering prices might boost overall revenue. Consequently, a nuanced pricing strategy tailored to elasticity measures can enhance profitability.

Substitutes and complements influence sales and elasticity further. Substitutes such as drugstore makeup brands or cosmetic could compete heavily on price, impacting her sales negatively if prices rise. On the other hand, complements such as skincare tools or other beauty accessories could increase overall demand if marketed together. Cross-price elasticity measures how sensitive her sales are to changes in substitute or complementary product prices; likely, cross-price elasticities are moderate, with substitutes exerting a stronger influence.

To remain competitive and profitable, she must monitor key metrics such as demand patterns, customer preferences, competitor pricing, and changes in import tariffs or customs regulations. Such tracking enables her to adapt pricing or sourcing strategies proactively. For instance, if she observes a rise in tariffs, she might adjust her supplier choices or alter her markup margins to maintain profitability.

Her business operates within a competitive market characterized by numerous small sellers offering similar products. The ease of entry and exit, coupled with product differentiation and pricing strategies, suggests a monopolistic competition structure. Her use of direct sales via her website, along with the ability to compete on price and customer service, aligns with this market classification.

From a managerial perspective, decision variables such as sourcing costs, pricing, marketing efforts, and inventory management are critical to profitability. She might employ pricing strategies like dynamic pricing—adjusting prices based on demand fluctuations or special editions—to maximize revenue. Additionally, strategic use of promotions, discounts, or bundling can stimulate sales.

Government regulations, including customs duties, import restrictions, and consumer protection laws, directly influence her pricing and product availability. Compliance with regulations ensures smooth operations but also adds to costs, which must be factored into her pricing decisions. Staying informed about legal changes allows her to adjust quickly, maintaining competitiveness while ensuring compliance.

In conclusion, this small, home-based makeup business exemplifies the complex interplay of demand and supply factors, cost management, market competition, and regulatory environment shaping small entrepreneurial ventures today. Effective management of these elements can enable her to optimize profits and sustain growth in a competitive e-commerce landscape.

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