Bates makes wage demand warning
Leeds chairman Ken Bates believes that players leaving the Premiership need to be realistic in their wage demands.
Fulham captain Lee Clark, 32, had been in line for a move to Elland Road but failed to agree personal terms.
"I know of three players who have been asking for £12,000 a week. The average Championship wage this season is going to be around £3,000 to £4,000."
Leeds encountered major financial problems after their relegation from the top flight and Bates is keen to avoid any such worries in the future.
"We have also had one player, who will not even be fit for the start of the season, asking for £12,000 a week for a two-year deal and his agent wanted another £75,000," he added.
Source: BBC News 14th June 2005 (adapted)
Questions
1.What is the percentage difference between the £12,000 a week asked for and the average Championship wage?
between 300% and 200 %
2.Calculate the difference between the average Championship wage and that of a Head teacher.
Head Teacher average wage is £1,200. So the difference is 150%
3.What is the annual salary of someone on £12,000 a week?
£624,000
4.Calculate the tax payable on a salary of £12,000 a week.
£240,224 (38% from salary)
5.Calculate the hourly wage of someone on £3000 a week assuming a 24-hour day.
£18 approx.
6.Research the amount of hours a day a footballer actually ‘works’ and then re-calculate the hourly wage. Compare that to the ‘going rate’ to see privately a Consultant Surgeon at a local hospital.
number of hours - 7
hourly wage - £245
going rate is about £45, which is 18% from a footballer hourly wage.
Saturday, 22 November 2008
Tuesday, 18 November 2008
question 30
Steadying energy prices helped to improve consumer sentiment in the US during January, according to the University of Michigan's index.
It rose for the third month in a row to 93.4 from December's final reading of 91.5, ahead of analysts' predictions.
Better job conditions and an optimistic outlook for US stocks during 2006 also helped push the index higher.
Consumer spending makes up two-thirds of US economic activity and is a key indicator of the health of the economy.
The dollar rose against the yen and firmed against the euro shortly after the report was issued on Friday.
Retail heating oil prices fell to a five-week low at $2.43 a gallon, down 1.7 cents from a week ago but up 46 cents from a year ago, EIA said.
On Thursday, the number of new jobless workers fell to 271,000 last week, its lowest level since April 2000, the Labor Department said.
Source: BBC News 20th Jan 2006 (adapted)
Questions:
1.What was the percentage increase in the index?
2% approx.
2.as the dollar rose against the yen this would make exports…(cheaper/more expensive)
more expensive
3.imports from Japan would now be…(cheaper/more expensive)
cheaper
4.If demand for imports is elastic, will the dollar’s rise be of great help/little help to Japanese exporters?
I think it will be of great help, because with dollar's rise, imports price for the US goes down. As price goes down, demand goes up ( assuming demand for imports is elastic), which will increase Japanese exports.
5.How much was retail heating oil a year ago?
$1.97
6.How much was retail heating oil a week ago?
$2.413
7.If demand for retail heating oil has not changed since a week ago, why would the price have fallen?
Retail price for oil is affected not only by demand. For instance, a change in availability and distance from supply, transportation costs causes change in price.
8.If a year ago demand for oil was 500,000 units and it is now 600,000 does this mean that the relationship between price and demand is direct, not inverse?
It is direct, but the numbers also prove that the demand for oil is inelastic. It means, that if price for oil rises, demand falls, but falls a little.
It rose for the third month in a row to 93.4 from December's final reading of 91.5, ahead of analysts' predictions.
Better job conditions and an optimistic outlook for US stocks during 2006 also helped push the index higher.
Consumer spending makes up two-thirds of US economic activity and is a key indicator of the health of the economy.
The dollar rose against the yen and firmed against the euro shortly after the report was issued on Friday.
Retail heating oil prices fell to a five-week low at $2.43 a gallon, down 1.7 cents from a week ago but up 46 cents from a year ago, EIA said.
On Thursday, the number of new jobless workers fell to 271,000 last week, its lowest level since April 2000, the Labor Department said.
Source: BBC News 20th Jan 2006 (adapted)
Questions:
1.What was the percentage increase in the index?
2% approx.
2.as the dollar rose against the yen this would make exports…(cheaper/more expensive)
more expensive
3.imports from Japan would now be…(cheaper/more expensive)
cheaper
4.If demand for imports is elastic, will the dollar’s rise be of great help/little help to Japanese exporters?
I think it will be of great help, because with dollar's rise, imports price for the US goes down. As price goes down, demand goes up ( assuming demand for imports is elastic), which will increase Japanese exports.
5.How much was retail heating oil a year ago?
$1.97
6.How much was retail heating oil a week ago?
$2.413
7.If demand for retail heating oil has not changed since a week ago, why would the price have fallen?
Retail price for oil is affected not only by demand. For instance, a change in availability and distance from supply, transportation costs causes change in price.
8.If a year ago demand for oil was 500,000 units and it is now 600,000 does this mean that the relationship between price and demand is direct, not inverse?
It is direct, but the numbers also prove that the demand for oil is inelastic. It means, that if price for oil rises, demand falls, but falls a little.
Saturday, 15 November 2008
house prices
The article tells us about the predictions for house prices in the near future and explains the housing market structure and the causes of falling and rising prices.
Yolande Barnes also states 2 indicators of housing-market overheating which are:
1.the house price to income ratio
in 1970-80's it was about 4:1 or 3:1, which is relatively low, comparing to recent 6:1 or 7:1
2. the cost of mortgage servicing
Moreover, Yolande Barnes talks on the nature of the recent credit crunch. An imporant point, that he emphasises in his article is the difference in roots of the US and UK downturn and, therefore, the difference in the housing markets.
'in the US as many as one home-owning household in 16 has defaulted on its mortgage or faces repossession, compared with fewer than one in 200 in Britain.' .
At the end of the article Yolande Barnes gives his opinion on what the behaviour of investors is likely to be in the near future and gives a forecast for the house prices in 2009 and 2010: 'by the end of 2009, house prices will probably have fallen 25 per cent from their peak.
'
Yolande Barnes also states 2 indicators of housing-market overheating which are:
1.the house price to income ratio
in 1970-80's it was about 4:1 or 3:1, which is relatively low, comparing to recent 6:1 or 7:1
2. the cost of mortgage servicing
Moreover, Yolande Barnes talks on the nature of the recent credit crunch. An imporant point, that he emphasises in his article is the difference in roots of the US and UK downturn and, therefore, the difference in the housing markets.
'in the US as many as one home-owning household in 16 has defaulted on its mortgage or faces repossession, compared with fewer than one in 200 in Britain.' .
At the end of the article Yolande Barnes gives his opinion on what the behaviour of investors is likely to be in the near future and gives a forecast for the house prices in 2009 and 2010: 'by the end of 2009, house prices will probably have fallen 25 per cent from their peak.
'
Tuesday, 11 November 2008
University Requirements
My main aim is to go to London School of Economics. I made some research on its admissions and what I have found out:
1. What is very important for me - age requirements. I'll be 17 when I finish my A-levels and i have heard that you can apply to the British universities only from the age of 18. But, luckily:
Age requirements
Admission to the School is based upon academic merit. As the School has a responsibility for safeguarding children under English Law, appropriate senior staff will be notified of an offer of admission made to anyone who will be younger than 18 years of age at the time of registration
2. UCAS Applications for the year 2010 are to be submit from September 2009 till (nearly) 15 January.
3. Also, the combination of subjects is important. The applicants with more than one 'soft subject' are not likely to get to the top universities.
Here are 'non-preferred' subjects for LSE :
Accounting
Art and Design
Business Studies
Communication Studies
Design and Technology
Drama/Theatre Studies*
Home Economics
Information and Communication Technology
Law
Media Studies
Music Technology
Sports Studies
Travel and Tourism
I study Further Maths, Economics and ICT, but I guess that ICT is considered as a 'soft subject' too.
4. A-level in Russian.
'Similarly, an A level or equivalent in your first language may not be counted' - that what LSE official website says. So is there a point in taking Russian A-level?
5. Competition
In 2007, we received 19,000 applications for 1,200 places. Competition for admission is particularly high in Accounting and Finance, Economics, Law and Management.
6. Interviews
Students are not usually invited for an interview to LSE, only those who have unusual qualifications or mature applicants may be asked for it.
7. Retakes
Competition for places at the School is intense, so it is important that you achieve consistently high grades throughout both years of your A level studies. Whilst grades can be improved by re-sitting modules, we prefer applicants who have achieved high grades in their AS and A2 examinations at their first attempt.
8. I'm not quite sure which course I want to apply for ( Economics, Management, Finance) but all these courses requirements are:
AAA or AAB grades ( including Maths).
9. I didn't see any information whether universities consider language A-level as 'preferred', but I'll find out.
I'd like to try to pass French AS-level in 2009.
1. What is very important for me - age requirements. I'll be 17 when I finish my A-levels and i have heard that you can apply to the British universities only from the age of 18. But, luckily:
Age requirements
Admission to the School is based upon academic merit. As the School has a responsibility for safeguarding children under English Law, appropriate senior staff will be notified of an offer of admission made to anyone who will be younger than 18 years of age at the time of registration
2. UCAS Applications for the year 2010 are to be submit from September 2009 till (nearly) 15 January.
3. Also, the combination of subjects is important. The applicants with more than one 'soft subject' are not likely to get to the top universities.
Here are 'non-preferred' subjects for LSE :
Accounting
Art and Design
Business Studies
Communication Studies
Design and Technology
Drama/Theatre Studies*
Home Economics
Information and Communication Technology
Law
Media Studies
Music Technology
Sports Studies
Travel and Tourism
I study Further Maths, Economics and ICT, but I guess that ICT is considered as a 'soft subject' too.
4. A-level in Russian.
'Similarly, an A level or equivalent in your first language may not be counted' - that what LSE official website says. So is there a point in taking Russian A-level?
5. Competition
In 2007, we received 19,000 applications for 1,200 places. Competition for admission is particularly high in Accounting and Finance, Economics, Law and Management.
6. Interviews
Students are not usually invited for an interview to LSE, only those who have unusual qualifications or mature applicants may be asked for it.
7. Retakes
Competition for places at the School is intense, so it is important that you achieve consistently high grades throughout both years of your A level studies. Whilst grades can be improved by re-sitting modules, we prefer applicants who have achieved high grades in their AS and A2 examinations at their first attempt.
8. I'm not quite sure which course I want to apply for ( Economics, Management, Finance) but all these courses requirements are:
AAA or AAB grades ( including Maths).
9. I didn't see any information whether universities consider language A-level as 'preferred', but I'll find out.
I'd like to try to pass French AS-level in 2009.
Thursday, 6 November 2008
When Markets Collide (review)
'When Markets Collide', a book written by on of the leading investors Mohamed El-Erian, is an essential reading for everyone how wants to deepen his knowledge of the modern global economy ( and especially investment market ).
This books mainly tells us about the transformation in the relationship of the economies and transformations in the emerging markets, so called 'noise'. El-Erian examines the drivers ( or the causes) of this 'noise' and usually refers to his own experience.
However, the book is primarily aimed at the experienced investors or people who are deal with this markets in their work life. So, he uses special terminology which sometimes require additional thinking ( or even looking up in the dictionary) for an unexperienced reader. He also gives some interesting insights for the way the investment market will be developing in future, which perhaps might be useful for planning investment strategies.
In the first part of the book El-Eriab gives us an approach to the important of 'noise'. This importance of the noise is usually under-estimated, it is considered as a temporary event. Investors should recognise the situations where this noise can be ignored and the situations that require interpreting the signals that this noise contain. El-Erian investigates the factors of the noise and 'missing signals'
As this book was published only this year, it contains the most recent information, such as the causes and consequences of the current financial crisis. It is an essential example to illustrate the transformation of the modern economy. However, El-Erian emphasizes that "the present turmoil is neither the beginning nor the end of the transformataion phase".
Wednesday, 5 November 2008
Sunday, 2 November 2008
Mohamed El-Erian
Mohamed El-Erian is Arabic, born in 1958. He graduated from the Cambridge University and got his master’s and doctorate degree in the University of Oxford (both in economics), which allowed him to become one of the world’s leading investing managers and earn a great reputation.He has been working for the IMF (Investment Monetary Fund) for 15 years, got the rank of the deputy director and has had an experience working at the London Citibank, teaching at the Harvard Business School.
Mr. El-Erian also made a substantial contribution working for PIMCO (Pacific Investment Management Company), the world’s largest bond fund, which he joined in 1999, as one of the CEOs (Chief Executive Officers).
And, eventually, this successful investment professional became a head of the HMC ( Harvard Management Company). It is a huge company, that deals with managing the Harvard University’s capital and assets ( worth about 35 billion dollars) - which is considered to be the largest university’s endowment. He has been working there for 2 years, but then returned to PIMCO. By the June 2008 PIMCO had more than $829.5 billion in assets under control and more than 1000 people employed.
He is also well-known as a publisher on different economic and financial issues at the world’s famous newspapers and the author of the book ‘ When Markets Collide’, which won the Financial Times and Goldman Sachs Business Book of the Year Award 2008. The book tells about the structure of the modern capital markets - El-Erian shares with us his unique understanding of the global market and forecasts dramatic changes in the financial markets- essential information each investor should be aware of.
He also has made several hypotheses about the development of the world crisis. In his interview to Handelsblatt he predicted the seat of tension of the crisis to be in Share Markets and the Markets for inputs. His prediction about crisis has strong influence on the behavior of investors.
Friday, 31 October 2008
Wednesday, 29 October 2008
Tuesday, 28 October 2008
Sunday, 26 October 2008
question 35
Landers Paints Ltd have for many years produced paints and varnishes specifically for industrial use. These products have been sold both directly to the customer and through builders’ merchants. Larger firms tend to buy directly from Landers, whereas smaller customers, such as builders and decorators, use the latter.
The products are sold in large quantities in basic packaging at low prices. This enables Landers to keep costs to a minimum and prices at a competitive level. The most popular products are basic items, for instance, white and magnolia emulsion paint.
However, the recent increase in the popularity of DIY has resulted in a small fall in sales at Landers. Keen to reverse this decrease, the Managing Director, John Smith, is considering whether to launch a range of paints for home decorating. At a recent board meeting, he put forward this proposal.
‘I think that Landers should launch a range of paints and varnishes for the domestic market. Given our expertise and production facilities, the new products will hardly disrupt things around here and should lead to a significant increase in sales.’
The Marketing Manager, Shirley Thomas, reacted with caution.
‘I’m not so sure because there are substantial differences between marketing products made for industrial markets and those for consumer markets. I think it may be a lot harder than you think.’
‘Obviously, there are differences’, replied John, ‘but I really don’t think that some new packaging and a bit of advertising is enough of a reason to miss out on such a good opportunity.’
Questions:
1. Explain why the recent increase in popularity of DIY has caused sales at Landers Paints Ltd to decrease.
It's clear-with the increase in popularity of DIY the demand for the paint products decreases, so that businesses have to supply less and buy less from the Landers Paints Ltd.
2 a) Identify the key differences between an industrial market and a consumer market.
The main difference between the industrial and the consumer market is that the latter is aimed directly at consumer and the first is for businesses. Moreover, organisation buying has special decision-making (purchasing) procedures, which vary from firm to firm, while consumer buying is made according to people's personal needs. Organisations also tend to have more information than ordinary consumers ( an example of assymetric information), so that they are more likely to be interested in technical specifictations of the product, when ordinary consumers are more worried about appearance and affordability.
b) Analyse the difficulties that may be experienced by Landers Paints Ltd if they move into the consumer market.
The main difficulty may consist in forecasting consumers needs - as they are less constant than that of businesses.
Also the company may experience increase in production costs: taking retailers on for new shops, logistics for making new marketing strategy, advertising costs... And, therefore, it may be difficult for company to set the affordable prices.
3. Landers Paints Ltd decide to launch a range of products for the consumer market. Recommend a marketing mix for the new products.
Creating a marketing strategy for the new products, the 4P's of the marketing mix should be considered.
The products are sold in large quantities in basic packaging at low prices. This enables Landers to keep costs to a minimum and prices at a competitive level. The most popular products are basic items, for instance, white and magnolia emulsion paint.
However, the recent increase in the popularity of DIY has resulted in a small fall in sales at Landers. Keen to reverse this decrease, the Managing Director, John Smith, is considering whether to launch a range of paints for home decorating. At a recent board meeting, he put forward this proposal.
‘I think that Landers should launch a range of paints and varnishes for the domestic market. Given our expertise and production facilities, the new products will hardly disrupt things around here and should lead to a significant increase in sales.’
The Marketing Manager, Shirley Thomas, reacted with caution.
‘I’m not so sure because there are substantial differences between marketing products made for industrial markets and those for consumer markets. I think it may be a lot harder than you think.’
‘Obviously, there are differences’, replied John, ‘but I really don’t think that some new packaging and a bit of advertising is enough of a reason to miss out on such a good opportunity.’
Questions:
1. Explain why the recent increase in popularity of DIY has caused sales at Landers Paints Ltd to decrease.
It's clear-with the increase in popularity of DIY the demand for the paint products decreases, so that businesses have to supply less and buy less from the Landers Paints Ltd.
2 a) Identify the key differences between an industrial market and a consumer market.
The main difference between the industrial and the consumer market is that the latter is aimed directly at consumer and the first is for businesses. Moreover, organisation buying has special decision-making (purchasing) procedures, which vary from firm to firm, while consumer buying is made according to people's personal needs. Organisations also tend to have more information than ordinary consumers ( an example of assymetric information), so that they are more likely to be interested in technical specifictations of the product, when ordinary consumers are more worried about appearance and affordability.
b) Analyse the difficulties that may be experienced by Landers Paints Ltd if they move into the consumer market.
The main difficulty may consist in forecasting consumers needs - as they are less constant than that of businesses.
Also the company may experience increase in production costs: taking retailers on for new shops, logistics for making new marketing strategy, advertising costs... And, therefore, it may be difficult for company to set the affordable prices.
3. Landers Paints Ltd decide to launch a range of products for the consumer market. Recommend a marketing mix for the new products.
Creating a marketing strategy for the new products, the 4P's of the marketing mix should be considered.
Here are these P:
Product
Price
Place
Promotion
Diversing its new products to the consumer market, Landers Paints Ltd should firstly set an affordable level of prices, so that people prefer buying this products and saving their time to DIY (doing it yourslef).
Secondly, the place of distribution this new products should be chosen correctly: it should be situated in the city centre or/and in the largest supermakerts- so that it is easy for people to consume and it creates the right impression of the product ( product for ordinary people, not for enterprises).
Thirdly, the product itself should have attractive appearance and be easy to use, the characteristics of this paints and varnishes should meet consumer's needs.
And, eventually, promotion of the new products. That's all about creating the right image of the product: this paints should be advertised as the high quality product and not requiring additional skills to use it.
picture source - http://www.tutor2u.net/business/marketing/what_is_marketing.asp
Product
Price
Place
Promotion
Diversing its new products to the consumer market, Landers Paints Ltd should firstly set an affordable level of prices, so that people prefer buying this products and saving their time to DIY (doing it yourslef).
Secondly, the place of distribution this new products should be chosen correctly: it should be situated in the city centre or/and in the largest supermakerts- so that it is easy for people to consume and it creates the right impression of the product ( product for ordinary people, not for enterprises).
Thirdly, the product itself should have attractive appearance and be easy to use, the characteristics of this paints and varnishes should meet consumer's needs.
And, eventually, promotion of the new products. That's all about creating the right image of the product: this paints should be advertised as the high quality product and not requiring additional skills to use it.
picture source - http://www.tutor2u.net/business/marketing/what_is_marketing.asp
Saturday, 25 October 2008
question 24
Cressida Grainger started her entrepreneurial career at the age of 22, running a small antiques business. Whilst on a visit to Glasgow market, she discovered lava lamps and bought some to sell on her Camden market stall. The 1960s lamps, which mix oil and water to create psychedelic patterns, were an instant success so she tracked down the inventor, Edward Craven, and eventually bought the then loss-making business from him.
In 1989, Mathmos was born. The firm started to market the lamps to a new set of fashion conscious consumers eager to buy ‘retro chic’ products. The marketing paid off and since then, Mathmos has enjoyed spectacular success, achieving £18 million of sales in 1999.
However, the business has recently run into some difficulties. Following the success of the lava lamps, competitors from the Far East have realised the potential of the products and the market is now being flooded with imitation lamps that are sold at prices that Mathmos would struggle to make the item for. This problem is increased by retailers who stock the cheaper, imported goods alongside the Mathmos originals. In effect, the Mathmos name is advertising other companies’ products.
Grainger is determined to fight back, though. With the name Mathmos linked to high quality products and first-rate after sales service, she believes that her business can be expanded in order to win back market share. Two strategies are being considered.
Option One: Diversification into other product areas, such as gifts and fashion accessories.
Option Two: Extend Mathmos’ unique position as leaders in innovative domestic lighting through the development of new lighting products.
Ultimately, Grainger knows that Mathmos must maintain its innovative edge in order to remain successful in the market place.
(Adapted from Sarah Gracie, The Sunday Times, April 9 2000)
Questions
1. Explain why Mathmos lava lamps were initially so successful.
Probably the main reason for this lava lamps to be successful is that a great advertising company was made- in order to make the consumer consider this product not as an old, out-of-fashion and useless thing, but as a 'retro-chic' product. So it was extremely fashionable. And, as we learned from the article, the right marketing strategy also played a great role in expanding the demand for the product.
2. Recently, Mathmos has begun to experience some difficulties. Analyse the key causes of these problems.
As the new firms entered the market, providing the same products for the lower price, the demand for the original product fell down. People didn't understand the difference between the original lamp and the imitation, or probably, didn't consider this difference worth overpaying for. People had already known all the benefits of the product and the target audience had been already formed - so there was no need for new firms to make a great advertising company. Therefore, they reduced their production costs, which allowed to make the product cheaper - - -> more attractive for consumers.
3. Explain how the use of market segmentation could help Mathmos to market its products
effectively.
Market segmentation is the process of classifying a market into distinct subsets (segments) that behave in similar ways or have similar needs. (wikipedia)
There are 4 main factors, using which the market can be segmented: demographical, geographical, behaviour and psyhographic bases.
So the whole lava lamp market wil be divided into several segments according to consumers purchasing abilities, product knowledge, usage and so on.
Therefore, market segmentation will increase market opportunities, as the consumer's needs will be recognised and satisfied more efficiently, that means, Mathmos will market his products more efficiently.
4. Evaluate the advantages and disadvantages of the possible options for development.
Firstly, option one seems to be a good idea, as if the lava lamp production diverses into other product areas, its target audience changes, so the new target audience might be wider and more willing to buy the product. In addition, it's clear that the lava lamp will be new to such product areas as gifts and fashion accessories, therefore, it should attract the consumers by its newness and exceptioness for this area of the market
Disadvantage may consist in this product being unappropriate for this area of the market, for exmaple, if nobody considers lava lamps as gifts.
Option two seems to me more profitable: it will make Mathmos a monopoly, which will allow to set the suitable prices for the new lamp products and, therefore, increase allocative efficiency and profit.
But the problem is - if there won't even be enough quantity of demand for the new types of lamp to cover all production costs? That is the thing that deals with market research- in this case, i guess, it is unavoidable .
In 1989, Mathmos was born. The firm started to market the lamps to a new set of fashion conscious consumers eager to buy ‘retro chic’ products. The marketing paid off and since then, Mathmos has enjoyed spectacular success, achieving £18 million of sales in 1999.
However, the business has recently run into some difficulties. Following the success of the lava lamps, competitors from the Far East have realised the potential of the products and the market is now being flooded with imitation lamps that are sold at prices that Mathmos would struggle to make the item for. This problem is increased by retailers who stock the cheaper, imported goods alongside the Mathmos originals. In effect, the Mathmos name is advertising other companies’ products.
Grainger is determined to fight back, though. With the name Mathmos linked to high quality products and first-rate after sales service, she believes that her business can be expanded in order to win back market share. Two strategies are being considered.
Option One: Diversification into other product areas, such as gifts and fashion accessories.
Option Two: Extend Mathmos’ unique position as leaders in innovative domestic lighting through the development of new lighting products.
Ultimately, Grainger knows that Mathmos must maintain its innovative edge in order to remain successful in the market place.
(Adapted from Sarah Gracie, The Sunday Times, April 9 2000)
Questions
1. Explain why Mathmos lava lamps were initially so successful.
Probably the main reason for this lava lamps to be successful is that a great advertising company was made- in order to make the consumer consider this product not as an old, out-of-fashion and useless thing, but as a 'retro-chic' product. So it was extremely fashionable. And, as we learned from the article, the right marketing strategy also played a great role in expanding the demand for the product.
2. Recently, Mathmos has begun to experience some difficulties. Analyse the key causes of these problems.
As the new firms entered the market, providing the same products for the lower price, the demand for the original product fell down. People didn't understand the difference between the original lamp and the imitation, or probably, didn't consider this difference worth overpaying for. People had already known all the benefits of the product and the target audience had been already formed - so there was no need for new firms to make a great advertising company. Therefore, they reduced their production costs, which allowed to make the product cheaper - - -> more attractive for consumers.
3. Explain how the use of market segmentation could help Mathmos to market its products
effectively.
Market segmentation is the process of classifying a market into distinct subsets (segments) that behave in similar ways or have similar needs. (wikipedia)
There are 4 main factors, using which the market can be segmented: demographical, geographical, behaviour and psyhographic bases.
So the whole lava lamp market wil be divided into several segments according to consumers purchasing abilities, product knowledge, usage and so on.
Therefore, market segmentation will increase market opportunities, as the consumer's needs will be recognised and satisfied more efficiently, that means, Mathmos will market his products more efficiently.
4. Evaluate the advantages and disadvantages of the possible options for development.
Firstly, option one seems to be a good idea, as if the lava lamp production diverses into other product areas, its target audience changes, so the new target audience might be wider and more willing to buy the product. In addition, it's clear that the lava lamp will be new to such product areas as gifts and fashion accessories, therefore, it should attract the consumers by its newness and exceptioness for this area of the market
Disadvantage may consist in this product being unappropriate for this area of the market, for exmaple, if nobody considers lava lamps as gifts.
Option two seems to me more profitable: it will make Mathmos a monopoly, which will allow to set the suitable prices for the new lamp products and, therefore, increase allocative efficiency and profit.
But the problem is - if there won't even be enough quantity of demand for the new types of lamp to cover all production costs? That is the thing that deals with market research- in this case, i guess, it is unavoidable .
Friday, 24 October 2008
Wednesday, 22 October 2008
The Prisoner's Dilemma
The best way to understand the Prisoner's Dilemma is to set 2 examples.
A classic example of the Prisoner's Dilemma
Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal.
If one testifies ("defects") for the prosecution against the other and the other remains silent, the betrayer goes free and the silent accomplice receives the full 10-year sentence.
If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge.
If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?
Economics application of the Prisoner's Dilemma.
Consider two firms, say Coca-Cola and Pepsi, selling similar products. Each must decide on a pricing strategy.
They best exploit their joint market power when both charge a high price; each makes a profit of ten million dollars per month. If one sets a competitive low price, it wins a lot of customers away from the rival.
Suppose its profit rises to twelve million dollars, and that of the rival falls to seven million. If both set low prices, the profit of each is nine million dollars.
Here, the low-price strategy is akin to the prisoner’s confession, and the high-price akin to keeping silent. Call the former cheating, and the latter cooperation. Then cheating is each firm’s dominant strategy, but the result when both “cheat” is worse for each than that of both cooperating.
sources:
1
2
A classic example of the Prisoner's Dilemma
Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal.
If one testifies ("defects") for the prosecution against the other and the other remains silent, the betrayer goes free and the silent accomplice receives the full 10-year sentence.
If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge.
If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?
Economics application of the Prisoner's Dilemma.
Consider two firms, say Coca-Cola and Pepsi, selling similar products. Each must decide on a pricing strategy.
They best exploit their joint market power when both charge a high price; each makes a profit of ten million dollars per month. If one sets a competitive low price, it wins a lot of customers away from the rival.
Suppose its profit rises to twelve million dollars, and that of the rival falls to seven million. If both set low prices, the profit of each is nine million dollars.
Here, the low-price strategy is akin to the prisoner’s confession, and the high-price akin to keeping silent. Call the former cheating, and the latter cooperation. Then cheating is each firm’s dominant strategy, but the result when both “cheat” is worse for each than that of both cooperating.
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