Download Strategic marketing test 2

Vatekueleni Menesia N
218203200
28 May 2020
Question 1
A business cycle is a cycle of fluctuations in the Gross Domestic Product (GDP) around its
long-term natural growth rate. It explains the expansion and contraction. In other words, it
refers to economy-wide fluctuations in production, trade, and general economic activity.
From a conceptual perspective, the business cycle is the upward and downward movements
of levels of GDP (gross domestic product) and refers to the period of expansions and
contractions in the level of economic activities (business fluctuations) around a long-term
growth trend in economic activity that an economy experiences over time.
3. Recession
Recession is a slowdown or a massive contraction in economic activities. A significant fall in
spending generally leads to a recession.
The recession is the stage that follows the peak phase. The recession stage starts as soon as
expansion ends and economic activity begins to decline. It lasts until the GDP returns to the point
that marked the beginning of the expansion stage. During a recession, demand begins to decline
almost immediately, but producers fail to adjust their output until the market has excess supply.
Positive economic indicators like prices and wages start to fall at this point. The demand for goods
and services starts declining rapidly and steadily in this phase. Producers do not notice the
decrease in demand instantly and go on producing, which creates a situation of excess supply
in the market. Prices tend to fall. All positive economic indicators such as income, output,
wages, etc., consequently start to fall.
6. Recovery
Economic recovery is the initial part of the expansion, where the economy gained strength
returned to growth after the recession.
After the trough, the economy moves to the stage of recovery. In this phase, there is a
turnaround in the economy, and it begins to recover from the negative growth rate. Demand
starts to pick up due to low prices and, consequently, supply begins to increase. The
population develops a positive attitude towards investment and employment and production
starts increasing. Employment begins to rise and, due to accumulated cash balances with the
bankers, lending also shows positive signals. In this phase, depreciated capital is replaced,
leading to new investments in the production process. Recovery continues until the economy
returns to steady growth levels. After the GDP reaches its lowest point in the cycle, the
recovery stage commences. During this stage, the economy begins to recover and reverse the
negative trends. Demand increases and supply soon follows. Eventually, investments resume,
and employment and production begin to rise.
The recovery stage lasts until the GDP returns to a steady growth line. Once it reaches this
point, the current business cycle ends and a new one begins as it enters the expansion stage
again. This completes one full business cycle of boom and contraction. The extreme points
are the peak and the trough.
QUESTION 2
The micro economic factor is basically the environment that has a direct impact on your
business. It is related to the particular area where your company operates and can directly
affect all of your business processes. In other words, it consists of all the factors that affect
particularly your business. They have the ability to influence your daily proceedings and of
the company. Still, the effect that they have is not a long-lasting one.
A macroeconomic factor is a pattern, characteristic, or condition that emanates from, or
relates to, a larger aspect of an economy rather than to a particular population. The
characteristic may be a significant economic, environmental, or geopolitical event that widely
influences a regional or national economy.
Micro economic factor
Macroeconomic factor
The environment that has a direct impact on It is the environment in the economy itself.
your business.
It includes customers, suppliers, resellers, It includes factors such as economic factors,
competitors, and the general public.
demographic forces, technological factors,
natural and physical forces,
Micro economic factor deals with prices and A macroeconomic factor is a phenomenon,
production in single markets and the pattern, or condition that emanates from, or
interaction between different markets.
relates to, a large aspect of an economy
rather than to a particular population.
It formulate various types of models based Macroeconomic factors can be positive,
on logic and observed human behaviour and negative, or neutral.
test
the
models
against
real-world
observations.
QUESTION 3
a) Market structure, in economics, refers to how different industries are classified and
differentiated based on their degree and nature of competition for goods and services. It is
based on the characteristics that influence the behaviour and outcomes of companies working
in a specific market.
Competitive structure may also refer to a system to evaluate the services or goods of an
organization with the goal of searching the way to compare these services or goods to similar
type of offerings in a competitive market.
Companies use the study of competitive structure to analyze their offerings while potential
investors use this method to access their chances of success in response to the current market
state.
In economics, market structures can be understood well by closely examining an array of
factors or features exhibited by different players. It is common to differentiate these markets
across the following seven distinct features.
1. The industry’s buyer structure
2. The turnover of customers
3. The extent of product differentiation
4. The nature of costs of inputs
5. The number of players in the market
6. Vertical Integration extent in the same industry
7. The largest player’s market share
Types of Market Structures
1. Perfect Competition
Perfect competition occurs when there is a large number of a small company competing
against each other. They sell similar products (homogeneous), lack price influence over the
commodities, and are free to enter or exit the market.
Consumers in this type of market have full knowledge of the goods being sold. They are
aware of the prices charged on them and the product branding. In the real world, the pure
form of this type of market structure rarely exists. However, it is useful when comparing
companies with similar features. This market is unrealistic as it faces some significant
criticisms described below.

No incentive for innovation: In the real world, if competition exists and a company
holds a dominant market share, there is a tendency to increase innovation to beat the
competitors and maintain the status quo. However, in a perfectly competitive market,
the profit margin is fixed, and sellers cannot increase prices, or they will lose their
customers.

There are very few barriers to entry: Any company can enter the market and start
selling the product. Therefore, incumbents must stay proactive to maintain market
share.
2. Monopolistic Competition
Monopolistic competition refers to an imperfectly competitive market with the traits of both
the monopoly and competitive market. Sellers compete among themselves and can
differentiate their goods in terms of quality and branding to look different. In this type of
competition, sellers consider the price charged by their competitors and ignore the impact of
their own prices on their competition.
When comparing monopolistic competition in the short term and long term, there are two
distinct aspects that are observed. In the short term, the monopolistic company maximizes its
profits and enjoys all the benefits as a monopoly.
The company initially produces many products as the demand is high. Therefore, its Marginal
Revenue (MR) corresponds to its Marginal Cost (MC). However, MR diminishes over time
as new companies enter the market with differentiated products affecting demand, leading to
less profit.
3. Oligopoly
An oligopoly market consists of a small number of large companies that sell differentiated or
identical products. Since there are few players in the market, their competitive strategies are
dependent on each other.
For example, if one of the actors decides to reduce the price of its products, the action will
trigger other actors to lower their prices, too. On the other hand, a price increase may
influence others not to take any action in the anticipation consumers will opt for their
products. Therefore, strategic planning by these types of players is a must.
In a situation where companies mutually compete, they may create agreements to share the
market by restricting production, leading to supernormal profits. This holds if either party
honors the Nash equilibrium state or neither is tempted to engage in the prisoner’s dilemma.
In such an agreement, they work like monopolies. The collusion is referred to as cartels.
4. Monopoly
In a monopoly market, a single company represents the whole industry. It has no competitor,
and it is the sole seller of products in the entire market. This type of market is characterized
by factors such as the sole claim to ownership of resources, patent and copyright, licenses
issued by the government, or high initial setup costs.
All the above characteristics associated with monopoly restrict other companies from
entering the market. The company, therefore, remains a single seller because it has the power
to control the market and set prices for its goods.
b) Over the years, technology has revolutionized our world and daily lives. Additionally,
technology for seniors has created amazing tools and resources, putting useful information at
our fingertips.
Modern technology has paved the way for multi-functional devices like the smart watch and
the Smartphone. Computers are increasingly faster, more portable, and higher-powered than
ever before. With all of these revolutions, technology has also made our lives easier, faster,
better.
Since there are so many new technologies to keep track of, it can seem overwhelming to
adapt. However, all of these new technologies are designed to make your life easier. Even
though it may not feel intuitive, learning how to use smart phones, smart watches and voice
assistants just takes a little bit of instruction and practice.
When it comes to the way we communicate overall, modern technology has had a powerful
influence. Digital technology has changed what people term as “media.” The influence of
new technology on media is apparent since a media company isn’t necessarily a news
platform anymore. A media company is now any company that helps pass information across
the globe, including social media platforms like Face book and Twitter.
Think about how businesses used to market products--purchasing ads in newspapers and
magazines, placing signs around the store, having salespeople go door to door. While those
activities still happen, you are much more likely these days to receive an advertising email,
read a tweet or check out a website found through a search engine. Technology has changed
the way businesses market products.
Internet
Websites have become business necessities when it comes to marketing products. The
medium allows for plenty of room to share product details, reviews, photos and videos that
engage potential customers. Announcements often go out through online services and
media stories, while blog posts and word of mouth can drive traffic to a website. Businesses
not only can announce products, but also can sell them directly to customers all over the
world. That reach stretches far beyond what a local newspaper ad can achieve.
Email Marketing
Email marketing is one of the most affordable and potentially engaging ways to market a
product. Businesses that have built up opt-in email lists have a large base of customers who
already are interested in the products they offer. Email marketing is an ideal way to
announce new offerings, distribute coupons or discounts and share information on products.
Many email marketing campaigns have evolved into digital newsletters, in which product
marketing integrates with compelling content.
Mobile
Mobile marketing involves reaching customers on their cell phones and other mobile
devices through text messaging and applications. Businesses can use text messages to send
special coupons or deals to people on a marketing list. While some businesses develop their
own branded applications for smart phones, many piggyback on existing applications that
offer space for advertisements or coupons geared for local users. For example, a business
may maintain a profile on a social media smart phone application that gives users a 20
percent discount if they try out a new product at the store.
In Store
Technology is making its presence known in stores. The use of digital signage is a trend
that allows businesses to capture the attention of customers and market specific products to
them. This is particularly helpful for restaurants and other businesses that need to respond
to changes in inventory or introduce new products on a regular basis. Advanced point of
sale systems can give employees real-time information on what products are in stock or
help them track a customer's preferences. Providing excellent customer service is a key to
successful sales and marketing.
Social Media
Social media is both a major opportunity and a great challenge for businesses when it
comes to product marketing. It can be a quick and easy way to communicate information on
new products to a large group, but businesses have to be careful to attract customers rather
than talk down to them. Businesses should look at social media as technology that enables
the age-old marketing technique of word of mouth. Create a compelling social media
experience, interact with customers and encourage them to share your product information
with others.
References:
Aghion and Howitt [1992], “A Model of Growth through Creative Destruction,”
Econometrica 60, 323-351.
Baumol, W.J., 2002a. Towards Microeconomics of Innovation: Growth Engine Hallmark of
Market Economics. Atlantic Economic Journal: Dordrecht.
Gordon, Robert J. Macroeconomics. 7th ed. Addison-Wesley, 1998.
Mankiw, Gregory N. Principles of Macroeconomics. Dryden Press, 1998.
Mansfield, Edwin. Principles of Macroeconomics. 7th ed. W.W. Norton & Company, 1992.