The aim of this article is to evaluate the microeconomic factors impacting on a UK business company and a product of their range. The business highlighted is Panasonic UK Ltd and the product this statement has been centered around is the Viera 3DTelevision set. Panasonic inserted the fray of the 3D trend in June 2010 with the world's first 3D plasma model. The product presently retails at the average price of Ј1500. With this report I'll make some assumptions, as because of the technology being new, there are no reliable information available for examination at the moment.
COMPANY PROFILE
Panasonic started life as Matsushita Electric Housewares Making Works. It had been founded by Konosuke Matsushita in 1918 and has extended to a global organization. Panasonic UK Ltd was founded in 1972 and has its headquarters in Bracknell, Berkshire. The business in the UK employs in excess of 500 staff and has an annual turnover of more than Ј700m. The business is a major company of consumer and business digital goods ranging from cameras to kitchen appliances.
DEMAND
The description of demand is the quantity of goods or service a consumer or group of consumers will want to buy at a given price.
The Legislations of Demand areas that there surely is an inverse romance between price and the quantity which will be demanded, which in essence refers to the actual fact that if prices climb then demand comes of course, if prices land then demand goes up. Because of this negative relationship, when illustrating this by using a graph the demand curve will usually slope downwards.
There are two significant reasons for the theory behind this rules:
Income effect - as individuals income change they will have more or less disposable income to invest on goods and services
Substitution effect - if the price of a product or service rises it is more likely that consumers will purchase substitute (swap) goods and services and if the price tag on a product or service decreases then consumers are less likely to get alternatives (substitutes).
This theory has been challenged however by a UK economist Sir Robert Giffen (1837-1910) who first researched and reported the paradox a product may experience an increased demand when the price rises and reduced demand for when the purchase price falls. This is mainly a theoretical concept, but there have arguably been goods with this property.
When discussing the concepts of economics the word 'ceteris paribus' is regularly used which is Latin and means "all things being equal". This is employed to isolate a explanation of occurrences from other variables.
In the case of the Panasonic 3DTV it has its group of factors that will have an effect on the demand for the product. In my judgment the key factors will be:
Consumer tastes and personal preferences - Due to recent increased publicity and high profile film improvements in the theatre with the release of films such as Avatar, I assume that this will have a major effect on the consumers 'wishes and desires' for this new technology. A recently available study noticed a 20% upsurge in the size of the audience who said they are prepared to buy a fresh TV to get the 3D experience because the release of the Avatar movie. This would have the result of increasing demand. (graph series D1) 3d incrase. jpg
Income- In my own opinion the demand for Viera 3DTV will be being placed back at the current time anticipated to increasing macroeconomic stresses giving consumers with less throw-away income and for that reason although they may desire the technology it'll be more difficult to have the ability to afford the good at its current charges levels therefore this decrease in disposable income persists this will have the result of decreasing demand.
Substitute Goods - I assume that the Viera 3DTv set has many close substitutes that will affect its demand as all the major manufacturers develop their own 3DTV's in the try to get their market show. Pricing in cases like this is vital therefore if the price tag on other manufacturers' products diminishes the demand for the Panasonic would decrease. Complementary Goods - the 3D technology has complementary goods associated with it such as 3D spectacles and 3D blueray players. The price of these will have an impact on the demand for the key technology as at the existing time you can take good thing about the 3D benefits without these therefore the prices of the decrease then your demand for the complementary tv set would also theoretically increase.
The Consumer anticipations about future prices and product availableness - some consumers may hang on until the technology for 3D becomes founded before purchasing as they expect the pattern to be bringing down in cost.
The following graph will demonstrate the effects of these factors on the demand for the Viera 3D television.
Increase popular curve (change to the right)increase source curve. png
SUPPLY
The explanation of resource is the quantity of a good that makers are eager and able to offer for sale at various prices.
In compare to regulations of Demand, the relationship between resource and price is an optimistic one. As source rises then price lowers and as resource decreases price increase, therefore for the purposes of illustrating supply the supply curve are upwards sloping.
The point at which the demand and supply curve meet is named the marketplace equilibrium and shows the perfect level of which the amount demanded is equal to the amount supplied.
Market equilibrium diagram Simple_supply_and_demand. png
There are again many factors that can own an effect on the way to obtain a good and in the framework of the Viera HD 3D television I consider those to be as follows:
Cost of resources and raw materials- if the price of such items is high then it is likely that the supply of 3DTV's will be constrained due to budgeting constraints of the company as they can only manufacture as much of the product as they have sufficient materials and labour to allocate to this.
Production technology - 3D technology has been around for quite some time however there's as yet not been the technology in spot to produce the merchandise on a higher consumer scale, therefore as the means of manufacturing the products gets easier it means that companies can increase their development.
Taxes and subsidies - if goods or raw materials are highly taxed the resource will be limited anticipated to money constraints within a company however if a good is subsidised the business have greater money to get materials etc. . . therefore they could produce more
Profitability of alternate goods - If other goods in a company's range are usually more profitable ie. Surveillance cameras instead of TV's then your supplier may concentrate its businesses on such products to increase their income and limit development of others
Increase in source curve (change to the right)increase resource curve. 1. png
Decrease in resource curve (alter to the left)
decrease in resource curve. png
ELASTICITY
"Elasticity actions the percentage reaction of a dependent variable to a percentage change within an independent changing. " Valentino Piana (2004)
Elasticity steps the amount to which demand will change.
There are three main methods of elasticity of demand that I'll determine in the framework of the Panasonic 3DTelevision.
Price elasticity of demand - (P. E. D) is determined as the ratio change in quantity demanded divided by the ratio change in cost. The results of this equation will indicate the responsiveness of the number demanded if the purchase price changes, with a P. E. D. of less than one indicating an inelastic good and a P. E. D. of greater than one, concluding a good is elastic.
In the framework of the Panasonic 3DTV it is my view if characters were currently available then the P. E. D. would be higher than one showing that particular good is stretchy. My reasoning for this is that product has close substitutes from other consumer electronics manufacturers which consumers are likely to turn their preference to should the price of this good increase. Also this kind of television I believe to be a luxury item and a huge percentage of consumer income would be used to get this technology. Because of this I believe an increase in price would potentially come with an extensive negative influence on the demand for the nice.
The information from this formula can be very helpful to a company when choosing its pricing strategy and its own affect on the business's total revenue as highlighted in the graph below.
Cross elasticity of demand - ( X. E. D. ) is thought as "the responsiveness of demand for just one good to a big change in price of another" (Sloman 2008:56) is calculated as the percentage change in the number demanded of good Y divided by the ratio change in the quantity demanded of good X. The results of this formula will evaluate whether a good is a complementary good or an alternative good.
Below -1
-1 to 0
0
0 to 1
+1
Strong complementary good
Weak complementary good
No relation
Weak alternative good
Strong alternative good
For the goal of relating this theory to my report I've chosen to determine the combination elasticity of demand between the Panasonic Viera 3DTelevision set and a Sony Bravia 3DTelevision set. For me, if results were available the consequence of the X. E. D. formula would be over 1 as I believe two 3DTv sets are very similar in technology, size shape and function therefore if the price tag on one were to raise the demand for the other manufacturers product would increase recommending a strong replacement relationship between your two products as highlighted above.
However I really do believe the Panasonic 3DTv set has many compliments such as 3D satellite television, 3D glasses, 3D video gaming, 3D Blueray players which would result in a negative end result. The degree to which these complements are yet to be observed however as the technology is still in the early development.
complement. jpg
Income elasticity of demand - (Y. E. D) is defined as "the responsiveness of demand to an alteration in consumer earnings (Y)" which "enables us to predict how much the demand curve will move for confirmed change income" (Sloman 2008:56) measured as the ratio change in the quantity demanded divided by the percentage change in income. ".
The consequence of this formula show the sort of good which table points out why.
-1
0-1
+1
Inferior good
Normal good
Superior good
Increase in income= reduction in demand
Increase in income = increase in demand
Increase in income = greater increase in demand
In the truth of my chosen product in my own opinion the results of the Y. E. D. formula would be that the 3DTv set is currently a superior or luxury good. The new technology will be up there on a great deal of consumers set of wants however the price of the nice would mean a higher proportion of income would have to be spent to obtain one. Maybe it's said that in the current economic environment the demand for these types of goods reduces as earnings reduce and people switch to essentials alternatively than luxuries.
COMPETITION
The amount to which a market or industry serves as a competitive is determined by how many rivals it has and how this impacts their pricing as well as the efficiency with which new businesses can get into and exit a particular market or industry in the long run.
The three main explanations are:
Perfect competition - a business or market that has hardly any or no obstacles to entry or leave, has many competitors which is a "price taker" as they don't dictate the price of their goods/services.
Oligopoly - an industry or market that is dominated by a tiny quantity of large businesses, there are few barriers to entry and leave, few competitors and if one firm places up the price others tend not to increase their prices, however if a firm drops its prices the other organizations in this market will have a tendency to lower their prices also, for example supermarkets.
Monopoly - is where the market is the firm or has more than a 25% share of a market. There are various barriers to entry and exit the marketplace and monopoly is a "price manufacturer" as they can dictate the price tag on goods and services as there are in theory no competitors, including the POSTOFFICE.
In terms of Panasonic UK Ltd as a corporation, it is my judgment that the business operates in a oligopoly. My reasoning behind this is the fact Panasonic does have competitors in the form of the likes of Sony, Samsung, LG, Toshiba and Sharp. There are many barriers to the entry of the industry such as premises, quality and branding and a few barriers to leave also.
The best approach of demonstrating the marketplace structure and its own effect on rates is via the diagram below by plotting a kinked demand curve. This shows that Panasonic raises the prices of its 3DTV's above the going rate it'll lose a great deal of sales to its competitors i. e. Sony and Samsung. However if Panasonic reduced it price for the HD 3D television set below the heading rate it will not gain many customer because its competitors will be required to match its price reductions to maintain their show of the marketplace.
market4. gif
SUMMARY
