IMPERFECT COMPETITION AND RISK
Nobody’s perfect. Likewise, not all markets are perfectly competitive. Instead, there are often segments of a market where a few competitors, or possibly one competitor, has a disproportionate influence.
This week, we will explore some imperfect market structures – like monopolies and oligopolies. We’ll discuss how these market structures are created through economic forces – like economies of scale, or legal mechanisms – like patents. These non–competitive structures tend to offer unusually strong pricing advantages to supplying companies, which are often regulated by government to keep them from going against the best interests of society.
Lastly, we will examine the various types of risks that companies face. Regardless of the market structure in which a company operates – perfect competition, monopoly monopsony, oligopoly, or monopolistic competition – there will always be some form of risk. We will describe the forms of risk and the tools that can help minimize their impact.
Market Structure or Risk
Option 1
Choose a company that you believe is a monopoly and describe the specific market conditions that lead you to conclude that it is one. Does the company’s monopolistic status automatically make it harmful to the economy or the public? Provide an example that demonstrates how its monopolistic position might actually benefit the public. If you cannot do so, make a strong argument to the contrary that shows how the firm’s monopoly power is harmful.
Option 2
Using the industry and company you are analyzing for your final project, discuss one internal and one external risk that companies operating in this industry face. As a Senior Manager of that company, what can you do to minimize their impacts? What changes or events, if any, would it take to eliminate these risks? Explain.
JWI 515: Managerial Economics Assignment 3
©2016 Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class.
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Assignment 3: Final Project – Industry Analysis
All of your hard work and relentless efforts have paid off! Your company is doing better than expected. In fact, you will be meeting next month with and presenting to a group of investors to secure an infusion of $100 million in new capital to significantly expand your operations. To prepare for your presentation, you need to conduct a thorough and honest evaluation of your company. Write a 6-8 page paper in which you address the following: 1. Describe your company and its major products or services from economic perspectives using terms and concepts learned in this course. Include such aspects as: a. Market sector and industry b. Market structure—pure competition, monopoly, monopsony, or oligopoly c. Major products and/or services d. Elasticity and the factors that affect their supply and demand e. Other economic characteristics, such as utility, type of good, etc. f. Noneconomic forces that impact sales and profitability, such as weather, business cycles, technology releases, or regulations. 2. Discuss the current and potential economic drivers and risks that your company faces. a. Macroeconomic drivers and risks—Using GUIDES, what elements post the greatest external issues for your company and its industry? b. Microeconomic drivers and risks—What internal risks does your company face? (Examples include, but are not limited to: personnel or managerial issues, supply or distribution constraints, production constraints, creating/sustaining competitive advantages (patents, trademarks, formulations, proprietary processes, etc.), technology, etc.). c. What can your company do, if anything, to influence or better respond to these drivers and risks? 3. Analyze your industry using Porter’s “Five Forces” framework. a. Classify each force as weak, strong, or neutral. b. Why did you choose that classification? c. How can your company best leverage this information? 4. Present information on pricing practices—basic and discriminatory. a. What are the more common pricing practices utilized by your company and/or within its industry? b. What types of discrimination options are not being used, but could be implemented? 5. Evaluate your company’s short-term and long-term economic outlooks. a. Given the above investigation into your company and its industry, what type of outlook (favorable/unfavorable) can your investors expect over the short-term (5-7 years) horizon? b. What type of outlook (favorable/unfavorable) can investors expect over the long-term (8+ years) horizon? Note: Refer to the course content and use online resources to gather both quantitative and qualitative information concerning your company.
JWI 515: Managerial Economics Assignment 3
©2016 Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class.
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Your assignment should follow these formatting requirements: • Typed, double-spaced, using Times New Roman font (size 12) with one-inch margins on all sides. • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, course title, and date. The cover page and reference page are not included in the required page length.
Weight: 23% Assignment 3.: Final Project
Criteria Unsatisfactory Low Pass Pass High Pass Honors
1. Describe the company and its major products or services from various economic perspectives.
Weight: 15%
The company and product or service description is not completed satisfactory. The market sector and industry is described in detail including the market structure, major products and/or services, elasticity of supply and demand, utility, and any other relevant noneconomic business factors that have a direct impact on the business. The description is concise, yet thorough and logically weaves together economic concepts to demonstrate unsatisfactory understanding.
The company and product or service description is partially completed. The market sector and industry is described in detail including the market structure, major products and/or services, elasticity of supply and demand, utility, and any other relevant noneconomic business factors that have a direct impact on the business. The description is concise, yet thorough and logically weaves together economic concepts to demonstrate partially understanding.
The company and product or service description is satisfactorily completed. The market sector and industry is described in detail including the market structure, major products and/or services, elasticity of supply and demand, utility, and any other relevant noneconomic business factors that have a direct impact on the business. The description is concise, yet thorough and logically weaves together economic concepts to demonstrate satisfactorily understanding.
The company and product or service description is thoroughly completed. The market sector and industry is described in detail including the market structure, major products and/or services, elasticity of supply and demand, utility, and any other relevant noneconomic business factors that have a direct impact on the business. The description is concise, yet thorough and logically weaves together economic concepts to demonstrate thorough understanding.
The company and product or service description is exemplarily completed. The market sector and industry is described in detail including the market structure, major products and/or services, elasticity of supply and demand, utility, and any other relevant noneconomic business factors that have a direct impact on the business. The description is concise, yet thorough and logically weaves together economic concepts to demonstrate exemplary understanding.
JWI 515: Managerial Economics Assignment 3
©2016 Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class.
Page 3 of 4
Weight: 23% Assignment 3.: Final Project
Criteria Unsatisfactory Low Pass Pass High Pass Honors
2. Discuss the economic drivers and risks impacting the company and its industry.
Weight: 20%
Discussion is not submitted or does reflect satisfactory understanding. Relevant macroeconomic and microeconomic drivers and risk were not satisfactorily highlighted and assessed in terms of their impact and what the company can do in response.
Discussion is partially completed. Relevant macroeconomic and microeconomic drivers and risk were highlighted and partially described and assessed in terms of their impact and what the company can do in response.
Discussion is satisfactorily completed. Relevant macroeconomic and microeconomic drivers and risk were highlighted and satisfactorily described and assessed in terms of their impact and what the company can do in response.
Discussion is thoroughly completed. Relevant macroeconomic and microeconomic drivers and risk were highlighted and thoroughly described and assessed in terms of their impact and what the company can do in response.
Discussion is exemplarily completed. Relevant macroeconomic and microeconomic drivers and risk were highlighted and exemplarily described and assessed in terms of their impact and what the company can do in response.
3. Use the Porter framework to analyze the market forces.
Weight: 25%
Porter analysis is not submitted or very incomplete. The five forces are not appropriately classified and have little supporting rationale. There is insufficient information about how the company can leverage this information.
Porter analysis is partially complete. The five forces are partially classified with some supporting rationale. Additionally, it partially described how the company can leverage this information.
Porter analysis is satisfactorily complete. Each of the five forces is satisfactorily classified with supporting rationale and satisfactorily described how the company can leverage this information.
Porter analysis is thoroughly complete. Each of the five forces is thoroughly classified with supporting rationale and thoroughly described how the company can leverage this information.
Porter analysis is exemplarily completed. Each of the five forces is exemplarily classified with supporting rationale and exemplarily described how the company can leverage this information.
4. Describe existing and potential pricing practices.
Weight: 15%
Pricing practices are not submitted or do not reflect minimal understanding. Nor is a price discrimination option presented or it does not reflect understanding of price discrimination techniques.
Pricing practices are partially complete. Current pricing practices within the company and/or industry are partially explained as well as price discrimination option that is not currently being used.
Pricing practices are satisfactorily complete. Current pricing practices within the company and/or industry are satisfactorily explained as well as price discrimination option that is not currently being used.
Pricing practices are thoroughly complete. Current pricing practices within the company and/or industry are thoroughly explained as well as price discrimination option that is not currently being used.
Pricing practices are exemplarily completed. Current pricing practices within the company and/or industry are exemplarily explained as well as price discrimination option that is not currently being used.
JWI 515: Managerial Economics Assignment 3
©2016 Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class.
Page 4 of 4
Weight: 23% Assignment 3.: Final Project
Criteria Unsatisfactory Low Pass Pass High Pass Honors
5. Evaluate short-term and long-term economic outlooks.
Weight: 15%
Both the short- term and long- term outlooks are not submitted or do not reflect adequate economic understanding.
Both the short- term and long- term outlooks are partially complete.
Both the short- term and long- term outlooks are satisfactorily complete.
Both the short- term and long- term outlooks are thoroughly complete.
Both the short- term and long- term outlooks are exemplarily completed.
6. Clarity, logic, writing mechanics, and formatting.
Weight: 10%
Multiple mechanical errors; much of the text is difficult to understand or the text does not flow; fails to follow formatting instructions.
Several mechanical errors make parts of the text difficult for the reader to understand; the text does not flow; the discussion fails to justify conclusions and assertions.
More than a few mechanical errors; text flows but lacks conciseness or clarity; assertions and conclusions are generally justified and explained.
Few mechanical errors; text flows and concisely and clearly expresses the student’s position in a manner that rationally and logically develops the topics.
Few to no mechanical errors; text flows and concisely, clearly, and exemplarily expresses the student’s position in a manner that rationally and logically develops the topics.
