Economic Assignment
Part A: Microeconomics
Question 1
The case study as presented by Woolworths and Coles matched the oligopoly market. Few competitive players rule the organization and a co-existing relationship exists among the organizations. Brander & Spencer (2015) reported that the originations produce homogenous goods. Woolworths and Coles sell fruits and vegetables in the Oligopoly market. Here both the organizations are involved in the price war which is related to the Bertrand model of oligopoly. It believes in competing with the rivalry firm by giving price cuts. The following diagram shows the oligopoly market conditions.
Question 2
According to the Bertrand model, the organizations compete with each other by giving discounts on the commodities, which is widely known as Price War (Caballero, Farhi & Gourinchas, 2016). Woolworth has increased its market share by reducing the price of the commodities by 1.9%. Woolworth has gained maximum market share by giving a greater price cut on its commodities whereas Coles has reduced the price of its commodities only by 3.1% only. The implications were huge. Though both the organizations have benefitted from the market Woolworth’s profit/revenue is more than Coles.
Question 3
In the oligopoly market structure, small business entities have faced huge financial losses. The financial losses have made the small entities incompetent for the large organizations. In the Bertrand model, an organization reduces the price of the commodities so that it can gain maximum market share. In the process of reducing the price of the commodities the organizations are not earning maximum revenue but they are also selling more products than before. This is allowing the other market players or the competitors to engage themselves to apply a similar pricing strategy (reducing the price of the commodities). The issue is that no organization can operate in the market less than the marginal cost of the commodity.
Question 4
The price war allows the giant organizations to gain the maximum share of the market by eliminating the small entities from the market (Galí, 2015). With the decrease in the cost of the commodity, the demand for the commodity increases (Law of Demand). The increased demand induces more production. The capacity of the organization to spend more price or reduce the price on the advertising strategies signifies and determines the effectiveness of the price war in the market.
Marketing Report
Executive Summary
This report analyzes the marketing strategy of Mos Burger. The restaurant offers affordable and premium quality products and services. However, the Restaurant faces a number of challenges including lack of ample parking space for its consumers. Additionally, since the firm provides fast foods the company faces the challenge of ensuring that all products are of the same quality and quantity. In order to retain competitive advantage the report proposes a number of recommendations: (1) providing high quality products and services, (2) Ensuring that all of its products are of the same quantity and quality. (3) Improving its process system to provide better services.
