Copyright by Paradigm Publishing, Inc. INTRODUCTION TO BUSINESS CHAPTER 3 Assessing Economic Conditions.
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Copyright by Paradigm Publishing, Inc. INTRODUCTION TO BUSINESS CHAPTER 3 Assessing Economic Conditions
Marketing plan 1. Target Market (RESEARCH – should have 8 –10 “cited” sources) LIBRARY 2. Competitor Analysis (3-5 top competitors, +’s and –‘s) YELLOW PAGES & WALK THE BLOCKS 3. Product/Service Characteristics (description) & Pricing Strategy(per text) 4. Promotional Plan (Promotional mix and budget) ON LINE RESEARCH
ECONOMICS Macroeconcomics: Overall US economy Microeconomics: Conditions impacting the industry or the firm. Industry conditions: Demand, supply(competition), regulation, labor, lifestyle. RESEARCH THESE….
Industry Demand Research After tracking pet industry statistics for more than a decade, The American Pet Products Manufacturers Association (APPMA) released new figures today proving the pet industry is leading the pack. Pet spending has more than doubled from $17 billion in 1994 to a projected $35.9 billion for 2005. And, according to the U.S. Census Bureau, the pet industry is now the seventh largest retail segment in the country*. In 2005, Americans’ spending on pets is projected to be higher than ever: · $14.5 billion for food · $8.8 billion for supplies and O-T-C medications · $8.6 billion for veterinarian care · $1.6 billion for live animal purchases · $2.4 billion for other services Pet spending in 2004 was even more successful than projected, with total sales coming in at $34.4 billion. This positions the pet industry 60 percent larger than the toy industry ($20 billion) and 33 percent larger than the candy industry ($24 billion). Source:www.appma.org/press_releasedetail.asp?id=51 - 33k acessed 7/11/05
Copyright by Paradigm Publishing, Inc. Impact of Economic Growth on Business Performance Strong Economic Growth When growth is higher than normal, incomes of consumers tend to rise, and consumers spend more money. This results in higher sales revenue for firms. Weak Economic Growth Weak economy results in lower incomes, a reduction in consumer spending, and a reduction in business sales.
Copyright by Paradigm Publishing, Inc. Impact of Economic Growth on Business Performance Indicators of Economic Growth Growth in GDP Level of unemployment Frictional unemployment: people are temporarily between jobs. Seasonal unemployment: people whose services are not needed during some seasons. Cyclical unemployment: people who cannot find employment because firms are not hiring, due to poor economic conditions. Structural unemployment: people who lack the skills needed by firms. Of the four types of unemployment, cyclical unemployment is probably the best indicator of economic conditions. Frictional best personally, structural worst….
Impact of Economic Growth on Business Performance Trend of Gross Domestic Product Copyright (c) 2008 All rights reserved
Copyright by Paradigm Publishing, Inc. Impact of Inflation Types of Inflation Cost-push inflation: results from higher costs of production. Demand-pull inflation: results from strong consumer demand for goods and services, which allows firms to raise prices.
Copyright by Paradigm Publishing, Inc. U.S. Inflation Rates Over Time
The business expense of transporting products increases when gasoline prices rise. Businesses commonly pass the increased transportation expenses on to consumers. Copyright by Paradigm Publishing, Inc.
When the standards to qualify for a mortgage were increased in 2008, the supply of new homes far exceeded the demand. Consequently, home prices dropped abruptly, and many homes under construction were abandoned because home builders could not sell them. Copyright by Paradigm Publishing, Inc.
Effect of Interest Rates on Interest Expenses and Profits Copyright (c) 2008 All rights reserved
Copyright by Paradigm Publishing, Inc. How Market Prices Are Determined Demand Schedule Indicates the quantity of a product that would be demanded at each possible price. Supply Schedule Indicates the quantity of a product that firms would be willing and able to supply at each possible price.
Copyright by Paradigm Publishing, Inc. How Market Prices Are Determined Interaction of Demand and Supply If the price is too high, the quantity supplied exceeds the quantity demanded, resulting in a surplus. If the price is too low, the quantity demanded exceeds the quantity supplied, resulting in a shortage. The price at which the quantity supplied is equal to quantity demanded is the equilibrium price.
Copyright (c) 2008 All rights reserved How the Equilibrium Price is determined by demand and supply.
Copyright (c) 2008 All rights reserved How the Equilibrium Price is affected by a change in demand
The price of flat screen LCD televisions declined substantially over time as producers learned how to produce them more efficiently, and the supply of televisions produced exceeded the demand. Copyright by Paradigm Publishing, Inc.
How the Equilibrium Price is affected by a change in supply
Copyright by Paradigm Publishing, Inc. How Market Prices Are Determined Effect of a Change in the Demand Schedule When the demand increases, the equilibrium price rises. When demand falls, the equilibrium price declines. Effect of a Change in the Supply Schedule When supply increases, the equilibrium price will fall. When supply decreases, the equilibrium price will rise.
Monetary Policy – Federal Reserve Fed Open Mkt. Comm. The Fed Money supply Interest Rates
Government Influence on Economic Conditions Fiscal Policy (Congress, Pres. & Legislators) Decisions by the federal government about how it should set tax rates and spend money. Revision of corporate taxes affect a firm’s after- tax earnings (profits) directly. Revision of excise taxes (on specific products) affects consumer spending on specific products.
Fiscal Policy – US & Local Govt. Excise Tax Personal Income Tax Corporate Tax Budget Deficits