Assignment 3 Part 1: Operation, Technology, and Management Plan

Due Week 8 and worth 70 points

Use the “NAB Company Portfolio”.

Write a three to six (3-6) page paper in which you provide the following information below.

Operations Plan (1 – 2 pages)

Note: Remember to assign a dollar amount to each operational cost you find, as you will need these figures for your income statement and cash flow in Week 8.

1. Create an operations plan for your NAB company using the template in the text as a guide (p. 214 | Operations Plan Preparation Form –Click here for help accessing a specific page number in your eBook). Extract appropriate information from the NAB Company portfolio, where applicable. Other required items in the template should be filled in using your personal preferences.
2. Provide a rationale for the competitive advantages section using appropriate functional-level and business-level strategies to explain the competitive advantages.
   • Note: Much of the research pertaining to the hints provided here can be found in the NAB company portfolio.
   • Hints: Consider whether you will rent or buy your facilities or outsource production to an existing company.
   • Hints: One of your biggest expenses as a startup non-alcoholic beverage company will be transitioning from a small batch prototype of your beverage to production on a large scale. Research the equipment you will need (vats, refrigerators, burners, ovens, bottling equipment, and so on), whether you will rent or buy, how you will maintain and clean it, and so forth. Consider how you will ensure quality control. What capacity do you intend to reach?
   • Hints: Deliberate your inventory control. Where do your supplies come from and what is your turnaround time to produce your beverage once you have received an order?
   • Hints: Consider your distribution method. Refer back to your notes for the SWOT analysis assignment in Week 2 of class.
   • Hints: How will you stay abreast of new developments in your industry? What new products do you have in development now, in addition to your flagship product?
3. Describe your research and development activities and explain how they will contribute to the company.

Technology Plan (1 – 2 pages)

1. Create a technology plan for your NAB company using the template in the text as a guide (p. 227 | Technology Plan Preparation Form ). Extract appropriate information from the NAB Company portfolio, where applicable. Other required items in the template should be filled in using your personal preferences.
2. Provide a rationale for the personnel needs section by incorporating appropriate functional-level strategies.
   • Hints: Consider the type of technology your company will use to conduct the following activities: manage personnel; take, fulfill, and track orders; manage inventory; communicate with customers and provide customer service; and produce your beverage.

Management & Organization (1 – 2 pages)

1. Create a management plan for your NAB company using the template in the text as a guide (p. 248 | Management Plan Preparation Form ). Extract appropriate information from the NAB Company portfolio, where applicable. Other required items in the template should be filled in using your personal preferences.
2. Using the flow charts on p. 242 as a guide, outline your company’s management hierarchy. Note: Charts or diagrams must be imported / included in the MS Word document.
3. Provide a rationale for the management structure and style section by incorporating appropriate functional-level strategies.
4. Format your assignment according to these formatting requirements:
   1. Cite the resources you have used to complete this exercise. Note: There is no minimum requirement for the number of resources used in the exercise.
   2. Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.
   3. 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 page length.

The specific course learning outcomes associated with this assignment are:

• Create a plan to implement a firm’s strategy and manage the change from current operations.
• Describe strategic planning techniques used to formulate alternative strategies designed to achieve stated business goals.
• Use technology and information resources to research issues in strategic management.
• Write clearly and concisely about strategic management using proper writing mechanics.

 

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Assignment 2

Due Week 6 and worth 100 points

This assignment consists of two (2) sections: a marketing plan and sales strategy, and a marketing budget. Note: You must submit both sections as separate files for the completion of this assignment.

For the first six (6) months your company is in business—to give you time to perfect your product and to learn from actual customers—you will start marketing and selling in your own community, a radius of twenty-five (25) miles from where you live.

For most non-alcoholic beverages, marketing (as opposed to the actual product itself) is key to success. Cola drinks, for example, are fairly undifferentiated, as are many energy drinks, juices, bottled water, and the like. Companies producing these types of beverages differentiate themselves and attract market share through marketing and brand awareness—both of which are critical to success.

Section 1: Marketing Plan & Sales Strategy (MS Word or equivalent)

Write the three to five (3-5) page Marketing Plan & Sales Strategy section of your business plan, in which you:

1. Define your company’s target market.
   1. Analyze the types of consumers who will be drinking your beverage in demographic terms (i.e., age, education level, income, gender, ethnic group, etc.). Support your analysis with actual data on the size of the demographic groups in your local community (nearby zip codes).
   2. Outline the demographic information for your company specified on the worksheet in the course text (p. 107 | Demographic Description).Click here for help accessing a specific page number in your eBook.
      • Hints: At American FactFinder (http://census.gov), you will find demographic information on potential consumers in your area. If you are selling through other businesses (such as grocery stores), indicate the number of those businesses in your local area. You will find information about such businesses in your local area at County Business Patterns (http://www.census.gov/econ/cbp/). Check Chapter 2 of Successful Business Plan for more research sources.
2. Assess your company’s market competition.
   1. Use the factors listed in the course text graphic (p. 123 | Assess the Competition) to assess your company’s market competition.
   2. Defend your strategy to successfully compete against market leaders in your segment.
      • Hints: For example, in the soft drink market, it is intimidating to try to compete against Coke and Pepsi. Newcomers in mature markets typically must pursue niche markets or even create new market categories, as Red Bull did with energy drinks.
   3. Defend your plan to differentiate yourself from the competition using the information detailed on the worksheet in the text (p. 131 | Market Share Distribution).
      • Hints: Every business faces competition and the non-alcoholic beverage market is an especially crowded market.
3. Clarify your company’s message using the information provided on the worksheet in the text (p. 160 | The Five F’s).
   1.  

1. Hints: Before you choose your marketing vehicles, you must determine the message you want to convey through those vehicles.
2. Identify the marketing vehicles you plan to use to build your company’s brand. Justify the key reasons why they will be effective. Provide examples of other non-alcoholic beverage companies that use these tactics effectively.
   1.  
3. Hints: If you plan to use online marketing tactics, refer to the worksheet in the text (p.171 | Online Marketing Tactics) to aid your response. Remember that even if you’re selling through grocery stores you need to build your brand and social media is a major part of that in regard to beverages. Some of the marketing tactics that beverage companies use include: sampling in grocery stores, building a following on social media, sponsoring events, exhibiting at trade shows attended by retailers, and so on. You will use a combination of these tactics. For example, if you decide to give out samples in grocery stores, promote your sampling on your social media networks and those of the grocery store.
   1.  
4. Hints: If you are planning to distribute through resellers, describe how you plan to reach them, for example, through industry trade shows or by establishing your own sales force. For information on trade shows, visit the Trade Show News Network (http://www.tsnn.com). You can exhibit or network at these shows.
5. Format your assignment according to these formatting requirements:
6. Cite the resources you have used to complete the exercise. Note: There is no minimum requirement for the number of resources used in the exercise.
7. Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.
8. 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 page length.

Section 2: Marketing Budget (MS Excel worksheets template)

Section 2 uses the “Business Plan Financials” MS Excel template (see: Course Required Files in Week 1). Use the “Business Plan Financials Guide” (see: Course Required Files in Week 1) to support your development of the Marketing Budget.

1. Complete the Marketing Budget worksheet for your company.
   1.  

1. Hints: The goal of the marketing budget is to help you determine how much it will cost you to reach your market and achieve your sales goals.
2. Hints: When filling out the “Marketing Budget” worksheet in the Excel spreadsheet:
   • Begin in the current year and complete a marketing budget for the first year of your business. The information you enter in the marketing budget spreadsheet will flow through to your “Income Statement” in the Business Plan Financials.
   • Leave the number at zero (0) for any marketing vehicles you do not intend to use.
   • Remember that all marketing activities involve costs. If social media represents a significant portion of your marketing, assume you will have cost of advertising and that should be reflected on your budget. Even if a social media site charges nothing to use it, you will need to use company resources to manage the site, pay someone to execute your social media marketing campaigns, and will most likely pay for ads on that site.
   • Do NOT leave the “Marketing Budget” blank, assuming you will not have any marketing costs.

The specific course learning outcomes associated with this assignment are:

• Recommend effective business strategies based on an analysis of domestic and global operating environments, market dynamics, and internal capabilities.
• Analyze competitive positions including foreign market entry and the resulting impact on business strategy.
• Use technology and information resources to research issues in strategic management.
• Write clearly and concisely about strategic management using proper writing mechanics.

 

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Assignment 1: Demand Estimation
Due Week 3 and worth 200 points

Imagine that you work for the maker of a leading brand of low-calorie, frozen microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April.

For a refresher on independent and dependent variables, please go to Sophia’s Website and review the Independent and Dependent Variables tutorial, located at http://www.sophia.org/tutorials/independent-and-dependent-variables–3.

Option 1
Note: The following is a regression equation. Standard errors are in parentheses for the demand for widgets.
QD       =          – 5200 – 42P + 20PX + 5.2I + 0.20A + 0.25M
(2.002)  (17.5) (6.2)    (2.5)   (0.09)   (0.21)
R2 = 0.55           n = 26               F = 4.88

Your supervisor has asked you to compute the elasticities for each independent variable. Assume the following values for the independent variables:

Q          =          Quantity demanded of 3-pack units
P (in cents)       =          Price of the product = 500 cents per 3-pack unit
PX (in cents)     =          Price of leading competitor’s product = 600 cents per 3-pack unit
I (in dollars)       =          Per capita income of the standard metropolitan statistical area
(SMSA) in which the supermarkets are located = $5,500
A (in dollars)     =          Monthly advertising expenditures = $10,000
M                     =          Number of microwave ovens sold in the SMSA in which the
supermarkets are located = 5,000

GUIDELINES

Write a four to six (4-6) page paper in which you:

1. Compute the elasticities for each independent variable. Note: Write down all of your calculations.
2. Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies. Provide a rationale in which you cite your results.

1. Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.
2. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600 cents.
   1. Plot the demand curve for the firm.
   2. Plot the corresponding supply curve on the same graph using the following MC / supply function Q = -7909.89 + 79.1P with the same prices.
   3. Determine the equilibrium price and quantity.
   4. Outline the significant factors that could cause changes in supply and demand for the low-calorie, frozen microwavable food. Determine the primary manner in which both the short-term and the long-term changes in market conditions could impact the demand for, and the supply, of the product.
3. Indicate the crucial factors that could cause rightward shifts and leftward shifts of the demand and supply curves for the low-calorie, frozen microwavable food.
4. Use at least three (3) 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.

The specific course learning outcomes associated with this assignment are:

• Analyze how production and cost functions in the short run and long run affect the strategy of individual firms.
• Apply the concepts of supply and demand to determine the impact of changes in market conditions in the short run and long run, and the economic impact on a company’s operations.
• Use technology and information resources to research issues in managerial economics and globalization.
• Write clearly and concisely about managerial economics and globalization using proper writing mechanics.

Additional info for assignment: 

Hints for Assignment 1

 Please review the following files posted in Week 2 Instructor Insights.

 Demand Estimation – Sample Analytical Problem

1. It shows how elasticities are calculated for the independent variables in the regression equation.
   1. It also shows how you can interpret the elasticities.

• Graphing Supply and Demand Instructions and Graphing Supply and Demand Sample Problem
  • These files will show you how to graph in Excel.

 Under Instructor Insights, you can find additional material on demand estimation and using Excel.

 IMPORTANT!!! You should use Option 1.  Ignore Option 2.

 Question 1:

 You should compute the elasticity for each independent variable as shown in the sample analytical problem mentioned above.

 Note: Do not convert the cents into dollars.

 Question 2: 

Interpret the elasticities as shown in the sample analytical problem.

 Question 3: 

You should look at the price elasticity of demand to answer this question. If the absolute value of elasticity is smaller than 1, the demand is inelastic, and the company would lose revenue if it cuts its price.  If the absolute value of elasticity is bigger than 1, then the demand is price elastic and the company would increase its market share and its revenue if it cuts the price.

 Question 4:

 The supply function is given to you. It is Q = -7909.89 + 79.0989P. You have to calculate the demand function.  The regression equation is the demand function, but you have to keep all factors that affect the demand constant, except for the price.  So, you can plug in the provided values of Px, I, A, and M in the regression equation.  Thus, you will derive the demand function, which shows the relationship between quantity demanded and price assuming that nothing else changes.

Here is and example based on the demand equation in the sample analytical problem.

Q_D = 15,000  –  10 P  +  1500 A  +  4 P_X  +  2 I

Q = Quantity demanded

P = Price = 7,000

A = Advertising expense, in thousands = 54

P_X = Price of competitor’s product = 8,000

I = Average monthly income = 4,000

Q_D = 15,000  –  10 P  +  1500 (54) +  4 (8,000) +  2 (4,000)

Q_D = 15,000  –  10 P  +  81,000 +  32,000+  8,000

Q_D = 136,000  –  10 P  (this is the demand function)

Follow the graphing instructions to plot the demand curve.

• Enter in one column the prices 100, 200,…,600
• Calculate the quantity demanded at each price using the demand function in a second column.
• Then, graph the demand curve using the graphing instructions.

1. Use the supply function and follow the instructions to graph it.
2. The equilibrium point would be the point of intersection between demand and supply curves.  The equilibrium price corresponding to this point is on the vertical axis, and the equilibrium quantity corresponding to this equilibrium point is on the horizontal axis.
3. To answer this question, review the demand and supply factors.

 Question 5:

 Consider the most important factors other than the price of the product that can affect the demand and supply of low-calorie microwavable food. You can do some research on the demand and supply conditions in this market.

Assignment 1: Demand Estimation
Due Week 3 and worth 200 points

Imagine that you work for the maker of a leading brand of low-calorie, frozen microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April.

For a refresher on independent and dependent variables, please go to Sophia’s Website and review the Independent and Dependent Variables tutorial, located at http://www.sophia.org/tutorials/independent-and-dependent-variables–3.

Option 1
Note: The following is a regression equation. Standard errors are in parentheses for the demand for widgets.
QD       =          – 5200 – 42P + 20PX + 5.2I + 0.20A + 0.25M
(2.002)  (17.5) (6.2)    (2.5)   (0.09)   (0.21)
R2 = 0.55           n = 26               F = 4.88

Your supervisor has asked you to compute the elasticities for each independent variable. Assume the following values for the independent variables:

Q          =          Quantity demanded of 3-pack units
P (in cents)       =          Price of the product = 500 cents per 3-pack unit
PX (in cents)     =          Price of leading competitor’s product = 600 cents per 3-pack unit
I (in dollars)       =          Per capita income of the standard metropolitan statistical area
(SMSA) in which the supermarkets are located = $5,500
A (in dollars)     =          Monthly advertising expenditures = $10,000
M                     =          Number of microwave ovens sold in the SMSA in which the
supermarkets are located = 5,000

GUIDELINES

Write a four to six (4-6) page paper in which you:

1. Compute the elasticities for each independent variable. Note: Write down all of your calculations.
2. Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies. Provide a rationale in which you cite your results.

1. Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.
2. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600 cents.
   1. Plot the demand curve for the firm.
   2. Plot the corresponding supply curve on the same graph using the following MC / supply function Q = -7909.89 + 79.1P with the same prices.
   3. Determine the equilibrium price and quantity.
   4. Outline the significant factors that could cause changes in supply and demand for the low-calorie, frozen microwavable food. Determine the primary manner in which both the short-term and the long-term changes in market conditions could impact the demand for, and the supply, of the product.
3. Indicate the crucial factors that could cause rightward shifts and leftward shifts of the demand and supply curves for the low-calorie, frozen microwavable food.
4. Use at least three (3) 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.

The specific course learning outcomes associated with this assignment are:

• Analyze how production and cost functions in the short run and long run affect the strategy of individual firms.
• Apply the concepts of supply and demand to determine the impact of changes in market conditions in the short run and long run, and the economic impact on a company’s operations.
• Use technology and information resources to research issues in managerial economics and globalization.
• Write clearly and concisely about managerial economics and globalization using proper writing mechanics.

Additional info for assignment: 

Hints for Assignment 1

 Please review the following files posted in Week 2 Instructor Insights.

 Demand Estimation – Sample Analytical Problem

1. It shows how elasticities are calculated for the independent variables in the regression equation.
   1. It also shows how you can interpret the elasticities.

• Graphing Supply and Demand Instructions and Graphing Supply and Demand Sample Problem
  • These files will show you how to graph in Excel.

 Under Instructor Insights, you can find additional material on demand estimation and using Excel.

 IMPORTANT!!! You should use Option 1.  Ignore Option 2.

 Question 1:

 You should compute the elasticity for each independent variable as shown in the sample analytical problem mentioned above.

 Note: Do not convert the cents into dollars.

 Question 2: 

Interpret the elasticities as shown in the sample analytical problem.

 Question 3: 

You should look at the price elasticity of demand to answer this question. If the absolute value of elasticity is smaller than 1, the demand is inelastic, and the company would lose revenue if it cuts its price.  If the absolute value of elasticity is bigger than 1, then the demand is price elastic and the company would increase its market share and its revenue if it cuts the price.

 Question 4:

 The supply function is given to you. It is Q = -7909.89 + 79.0989P. You have to calculate the demand function.  The regression equation is the demand function, but you have to keep all factors that affect the demand constant, except for the price.  So, you can plug in the provided values of Px, I, A, and M in the regression equation.  Thus, you will derive the demand function, which shows the relationship between quantity demanded and price assuming that nothing else changes.

Here is and example based on the demand equation in the sample analytical problem.

Q_D = 15,000  –  10 P  +  1500 A  +  4 P_X  +  2 I

Q = Quantity demanded

P = Price = 7,000

A = Advertising expense, in thousands = 54

P_X = Price of competitor’s product = 8,000

I = Average monthly income = 4,000

Q_D = 15,000  –  10 P  +  1500 (54) +  4 (8,000) +  2 (4,000)

Q_D = 15,000  –  10 P  +  81,000 +  32,000+  8,000

Q_D = 136,000  –  10 P  (this is the demand function)

Follow the graphing instructions to plot the demand curve.

• Enter in one column the prices 100, 200,…,600
• Calculate the quantity demanded at each price using the demand function in a second column.
• Then, graph the demand curve using the graphing instructions.

1. Use the supply function and follow the instructions to graph it.
2. The equilibrium point would be the point of intersection between demand and supply curves.  The equilibrium price corresponding to this point is on the vertical axis, and the equilibrium quantity corresponding to this equilibrium point is on the horizontal axis.
3. To answer this question, review the demand and supply factors.

 Question 5:

 Consider the most important factors other than the price of the product that can affect the demand and supply of low-calorie microwavable food. You can do some research on the demand and supply conditions in this market.

 

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Assignment 2

Instructions

From Assignment 1, you will use the following information:

Qs = -7909.89 + 79.1P

Qd = 38650 – 42P

P = 384.48 cents and Q = 22,502 units 

You should also use the following rules for profit maximization:

P = MR = MC in perfect competition

MR = MC in imperfect competition 

Client Guide

Question 1

 Outline a plan that will assess the effectiveness of the market structure for the company’s operations. Note: In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting Qd equal to Qs. The market structure in the first assignment was competitive. This means that the firm does not have control over the price and it has to charge the equilibrium price. You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own “optimal” price.

 Since the company has control over the price, it has to decide how much to charge and how much to produce to maximize profit. 

• The profit-maximizing/loss-minimizing quantity and price can be determined by setting the MR = MC. This involves the following.
  • Find the total revenue: TR = P x Q
  • Find the marginal revenue by calculating the derivative of the total revenue function.
  • Set MR equal to the provided MC function and solve for Q, and then for P.
• Based on the results, the company should make a decision to continue producing or shut down.

 Question 2

 Given that business operations have changed from the market structure specified in the original scenario in Assignment 1, determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.

• Consider the change in the degree of competition.
• Review the sections “Industry Performance” and “Competitive Landscape” in the IBISWorld report provided.
• Factors that might have caused change could be for example consolidation of the industry, i.e., firms become bigger and have now some control on the price.  Also, firms can differentiate their product from the products of their competitors, which again results in more control over the price.  Firms’ actions are interdependent and now their decisions are affected not just by the demand and supply conditions, but by what moves their major competitors make.  These are just examples.  You might come up with other factors.

 Question 3

 Analyze the major short run and long cost functions for the low-calorie, frozen microwaveable food company given the cost functions below. Suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both short and the long-run.

 TC = 160,000,000 + 100Q + 0.0063212Q²

VC = 100Q + 0.0063212Q²

MC= 100 + 0.0126424Q

 To maximize profit, the firm has to find ways to maximize its total revenue and minimize its cost. You should also consider the difference between short and long run.  In the short run, at least one of the costs is fixed.  In the long run, all costs can be changes, i.e., all costs are variable. A review of the IBISWorld Industry Report on the frozen food production in the US can also help you answer this question.  The cost functions affect the profit. The cost functions are to be used to answer question 4 as well.

• Using the provided cost data for the firm, determine whether the firm is making a profit or a loss by charging the equilibrium price determined in Assignment 1.
  • Calculate the total revenue.
  • Calculate the total cost.
  • Find the difference between TR and TC, which is the profit or the loss. 
  • Review the section “Cost Structure Benchmarks” (p. 22) in the IBISWorld report.

Question 4

 Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response. (Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.)

 Here, you have to find the profit maximizing or loss-minimizing quantity and price. Then, determine whether the company is making a profit. To find the value of Q and P, you should use the marginal rule MR = MC. 

• MC function is given. 
• You should calculate MR by using the demand function from Assignment 1: Qd = 38,650 – 42P.
  • First, inverse the demand function to show the price in terms of quantity:  P = 920.238 – 0.0238Q.
  • Then, find the TR function, which is equal to price times quantity TR = (920.24 – 0.0238Q)*Q = 920.24Q – 0.0238Q². 
  • Finally, find MR which is the derivative of TR with respect to quantity, i.e., MR = 920.238 – 0.0476Q.
• Next, set MR equal to the MC given in the second assignment and solve for the profit maximizing or loss minimizing Q and P.
• When you find the values of Q and P, you can plug in the number for Q into the TR function to find the TR and in the TC function, to find the TC.
• Then subtract TC from TR to find the total profit. 
  • If you get a negative number, the firm is making a loss. 
  • If the number is positive, the firm is making a profit.
• If the firm is making a loss, you should figure out whether the firm should continue to produce at a loss in the short run, or shut
  • To answer this question, you should compare the TR with VC, or price with AVC.  If the firm is making a loss and the TR is higher than VC or the price is higher than the AVC, then it would be better off producing rather than shutting down because it will be able to cover some of its fixed cost. But if TR is smaller than VC, or if price is smaller than AVC, the firm will be better of shutting down.
    
    

Question 5

 Suggest one (1) pricing policy that will enable your low-calorie, frozen microwavable food company to maximize profits. Provide a rationale for your suggestion.

(Hints:

• In Assignment 1, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.
• Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.)

 Use the profit-maximizing rule MC = MR to find the price and quantity that maximize profit.

Question 6

 Outline a plan, based on the information provided in the scenario, which 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.

 (Hints:

 Calculate profit in the short run by using the price and output levels you generated in part 5. Optional: You may want to compare this to what profit would have been in Assignment 1 using the cost function provided here.

• Calculate profit in the long run by using the output level you generated in part 5 and cost data in part 3 and assuming that the selling environment will likely be very competitive. Determine why this would be a valid assumption.)

 You can also review the section “Key Statistics” on p. 38 of the IBISWorld Industry Report Report.

Question 7

 Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders. Outline, in brief, a plan to implement your recommendations.

Review the sections “Industry Performance” and “Products and Markets”

 Additional Information

Write a six to eight (6-8) page paper in which you:

1. Outline a plan that will assess the effectiveness of the market structure for the company’s operations. Note: In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting QD equal to QS. You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own “optimal†price.
2. Given that business operations have changed from the market structure specified in the original scenario in Assignment 1, determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.
3. Analyze the major short run and long cost functions for the low-calorie, frozen microwaveable food company given the cost functions below. Suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both the short-run and the long-run.

TC = 160,000,000 + 100Q + 0.0063212Q2

VC = 100Q + 0.0063212Q2

MC= 100 + 0.0126424Q

1. Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response. (Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.)
2. Suggest one (1) pricing policy that will enable your low-calorie, frozen microwavable food company to maximize profits. Provide a rationale for your suggestion.

(Hints:

In Assignment 1, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.

Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.)

1. Outline a plan, based on the information provided in the scenario, which 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.

(Hints:

Calculate profit in the short run by using the price and output levels you generated in part 5. Optional: You may want to compare this to what profit would have been in Assignment 1 using the cost function provided here.

Calculate profit in the long run by using the output level you generated in part 5 and cost data in part 3 and assuming that the selling environment will likely be very competitive. Determine why this would be a valid assumption.)

1. Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders. Outline, in brief, a plan to implement your recommendations.
2. 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.

The specific course learning outcomes associated with this assignment are:

Analyze short-run and long-run production and cost functions.

Apply macroeconomic concepts to changes in global and national economies and how they affect economic growth, inflation, interest rates, and wage rates.

Evaluate the profit-maximizing price and output level for given operating costs for monopolies and firms in competitive industries.

Use technology and information resources to research issues in managerial economics and globalization.

Write clearly and concisely about managerial economics and globalization using proper writing mechanics.

Click here to view the grading rubric.

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