Case study: Minute batteries report a) What happened to sales of batteries in the period 2004-8? Provide a quantitative estimate. How do you explain the fact that over that period the amount of batteries sold increased whereas the value of sales declined? From figure 20 we can see that the volume of sold batteries from 2004 (584 million batteries) to 2008 (611 million batteries) has increased by 27 million batteries. During that period of time the volume has slightly raised, where in 2006 was the highest volume of batteries sold 620 million batteries.
Being a difference the value at 2004 to 2008 prices has decrease, started with Emma in 2004 and falling down to IEEE m in 2008. Here the conclusion which we can drew, as the prices of the batteries fall down , the volume or the demand for them will go up and the way around. The competitors selling batteries are too many, that makes the price of them goes down as the demand is too high and consumers have got big selection. We consider that as price elasticity of demand, where the elasticity measures the extent to which demand will change.
Where we have % change in demand greater than % change in rice, we have elastic demand same as in this case. In those recent years, the market for batteries sold has become bigger as producers of batteries have increased under the influence of huge demand of batteries. The prices of batteries had felt down because of that and also competition is pretty high. Because of the low prices of the batteries, the sales still increasing, because of need of batteries for all technologies this required batteries in order to work. Figure 21 .
We can see there are several classifications as purchasing batteries made by adult population, number of errs of batteries and number of batteries purchased per buyer. They all have slightly increased by approximately 1% or less per each category. Situation for the figure 21, which presents purchasing of batteries events, is almost the same. Figure 24. The average spending on batteries per battery buyer based on adults started with 49. 44 in 2005 and has grown to 50. 64 in 2008. The average spending for batteries per buyer stood almost the same during the period from 2005 to 2008, it was 10. In 2005 and felt down to 10. 00 in 2008. The number of buyers of batteries tit 38 96 in 2005 and reached to 1 18 in the tolling year , kept tailing down in 2007 (40. 05) till reaching almost its starting point (38. 89) in 2008. Figure 26 we can see over the volume sales of batteries by type. We can see that Recharge cells batteries have growth rapidly independently by the small segment of the market. In 2005 they started with 1. 5 % of market volume sales and reached to 2. 3% for 2008, and growth with 56% since 2005. However, alkaline batteries accounted for 79% of value sales, are the biggest segment of the market.
In 2006 value of sales was Emma and felt down to Emma in 2008. There is no visible change in volume of sales for alkaline batteries, the difference is 1%. The value sales of Kink carbon batteries have decrease from 2005 to 2008 with 14 million and the volume of sales has fallen down from 13. 4% in 2005 to 10. 6% in 2008. Specialists hold their own. The value sales of this type of batteries have decreased slightly with E from 2005 to 2008, there has no change in percentages, and the volume of the sales has increased by EOM, starting with Meme in 2005.
There specialist/other have 2. 6% which has grown to 3. 3% in 2008. ) Using the data supplied for that period show how it can be calculated that the price elasticity of demand for batteries is about -0. 46. Interpret this figure and explain what it implies about the behavior of consumers. Percentages change in price: P = (2008 price -2004 price) / (2004 price) To find value, current price has to be added with 2009 price and divided by 2 100=- 9. 8 Percentages change in quantity: = (611-584)/584 x 100 = 4. 6 E = change in quantity demand) / (% change in price) E = 4. 6/(- 9. 8) = 0. 6938 These days’ people tent to buy more at lower prices instead of higher however pending on availability and importance in goods. The reaction to the price change shows demand elasticity. If the prices increase the consumer purchases less and then the prices go down the purchases increase. This is a logical reaction of consumer; however it depends on particular needs. There are products in the market which consumer has to buy it even the price has increased. The calculation above shows that consumer behavior is not responsive to the price change. The elasticity is low and it has only a little influence on demand.
As it can be seen price elasticity of eateries is less than 1 and quantity of batteries is not sensitive to price changes over the period. Rechargeable batteries concerning about value and environment had a big impact on substitute and even costing more the price was effective. The popularity of these batteries hit the Alkaline sales. The other factor which had an impact on quantity demand was amount of income approachable to spend. Zinc carbon batteries in 2 low income consumers. Recovered in sales and low cost batteries were a c) Account for the increase in sales of zinc carbon batteries in 2009, following a period of decline.
The increase in sales of zinc batteries in 2009 can be accounted for by many different factors that have taken place. These have all contributed towards the increase these factors are as follows: The first factor is the fact that there has been a second hit of recession that has taken place in the I-J. This has meant that people have not got the money available to entertain themselves and children over periods such as the summer holidays and over Christmas. This has resulted in adults and children playing with more toys and hand held games, which requires batteries. An example of this is the fact that games such as bop it making a comeback.
It has become cheaper to buy games like this and buy batteries then to buy computer games and have to pay the electricity charges to be able to play them. The second factor is that zinc batteries are more cost effective than any other type of battery available in the market. These batteries are sold in the pound shops in big packs that may not last as long but still work out cheaper in the long run. Large supermarkets such as Tests and Sad have realized the market for cheap zinc batteries and have so introduced their own range of these. Both supermarkets offer two brands at two different prices.
You can buy the standard Adds and Tests brand which have a longer life and are a little cheaper than brands such as Durable and Phillips. They also have Sad smart price and Tests everyday brand which are cheaper than the pound shop batteries but have a smaller battery life. These alternatives that are available means that the zinc batteries are much more cost effective and have a bigger market share than rechargeable and alkaline batteries. The final factor is the fact that the population in the UK has increased this has meant hat the need for necessities such as batteries has increased.
The increase in the sales can be a result that people aren’t buying more batteries but the fact that there are more people buying the same number of batteries. If the sales of a product increase it is not necessary that the existing customers are buying more but instead that there are more customers buying the same amount. These factors have all contributed slightly towards the increase in sales of zinc batteries. Individually each factor may not make a big difference to the volume of ales but as the factors increase you then get an increase that is larger and more measurable. ) The market structure that has been used in this market for Minute batteries is Oligopoly. This structure stands between Monopoly and Perfect competition . This is a structure in which a small number of companies compete. Few large producers of either differentiated products or homogeneous dominate in the market. It determines by whether the firm produce differentiated or standardized products. The differentiated products are often connected to significant non price competition ND strong promotion.
The quantity sold depends on the other firm’s price and quantity sold, and the decisions are influenced of the decisions of other firms. The industry is dominated by few sellers and each one is aware of the other’s actions. The responses, taken into account should be consistent with the other market partners. There are only few firms, so the actions of one firm can affect the others. Oligopolies are price makers rather than price takers. It should take into consideration the potential reaction of competitors to its own output, product characteristic, pricing ND advertising decision.
The output level is set in order to maximize firm’s profit, but for example, deciding to make lower prices, the firm must make an admission of possible response of the other firms. Oligopolies competition is divided by perfect and imperfect. Perfect oligopoly appears when the firm produces homogeneous or identical products. Imperfect oligopoly occurs when the products that oligopolies produce are differentiated. Collusive and competitive oligopoly In the competitive oligopoly the degree of imperfect competition is influenced by the rim’s behavior.
When forming a market strategy, the firms must to take account of the reactions of one another (cooperative behavior), when they decide the market strategy without co-operation or collusion (uncooperative). By co-operation and collusion, the uncertainty can be reduced. By acting collectively, the firms can achieve a better outcome for all of them (maximize their profits). Barriers of entry There are very high barriers of entry. The most important ones are access to expensive and complex technology, economies of scale, actions taken from other rims in order to destroy or discourage incipient firms, and patent.
Other barrier for new firms to enter the market can be the preference of the government to other, already existing firms. New firms may have small market share and they would not be able to achieve economies of sales. They would be high-cost producers and they would not survive. References: Samuelsson. P, Northwards. W. Tenement edition, McGraw-Hill Inc Powell. R, (1993), Economics for professional and business studies, second edition McConnell. C. (1999), Economics principles, problems, and policies, fourteenth edition, McGraw-Hill