Assignment #3: Business Analysis Report

Business #1: H&M
H&M is a clothing store that focuses on providing customers with great fashion and quality at the best value. The business was started in 1947 by Erling Persson in Vasteras, Sweden. Currently, H&M have over 2200 stores across 41 markets. The business's industry is multinational. Their products include affordable clothes, accessories and footwear. They target families and teenagers with potential. Their target market also depends on the location of their store. H&M is cost conscious and they have an advantage because they efficiently distribute their products. The reason that H&M have been so successful is because they have affordable clothing and they always have an attracting atmosphere. Some weaknesses include quality of jeans and low supply of sizes on products.

Business #2: Seattle's Best Coffee
Seattle's Best first started in 1970. Their main products was coffee. They target coffee drinkers that want the best coffee out there. Pricing of Seattles has to include inventory, labour, building costs, and advertising. There are five stages of production. This is an overview:
§ Ranking their coffee in levels:
1: mild, light, and crisp
2: bright lively, easy drinking
3: balanced, smooth, full flavoured
4: rich, elegant, complex
5: bold, dark, intense
§ Growing:
-Work with coffee farmers to ensure quality standards are met.
-Responsibly grown and ethically traded coffee
-Coffee cherries are grown on trees and contain 2 beans
§ Sourcing:
-Obsessively taste dozens of coffee bean shipments
-Beans are tasted a minimum of 3 times a day so they match up to a level
§ Blending:
-To balance Level 3, the best beans are sourced and then blended together before roasting.
§ Roasting:
-Each level requires its own finely calibrated roasting curve
-The gentle roasting process coaxes the flavour out of each bean while producing the signature Seattle’s Best Coffee.

Business #3: Starbucks
Starbucks is an multinational industry. Their main goals are to inspire and nurture the human sprit, one person, one cup, and one neighbourhood at a time. They started in 1970 where the first Starbucks in Canada opened on March 1st, 1987 in Vancouver, B.C. The name "Starbucks" came from Herman Melville's novel "Moby Dick." Currently, there are over 6,000 locations in over 30 countries. In country, there are over 785 company-operated stores and over 266 licensced concept stores. Employees at Starbucks are called "partners." Starbucks main products are coffee, coffee beverages and pastries. Their main competition include Second Cup and Tim Hortons. Starbucks has an advantage over their competition because employees are friendly, food is fresh, service is fast, and coffee is never served more than 30 minutes when it was brewed.

Business #4: Cora
Cora is a licensed chain restaurant that started in may 1987. The chain was started by Cora Mussely Tsouflidou who bought her first diner in Montreal. The main goal of Cora was to change the generations eating habits and to promote the importance of breakfast. Currently, Cora has expanded over 120 franchised restaurants. Their main products are breakfast favourites such as omlettes, waffles and crepes.

Business #5: Ikea
Ikea is a furniture store that was founded by Ingvar Kamprad in 1926 in Smaland, southern Sweden. Ikea's vision was to provide well designed furniture at low prices so that they could create a better life for people. Ikea has over 280 stores in 26 countries. Sales revenue were at 23.1 billion annually. Ikea's business idea was based on their relationship with the customer. They start off by working with manfacturers and then their buyers look worldwide for suppliers with the most suitable raw materials, then they buy bulk materials on a globe scale to get the best deals and the lowest price.

Comparing Market Structures

https://docs.google.com/spreadsheet/ccc?key=0Au5cuYUXsI63dHctaTREWUZud0M2Z3FoVzZQTzQ0MlE&hl=en_US#gid=0 - this is the graph, you can access it through your SAIT email

Defining Oligopoly and Game Theory

Game theory is the act of analyzing firm behavior that highlighrs mutual interdependence among firms. It was developed by John Neumann & Oscar Morgenstern. They came up with the idea to analyze strategic behavior. The payoff matrix is the figure of the outcome of if Aman and Omar keeps their aggreement for trade. It also shows the possibilities of what would happen if one of them cheat and the result for the other party. Cartel is where sellers act in unison.

Source: Textbook, Chapter 11 (pages 387-394)

Competing as Starbucks

Starbucks can be considered to be part of a perfect competition market because compared to other companies, they are one of the top successful. With their friendly "partners" (employees), great training, fresh products, variety of merchandise and over 10 different types of coffee beans to purchase, compared to the competition, I would choose Starbucks. Starbucks would realign their business practices mainly to satisfy the average customer. For example, Starbucks has changed the height of their bar and their espresso machines so that customers were seen. This is to provide the partners a chance to connect with their customers. Starbucks also wanted to change recipes of their products to meet quality expectations.

Starbucks had to close down stores because they were unprofitable due to the fact that another nearby Starbucks were taking all their business. Starbucks is planning to close down 5% of U.S. stores. The reason being is that they are trying to boost its stock prices. Starbucks would have lost profits due to store closures. Long run costs to stores would be advertising, and inventory costs.

To compare to Starbucks for me is easy. This is because I am currently working as a shift supervisor. As an employee, I still think that our products are expensive. At least once a day, I get a customer saying that a product is too expensive. But they have to know that we need to cover inventory costs, equipment and labour. I once had a customer tell me that Starbucks is too expensive that they are the reason people are on welfare. I think this is unfair because we are not forcing people to be our customers, we are just known to provide a excellent experience to customers. I think that if Starbucks were to lower prices, demand would increase and supply would decrease, maybe causing a slight shortage.

Sources: http://starbucksgossip.typepad.com/_/2007/02/starbucks_chair_2.html

http://www.cbc.ca/news/business/story/2008/07/01/starbucks-closures.html

http://seattletimes.nwsource.com/html/businesstechnology/2008028854_starbucks02.html

Long Run Costs and Economies of Scale

I have looked at Andreas blog, but I did not find a business idea of hers. Sorry about that.

Law of Diminishing Returns

The article that is being expained is about tobacco legislation. It explains reasons as to how tobacco leads to many causes of different types of diseases. The reason that the debate for tobacco legislation is lessend is that remaining smokers are usually ones that value smoking and need higher disincentive before they quit smoking and also that those smokers that were easily persuaded to stop smoking have already quit.
I think the point of diminshing returns is that too much information on health problems of tobacco consumption is spread and consumers are inelastic to the information. Currently, cigarette consumption is smuggled between 6-8.5 percent in the world· To lessen diminishing returns on tobacco, increasing regulations & taxes would need to come into effect. Currently, the supply and demand are both equal for tobacco. Sin taxes are taxes that are applied towards proscribed goods and services. Examples include tobacco, alchohol, soft drinks and candy. In terms of sin taxes, if the sin taxes increased on tobacco, it still would not affect the consumption of tobacco. Instead, it increases the consumption of tobacco.

Oil and gas industry in Alberta

Oil and Gas Industry in Alberta

Currently in Alberta, investments in oilsands are increasing. Over the last decade, over $100 billion dollars have been invested in oilsands. The current average investment is $10 billion a year. GDP growth is happening in Alberta but gas is currently a negative factor. In 2008, Alberta had collected gas royalties of $8 billion. This year, we have only collected $1 billion. This results proves that demand for gas has declined over the last few years. The demand of investing in oilsands have definetly improved.

The demand for gas had affected the production in Alberta. Not only is it a problem for the industry, but it is also a problem for Alberta's government. Alberta's government is approving of the Northern Gateway pipeline project but B.C.'s premier is agianst the project. This may be due to the fact that British Columbia is new to to energy production.

Source: http://www.edmontonjournal.com/business/Bullish+Alberta+future/5876331/story.html

Elasticity and Revenue

Impact of Elasticity of Demand on Price in the Hearing Aid Market

Source : http://www.audiologyonline.com/articles/article_detail.asp?article_id=1757

Below is a an example of the relationship between price elasticity and total revenue. The graph is from the source above. The relationship between the two is the for revenue to increase, price has to increase. Price is elastic to revenue because when price increases, total revenue will drop because demand is down.

Below is a chart from the article of how demand can be both elastic & inelastic to pricing.



This article is based on the impact of elasticity in the hearing aid industry. The elasticity of a products demand has to do with their substution products. This is the leading determinant. As stated in the article, "A market having a large number of substitutes—such as over-the-counter pain and fever medications—generally lends to an increase in responsiveness by consumers (i.e., elasticity) as price changes." This just means that perhaps a customer is looking for birth control, and they usually get "Yasmin." for about $15. The next time that they go into the pharmacy, this birth control doubles the price and is now $30. The customer would likely ask the pharmasist for other brands, lets say "Plan B" which is $15 dollars. The customer might switch brands and try "Plan B" because its now cheaper. So now the demand for "Yasmin" has decreased, which makes the elasticity of the price to come into affect immediatetly. Now, the price of "Yasmin" would decrease, hopefully making the total revenue increase due to decrease of price.

Graphing Changes to Demand

Demand is know as the quantities that consumers are willing to buy per period of time of various prices. In this blog, demand will be discussed. Demand changes can be caused from different reasons. One is known as the price. For instance, if a pint of blueberries were .99 cents, the demand would increase because the price is fair and low. In the case that this pint of blueberrys were $4.99, demand would decrease because the price is too high.
I know what demand and supply means. Personal situations can involve demand such as grocery shopping. Let's say that because we all need tissue for our homes, we buy it often. I went to a drugstore today, and they had tissue boxes for .77 cents. This is cheap for the brand and how many plys the tissue have. The store had put a limit quantity on this product because if there was no limit, the demand would be too high and supply would be low. If there was no limit, there would have been unhappy customers since they never got a chance to purchase this item. This would then cause customers to not visit the store as often because they were unhappy with the situation.

Games about the Economy and Marketplace

After playing Diner City, I've noticed that there is a lot of competition in the economy. When I was playing this game, my competition had started with some decorations so more customers went to their restaurant. I then added lights and live music which attracted more customers. If another person were to play this game, I would recommend starting with some decorations then add live music and a menu board to let customers know what would be on the menu at your restaurant. This also demands more of what is on your menu, so your supply and demand would change. When selling products at a price, you have to think of what is in the cost. One would be the price you bought it for, and the second one would be labor costs. The price of your products should be able to cover these costs and also make a renevue at the same time.

Possibility Curve - ECON205

Learning about the economy can help us build a model of what it might look like. Figure 1.1 in our text illistrates the circular flow of our economy. In our economy, there are two sectors: the business and household sector. Even though this is our economy flow, our economy is more complex. Our next figures which are Figure 1.2, Figure 1.3 and Figure 1.4 in the text. These figures represent production possibility curves. In figure 1.3, we have identified the law of increasing costs. This means that when the production of a single item increases. the per unit cost of producing additional units will rise as well.

Some choices in life that are made are based on scarcity. Let's say we are grocery shopping in the winter, I do this on a weekly basis. We come across the produce section. We see some fresh cherries for about $4.50/lb. Of course this is far more pricey than usually because right now, cherries go for $1.99/lb. Demand could be higher for cherries in Winter because we don't usually get them. If we wanted to wait till summer time for cherries, it would cost us less and we could save money. If we were to buy cherries in Winter, we would be paying a higher price. We have the choice to purchase this in Winter and Summer. The choice is also to save or spend money.

When I went back to school, the one opportunity cost I gave up was being able to go out as often. To do good in school, I gave up hanging out with friends a lot, going to the movies and going out late. I think that this opportunity cost was a good one because it helped me stay in line in school.