Marketing, Development, Distribution, and Sales Force Utilization - Assignment Example

Paper Analysis Analysis According to an article in the New York Times, Ford Group intends to implement a strategy that prices their Lincoln MKZ Hybrid in a similar way to its gas counterpart. While they do expect the gas engine to continue being their flagship car, it is also expected that the gas-electric hybrid will carve out a niche for itself. The hybrid is expected to give the consumer more fuel efficiency over the standard car, although it will be less powerful. By seeking to do away with cost premiums for hybrid cars, Ford Group aims to produce a higher volume of hybrid cars, which will reduce their unit cost (Motavalli 1). Economies of scale are the cost advantage that comes from a product’s increased output. They arise due to an inverse relation between fixed costs per-unit and quantity produced. The more cars produced in this case, the lower the fixed cost per unit, as the cost is shared among a larger quantity of cars. They may also reduce unit variable costs due to synergies and operational efficiencies. Economies of scale are in two major types; external that arises from industry size and other extraneous factors and internal that arises from inside the firm (Motavalli 1). While benefits of this concept are obvious, I think they also impact on such areas as finance. For instance, a company like Ford Group would have a lower capital cost compared to smaller firms due to their ability to borrow at lower rates of interest. However, I believe that, even with this advantage, I think there is a finite upper limit to how Ford Group can grow in achieving economies of scale. When the hybrid car production reaches a specific number, it will be more expensive to manage due to bureaucracy, complexity, and operational inefficiency. The results from Ford Group are also hard to ignore. For instance, the model T line of production and task specialization were integrated with standardization, as can be seen in their hybrid plant. The specialization that will go with the hybrid car production will lead to productivity increase. The coupling of specialization and standardization will ensure that the model parts will be of universal size at all times, which greatly reduces costs of restoration. However, it can also be argued that the reduction of costs by specialization and increase in productivity is offset by huge human costs. While there is little evidence of how economies of scale impact organizations like Ford in the long run, the idea has become a hallmark of Ford Group and other similar companies because it can be used all manufacturing functions; for example, marketing, research and development, distribution, and sales force utilization (Motavalli 1). Analysis # 2 The Texas drought of 2011 is bound to have ripple effects across the globe, especially with regards to agricultural products. Texas produces approximately 55% of cotton crop in the US, supplying the same to mills around the world. Because of the drought’s effect on cotton, the prices are on the up. The drought has also affected beef prices with ranchers being forced to sell off their cattle due to dramatic reductions in water and animal feed. The selling of, off valuable breeding stock is expected to see a long-term increase in the price of beef. It is also expected that there will be a 50% jump in the prices of wheat in winter because of the drought, especially since Texas accounts for 20% of wheat production (Hylton 1). The FAO price index for food raised to 6% in mid-2012, which was attributed to the unfavorable conditions of weather, particularly the drought currently ravaging parts of the United States, which have driven the cost of agricultural products up. However, what is happening now is more a climatic transition than a random weather event. The consequences have been predicted to be especially dire for the poor population in the world (Hylton 2). However, in my opinion, the prices of beef, wheat, and cotton will be affected by other factors, rather than by drought alone. The use of biofuels will only exacerbate the drought situation as corn and wheat are used for its production, rather than being used as human and animal feed. This will only push the prices of food and animal products up. Together with drought, the use of biofuels will only worsen price elasticity of demand, which will lead to commodity market volatility. This is the reason for the heated debates in the US and the EU on biofuels and the manner in which it is exacerbating the effects of the drought on food prices. The United States is a major exporter of wheat, cotton, and beef globally. For this reason, when drought hits a major producer of these agricultural products, there is a significant effect on global food prices. The impact of cotton, beef, and wheat supplies will also affect economies of various countries around the world. Thinking back to 2008, the government in Haiti collapsed under the pressure of high wheat and bread prices. In 2011, at a time when agricultural exports from the US had begun to fall, high food prices were the issue that initiated the Arab Spring in Tunisia. For this reason, it is clear that the current drought in Texas will significantly increase global prices of cotton products, beef, and wheat (Hylton 2). Analysis # 3 The third article deals with profits where there is perfect competition and deals with those who make profits in great economic bubbles. According to the article, the housing bubble has benefited real-estate brokers, especially because they have kept steady commissions with a rate of 6% split by the agents representing the seller and the buyer. However, the fact that being a real-estate agent is easy has ensured that there is thousands of brokers are licensed every year, which will ensure that there will be fewer houses to broker per agent. This is the zero-profit condition. Rising house prices also saw rising numbers of agents, which reduced the number of houses an individual agent, could sell (Goolsbee 1). It is not possible for a company to get economic profit where there is perfect competition, especially in the long term. This means that an industry like estate-brokerage cannot earn more than is needed to cover their economic costs. Classical economists define profit as the cash left when costs are subtracted with the exception of risk coverage and interest. Profits, therefore, will not disappear in the long term but will tend to normal profit (Goolsbee 1). Firms earning abnormal profits act to trigger the entry of other firms into the industry, which causes an outward shift of the market supply curve and a fall in prices. Market prices will go down until every firm earns only normal profit. In my opinion, perfect competition in this case attempts to represent the estate agents as being passive in totality. This removes their attempts to increase their profits through innovation, advertising, product design, and price undercutting. These aspects are the issues that characterize the majority of markets and industries, and these should be no different in estate-brokerage. Using perfect competition as a yardstick to compare with structures in other markets, such as oligopoly and monopoly, is effective because it shows high economic efficiencies. In the long and short run, the price will be equal to the marginal cost. Therefore, allocative efficiency is attained; consumer prices in the market are reflective of resource factor costs in provision of the service. Productive efficiency is achieved when service prices are equal to minimum cost. Productive efficiency cannot be attained in the short term since firms are able to operate at all points on the average total cost curve in the short run. However, it can be achieved in the long run. Long run perfect competition; therefore, shows static economic efficiency levels that are optimal (Goolsbee 2). Works Cited Goolsbee, Austan. Why Most real Estate agents aren't getting rich. 2005. Print. Hylton, Hillary. "Why Texas' Drought May Have Global Effects." YAHOO! NEWS (2011): 2. Print. Motavalli, Jim. "Is This the End of the Hybrid Premium?" The New York Times (2010): 2. Print. Read More