Question about Market Concentration
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PART 1
Select any company and think about its buying and selling activities -- everyone buys and sells, or at least "procures" and "supplies", or otherwise participates in exchange transactions.
Please address the following questions in a 2 page double spaced paper
1. Who are the organization's' clients/customers? What products and/or services do you supply to them?
2. What factors affect demand for the organization's products/services? Could it respond if demand increased? Is it in a position to create such increased demand?
3. Who are the organization's' principal suppliers? What products and/or services do you acquire from them?
4. What factors affect your demand for outside products/services? Can you get what you need when you need it, at acceptable cost?
5. Pick one recent transaction, either a sale or a purchase, of some significant amount, with which you are at least somewhat familiar. Describe it -- what it was, how it came about, who was involved, how it worked, and the degree of satisfaction of both sides with the outcome. Was it a truly reciprocal transaction, or more one-sided? How much interaction was there in carrying the transaction through? Does it represent any sort of long-term or emerging relationship, or is it strictly a one-time commercial transaction. Why, in either case?
6. To what degree do you find it helpful to apply economic thinking to the transaction behavior of this organization? Does this kind of thinking give you any new insights into the organization and how it works? Why or why not?
PART 2
Please use the organization selected in Part 1. Think about the structure of the market in which it operates. Who are the other players? To what degree is the market concentrated? Are there any big players? How does competition operate in it?
Please address the following questions in a 2 page double spaced paper
1. Discuss the structure of the market of your reference organization? Is it characterized as close to a 'perfect competition', or close to a monopoly or to a competition among few?
2. What are the major products that your organization buys from outside suppliers? How does it choose its suppliers? How does it decide what prices to pay?
3. What are the major products that your organization sells or otherwise provides to outside buyers? How does it choose its buyers? How does it decide what prices to charge? (As we said, if you're not using a for-profit company here, you may need to be a little creative in how you interpret this question, but I'm sure you can come up with analogs.)
4. What are the adaptations that your organization has made to the structure of its market? How does the organization cope with its position in the economic "food chain"?
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The solution answers questions about market concentrations.
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PART-1
1. Who are the organization's' clients/customers? What products and/or services do you supply to them?
Answer: The organization produces yarn from fibres. The yarn produced is sold to weaving company which manufactures fabrics or clothes. The clothes are either sold directly to whole sale agents for onward sales to distributors and then to customers or alternatively the clothes are sold to garment producers who make garments out of it and then sell to whole sellers who in turn sell to distributors and who in turn sell to consumers. The organizations clients are weaving companies or fabric manufacturing companies.
2. What factors affect demand for the organization's products/services? Could it respond if demand increased? Is it in a position to create such increased demand?
Answer: The demand for the product will increase with increase in usage of clothes. Normally clothes being an essential product, its demand increases with population, increase in income of the consumers. The production capacity at present is about 75% because it is at that level; the company attains the targeted performance. However, the organization can produce another 10-15% more if the demand increases to that extent. But if the demand increases, beyond that, it cannot match. The organization is not in a position to increase the demand by itself.
3. Who are the organization's' principal suppliers? What products and/or services do you acquire from them?
Answer: The organization’s principal suppliers are producers of Cotton, viscose, polyester, nylon. We acquire ginned cotton, viscose staples, polyester fibers and nylon fibers. Our principal suppliers are Virudhunagar cotton mills, Madura fibres, South India Viscose.
4. What factors affect your demand for outside products/services? Can you get what you need when you need it, at acceptable cost?
Answer: As far as cotton is concerned, it depends on the agricultural output which in turn depends on monsoon. For Viscose, it depends upon the cost of wood pulp. For Polyester, it depends on the cost of chemicals like ethylene glycol, dimethyl terephthalate. For nylon, it depends upon cost of chemicals like diamine etc. The costing depends upon various factors as cited above. As of now, we are able to get at acceptable cost.
5. Pick one recent transaction, either a sale or a purchase, of some significant amount, with which you are at least somewhat familiar. Describe it -- what it was, how it came about, who was involved, how it worked, and the degree of satisfaction of both sides with the outcome. Was it a truly ...
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