Comparing Market Structures

Monopolistic Competition

Perfect Competition:

Oligpopoly

Monopoly:

Assignment 3 - Indigo Books and Music

Indigo Books & Music Inc. (TSX: IDG) (stylized as !ndigo) is a Canadian retail bookstore chain. The company was founded in 1996 by CEO Heather Reisman, wife of Gerry Schwartz, majority owner and CEO of Onex Corporation.
The company's first big box bookstore, initially called "Indigo Books, Music & More", was opened in Burlington, Ontario on September 4, 1997. With the aid of Onex, Indigo later engaged in a hostile takeover of Chapters, their largest competitor, and succeeded in acquiring the company in 2001, but continues to operate many stores under the Chapters banner. Indigo also gained the ownership of the Coles chain of small-format bookstores, which was also owned by Chapters.

Main Products:
Books and Cds
A vast area of Indigo stores are dedicated to giftware, such as candles, notebooks, chocolate, book accessories, and seasonal items.

Target Market:
Children, teens, adults, seniors of any race, or beliefs.

Pricing:
Pricing of main products and services varies from $1 for a chocolate bar; too over $100 for a special edition book.

Financial:
(From  http://www.theglobeandmail.com/globe-investor/markets/stocks/financials/?q=IDG-T)

2010

Sales $1,021,807,000

Earnings $11,346,000

Return on Equity 4.20%

Assets $516,180,000

Liabilities $253,060,000

Liabilities-to-Equity Ratio 0.96

Indigo Competitors:

Indigo has few competitors. It's main competitor was Chapters, but Indigo bought Chapters out in an aggressive takeover in 2001. Amazon.ca is Indigo's number one competitor.

Indigo Strengths:

-able to sell books cheaper due to volume in store. This put many small booksellers out of business

-Carries the most variety of book topics of any Canadian book seller.

-A one stop shop for books, gifts, music and stationary.

Indigo Weaknesses:

-political alignment of company CEO Heather Reisman causes censorship of some books. Indigo received criticism of cencorship for the banning of Hitler's Mein Kempf being carried in the store.

Indigo Books and Music is a true industry leader.

Assignment 3 - Wal Mart

Wal-Mart Stores, Inc. (NYSE: WMT), branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000 list, and the largest public corporation when ranked by revenue.

The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. It is headquartered in Bentonville, Arkansas. Walmart is also the largest grocery retailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business.^[2] It also owns and operates the Sam's Club retail warehouses in North America.

(http://en.wikipedia.org/wiki/Walmart)


Main Products:"The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good-quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience."
- Sam Walton (1918-1992)
http://www.walmart.com/cp/An-Introduction-to-Walmart.com/542413
As stated above, Walmart carries everything from clothing to tires, lawn mowers to bananas.
It has grown over the years into a "supercentre" which is comprised of a grocery store, book store, restaurants, (Tim Horton's and Mcdonald's) photo lab, and in some stores, even a spa. Indeed, it is a one stop shop like no other.
Walmart's Target Market:Walmart targets all market segments that are lower-middle class. However, with the recent economic recession, Walmart has been working to cater to middle and upper-middle class people as-well. http://snippets.com/who-and-what-is-wal-marts-target-market.htm
Pricing:Walmart boasts of offering the lowest prices available to consumers today. It offers "every day low prices" and prices vary by product, but remain low for the product itself.
Books in the Walmart bookstore are always 30% off the regular Canadian cover price.
Fixed Costs:
Buildings
Labour
Plant for Walmart brand food
Variable Costs
Future costs
Strongest Competitors
Walmart has few strong competitors as it dominates the market it is in. Possible contendors are Target and Zellers.
Possible Weakness of Walmart:

Walmart Weankesses:

Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.
Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.
The company is global, but has has a presence in relatively few countries Worldwide. http://www.marketingteacher.com/swot/walmart-swot.htmlWalmart Strengths:

• Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.
• Wal-Mart has grown substantially over recent years, and has experienced global expansion (for example its purchase of the United Kingdom based retailer ASDA).

• The company has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement.
• A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.

http://www.marketingteacher.com/swot/walmart-swot.html

Walmart has proven to be am industry leader. 

Assignment 3 - Mercedes Benz

The Mercedes automobile was first marketed in 1901 by Daimler Motoren Gesellschaft. The first Mercedes-Benz brand name vehicles were produced in 1926, following the merger of Karl Benz's and Gottlieb Daimler's companies into the Daimler-Benz company.^[1] Mercedes-Benz has introduced many technological and safety innovations that later became common in other vehicles.^[2] Mercedes-Benz is one of the most well-known and established automotive brands in the world, and is also the world's oldest automotive brand still in existence today. John Blanchard is president and CEO of Mercedes Benz.

Mercedes Benz main products are obviously automobiles. They manufacture sedans, coupes, sports cars and super cars. They also manufacture semis and other industrial automobiles.
Target Market:
Mercedes Benz carries different target markets for each vehicle. A similarity between all of them are those consumers who look for a quality vehicle and who are willing to pay a premium price as such.

Mercedes dealerships carry 14 different "classes" or models with the lowest end and most affordable being the B class, starting at $29,900:

Mercedes, of course, also carries sports cars that well exceed the 100 000 dollar mark as well:

(http://www.mercedes-benz.ca/content/canada/mpc/mpc_canada_website/en/home_mpc/passengercars.flash.skipintro.html)

Fixed Costs:

Factory, labour, materials

Long run costs:

New factories

2010 Profits:

The division's full-year earnings before interest and taxes will be "at the upper end" of its forecast of between 2.5 billion euros and 3 billion euros, Daimler also said. In the first quarter, Mercedes-Benz Cars posted Ebit of 806 million euros. (http://www.marketwatch.com/story/daimlers-mercedes-benz-unit-sees-higher-earnings-2010-05-28)

Strongest Competitors:

BMW, Porsche, (Honda) Acura, (Nissan)Infiniti, (Toyota) Lexus

Mercedes Competitive Advantage:

Oldest running car manufacturer in history, pioneer in automobile innovative technology

http://en.wikipedia.org/wiki/Mercedes-Benz

Mercedes Strengths:

Ability to build brand loyalty for over a century and maintain it's reputation for exceptionally engineered vehicles. Able to adapt to a changing market and keep one step ahead of it's competitors.

Mercedes Weakness:

Overly priced by some people's standards, and can be a deterrent because of this.

Summary:

Mercedes Benz continues to be one of the world's most recognizable and sought after vehicles.

Assignment 3 - Nexen Inc.

Nexen Inc is an independant, Canadian -base global energy company, listed on the Toronto Stock Exchanges under the symbol NXY. They  are focused on three growth strategies: oil sands and shale gas in Western Canada and conventions exploration and development primarily in the North Sea, offshore West Africa and deep-water Gulf of Mexico. Shareholder value is addesd through successful full-cycle oil and gas exploration and development, and leadership ethics, integrity, governance and environmental stewardship.
 http://www.nexeninc.com/

Nexen originated in 2001, as a combination ofWesCana Energy and Canadian Occidental, two long established petroleum companies. It's head quarters are located in Calgary Alberta. http://en.wikipedia.org/wiki/Nexen
It's president and CEO is Marvin Romanow.

Short Run Fixed Costs:

Equipment, labour, plant

Long Run Costs:
 future exploration development.

Their target market - They don't have a target market as everyone needs oil. Oil is used in practically everything and billions of people across the globe depend on it daily.

2010 Company Profits:
Net Income Attributable to Nexen Inc. in 2010 was approximately 1.2 billion.
(2010 annual report).

Canadians’ present petroleum-based prosperity is due to events that occurred on two very different time scales. During a half billionyears of Earth’s history, nature formed hydrocarbons in

the types of sedimentary rocks that are under parts of everyprovince and territory.Over the past century and a half,Canadians became skilled in extracting, processing andtransporting this buried wealth.Canadian companies andindividuals have played a role in developing petroleum resources at home and around the world. http://www.centreforenergy.com/shopping/uploads/122.pdf

Nexen Strengths: Nexen continues to grow and expand and provode shareholder value and a competitive benefits program for it's employees.

Nexen Weakness: Nexen faces daily opposition from environmentally senstive citizens looking for eco friendly alternatives to oil production.  Currently Nexen carries an active Health Safety and Environment department to ensure sustainability. One possible weakness is that they have not to this date explored alternative sources of energy apart from drilling and oilsands themselves.

Nexen Inc. continues to be a well rounded company.

Assignment 3 - Whiskas

Whiskas is a one of the most renowned brands of cat food in the world, and it owned by the American group. Mars, Incorporated. Started as a candy manufacturer, Mars grew over the years to eventually include the purple packaged products for cats. The brand consists of wet and dry food in a variety of flavors, as well as cat treats and lactose reduced cat milk. The brand was first introduced in 1936 under the name Kal Khan, then later changed it’s identity to Whiskas in 1988. The food is manufactured in McLean, Virginia. John Mars is the chair man, and Paul Michaels is the president and CEO. en.wikipedia.org/wiki/Whiskas

Main products:

-Wet Food

-Dry Food

-Cat Milk

-Treats

-Dry Food for Kittens

Whiskas target market are those with a very pragmatic relationship with their cat and its food. They believe their cat is the authority and would therefore choose cat food by what their cat likes. In other words, their relationship with brands is emotional rather than rational.
http://www.thinktv.co.nz/resources/case-studies/whiskas-dry/

Short Run Costs:

plant, equipment, labor, food ingredients

Long run Costs:

opening other plants, supplying more labour, equipment, food ingredients

Competitors include Fancy Feast, Kirkland Signature, Friskies, and Iams.

The company has succeeded largely due to their ability to adapt over the years to a changing market. By diversifying their products they have been able to stay in good business.

One weakness is that they are not keeping up with the new trend of organic cat food with no buy products. Their ingredients in their current dry cat food is Chicken meal, Chicken by-product meal, Corn Gluten meal, Ground Yellow Corn, Rice, Animal fat (preserved with BHA/BHT), Natural Chicken Flavour, Powdered Cellulose, Dried Beet pulp, Wheat Flour, Salt, Potassium Chloride, Calcium Sulphate, Vegetable oil, Caramel colour, Vitamins (Choline Chloride, dl-Alpha toCopherol Acetate [source of Vitamin e], Vitamin a Acetate, Niacin, Vitamin b12 supplement, Riboflavin Supplement [Vitamin b2], Thiamine Mononitrate [Vitamin b1], d-Calcium Pantothenate, Vitamin d3 supplement, Biotin, Pyridoxine Hydrochloride [Vitamin b6], Folic acid), Taurine, dl-Methionine, Trace minerals (Zinc Sulphate, Copper Sulphate, Manganese Sulphate, Potassium Iodide), Whitefish meal, Calcium Carbonate, Ethoxyquin (a preservative). http://www.whiskas.ca/en-ca/home.aspx

Some other organic cat food manufacturers have stolen some of the market through appealing to a more descerning cat owner market, willing to pay top dollar for only the best in cat food.

Game Theory

·         What are the main ideas behind game theory?

Game theory is an umbrella term that was first developed economically to describe the actions of firms and corporations. Later is was used in biology, mathematics, and the animal kingdom. Game theory is used to describe how the actions of one group are based on what the reactions of another would be. There is evidence of game theory in our current economy. WIth an oligopoly, game theory will come into play in certain extents, because each company wants to maximize it's own profit. This can be seen with soft drink, appliance, and movie production companies.

The pay off matrix assumes two different outcomes for two different firms and can be set up in a grid. It can be applied to any situation, not just an economic one. Here is an example of a jail time matrix, and the consequences for each. Each decision is based on the liklihood of what the other will do.

Collusion is the illegal practice of two firms agreeing to set the price of their product or the quantities that each will produce in order to acheive maximum profts. In reality, both firms will cheat on the assumption that the other is cheating, thus driving down the profits they make.
A Cartel is a legalized association of sellers acting in unison. Together they form a mass firm that sets prices and quantities.

7.1 Monopolistic Competition

Monopolistic Competitive Companies

Size:	Small Company	Medium Company	Large Company
Features:	Wedding Invite Shop	Hair Salon Chain	LuLu Lemon Athletica
Differentiated products	Different looks by the designer	Different hair care retail products, different stylists	Designer yoga and workout gear
Control over price	Some. Can vary price depending on education and materials used.	Little. Can vary depending on stylists experience	Lots. Can charge more as consumers are willing to pay. Little substiture.
Mass advertising	Word of mouth and classified ads	TV commercials for the big chains	Word of mouth
Brand name goods	No	May have own products	Yes

Starbucks Gossip

Is Starbucks the ideal definition of a perfectly competitive market? It could certainly be said so! Unless you've been living under a rock all your life, you know that Starbucks is the most famous coffee peddler in all the world. Although they dominate the market, there are still numerous other coffee shops on this planet, all selling coffe. It is easy for prospective coffee shop owners to enter and exit the market.  Everything appears to line up with the definition of perfect competition, except for that whole "seller having NO control over the price" thing. A long standing gripe with Starbucks are their expensive prices for their designer brews. It would appear that Starbucks is very much in control of what it charges per cup! Despite this, the company is still ruled by the competitive market, and that means it must bow and accomodate booms and busts with the rest of them. They've shut down numerous shops that are built to close to older ones. The world has been in recession after all, and that's one thing Starbucks can't avoid! In production terms, they have hit diminishing returns, and it's best to scale back operations and output of their "plants" in order to maintain that tidy profit they've come to expect! Criticized for turning the quaint coffee shop experience into nothing more than a stark visit in a roboticly mass produced and sterile "store", Starbucks is working hard to bring back the charm that the original Seattle store so richly possessed. But is it too late?
Is coffee too expensive at Starbucks? That all depends. Are designer jeans that flatter the body too expensive? What about a Prada hand bag that last a lifetime? When compared to the cheaper alternatives, of course these "luxury items" are expensive. Consider Starbucks the Cadillac of the coffee industry. For some people, the extra money is worth it. For them, the coffee tastes better, the atmosphere is cosier than a mud ridden floored Tim Hortons' and they like being served their cup of Joe by friendly barristas who enjoy what they do. It all depends on the experience you are seeking
. Starbucks is no exception to any large corporation that, no matter how successful they have become, cannot escape the inevitable booms and busts of the economy.

5.5 Long Run Costs and Economies of Scale

Kim's Vanity

Custom Jewellery Since 2011

Kim's Vanity is a petite jewellery shop located in Calgary, Alberta which specializes in made to order necklaces, bracelets and earrings.

The shop is small, with room for only the finest beads, crystals, pearls, sterling silver, and gold available today.

Kim's Vanity targets the smaller scale (if growing) market of descerning women wishing to wear only the highest quality jewels.

Costs of Production:

Long-Run:

Gold and Silver

Diamonds

Precious Stones

Short-Run:

Chain links

Clasps

Beads

Crystals

Wire

Tools

Fixed:

Shop Rent

Utilities

Postage

Website.

Kim's Vanity in comparison to Tiffany & Co:

What size is Tiffany & Co Plant?

Extremely large, built to cater to a global market.

More than half of Tiffany's 2010 sales were made outside the USA, clearly demonstrating the power of a global expansion program that has provided a platform for robust and sustainable growth.

Tiffany has expanded since 2010, with several macro economic challenges facing not only them but the world as a whole.

http://www.shareholder.com/visitors/DynamicDoc/document.cfm?DocumentID=2945&CompanyID=TIF&zid=4aa3a869

5-A Law of Diminishing Returns

A few thoughts on:

The Diminishing Returns to Tobacco Legislation

by Pierre Lemieux

From 1985-1995, the government increased taxes by 52 percent, and not surprisingly, a decrease in tobacco consumption by 18 percent soon followed. So it would appear that increasing taxes would help combat the issue of smoking, right?
Yes and No.
Higher taxes will definitely deter some who are not as deep into the throes of addiction, but for those who will puff on the cancer sticks at any cost, their disposable income gets smaller by with each year they stay hooked.
Pierre Lemieux writes:
“In order to maintain the antismoking movement's momentum, more and more regulations and taxes are required, which is also consistent with the interest of our large public health bureaucracies. Certainly, health bureaucrats have become addicted to power. One wonders what will be the next regulatory steps.”
Indeed, health bureaucrats to appear to be making a fortune off of addicts’ accommodation of the sky high taxes. But where does all this tax money go? Perhaps to truly make a mark in the combat against nicotine addiction, the surplus of sin tax money could be used to provide government funded treatment for smokers (prescriptions, over the counter aids, and addictions counseling), or for research funds to help develop a more effective quitting method. Scrap the expensive pack illustrations and get to the root of the problem.
It appears the government cares just enough about the health of smokers to slap a label on a pack of cigarettes, and safely avoid scrutiny in the process. But are they ready to transfer the millions of tax dollars they make on addiction to really helping smokers? Perhaps reforming their thought pattern would reduce the government diminishing returns.
Pierre touches on comparing the anti smoking campaign to the war on drugs. This is interesting, but incorrect. Nicotine is legalized, saving the millions of tax dollars spent on the incarceration the drug trade garners.
With a product as inelastic in tobacco, the cigarette industry clearly goes against the standard law of supply and demand. Prices go up, but demand stays the same. We have sin taxes and government agenda to thank for this phenomenon. The tobacco companies have it made. How they sleep at night is another story.

4.3 Tourism in Canada

Due to an increasingly high Canadian dollar, there has been a steady travel defecit in Canada. Travelers are seeking out destinations where their own dollar goes further. Conversely, Canada’s domestic travel remains strong, due to solid growth in disposable income.
The Canadian airline industry is benefitting from the high dollar, as it brings increased travel to international destinations. Strong growth in incomes and corporate profits is boosting spending on pleasure and business travel as well.
As previously mentioned, Canada is an expensive destination for many, and this has been reflected in earnings for the accommodation sector. Conversely, strong hotel room rates have attracted hotel investors.

Currently Canadian Tourism is quite elastic. With it’s high dollar there are many other more affordable substitutes for vacations and holidays.


From ‘Canada’s Tourism Industry.:

http://www.corporate.canada.travel/docs/research_and_statistics/trends_and_outlook/industrial_outlook/Industrial_Outlook_Spring_2008_eng.pdf

Excercise 4.2 - Buttery Popcorn

Have you ever tried to sneak warm, buttery popcorn into the movie theatre with you? Chances are you would need a large bag to attempt such a feat, or risk leaving a greasy stain on the outside of your pants pocket. It would be easier to buy a bag at the theatre. You could leave the backpack at home and avoid the throng of animals trailing you to the theatre as well.



So why would anyone want to sneak popcorn in?
One, popcorn in the movie is expensive.
Two, there are no subsittues for the popcorn.
Three, the popcorn is so delicious, that you know you can't make it as well at home.
When there are little to no substitues for a product, the product is said to be inelastic, and generally, the more inelastic a product is, the more revenue it will create.

At $6 a bag, 200 people per night are willing to buy popcorn.
At $8 a bag, the same 200 people per night are also willing to buy popcorn.
If the rising of the price of popcorn deterred the popcorn lovers from buying it, would be an elastic product.

From website: http://m.theglobeandmail.com/report-on-business/article972617.ece?service=mobile

3.2 Market Equilibrium

A simple example of the market for eggs at equilibrium

Production Possibilities

The Production possibilites curve represent several different factors. Figure 1.1 represents the basic idea of scarcity that all societies and economies face. Limited resources allow for a maximim of 20 tonnes of wheat if there are no cars produced. The further down the curve you move, the less wheat and more cars are produced, until there are maximum productoin of cars and no wheat. An economy is said to be operating inside their production curve when they are underemploying their available amount of resources, using them inefficiently, or inappropriately using technology. Figure 1.2 is an increasing Costs production curve. As one comodity is produced less, the other is produced more. With the increased production comes the law of increasing costs: As an economy's production level of any particular item increases, it's per unit cost of production rises. This is beacuse the resources of the less producing will need to be re allocated to the more producing item because a larger sacrifice of wheat production will be required.

Figure 1.3 represents the effect that technological change has on the production curve.Improved technology causes the production curve to shift. But where to? If the same amount of capital goods are produced, the curve will shift out only. If both consumer and capital good production are increased, the the curve will move diagonally upwards and if only the capital goods increase, the curve will move up in a straight line.

Figure 1.4 shows which icrease of good production (capital or consumer) will cause the most growth. Increased production of capital goods allow for more economic growth than increased production of consumer goods. This is because increased capital goods cause the curve to shift out more over time.

Opportunity cost is the sacrifice of one item for the aquisition of another. Let's look at an example. You may wish to put a tidy sum of money away for future growth. All of my past and current invested money has been low risk, low growth. As I'm in school while working and still trying to build my finances, it wouldn't be wise for me to throw any extra money into high risk investments right away. I like collecting my principle investments and savings plus a small interest, guarenteed at the end of a set term. Simply put, I can't afford to lose much of the money I'm putting away. The opportunity cost of these guarenteed savings is the potential for higher yields through a riskier investment. I lose out on the chance to make big money in a short period of time through speculative stocks. I can't have both high returns and guarentee of returns. I must sacrifice one or the other at this point in time. If you are a student, surely you will understand. Living on my own is great, but I must work full time to afford this luxury. In order to advance my current career, I must also aquire higher education. Working full time comes at the opportunity cost of being done school quicker. I can't get a degree in four years and work full time. This is scarcity (of time) in it's simplest form.