Consulting Team #1 - NAF



AOF Business EconomicsLesson 9Competition and the MarketplaceStudent ResourcesResourceDescriptionStudent Resource 9.1Learning Guide: Market StructuresStudent Resource 9.2Defining Format Frames: Market Structures Student Resource 9.3Memo: Elevator Pitch InstructionsStudent Resource 9.4Project Guide: Know, Need to Know ChartStudent Resource 9.5Chart: Avocado Sales DataStudent Resource 9.6Reading: Demand and PricingStudent Resource 9.7Memo: Increased CompetitionStudent Resource 9.8Reading: CompetitionStudent Resource 9.9Project Guide: Competition PresentationStudent Resource 9.10Form: Presentation FeedbackStudent Resource 9.1Learning Guide: Market StructuresDirections: In this reading, you will be introduced to the four major broad types of market structures in a market economy: perfect competition, monopolistic competition, oligopoly, and monopoly. Read about each market structure and then work with a partner to identify which form of market most closely resembles each of the two sales of homework passes in the classroom activity.Perfect competition is a market structure made up of many small firms with full market information. They also have equal access to the same production technology, and each one is selling identical products to a large number of buyers. In perfect competition, no seller is large enough to set the price of a product. Also, the behavior of individual buyers and sellers doesn't have a significant effect on the market price. If it sounds a little too perfect, you’re right! Perfect competition rarely happens. It's considered an ideal. Some markets do come close to it, however. One current example would be a large farmers market where numerous local producers (truck farmers) come to sell their produce and numerous consumers come to buy it.Imagine a busy Saturday with lots of local farmers trying to sell their fruits and veggies to a large crowd of shoppers. Each vendor’s table would be stocked with nearly identical items (it’s pretty difficult to distinguish one ripe red tomato from another two stalls over). Farmers choose to grow crops that they believe will bring the highest profit. So they might grow sweet peppers one season and carrots the next, responding to market demand. Sellers and buyers all act independently and the interaction of supply and demand determines the price equilibrium. Finally, since all sellers post their prices for everyone to see, buyers and sellers all work with enough pricing information for consumers to make the best and most efficient purchasing decisions, and for sellers to make efficient decisions as to what to bring to the market next time and what to plant and harvest in the next growing season.To sum up, a perfect (or close-to-perfect) market generally displays all of the following characteristics:Large number of buyers and sellersIdentical or nearly identical productsAll buyers and sellers acting independentlyPerfect and equal (or nearly perfect and equal) information on prices and productsEasy entry into and exit from the industryThe seller does not set the price. No matter what an individual seller’s cost of production, the market determines the price (the seller and the consumer are therefore called price takers since neither party can decide the price alone). Monopolistic competition is a very common market structure today. It shares many characteristics with perfect competition. The difference is that the products sold by competing suppliers are not identical. Two things make monopolistic competition different from perfect competition: product differentiation and competition that is not wholly based on price (and where competitors try to gain or protect market share by other means).Product differentiation boils down to attempts by companies to make products stand out even when they are nearly identical to the competition. Non-price competition simply means competition through ways other than price. For example, one way would be discount tickets for amusement parks that can only be redeemed by submitting specially marked cans of soda. The toothpaste market is a good example of monopolistic competition. While Crest and Colgate do taste a little different, the distinction seen by consumers reflects the companies' efforts to differentiate their products through branding and marketing. That’s why companies pay huge sums on television ads. In the end, these non-price competitive practices do give the brands some pricing power. However, it is limited. If one player in the market attempts to push the price up beyond a certain point, consumers will respond to the price difference by switching to a competitor. To recap, a monopolistic competitive market generally displays all of the following characteristics:There are large numbers of buyers and sellers.Differentiated products are present.All buyers and sellers act rmation on prices and products is extensive and equal for all consumers.There are low or no barriers to entry.There is non-price competition (advertising, promotions, cross marketing, etc.).Marketing, product differentiation, and other techniques of non-price competition enable suppliers to influence the market price of their product, but only over a limited range.An oligopoly is a market structure where a small number of companies own or control the production of a specific good or service. It is less common than monopolistic competition, but it is a substantial part of all modern economies. Unlike the two market structures already discussed, oligopolies have a limited number of sellers but many buyers. A very high cost of entry is usually why there are so few sellers. But other barriers to entry can be significant too. In order to enter the market, new companies must spend a great deal of money before they can begin to compete effectively.In oligopolies, there is interdependent behavior among the competing firms. In the fast-food industry, for example, you'll notice that once one company introduces a value menu, most of the competitors will follow. This interdependence cuts both ways for the consumer. Just as all the companies in the industry will follow their competitors’ prices down, they will also follow them up. The problem is that consumers do not know if prices went up because of additional costs or because of collusion (a formal or informal agreement to cooperate in product pricing). Generally, consumers pay more in oligopolistic markets than in other, more competitive, market structures.Some examples of oligopolies include oil (Shell, ExxonMobil, BP), soft drinks (Coca-Cola, Pepsi), airlines (United, Southwest, American Airlines), and computer operating systems (Microsoft, Apple).To recap, an oligopoly generally displays all of the following characteristics:Few sellers (when four firms own more than 40% of the market)Differentiated products that are functionally identical or very similarHigh barriers to entryParallel pricing structures (a pattern of behavior of setting prices to match those of competitors)Non-price competition (advertising, promotions, cross marketing, etc.)Tendency toward price fixing and collusionPricing generally higher than that found in perfect or monopolistic competitionMonopolies are rare (as is perfect competition). Governments in most well-developed market economies have adopted laws against them. A monopoly happens when a single producer dominates a market. In that case, it has substantial market power. Market power is the ability of a company to alter the market price of a good or service. This market structure gives the producers a great deal of power over price. This is true because there is typically little opportunity for new businesses to enter the market or because the cost of joining the industry is too high. Since there is only one producer, consumers typically see little or no product differentiation and experience limited choices. Even though monopolies are generally frowned upon in the United States, there are cases in which they are either welcomed or unavoidable. For example, the provision of water to a city is what is called a natural monopoly. This is a situation in which extreme economies of scale exist (the average cost of goods decreases dramatically the larger a firm becomes). Once a water system is in place, it costs relatively little to connect one additional house or apartment. By contrast, building a second competing water system would be cost prohibitive. Therefore, the government allows these types of monopolies but imposes service obligations (water must be available to everybody) and often regulates the price charged. When prices are regulated, the regulator must also allow the company to make a return on its investment that is sufficient to ensure continued investment in the water system.To recap, a monopoly generally displays all of the following characteristics:One seller dominates No product differentiationExtremely high barriers to market entryPrice maker (the monopolist’s own actions affect the price of its goods or services)Student Resource 9.2Defining Format Frames: Market Structures Student Names: Date:A Defining Format frame can help you organize your thoughts about a particular topic’s characteristics. An example is provided below. TermCategoryCharacteristicsAttentiveness is a way of acting thatshows customers you are listening.is polite.enhances a customer’s experience.Directions: Now that you see how it works, use the information from the presentation to complete the frames below. List between two and five characteristics in the space provided.TermCategoryCharacteristicsPerfect competition is amarket structure that Monopolistic competition is amarket structure thatOligopoly is amarket structure thatMonopoly is amarket structure thatStudent Resource 9.3Memo: Elevator Pitch InstructionsAcme Consulting CompanyMariana Johnson, President & CEOMemorandumDate:January 15, 2016To:New ConsultantsFrom:Mariana Johnson, President & CEOSubject: Awesome Avocados AccountAs you may know, Acme Consulting Company is currently in conversations with Awesome Avocados, Inc., to try to win its five-year consulting account. The company is looking to hire a group of consultants who have extensive knowledge of business economics, including such topics as supply and demand curves, pricing, and competitive advantage. Your job over the next few days is to win the Awesome Avocados account by analyzing its business model and sharing your insights with Armina J. Pitts, the CEO of Awesome Avocados.Though you will have several opportunities to present to Ms. Pitts, the first will be an informal talk at the upcoming National Avocado Grower’s Conference. Since you may only have a very short time to speak with her in the elevator, I’d like you to prepare a two-minute elevator pitch.To prepare, please write a one-page summary that explains the economics behind the company’s prices, costs, and profits over the past two years. I have attached two sets of tables (see Student Resource 9.5), one each for 2014 and 2015, that track sales, revenue, profit, and cost numbers for each quarter. Ms. Pitts will want to know why demand, prices, and profit changed between 2014, when they were still selling high-calorie avocados, and 2015, when they began selling low-calorie avocados. As you know, many CEOs have strong backgrounds in economics and will expect your explanations to be grounded in supply and demand. They will also expect you to use this information to predict revenues and profits for next year.Use your summary to develop a two-minute pitch. Be creative about how you could persuade her about hiring our company to serve as Awesome Avocados’ consultants.Ms. Pitts will likely assess your short pitch using the following criteria:You show a clear understanding of the interrelationship between competitive advantage, demand, prices, and profit.You present persuasive and accurate reasons why demand, prices, and profit changed between 2014 and 2015.You are able to call on your knowledge of supply and demand, competitive advantage, and market forces to predict revenue and profit for the future. Your elevator pitch is clear, polite, and limited to no more than two minutes.Future presentations:As I stated above, the short talk with Ms. Pitts at the National Avocado Growers Convention is just the first step in our process to win the account.You and your team will be working on this account for the next several months and will have further opportunities to analyze financial information and make presentations to Ms. Pitts. At the end of the process, you and your team will prepare one final presentation, along with other competing consulting companies, and Ms. Pitts will decide at that time which consulting firm will be chosen for the long-term consulting contract. Be sure to keep all your Awesome Avocados work in a separate folder so that it is easily accessible for the rest of the project!Example Elevator PitchA two-minute elevator pitch on a different topic is presented below. Your pitch should be similar in style to this one, but yours must fully address the criteria Ms. Pitts has listed above. Has N&B Apparel Company stopped showing the profits and growth you’ve come to expect?Well, we at California Fashion Consulting want to partner with you. We’ll help you better understand your business’s competitive environment and use that information to improve your market position and profitability. We’ve worked with all types of clothing companies across the United States for the past 20 years, transforming them into the businesses of their owners’ dreams. We’ve gone ahead and analyzed N&B’s financial data from 2014 and 2015 and are prepared to make recommendations based on our findings. The biggest issue facing your company is the rising cost of cotton used to make your best-selling jeans. In 2014, this increased cost cut into your profits significantly. In response, you raised the price of your jeans by nearly 20% in 2015. You did this thinking you would recover the profit margins from previous years. But instead, it meant decreased sales because consumers were less willing to buy your jeans at the new higher prices.Your company’s competitive advantage has long been selling high-quality designer jeans at discount prices. We've analyzed your supply and demand curve and can recommend an ideal price point of $50 for your basic jeans. If all of our suggested changes are implemented, we predict that revenue for 2016 will increase by 10% and profits will go up by more than 5%. This will return your company to its former level of financial success. If you end up hiring us, we will more thoroughly explain our analysis of the past two years' sales, revenue, profits, and costs.Our team at California Fashion Consulting would love to schedule a time to talk more about some of your company's challenges, and explore how we can help you become the best fashion company in the state.Student Resource 9.4Project Guide: Know, Need to Know ChartStudent Names: Date:Directions: In order to complete a project, it is important to know what still needs to be learned in order to meet the goals of the project. Working in your group, write down a list of all of the things you already know and what you need to know in order to deliver a successful elevator pitch.What We KnowWhat We Need to KnowWhat We LearnedStudent Resource 9.5Chart: Avocado Sales DataAvocado Sales (in thousands), 2014 Low-Calorie Avocado Sales (in thousands), 2015Price1st Quarter2nd Quarter3rd Quarter4th QuarterPrice1st Quarter2nd Quarter3rd Quarter4th Quarter$0.490000$0.490000$0.590000$0.590000$0.69002000$0.690000$0.79015000$0.79002500$0.89100000$0.89020000$0.9900050$0.99150000$1.090000$1.09000100Total Revenue (in thousands), 2014 Total Revenue (in thousands), 2015Price1st Quarter2nd Quarter3rd Quarter4th QuarterPrice1st Quarter2nd Quarter3rd Quarter4th Quarter$0.490000$0.490000$0.590000$0.590000$0.6900$1380$0.690000$0.790$118.5000$0.7900$197.500$0.89$89000$0.890$17800$0.99000$49.50$0.99$148.50000$1.090000$1.09000$109Costs (per avocado), 2014 Costs (per avocado), 20151st Quarter2nd Quarter3rd Quarter4th Quarter1st Quarter2nd Quarter3rd Quarter4th Quarter$0.80$0.70$0.60$0.90$0.80$0.70$0.60$0.90Profit (in thousands), 2014 Profit (in thousands), 20151st Quarter2nd Quarter3rd Quarter4th Quarter1st Quarter2nd Quarter3rd Quarter4th Quarter$9$13.50$18$4.50$28.50$38$47.50$19Discussion Questions:How does the quantity of avocados sold vary with price?How did the demand for avocados change between 2014 and 2015?How did the demand change between 2014 and 2015 affect profit?Student Resource 9.6Reading: Demand and PricingThis presentation covers the interplay between demand and prices. It also looks at how this plays out in the decisions made by companies. This presentation explains how increases in demand increases prices (other factors being unchanged) while it also entices new firms to enter the market. This brings in additional supply, which tends to pull the price down (other factors being unchanged). As demand increases and prices go up, companies begin to make more money. But this increased profit brings in new competition and new supply as other companies chase this new profit opportunity. The result is that prices are kept in check.For most companies, profit is the primary goal. Companies will enter markets in which profits can be made and avoid or exit markets where profits are not available. From an accounting point of view, operating profit is simply the amount that the firm can charge above what it costs to produce and sell the good. So, if Awesome Avocados can grow, package, and deliver (that is, produce) one avocado for $0.49 each and sell it for $0.59 each, it pockets $0.10 of operating profit per avocado. (From now on, we’ll just call that the profit.)Firms will not commit the resources (money, time, effort) to enter a new market unless the amount of profit available is more than if they had invested those same resources somewhere else. A calculation called return on investment, or ROI, is used to assess whether or not the expected profit from an activity is enough to justify spending the money that it costs to get started or to expand. Consider a company interested in investing in the avocado business. To do so, the company would have to spend money buying an avocado orchard, farming equipment, delivery trucks, storage bins, and so on. If the end result was a business in which the firm only earned $0.05 for every dollar invested, why wouldn’t it just take that original investment money and put it in a bank account that earns $0.06 for every dollar invested? For a business to decide to move into a market, expected profits must be higher than what the company would earn investing in the next best opportunity—the opportunity cost of the investment.The example of Awesome Avocados’ low-calorie avocado demonstrates one reason why firms choose to invest in a new opportunity. Before the low-cal avocado, supply and demand met at the equilibrium price of $0.89 and equilibrium quantity of 100 avocados. When the new kind of avocado arrived, people were willing to buy more avocados at the same price (in this case 100 avocados more) or to pay more for the same quantity of avocados. In other words, the demand curve had shifted in the direction of higher demand, as shown by the new demand curve D2015. This increase in demand creates the opportunity for the avocado suppliers to either increase production and sell more avocados at the same (or similar) price or to increase the price of each avocado sold. All else being equal—that is, if nothing else changes—increased demand will raise prices and profits, at least at first. However, it will then also increase production. Firms already producing avocados will produce more, and new firms will start to grow avocados as well.As the chart shows, increased demand led to increased production (from 100 avocados to 150 avocados) AND increased prices (from $0.89 to $0.99 per avocado). Firms are producing more avocados and making more profit on each avocado produced. The primary goal of firms is to make a profit. If one or more firms profits by selling avocados, other firms will start producing them. New businesses will enter the market resulting in an increase in supply.Increased supply (a shift in the supply curve) lowers the price, which reduces the profit.Firms keep entering the market, thus increasing supply and pushing prices down, until profits (after counting the opportunity cost of investment in the business) go to zero.As Adam Smith wrote in Wealth of Nations, the competitive marketplace can regulate the use of resources for production, and which products and services are produced, with economic efficiency.While it is the goal of most companies to make the greatest possible profit for their shareholders and investors, the greatest benefit to society occurs when firms use available resources efficiently. Technically and economically efficient use of resources, encouraged by competition, tends to keep prices low for consumers. Student Resource 9.7Memo: Increased CompetitionAcme Consulting CompanyMariana Johnson, President & CEOMemorandumTo:New ConsultantsFrom:Mariana Johnson, President & CEOSubject: Competitors in the market!In the midst of trying to secure the Awesome Avocados consulting account, the company has unexpectedly encountered some problems. When I wrote you last, Awesome Avocados was feeling the amazing effects of soaring profits. The company was in the midst of expanding production of its low-calorie avocado and its future was looking great. Unfortunately, things have taken a turn for the worse.More competitors have entered the market: these other companies have noticed Awesome Avocados’ profits and have begun producing and selling avocados. Due to this competition, even though sales have remained strong, Awesome Avocados has seen its profits fall. The attached tables provide all the data you need to see that the company’s profits have dropped to nothing, since it could have made as much had it kept the money in the bank instead of using it to get into growing avocados.The increased competition could not have come at a worse time. That nasty bug that eats the leaves of the avocado tree—the persea mite—is starting to destroy its trees in much the same way the boll weevil worked its way through cotton crops in the South. The CEO is now questioning the fate of the company. She argues that since other companies have the same price, and similar sales figures, Awesome Avocados will be forced out of business by too many producers in the market. She believes that the declining profits is evidence that the business may fold, commenting that in highly competitive markets (such as this one has turned out to be), competition eliminates economic profit; meaning that (like Awesome Avocados) firms in the avocado industry are now barely making enough profit to cover their cost of capital.We need to convince Armina J. Pitts, the CEO of Awesome Avocados, that the new competitors do not know about the persea mite yet, and hopefully the competition will fold due to its lack of preparation for the infestation. In the long run, Awesome Avocados will be one of relatively few surviving competitors as we encourage it to conquer the mite with steady research. Once again, I must call on you to explain why Awesome Avocados’ sales, revenue, and profit numbers are consistent with competition in market economies. The CEO does not care about the mites, as such. She primarily cares about profit and wants to be assured that the company will regain its profitability. We need the company’s confidence as we encourage it to invest in research to develop a method for getting rid of the mites.We have managed to squeeze in a two-minute meeting with Armina J. Pitts tomorrow morning. Please develop a presentation about the economic viability of the firm despite declining profits. Be sure to explain why profits have fallen and make a case for further investment to develop a method to get rid of the mites.Low-Calorie Avocado Sales (in thousands), 2015Price1st Quarter2nd Quarter3rd Quarter4th Quarter$0.490000$0.590000$0.690000$0.79120120120120$0.890000$0.99000Total Revenue (in thousands), 2015Price1st Quarter2nd Quarter3rd Quarter4th Quarter$0.490000$0.590000$0.690000$0.79$94.80$94.80$94.80$94.80$0.890000$0.99000Costs (per avocado), 20151st Quarter2nd Quarter3rd Quarter4th Quarter$0.80$0.70$0.60$0.90Profit (in thousands), 20151st Quarter2nd Quarter3rd Quarter4th Quarter$-1.2$10.8$22.8$-13.2Student Resource 9.8Reading: CompetitionThis presentation addresses the two types of market structures around which the culminating project is based. It presents the characteristics and outcomes of monopolies and competitive markets, examining how each operates relative to profits. These two market structures are idealized extremes, but they still provide useful insights for analysis. In reality, structures are much more complex. Other market structures, such as monopolistic competition and oligopoly, fall in between these two extremes.With a competitive market structure, the interaction of supply and demand sets the prices; suppliers can’t control them. Supply and demand equilibrium sets the prices, and sellers and buyers enter and leave the market freely in response to profit opportunities (or lack of them). The economic profit for the market as a whole (defined as Total Revenue minus Total Cost, including the opportunity cost of the capital used in the business) tends to move toward zero as competition among sellers drives prices down.Economists look at characteristics and outcomes when considering competitive markets. Characteristics include if there are a large number of buyers and sellers, if products are alike, and if there are low or no barriers to entry. The outcomes include that: firms and consumers are price takers (the market sets prices); there are zero profits, after allowing for the opportunity cost of capital; the consumers get low prices; and it is economically efficient (low price, better suppliers gain market share).In competitive markets that at least approximate the idea of a perfectly competitive market, firms respond quickly and efficiently to profit opportunities. If a firm begins to make profit (total revenue > total cost) providing a product or service, competitors soon enter to take a piece of the pie. So, when economic profits exist, firms move in quickly—because as soon as profits are recognized by competitors:New firms enter the market.Supply increases.Prices fall.Profits tend to diminish or even disappear.This does not mean that markets stay static. Instead, the competitive pressures that tend to reduce profit also make new opportunities available. As economic profits move down toward zero, firms respond:Some firms may quit growing avocados because the profit no longer justifies the risk.Supply decreases.Profits rise.Profits tend to improve.New profit opportunities arise.Generally, consumers benefit most from a competitive marketplace. As competition drives prices down toward the cost of production, firms are forced to operate as efficiently as possible, in an effort to keep maximizing profit. This means society’s resources are used well to produce the products customers want. This leads to companies having to operate at the lowest possible per-unit cost. This in turn leads to consumers getting the biggest bang for their buck.However, consumers bear some costs from a highly competitive market over and above the price they pay for the product. Because profits (after allowing for the opportunity cost of capital) tend to move toward zero, companies in competitive markets generally can’t find extra money for research and development. This eventually results in fewer new and better products and fewer new and better production methods. Also, the way that competitive markets work means that prices only reflect direct costs to the producer and direct and easily perceived benefits to the consumer. The market does not consider social costs and benefits—only “private” costs are considered. Things like pollution are not calculated into the price. Instead, a very wide range of people across society pay the price for it—even those who have never bought the product. Monopolies differ greatly from competitive markets. The competitive nature of supply and demand does not come into play in a monopoly in the same way as in highly competitive markets. Instead of many sellers, there is only one—so it can set prices, limited only by the direct effect of price on demand. Monopolies can often raise their profits by restricting production to a level below what would be produced in a competitive market, and setting prices above what they would be in a competitive market. Consumers are forced to pay the higher prices because they have no alternative. No alternative exists because other firms cannot enter the market. New firms are not there to increase supply and decrease costs. Monopolies maximize profits by limiting production and setting prices well above the cost of production. Overall, a monopoly is an inefficient use of resources. Although consumers generally pay more for products in a monopolistic market, monopolies do provide some advantages. Unlike highly competitive markets, in which profits are limited, monopolies can provide higher profits. This means that firms have both the resources and the incentive to innovate through research and development (R & D). This can lead to new and sometimes better products, as well as new production methods and technology. Under some conditions, monopolies can be more economically efficient, even before considering the funding of R & D. Take the example of a city’s water system. In order to build such a distribution system, a company would need to invest millions of dollars. Once a distribution system is built, it is relatively inexpensive to connect each additional house or apartment. Therefore the marginal cost of serving each new customer is low, and way below the average cost. Building a second water system alongside the first would hugely increase the costs. Both water companies would have a very poor return on investment (ROI), and therefore little incentive to invest in their water systems.Consequently, in this situation (which is called a natural monopoly), a monopoly can be more economically efficient than a number of smaller firms competing with one another.More often than not, monopolies are economically inefficient because their profit is highest when they produce less than would be produced in a competitive market. Increases in production generally decrease profitability. As profit-maximizers, monopolies act in their own interests. Prices are often higher in a monopolistic market than they would be in a competitive market. Prices can also be substantially higher than the per-unit cost of production. Another disadvantage of monopolies is that they are often economically inefficient. Consumers who are willing to pay more than the full cost of production can’t do so. Also, firms willing to produce at a lower price can’t do so.Without some assurance of future profitability, companies have less incentive to pursue research and development (R & D) leading to innovations. For this reason, there is some economic logic behind providing a form of monopoly under specific conditions and for limited time periods. This gives companies a chance to earn profits above their opportunity cost of capital. That’s what a patent does. R & D is costly, with a future payoff petition removes the profits (above the opportunity cost of capital) that can pay for R & D.Patents provide established companies the incentive to bear R & D costs and the superior profitability to pay for them.With patents, entrepreneurs and their backers have an incentive to bear the risk of R & D.If all goes well, the payoff for the companies is higher profits, leading to better products for the consumer, or new ways of producing goods and services at a lower cost. The longer the patent, the greater the incentive for R & D.There are positive and negative aspects to monopolies. Are the economic costs worth the benefits? Many economists think that’s a gray area. Like a lot of issues in economics, it really depends on the facts in each particular case. Some positive aspects of monopolies are: They incentivize companies to engage in R & D and help them pay for it. Also, patents reward the entrepreneurial innovation in new products and technology. The negative aspects of monopolies include: Monopolies often mean higher prices, and few goods produced, than with competition. With monopolies, the supplier gains, but consumers pay higher prices. Also, barriers to entry lead to overall inefficiencies.There are barriers in the real world that keep markets from either being efficient or moving toward efficiency. Some of these barriers include: a constricted flow of information, government regulations, constantly evolving consumer needs, and the time it takes from an idea’s inception to its appearance on the market. These barriers are natural and exist all around us. There are also changes that break down these barriers. The Internet, for example, has increased the flow of information, resulting in a more level playing field where everyone has the same knowledge about products and prices. Business managers must be constantly aware of the changes around them, whether beneficial or detrimental. New competitors, market-changing innovations, changing consumer needs, current events, and many other factors influence the success of a business.One important role of a business economist is to understand competitive forces and help businesses remain competitive for the long term in a changing world.Student Resource 9.9Project Guide: Competition PresentationStudent Name:_______________________________________________ Date:___________Directions: Working with your consulting team, complete the following guide. Doing complete and accurate work on this guide will help to ensure a successful presentation. Remember, this is just a way to help your team organize the information for your presentation and does not take the place of thoughtful oral practice.Describe some of the characteristics of a competitive market.Give a brief explanation of the problems that Awesome Avocados is currently facing.Why have profits fallen?Discuss the economic viability of the firm despite declining profits.Explain the role of prices and profit in the processes and outcomes of competitive markets.Why should Awesome Avocados focus on investing in research for getting rid of the mites?Other important information:Ms. Pitts will assess your short talk using the following criteria:You present a clear and concise understanding of the relationship between competitive advantage, demand, pricing, and profits.You accurately use the data to explain why demand, prices, and profit have changed between the years 2014 and 2015.You correctly analyze what the data are showing and use them appropriately to make a prediction of revenue and profit for the future.You are creative in your approach to persuade the CEO to hire your company to serve as consultants.The elevator pitch is clear, polite, and limited to two minutes.Student Resource 9.10Form: Presentation FeedbackStudent Name:_______________________________________________ Date:___________Directions: You will be required to complete a presentation feedback form for each consulting team as they give their presentation. In the “+” column, note aspects of the presentation that worked well. In the “?” column, note any problem areas or negative reactions, such as disagreements with ideas or facts. In the “?” column, write down any questions that you have while listening.Consulting Team #1+??Consulting Team #2+??Consulting Team #3+??Consulting Team #4+??Consulting Team #5+??Consulting Team #6+??Consulting Team #7+??Consulting Team #8+??Consulting Team #9+?? ................
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