Economics of Organization and Industry

For this final SLP, imagine that your business has become successful and you are now considering expanding the scope of your company. Carefully review all of the required background materials, and then write a three-page paper answering the following questions. Make sure to cite at least one of the required readings for each of your answers:If you were to engage in horizontal integration, which of your direct competitors would you decide to acquire? Overall, do you think horizontal integration is the best long-run plan for your business if it is successful?Do you think your business should vertically integrate over time? Should you engage in backwards vertical integration, forward vertical integration, both, neither? Explain your reasoning.How about diversification/conglomerate strategy? Any advantage to diversifying your business? Discuss unrelated diversification and related diversification and whether or not these strategies might be good for your business. Explain your reasoning. SLP Assignment ExpectationsAnswer the assignment questions directly.Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.Make sure to use reliable and credible sources as your references. Articles published in established newspapers or business journals/magazines are preferred. If you find articles on the Internet, make sure they are from a credible source.Reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper, including pages 11- 14 on in-text citations. Another resource is the â??Writing Style Guide,â? which is found under â??My Resourcesâ? in the TLC Portal.
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Running head: SUPPLY AND DEMAND
1
Trident University International
Kevin Ward
Module 1 SLP
BUS 530: Managerial Economics
Dr. John Gaze
28 May 2018
Running head: SUPPLY AND DEMAND
2
Introduction
The business that I would like to start is a bike shop that deals with repairing
bikes in general. The main reason for this preference is because I have experience in
the sector. Growing up with a father who loved bikes, I learned how to repair bikes at
a young age through apprenticeship. The skill was harnessed early in me. Therefore, I
already have enough expertise that is required to begin the business. I have a personal
connection to the business. My siblings and I used to compete on who would repair
bikes the best way possible. I always finished last. However, the work that I put into
repairing the bikes always stood out. There are very many sources of information that
I would go to gather relevant details about the bike shop. First, I would go to my dad.
My father has been repairing bikes almost all his life.
The amount of experience and diversity that he holds in terms of the
proper equipment and spare parts that I will require is significant. I would also talk to
different bike shops in town to understand more about location, rental rates, and price.
Marketing my services would be learned through a colleague of mine who focuses in
the area to assist me with his expertise. I would also head to the bike market both
online and at the town to get the best offers on the best spare parts for sale in the
market (Blakcwel, 2011).
Prices Offered by Businesses in the Industry
The bike industry charges different prices for their services according to the
expert level a repair shop can accomplish. Different businesses charge different prices
for say the installation of a new chain. The prices differ from shop to shop which
creates a little insight on demand from clients of various shops as compared to others.
Most bike owners have reported that they would not mind spending extra on clean
services that will last a while (Blakcwel, 2011).
BIKE REPAIR BUSINESS STARTUP PLAN
Firm
High-End Price
3
Low-End Price
Ala Carte
$10
Freddie Grubb
$9
Open
$20
Bikes Trans
$23
Auto Bikes
Tollar Shop
$12
$24
Glance Repairs
Fortified Chains
$14
$26
Pro Biker
7TH Shop
$13
$23
Different Reasons for the Price Difference
The price differences on the same services offered by these bike repair shops exist
because of a few reasons. First, a shop like Fortified Chains is located in the heart of
town. The location has played a significant role in the prices that it has to charge for
its services. If the firm does not cost $26 for the installation of a new chain on a bike,
then it might end up at a loss since the rental prices of the location are quite higher.
On the lower end, Freddie Grubb has focused on starting its shop in a cheap area of
town that experiences a steady flow of clients, but the rent is not as high. Therefore,
the firm can afford to charge as little as $9 for similar services without struggling in
any way. The quality of the service also matters. Even though Freddie Grubb costs
only $9 for the installation of a new chain on a bike, the bike owner might end up
revisiting the shop three or four times before a customer of Tollar Shop visits the
shop. The Tollar Shop has created a culture where it has been known for its
BIKE REPAIR BUSINESS STARTUP PLAN
4
professionalism and quality of work. This is the main reason that the shop is always
packed with clients.
The Tollar Shop has also invested a lot in advertising especially through the
internet. Not only does it repair bikes but also sells new ones and also offers delivery
services to the clients requiring spare parts or bikes. Ala Carte has been struggling
with gaining new clients. The firm can adopt Tollar Shopâ??s strategy that will benefit it
in terms of receiving new clients while increasing their service prices (Blakcwel,
2011).
The Elasticity of the Business
The elasticity demand in the market is one that is more confined to a specific
range. The highest price of a new chain installed on a bike given in the table is $26
while the lowest is $9. The cost for the service has been noted not to go higher or
lower. Therefore, the elasticity demand lies in the region. The market is an inelastic as
it might occur in different industries (Mucka, 2016).
Conclusion
I chose the bike industry because I have experience in the field ever since I was a
young child. There are different factors that I ought to consider before determining the
prices that I should charge for services offered. Some of these factors include
location, advertising and marketing, and the quality of services. For the location, if the
shop will be in a central location with a buzz in business, then the rent will be high
which will equate to higher prices for services offered. When the location is cheap,
then the services might as well be of a reasonable rate. For the advertising and
marketing and quality of service provided, when more is invested in the two sections,
then the price of services will be high. Also, the industry has an inelastic demand.
BIKE REPAIR BUSINESS STARTUP PLAN
5
Therefore, as I raise the prices, it is also important to note that the clients have a limit
of how much they can pay for services (Mucka, 2016).
BIKE REPAIR BUSINESS STARTUP PLAN
6
References
Blakcwel, E. (2011). How to Prepare a Business Plan: Create Your Strategy; Forecast
Your Finances; Produce That Persuasive Plan.
Mucka, S. (2016). Price Elasticity of Demand and Its Effect on Revenue. United
States: GRIN Verlag.
Pinson, L. (2008). Anatomy of a Business Plan. United States: Aka Associates.
Seidman, D. & Ball, M. K. (2011). Supply and Demand. United States: The Rosen
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