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ECONOMIC PRINCIPLES AND DECISION MAKING

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ECONOMIC PRINCIPLES AND DECISION MAKING

Introduction

 

By viewing the several activities of consumers, the business professionals are making various decisions in order to make development in the economic structure of the organisation. The current trade market is ever changing therefore; the management of any organisation is make vital decision in order to respond according to the demand of the consumers. Therefore, the topic helps the researcher to understand vital key points regarding decision- making in the context of activities of a certain organisation namely Schmeckt  Gut.    

Part A

 

Q1: Importance of Elasticity

 

In order to measure the strength and weaknesses in the marketing strategy of Schmeckt Gut and to analyse the basic demands from their consumer, it is important to analyse the elasticity of the companies productivity and decision- making ability. With the help of elasticity concept, the management of the firm can regulate the change in market price of some product and services offered by the company. In order to set appropriate pricing for the product or service, the management of the aforesaid firm need to consider the elasticity demand of the market as inappropriate change in price of a particular product can impact the demand in quantity of the product that can cause a huge loss in the business (Epstein, 2018). Due to improper pricing strategy there is a possibility of falling to get the desired revenue from the business. It can be understood easily that the firm has incurred a loss if the product demand is elastic. On the contradictory, the firm is able to gain a good amount of revenue from their business if there is a static demand of their product in the market. Therefore, the organisation cannot maximize their profitable amount by ignoring the effect of price elasticity or elasticity of demand for the product. Many organizations in the market are not giving so much importance to the elasticity while making pricing decisions for their product and hence, they are unable to calculate the effective price as they have no data about the previous pricing strategy for the same product. As a result, they are often failed to relate the pricing decision with the elasticity of demand for the product in the market (Cvitanovicet al. 2016).     

Q2: Suggestion to the Board of Directors for introduction of company’s’ energy bar.

 

In order to introduce any new product in the market, it is important to examine the demand of the product in the existing market. In this context, for introducing Energy Bar in the market, the Board of Directors of Schmeckt Gut need to analyse the market properly in order to get a brief idea about the demand of the Energy Bar among the consumer groups. In addition to that, they need to keep in mind that there are lot of expectations from the suppliers, partners and most importantly the loyal consumers of the company on the new product. Therefore, before introducing the product in the market they need to set the pricing of their Energy Bar in such a way that can able to hold the interest of the consumers to get the product (Kruglanski&Gigerenzer, 2018). In order to deliver the product that is the Energy Bar in affordable price to the consumer groups, it will be the best practice for the management of the aforesaid organisation to make proper segmentation of their customer group according to their buying nature and efficiency. Hence, they can able to set proper pricing to their Energy Bar depending upon the quality of the product that is designed for several customer groups.           

Part B

Question 3:

It can be concluded that the energy bar of the company Schmeckt Gut and the energy bar of Fly Highs are substitute goods (Rosato, 2016). It can be note form the report presented that as soon as the price was decreased from the $ 3 to $ 2, the quantity demanded increased to 20 thousand per day from 10 thousand per days. This evidence verified the fact that the energy bar of the company Schmeckt Gut is a normal good since the reduction in price is accompanied by the increase in the overall demand of the quantity. Since, the energy bar of Fly High is a substitute good, the increase in the quantity demanded of the energy bar of the company Schmeckt Gut is accompanied by the decrease in the quantity demanded of the energy bar of the company Fly High. The energy bar of both the company can also be identified as interlinked goods since the price change in one of the goods has the potential to impact the change in the quantity of the other good.

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