Strategic Human Resource Management
November 9, 2020Market Segmentation and Targeting
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Question 1
Part 1
It is important for an organization to take into consideration the degree of competition existing in the market and the nature of its inception (Dillard, 2018). This can help the organizations to develop long term suitable strategies associated with the growth and expansion of business operations. A firm which is characterized by monopolistic competition would be able to ensure that it earns the highest level of profit only when its marginal level of revenue is same as the marginal cost, i.e. MR = MC.
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Case 1: When the expense is lower than the revenue
In the first case, it can be observed that the firm would tend to maximize profit at a point when its average level of expense is lower than its average level of revenue. The area of the profit is denoted by the portion of the curve where its level of average revenue is more than the average level of expenditure (Gallant, 2018). It has been observed that the organization sells a number of units amounting to 40. It maximizes its profit at a point where its level of MR is the same as its MC.
The portion of the profit is denoted by the area and is calculated as follows:
P = (2.5*40) + (½ * 40 * 5) = 100 + 100 = 200
This can be used to reveal the phenomena that the firm earns a volume of profit when it equals its marginal level of revenue and marginal expenditure. The amount of profit earned in this regard is 200.
Case 2: When the expense is greater than the revenue
In the second case, it can be observed that the firm incurs a loss when its level of expense is greater than the level of revenue (Giacobbe et al., 2016). This can be used to denote the loss of the firm. The area which is used to denote the loss is given by the portion where its excess of expense overlays the revenue.
Loss = (22.5 – 20) * 40 = 100
This can be used to reveal the fact that the organization would actually have to bear a loss amounting to 100 units.
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Part 2
A firm which is monopolistically competitive in nature operates in a segment of the market which is characterized by perfect competition. It bears the same resemblance as that of a firm which is characterized by a perfectly competitive market (Ito and Sallee, 2018). It is the same as that of a firm which is characterized by a high degree of rivalry in the market. Firms which operate in a market that is perfectly competitive in nature have low barriers associated with entry and exit. It can also be used to reveal the fact that the firms operating in such a segment have a low degree of bargaining power associated with the suppliers.
On the other hand, firms which are characterized by an imperfect competition in the market have high barriers associated with entry and exit of firms (Krugman et al., 2017). This includes firms which have a high degree of monopoly power and can have significant control over the operations of the market. Firms which are characterized by imperfect competition also includes the oligopolistic market framework. These firms enjoy a significant degree of hold over the market segment.
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Question 2
The value associated with the level of nominal GDP can be used to measure the hypothetical growth in the economy. On the other hand, the level associated with real GDP also takes into account the rate of inflation while determining the prices of the goods and services in the economy.
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The level associated with nominal GDP is estimated by taking into account the product of the base year price and quantity and adding it with the level of current product of price and quantity (McLennan, 2018). On the other hand, the level of real inflation is taken into account by obtaining the product of the price and quantity associated with current GDP and adding the same with the product of the price of the base year and quantity of goods which has been produced in the current year. It is always observable that the level corresponding to the value of real GDP is lower than the nominal GDP (MUNRO, 2019). This is due to the fact that the nominal GDP does not take into account the rate of inflation in the economy. On the other hand, real GDP takes into account the level of inflation in the economy.
The nominal and real level of GDP has been highlighted in the form of a table.
Item | Price in 2017 | Price in 2018 | ||||
Production | Per unit | Production | Per unit | Nominal GDP | Real GDP | |
Rice | 50000 | 1.5 | 55000 | 2 | 185000 | 157500 |
Wheat | 100000 | 2 | 98000 | 2.5 | 445000 | 396000 |
Tractor | 50,000 | 23000 | 45000 | 24500 | 2252500000 | 2185000000 |
Cotton | 120000 | 100 | 110000 | 120 | 25200000 | 23000000 |
Used cars | 5000 | 5000 | 6000 | 7000 | 67000000 | 55000000 |
Garments | 150000 | 50 | 145000 | 70 | 17650000 | 14750000 |
Eggs | 2000 | 2.5 | 2300 | 3.5 | 13050 | 10750 |
Coca Cola | 6000 | 0.8 | 6500 | 1.2 | 12600 | 10000 |
Pepsi Cola | 700 | 1.1 | 850 | 1.5 | 2045 | 1705 |
Beef | 5000 | 6.5 | 4800 | 8.5 | 73300 | 63700 |
Second-hand cloth | 500 | 15 | 450 | 25 | 18750 | 14250 |
Alcohol | 500 | 3.25 | 600 | 3.75 | 3875 | 3575 |
Milk | 7000 | 2.3 | 7500 | 2.5 | 34850 | 33350 |
Aggregate | 496700 | 28184.95 | 482000 | 31740.45 | 2363138470 | 2278440830 |
GDP deflator | 103.7173509 |
Table 1: Nominal and real GDP
(Source: Created by author)
The GDP deflator has been estimated to be 103.71%. This signifies a massive level of inflation pressure in the economy. It can also be used to denote the fact that the government should adopt stable contraction policies to lower the rate of inflation (Rates and Market, 2018). This includes fiscal and monetary tightening policies aimed at reducing the growth rate from inflation in the economy. It is important for the economists and policymakers to take into account the factors associated with the rate of interest in the economy and the consumption level. It is also essential to take into consideration the volume of aggregate demand and general level of supply in order to determine the degree of price rise associated with goods and services in the economy (Samuelson, 2016). The level denoting the degree of inflation can also be used to compare the prices of goods in the base year and the corresponding level in the quantity in the current year. This can also be used to reveal the factors associated with price rise and fall over the time period by taking into account the economic indicators which can define the rate of inflation and growth.
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Question 3
The cycle of business activities in any economy is denoted by the level of consumption and production cycle which the economy can engage in at present. It is also essential to take into account the factors associated with the components of GDP such as the rate of inflation in the economy (Tily, 2016). It is mandatory to take into account various components associated with consumption, level denoting the degree of investment, expenditure incurred by the government and the level of balance associated with the trade. The equation denoting the system of national income accounts is represented as follows:
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Y = C+I+G+NX
The equation can be used to signify the fact that an increase in the level of government expenditure and investment in the economy can create a stimulus for the aggregate demand. This in turn would also induce producers to supply a larger volume of goods in the economy. Thus, the cycle associated with business activities involving the production and consumption of goods would increase. This in turn would cause the business cycle to always reflect a positive outflow (Wilkinson and Klaes, 2017). The expenditure which is incurred by the government can also be used to reveal the fact that the degree of price rise or fall would create a significant degree of impact upon the operations of the business enterprise. It is also essential to take into consideration factors associated with phenomena such as the volume of price rise and fall in order to determine the degree of changes in the level of inflation in the economy (Samuelson, 2016). It is important for the government to take into account the sectors in which it should primarily diversify its funds so that it can easily engage in increasing the GDP output of the nation by creating adequate forward and backward linkage effects in the economy.
Question 4
Part 1
The anticipated level associated with the rate of inflation in the economy stood at 4%. On the other hand, it can be observed that the actual level of inflation in the economy stood at 6%. The consumer is currently receiving interest on the term deposits at a rate of 5% per annum. This can be used to reveal the phenomena that the volume associated with the real interest rate in the economy has actually fallen. This can be revealed through the calculation below:
Real interest rate = (5% – 6%) = -1%
This phenomenon can be used to reveal the fact that the consumer, in reality, earns a negative return. Instead of earning savings, he actually has to forgo a greater amount in the form of payment due to the high rate of inflation in the economy. The level of real interest rate in the economy can also be used to signify the extent to which a nation can gain long term sustainability (Rates and Market, 2018). The level associated with real interest rates can have varied implications in the economy. This can be used to signify that a country which has a very low level of real interest rate. This has been used to reveal the fact that the level of prominence of national output depends upon the real interest (McLennan, 2018). The level associated with a real interest in the economy can be used to determine.
It is also essential to take into account the real rate of interest and also take into account the factors associated with the level of the exchange rate and the level of interest and the level of consumption. It is also essential to take into account the factors. It is also essential to take into consideration the factors associated with real interest rates (Ito and Sallee, 2018). This is also used to denote the fact that an organization also takes into account the factors associated with components of growth and stability. It is also essential to take into account the factors determining the degree of growth and stability by taking into account the overall level of operations.
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Part 2
The level of unemployment in the economy is used to denote the factors associated with components such as the participation force of the labourers. It is also mandatory to take into consideration the extent to which people are employed and those who are unemployed in the economy (McLennan, 2018). It has been observed that there are a total 20.8 million people in the economy out of which 13.5 million belong to the category of the employed and 0.7 are unemployed.
The percentage is denoted as follows:
(13.5/ 20.8) = 0.64
This can be used to reveal the phenomena that out of 100 workers, 64 are actually employed across different sectors in the economy.
The percentage of unemployed is calculated as follows:
(0.7/ 20.8) = 0.033
It is also essential to take into account factors such as the degree to which people in Australia are employed. It has been observed that the degree of unemployment in Australia is relatively low (MUNRO, 2019). This is due to the fact that the country has a stable form of economic policies which can be used to stimulate growth.
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Question 5
The investment and the expenditure incurred by the government in the construction sector can be used to reveal the fact that the level of investment in projects can be used to denote the right level of cash inflow and outflow in the economy (McLennan, 2018). It is also essential to consider the aspects associated with the gestation period of each project while taking into account the factors related to ROI and other similar components.
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The downward slope associated with the curve denoting aggregate demand is used to reveal the inverse relation that exists between the price of products and the volume of goods and services produced in the economy (Ito and Sallee, 2018). It is also evident that when the level of prices associated with goods and services in the economy rises, the level of aggregate demand decreases.
References
Dillard, D., 2018. The economics of John Maynard Keynes: the theory of a monetary economy. Pickle Partners Publishing.
Gallant, A.R., 2018. An introduction to econometric theory: measure-theoretic probability and statistics with applications to economics. Princeton University Press.
Giacobbe, F., Matolcsy, Z. and Wakefield, J., 2016. An investigation of wholly‐owned foreign subsidiary control through transaction cost economics theory. Accounting & Finance, 56(4), pp.1041-1070.
Ito, K. and Sallee, J.M., 2018. The economics of attribute-based regulation: Theory and evidence from fuel economy standards. Review of Economics and Statistics, 100(2), pp.319-336.
Krugman, P., Obstfeld, M. and Melitz, M., 2017. International Economics: Theory and Policy, the latest edition. Addison-Wesley.
McLennan, A., 2018. Advanced fixed point theory for economics (Vol. 25). Singapore: Springer.
MUNRO, C.W.C.G.R., 2019. The Economics of Fishing and Modern Capital Theory: A Simplified Approach1. Fisheries Economics, Volume I: Collected Essays, p.46.
Rates, E. and Market, E., 2018. International economics: theory and policy.
Samuelson, L., 2016. Game theory in economics and beyond. Journal of Economic Perspectives, 30(4), pp.107-30.
Tily, G., 2016. Keynes’s General Theory, the Rate of Interest and Keynesian’ Economics. Springer.
Wilkinson, N. and Klaes, M., 2017. An introduction to behavioral economics. Macmillan International Higher Education.
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