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    • This is an important paper.  For this assignment please make sure you use the concepts covered so far in analyzing the business opportunities for this product.  Hence, make sure your analysis covers those points detailed in the rubric including:
      • Market structure and Elasticity – clearly identify and justify them for the product
      • Pricing Strategy – Identify and justify pricing strategy based on the assumed market structure and demand elasticity 
      • Non-price barrier to entry – Identify and justify non-pricing, barriers to entry   based on market factor
      • Increasing revenue – Chose methods to increase revenue based on pricing and non-pricing strategies
      • Product differentiation- Demonstrate understanding of the importance or otherwise of product differentiation for the business
      • Economic cost concepts – Discuss the underlying economic cost concepts as it relates to this product including fixed, variable, marginal costs etc,.
      • Profit maximization quantity – uses the concept of cost and revenue to determine profit maximization point

 

You will apply economic principles presented in Weeks One through Three in this week’s assignment. Your assignment will be reviewed by your peers and by your facilitator in week five and should be revised as necessary based on feedback as the first part of the final assignment in week six. 

 

Select a new, realistic good or service for an existing industry.

 

Write the economic analysis section of a business proposal.  This will include statements about the market structure and the elasticity of demand for the good or service, based on text book principles. You need to create hypothetical data, based on similar real world products to estimate fixed and variable costs.


Required Elements:

  • Identify market structure
  • Identify elasticity of the product
  • Include rationale for the following questions:
    • How will pricing relate to elasticity of your product?
    • How will changes in the quantity supplied as a result of your pricing decisions affect marginal cost and marginal revenue?
    • Besides your pricing decisions, what are your suggested nonpricing strategies? What nonpricing strategies will you use to increase barriers to entry?
    • How could changes in your business operations alter the mix of fixed and variable costs in line with your strategy?
    • incorporate appropriate concept graphs in your discussion

Others

  • Use the attached grading rubric as guide in identifying all requirements for the paper
  • No more than 1400 words
  • Your proposal must be consistent with APA guidelines

·         Will Bury’s Price Elasticity Scenario

·          

·         Will Bury, an enterprising inventor, is convinced that soon everyone will be reading or listening to everything digitally, including books that have been mostly available in hard copy. He knows that there are books on CD, but these are relatively expensive and have been recorded using human readers. He also knows that there is technology that can transform the printed word into audio, but the sound is somewhat inhuman. Will plans on speeding up the transformation with a proprietary technology he has developed and patented. This technology takes the printed word for text materials and creates a file with the option of reading it digitally or listening to it with a realistic synthetic voice. Will knows that he has free access to books no longer under copyright protection, and he figures he can pay a royalty fee of $5 per title for copyrighted books that will greatly expand his catalog. So far, he has limited himself to English-language books but is working on a language translation option as well.

·          

·         To date, Will’s technical skills outpace his business acumen. He is struggling with some basic decisions. He has been working on his invention as a garage operation for the last few years and has missed many of his daughter’s soccer games while working at High Tech Digital Industries to keep his family comfortable on his $200,000 annual salary and benefits package. Will may eventually have to decide whether to devote most of his time to his invention. Moreover, he is not sure how to determine all the applications for his technology, who would want it, how it would be delivered to customers, how many books would be bought at what price, and so forth. Even after he has secured the rights to copyrighted material, he needs some help acquiring the books he wants to digitally transform and scanning them into his digitizer. It is not difficult to train others to do this, but the process takes about an hour per 500 pages to complete. To make sure the process works well, Will has been doing this himself, but he realizes this is neither a good use of his time nor will it get many books digitized. Fortunately, the digitizer Will uses is inexpensive to reproduce for others to use, and Will is certain that the security he has encoded into it will prevent others from unauthorized replication of the device. Where are the people Will can hire to do the work, and how much should he pay them? If it is easy to train workers in the United States to do this, could Will pay $10 an hour for someone with the skills of a high school graduate? If this is the skill level, could he pay a worker overseas $2 an hour for the same service?

·          

·         To address some of these issues, Will has been doing some research. First, he checked online to discover that a 500-page book on CD costs approximately $20. This is a good substitute for his audio files, and further research suggests that he could apply his digitizing process to more recent copyright-protected books for a royalty fee of $5 per book. He would still incur the labor charge of scanning the book. Will continues to wonder whether people want to read digitally or listen to audio books, or whether they still prefer a physical book to read. Will found an article from a reputable source that suggests customers of digital and audio books are relatively affluent, their household incomes are above average, and acceptance of digital reading for pleasure is lagging behind acceptance of digital reading for business. The article found that digital listening is attracting the same audience who download music to digital devices.

·          

·         Further research has suggested that price is an important feature driving the appeal of digital book files. Will is trying to apply some earlier experiences in movie distribution to his digital book project. When movies were first released for general consumer distribution as videotapes, they were expensive—about $80 per title. When the price was lowered to $20 per title, evidence suggests that volume sales typically went up 600%. Of course, not everything stayed the same. In recent years, movie titles have been released more quickly following their showing in theaters, there have been more extra features on the DVDs because of greater storage capacity, and the format changed from videotape to disk. Some have hinted that although there are fewer blockbuster hits now, there are more titles appealing to a broader audience. Will is trying to find more evidence of the effect of price on volume demand, but this is all he has discovered so far.

·          

·         Nevertheless, Will must determine a launch price for when he first introduces his digital titles to the market. He set up a website offering his small catalog of books. He set the price at $10 for a title on which copyright has lapsed and $15 for a title that includes a royalty fee. He is a little disappointed in his sales in the first 6 months of operation, having sold only 1,000 of the older books with a lapsed copyright and 2,000 of the newer books. Moreover, he is confused as to why he sold twice as many of the more expensive books. He wonders whether he should lower or raise prices to increase his revenues. What might he expect to happen to his volume sales if he does change prices? If he decides to increase or decrease prices, is it better to make a small change and observe the effects on quantity, or will customers more likely react to a change in price of at least $1 per title? If he changes his prices, will this have any effect on the prices charged by big-volume sellers for conventional hard-copy books?

·          

·         While Will is pondering his pricing strategy, he visits a friend, Elsa Budley, who has had experience selling online. Elsa started an online business selling her artwork. Although her initial sales were a bit disappointing, she offered some shocking advice. She discovered that she sold more artwork when she raised her prices at the same time that she expanded her online advertising budget. Elsa thinks Will’s key to success is to raise prices and sell more books!

·          

·         Will senses that he is on the brink of great success with a proprietary technology that transforms the way people access books and other materials currently offered only in print. He is also on the verge of making some fundamental business mistakes, however, that could rob him of his success. He may be more successful if he observes some basic concepts included in the early part of this course.

Week 4 – Written Assignment Feedback

 

 

Student:                                                                                               

Course         ECO561                                                                             

 

Date                                                                                                     

Assignment:  Week 4 Business Proposal Written Paper

 

 

                                                                                               Content/Development

 

 

Subject Matter:

The goal of this exercise is to use most the concepts in Week1 to date to analyze opportunity for developing a new good or service for a business.  This involves using the economic  concepts covered to address the following critical business decision factors:

 

·          Market structure and Elasticity – Appropriately evaluated market structure and elasticity for the product and defends position on these key factors

·          Pricing Strategy – Created a pricing strategy based on the assumed market structure and demand elasticity 

·          Non-price barrier to entry – Identify and justify non-pricing, barriers to entry   based on market factor

·          Increasing revenue – Chosen method to increase revenue based on pricing and non-pricing strategies

·          Product differentiation- Demonstrated an understanding of the uses of product differentiation

·          Economic concepts – Demonstrated an understanding of economic cost concepts including fixed, variable, marginal costs and cost minimization

·          Profit maximization quantity – uses the concept of cost to determine profit maximization point

·          Others:

·          Content is comprehensive, accurate and persuasive

·          Displays an understanding of relevant theory

·          Major points supported by specific details/examples

                                                                                                                                  

 

Comments:

 

The paper is graded based on the following key topics from the left column: 

 

 

Appropriately evaluated market structure and elasticity for the product

 

Created a pricing strategy based on market factors

 

Created non-price barriers to entry based on market factors

 

 

Demonstrated an understanding of the uses of product differentiation

 

Demonstrated an understanding of economic cost concepts

 

                                                                                                                                                                                               

 

 

Organization

 

 

The paper is organized in a logical and coherent manner. Transitions are used to improve flow.

·          The introduction provides a sufficient background on the topic and previews major points

·          Central theme/purpose is immediately clear

·          Structure is clear, logical, and easy to follow

·          Subsequent sections develop/support the central theme

·          Conclusion/recommendations follow logically from the body of the paper                                                                                                                     

·           

 

 

 

 

 

 

 

Mechanics

 

 

The author uses correct grammar and spelling. Format and citations are consistent with APA rules

 

·          Rules of grammar, usage, punctuation are followed

·          Spelling is correct

·          Sentences are complete, clear, and concise

·          Sentences are well-constructed with consistently strong, varied structure

·          Transitions between sentences/paragraphs/sections help maintain the flow of thought

·          Words used are precise and unambiguous

·          The tone is appropriate to the audience, content, and assignment

 

Valid research is used to appropriately support the content. References to sources are used when required

 

·          Research is adequate/timely

·          Writer has gone beyond textbook for resources

·          Format- including the title page, reference page, tables, and appendices —follows APA formatting guidelines – 

·           Properly cites ideas/info from other sources

·          Paper is laid out effectively–uses, heading and other reader-friendly tools

·          Paper is neat/shows attention to detail

 

 

Components of the assignment instructions are followed (Higher order thinking, number of examples, paper length, etc.)

·          Compares/contrasts/integrates theory/subject matter with work environment/experience

·          At an appropriate level,  analyzes and synthesizes theory/practice to develop new ideas and ways of conceptualizing and performing                                                                                                                                                        

 

                                                                                                                                                                                                                                                                                                                       

 

                                                    

 

 

 

 

 

 

 

 

 

 

 

 

 

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