This document contains an individual assignment prepared by Alealiana Binti Azmi for the course ECO745 Economics for Business Decisions. The assignment contains several parts analyzing the goals of firms, providing a case study analysis for F&D Sdn Bhd, and conducting a case study analysis for Johan Electronics Co. It uses regression models to forecast demand and maximize revenue based on market characteristics. Key determinants of demand discussed include income, tastes, prices of other goods, and population changes.
This document contains an individual assignment prepared by Alealiana Binti Azmi for the course ECO745 Economics for Business Decisions. The assignment contains several parts analyzing the goals of firms, providing a case study analysis for F&D Sdn Bhd, and conducting a case study analysis for Johan Electronics Co. It uses regression models to forecast demand and maximize revenue based on market characteristics. Key determinants of demand discussed include income, tastes, prices of other goods, and population changes.
This document contains an individual assignment prepared by Alealiana Binti Azmi for the course ECO745 Economics for Business Decisions. The assignment contains several parts analyzing the goals of firms, providing a case study analysis for F&D Sdn Bhd, and conducting a case study analysis for Johan Electronics Co. It uses regression models to forecast demand and maximize revenue based on market characteristics. Key determinants of demand discussed include income, tastes, prices of other goods, and population changes.
This document contains an individual assignment prepared by Alealiana Binti Azmi for the course ECO745 Economics for Business Decisions. The assignment contains several parts analyzing the goals of firms, providing a case study analysis for F&D Sdn Bhd, and conducting a case study analysis for Johan Electronics Co. It uses regression models to forecast demand and maximize revenue based on market characteristics. Key determinants of demand discussed include income, tastes, prices of other goods, and population changes.
Question i- Analyze the different goals of firms (10marks)
Firms, regardless of their size or industry, operate with specific goals in mind. These goals serve as guiding principles that shape their strategies, decision-making processes, and overall direction. The goals of firms can vary significantly depending on factors such as industry dynamics, market conditions, organizational structure, ownership structure, and stakeholder expectations. In this essay, we will analyze and discuss the diverse goals pursued by firms, ranging from profit maximization to social responsibility, market leadership, innovation, and sustainability. Diagram showing different objectives of firms.
• Q1 = Profit maximisation (MR=MC)
• Q2 = Revenue Maximisation (MR=0) • Q3 = Marginal cost pricing (P=MC) – allocative efficiency • Q4 = Sales maximisation – maximum sales while still making normal profit (AR=ATC)
a) Profit maximization Maximising profits is a fundamental goal for many firms. Profitability ensures the survival and growth of businesses by providing financial resources to invest in research and development, expand operations, reward shareholders, and attract capital. Profit maximization is often associated with shareholder primacy, where the interests of shareholders are prioritized above other stakeholders. This goal can drive firms to seek cost efficiencies, increase sales, optimize pricing, and explore new revenue streams.
b) Market Share Leadership: Some firms strive to become market leaders by capturing the largest share of the market in which they operate. They may pursue strategies such as aggressive pricing, product differentiation, and extensive marketing efforts to attract customers and gain a competitive advantage. c) Growth and Expansion: Many firms seek to grow and expand their operations over time. This can be achieved through various means, such as entering new markets, introducing new products or services, acquiring other companies, or expanding geographically. Growth-oriented firms aim to increase their market presence and generate higher revenues.
d) Customer Satisfaction and Loyalty: Firms that prioritize customer satisfaction and loyalty aim to build strong relationships with their customers. They focus on delivering high-quality products or services, providing excellent customer support, and maintaining a positive brand image. Customer-centric firms believe that satisfied and loyal customers contribute to long-term success and profitability.
e) Innovation and Research: Some firms place a strong emphasis on innovation and research and development (R&D). They invest in creating new and improved products, technologies, and processes to stay ahead of the competition and meet changing customer needs. Innovation-driven firms aim to foster a culture of creativity and continuously improve their offerings.
f) Corporate Social Responsibility (CSR): Many firms recognize the importance of social and environmental responsibility. They adopt CSR initiatives to contribute positively to society, protect the environment, and address social issues. CSR-focused firms aim to balance their economic goals with ethical and sustainable practices.
It's important to note that firms may prioritize different goals depending on their specific circumstances and the prevailing market conditions. Additionally, firms can have multiple goals simultaneously and must strike a balance between them to achieve long-term success. Part II
Case Study
(40marks)
Question :
F&D Sdn Bhd, based in Ipoh is a producer of shampoo products. About a year ago, F&D products rolled out its new Super Shampoo in 30 regional markets following its success intest markets.
F&D Sdn Bhd decides to project its demand for the future to reduce market disruption. The company appoints you as the management consultant to advise the company on the management action. The research department collected data and obtained the following information.
a) Provide a market report for F&D Sdn Bhd based on the market demand (20 marks)
Answer:
Table shows the R and R2 values. The R value represents the simple correlation. The result is 0.931, which indicates a high degree of correlation. The R2 value indicates how much of the total variation in the dependent variable. Price can be explained by the independent variable, Income. In this case, the results is 84.6% and can be explained as large correlation. The next table is the ANOVA, which reports how well the regression equation fits the data. The table is as shown below:
The table shows that the regression model accurately predicts the dependent variable. This reflects the statistical significance of the regression model used. In this case, p is 0.0005 and it is less than 0.05, indicating that the regression model statistically significantly predicts the outcome variable.
The Coefficients table provides the necessary information to predict price from income, as well as determine whether income contributes significantly to the model by looking at the "Sig." column below. In addition, we can use the values in B column under unstandardized coefficients columns as shown as below: b) Use the regression model to forecast weekly demand in new markets A with the following characteristics (5marks)
= RM192.357 d) Briefly explain 4 other determinants that may well influence the demand for F & D product. (10marks)
Answer:
i) Incomes - Increase in consumers incomes is likely to shift a demand curve - Disposable income people buy more of the things they want - For example, increase in income could lead to increased in demand for cars, holidays and others - ii) Change in tastes and fashion - If goods become more fashionable the demand for it will increase. If the goods go out of fashion, the demand will decreased - iii) Change in price of other goods - Complimentary good will also shift the demand curve - A change in price also can change the demand curve of substitute good - A substitute is a good use instead of another one - Example, if train fares higher, people will prefer to use a public transport - iv) Change in population - Population can have a significant effect on demand. Population size and demographics play a crucial role in shaping consumer demand patterns and market dynamics. - Factors such as age, household size and urbanization can determinants the influence of demand because for example, young generation prefer more digitalization compare to old generation. The demand for smartphone among young generation might be higher than older generation. Part III
Johan Case Study
(30marks)
Johan electronic Co. decides to project its demand for the future to reduce market disruption. The company appoints you as the management consultant to advise the company on their future management action. The research department collected data and obtained the following information.
Question : a) Provide a market report based on the market demand for Johan Electronics Co. Product (15marks)
Answer:
Table shows the R and R2 values. The R value represents the simple correlation. The result is 0.968, which indicates a high degree of correlation. The R2 value indicates how much of the total variation in the dependent variable. Price can be explained by the independent variable, Income. In this case, the results is 91.4% and can be explained as large correlation.
The next table is the ANOVA, which reports how well the regression equation fits the data. The table is as shown below: The table shows that the regression model accurately predicts the dependent variable. This reflects the statistical significance of the regression model used. In this case, p is 0.0005 and it is less than 0.05, indicating that the regression model statistically significantly predicts the outcome variable.
The Coefficients table provides the necessary information to predict price from income, as well as determine whether income contributes significantly to the model by looking at the "Sig." column below. In addition, we can use the values in B column under unstandardized coefficients columns as shown as below: b) Use the estimated demand function to forecast the demand in a new marketA with the following characteristics: (5marks)
Market A Forecasted Price (RM) Advertising Personal Selling
c) Provide advise if the company plan to maximize its revenue at market A
(5marks)
Answer: a) Pricing Strategy: Analyze the impact of price on sales. Determine whether adjusting the price of the product can increase demand and, consequently, revenue. Consider conducting pricing experiments or market research to identify the optimal price point that balances profitability and customer demand.
b) Advertising and Promotion: Evaluate the effect of advertising expenditure on sales.
Determine if increasing advertising efforts can lead to higher sales and revenue. Consider allocating resources to targeted advertising campaigns that effectively reach the target audience in Market A. Monitor the response to advertising initiatives and adjust strategies accordingly.
- Johan Electronic Co need to develop effective marketing strategies to reach
your target audience and generate sales. - Advertising by using digital marketing, social media and others is the example in order to maximize revenue. - Marketing also important to create awareness and increase demand. c) Personal Selling: Assess the influence of personal selling expenditure on sales. Review the effectiveness of personal selling efforts and identify areas for improvement. Ensure that the sales team is adequately trained and equipped to engage with potential customers and close sales effectively. Evaluate the return on investment for personal selling activities and adjust spending accordingly.
d) Market Segmentation: Segment the market to identify specific customer groups in Market A. Analyze their preferences, needs, and buying behaviors. Tailor marketing messages and strategies to address the unique requirements of each segment. This targeted approach can increase the effectiveness of marketing and sales efforts, leading to higher revenue.
e) Competitive Analysis: Understand the competitive landscape in Market A. Identify the
strengths and weaknesses of competitors, their pricing strategies, and their advertising and selling efforts. Differentiate your product or service by highlighting unique features, benefits, or value propositions. Focus on providing superior customer value and experiences to attract customers and gain a competitive edge.
f) Continuous Improvement: Regularly monitor and evaluate sales performance, market
trends, and customer feedback. Continuously adapt strategies based on market dynamics and customer preferences. Stay updated on industry developments and incorporate innovative approaches to stay ahead of the competition.
