|Assignment Brief: Managerial Economics Course
Please answer each bullet in each of the following questions for Managerial Economics Course. Answers are short answers (approximately 50 words each). All work must be referenced correctly using Harvard Referencing System.
THE IMPORTANCE OF COMPETITION IN MARKETS (60 marks)
1.0 The US Department of Justice has recently announced that StarKist has agreed to plead guilty to a charge of price-fixing in relation to a conspiracy with officials from other tuna companies to fix the price of canned tuna that ran from at least late 2011 to late 2013 and came to light in 2015. The company faces a potential fine of $100 million. The canned tuna market in the US has long been dominated by the following three companies: StarKist, Chicken of the Sea and Bumble Bee. Bumble Bee agreed to plead guilty in May 2017 and paid a fine of $25 million. Chicken of the Sea has not been charged because prosecutors say the company exposed the scheme and co-operated with the investigation.
The fact of the case is about price fixing conspiracy where companies involved and it is fact where organizations intrigue to set costs, successfully disassembling the free market. To implement the anti-competitive scheme business practices that anticipate or lessen rivalry in a market. The discussion about the ethical quality of certain business rehearses named as being hostile to focused has proceeded both in the investigation of the historical backdrop of financial aspects and in the mainstream culture. (Starkist, 2018)
· Raw tuna is an input for the production of canned tuna. Explain your expectation with respect to what the normal relationship should be between the price of raw tuna and the price of canned tuna. Explain the relationship between the price of raw tuna and the price of canned tuna in this case and describe how this relationship played a role in the anti-competitive conspiracy being exposed.
As raw tuna is an input for the production of the canned tuna, the relationship is positive because canned tuna depends on the raw tuna, in that case if the price fixing conspiracy held here, then the price of the canned tuna will be effected. This relationship played a role in the anti-competitive conspiracy being exposed by the way of free market mechanism. (Lincoln, 2017)
· Describe how Merger & Acquisition activity among suppliers in this market impacted competition and played a role in the price-fixing activities being exposed.
Merger & Acquisition activity among suppliers in this market impacted competition by the means of providing noteworthy market focal points that are reflected in the extension of the market, as well as principally in the defense of activities. In the meantime, they can be extremely disturbing variables with regards to abundance limit or a lacking association and business culture in the price fixing activities. (Dujak, 2015)
· Describe how the collusion and price-fixing in this case impacted consumers in the US market.
Price-fixing hurts customers in urbanized society, and also in the developing nations. In including, price fixing modern parts need rivalry which unquestionably diminishes intensity over the long haul and may negatively affect the general execution of a nation’s economy like USA. (Lincoln, 2017)
2.0 The Australian Competition and Consumer Commission recently announced an inquiry into price competition among providers of foreign exchange services to consumers and small businesses.
· Describe how the cost of sending money overseas from Australia in relation to other G20 countries played a role in this inquiry being commenced.
Inquiry into price competition among providers of foreign exchange services to consumers and small businesses made the aspect of transparency strong by which it will increase the accountability and they will be able to find the cheap deals for them
· Identify the four largest banks in Australia and the three largest online money transfer companies and describe how complaints about these firms played a role in the inquiry being commenced.
The four largest banks in Australia
· Commonwealth Bank (CBA)
· National Australia Bank (NAB)
· Westpac (WBC)
· Australia and New Zealand Banking Group (ANZ)
The three largest online money transfer companies
XE Money Transfer
World First Money Transfer
So, the complaints about these firms played a role in the inquiry being commenced by the way to taking the feedback about the complaints and take necessary step for correction action.
· Describe generally how the inquiry will be conducted with specific reference to the range of issues to be addressed.
The inquiry will be conducted by an Audit Teams who will be responsible to address and submit the report regarding reasons and causes of the issues created
3.0 The European Union regulates Competition among suppliers to European consumers. This competition policy is designed to apply rules to make sure companies compete fairly with each other.
· Describe the reasons why the EU has adopted these policies and the tools available to fight anti-competitive behavior.
The EU’s policies on competition are the reasons to guarantee reasonable and approach conditions for organizations, while leaving space for advancement, brought together norms, and the improvement of independent ventures. Here, business can’t repair costs or cut markets among themselves, can’t mishandle a predominant position in a specific market to crush out littler contenders. It is the Protection for little firms. (Alex, 2017)
4.0 In 2017, the European Commission imposed a €2.4 billion penalty after finding that Google had used its dominant search engine to skew the market in favor of its internet shopping service. Google is appealing against this decision.
· Describe the EU’s allegations against Google in this case and explain why these activities would have a negative effect on competition and consumers if true.
Allegations that have been brought against Google, regardless of a yearlong go head to head between the organization and controllers here. It will more likely than not expand weight on Google to address grumblings that the organization supports its very own items in query items over its adversaries’ administrations. If, it will be true, these activities would have a negative effect on competition and consumers because the business will be adversely affected and harmful effect in the internet platform. (Brussel, 2017)
· Describe Google’s defenses and explanations in response to the EU’s case.
Google have consulted with the commission and the request could likewise extend past shopping locales, to zones like online looks for eateries and travel. They convinced that they are not here to take the side of adversaries — they are here to take the side of competition.
5.0 The European Union has recently imposed a record penalty on Google in the amount of €4.34 billion over “serious illegal behavior” to secure the dominance of its search engine on mobile phones. Google is appealing against this decision.
· Describe the EU’s allegations against Google in detail and explain why these activities would have a negative impact on competition and consumers if true.
Today, internet in mobile makes up the greater part of worldwide web movement. It has changed the lives of a great many Europeans. Our case is around three kinds of limitations that Google has forced on Android gadget makers and system administrators to guarantee that activity on Android gadgets goes to the Google internet searcher. Along these lines, Google has utilized Android as a vehicle to bond the strength of its internet searcher. These practices have denied rivals the opportunity to enhance and contend on the benefits. They have denied European purchasers the advantages of compelling rivalry in the imperative portable circle. This is illicit under EU antitrust rules. (Brussel, 2017)
These activities would have a negative impact on competition and consumers because it kills privacy.
· Describe Google’s defenses and explanations in response to the EU’s case.
At the point when Google builds up another form of Android it distributes the source code on the web. This on a basic level enables outsiders to download and adjust this code to make Android forks. The transparently open Android source code covers fundamental highlights of a keen portable working framework however not Google’s exclusive Android applications and administrations. Gadget producers who wish to get Google’s exclusive Android applications and administrations need to go into contracts with Google, as a component of which Google forces various confinements. Google likewise went into contracts and connected a portion of these limitations to certain vast versatile system administrators, who can likewise figure out which applications and administrations are introduced on gadgets sold to end clients. (Europa, 2017)
SUPPLY AND DEMAND IN THE MARKET AND PRICES (25 marks)
1.0 Swiss luxury conglomerate Richemont, owner of Cartier, Piaget, Vacheron Constantin and other brands, revealed recently that it is struggling to emerge from a sharp pullback from Chinese consumers that shocked the industry a few years ago. A major part of the problem is that a change in policy by the Chinese government to reduce corruption has resulted in a sharp decline in demand for luxury Swiss watches.
· Describe the importance of demand from Chinese consumers to the manufacturers of luxury Swiss watches, include estimates of the percentage total production that ends up being sold in the Chinese market.
The importance of demand in the event that the watch business has anything to be pleased with, it is that great watches still experience solid buyer intrigue, and that the business has possessed the capacity to create enough great items to store up countless around the globe. A lot of this is on account of the Internet – which is a stage the watch business has, in many respects, neglected to use effectively. (Adams, 2017)
· Describe the new policies implemented by the Chinese government to limit “gifting” of watches to grease the wheels of Chinese bureaucracy and business and the corresponding impact this has had on demand for luxury Swiss watches in the Chinese market.
The new policies to limit “gifting” of watches to reduce the corruption by the means of showing the proper source of money to buy the gifts and it has impacted on the demand of the watches negatively that reduce the sales. (Siegenthaler, 2017)
· Describe the steps that can be taken by Richemont and other suppliers of luxury Swiss watches to support prices, protect profit margins and buttress the perceived value of timepieces that can cost more than a new car.
The steps that can be taken by Richemont and other suppliers of luxury Swiss watches to support prices, protect profit margin by reducing the production cost or making it available to the international market for international buyer. (Politico, 2017)
2.0 As we discussed previously in class, concerns around oil supply drove the price of oil to a four-year high above $85 per barrel in early October. Since then, oil prices have fallen below $70 per barrel as concerns around oil supply have faded away.
· Describe the circumstances around the fact that concerns about the supply of oil have recently faded away. At a minimum, be sure to describe the circumstances related to the following oil producing countries:
o United States – Supply increased
o Saudi Arabia – supply increased
o Iraq – supply decreased
o Iran – supply increased
o Russia – supply decreased
CONSUMER PREFERENCES AND PRODUCTS (15 Marks)
Apple is one of the world’s most successful and profitable companies. The company has recently announced a series of updates across its product lines along with new pricing strategies that seem designed to extend product life cycles and maintain growth in revenue and profit margins as the products mature.
· Describe the Product Life Cycle and its various stages.
Apple has numerous items that are right now at various phases of the item life cycle. As of late, they presented a red hued iPhone. Since this is another item, it is in the presentation arrange. This stage is described by couple of offers and moderate development. Apple is offering red iPhones with an end goal to bring issues to light, and cash for the Global store to battle HIV and AIDS. By doing this, Apple is advancing corporate social duty. Since this item isn’t essentially not the same as different iPhones, it is viewed as a low learning item. Apple doesn’t generally need to show purchasers anything this item since they most likely as of now know about iPhones, and all Apple is changing is the shading. In any case, this is as yet another item in the acquaintance stage and Apple has with convey attention to customers. (Apple, 2017)
Apple’s AirPods then again are in the development phase of the item life cycle. This stage is portrayed by numerous deals and expanding piece of the overall industry development. AirPods were acquainted with the market in December thirteenth, 2016. They have been advanced by Apple through notices, including one that disclosed amid Superbowl 51. Most Apple customers know about the new AirPods, and many are acquiring them. They haven’t exactly achieved the development arrange be that as it may, in light of the fact that they are as yet a moderately new item. (Burst, 2017)
Apple iPhones anyway are in the development phase of the item life cycle. This piece of the existence cycle includes a moderating of aggregate industry deals and income. Apple has been creating iPhones reliably throughout the years, and purchasers are very much aware of them. Likewise, numerous iPhone clients are “repurchasers,” which means they reliably purchase iPhones and don’t switch brands. Along these lines, iPhones are in the development arrange. (Apple, 2017)
At long last, Apple has a few items that are in the decay organize. Macintosh’s iPods are unquestionably in this stage. The decay arrange happens when deals drop. Numerous previous iPod clients needn’t bother with them any longer since they have all their music on their telephones. Since the interest for iPods has dropped, Apple chose to reap them, where they diminish the cost of iPods and lessen the advertising costs for advancing them. (Burst, 2017)
· Describe steps taken by Apple to extend the Product Life Cycle for each of the following products:
o Macs – steps to increase the quality of it
o iPhones – establish it as a global brand
o iPads – more smooth and comfortable use
o iWatches – demand of young generation
· Describe the pricing strategies being implemented by Apple and explain the likely impact on quantities demanded for the following products:
o Macs – moderately priced for moderate class people
o iPhones – highly priced for some specific class of people
o iPads – moderately priced
o iWatches – moderately priced.
References (Managerial Economics Course)
Adams, A., 2017. Despite Consumer Demand, The Luxury Watch Industry Will Have To Shrink Before It Recovers. Journal of Consumer Behavior, 11(4), pp. 55-58.
Alex, 2017. Europe Challenges Google, Seeing Violations of Its Antitrust Law. Journal of Anti Trust Compettion, 2(1), pp. 15-18.
Apple, 2017. Apple Products and the Product Life Cycle. [Online]
Brussel, 2017. Antitrust: Commission fines Google €4.34 billion for illegal practices regarding Android mobile devices to strengthen dominance of Google’s search engine. [Online]
Burst, 2017. The Product Lifecycle: The Success of Apple’s iPod at Each Stage. Journal of Marketing, 2(1), pp. 01-12.
Dujak, D., 2015. Effects of acquisitions and mergers on supply chain structure and strategy. Journal of Supply chain management, 2(1), pp. 22-25.
Europa, 2017. The EU’s rules on competition are designed to ensure fair and equal conditions for businesses,. Journal of Europian Union, 12(4), pp. 222-228.
Lincoln, 2017. StarKist admits fixing tuna prices, faces $100 million fine for collusion. [Online]
Politico, 2017. With record antitrust fine, Europe lands blow against Google. [Online]
Siegenthaler, P., 2017. Why Swiss watch repairs are becoming a pain. [Online]
Starkist, 2018. StarKist to Plead Guilty to Price Fixing and Face $100 Million Fine. [Online]
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