Specialty Chocolate Company Essay Dissertation Help

Part I. Breakeven analysis : Speciality Chocolate Company

One-time Fixed Cost
Rent of Facility 800,000
Plant Maintenance 300,000
Advertising 400,000
Employees’ salary 400,000
Insurance 500,000
Total Fixed Cost 2,400,000
Annual Variable Costs per box sold
Electricity 3,200,000
Cost of Packaging 1,600,000
Cost of Ingredients 2,400,000
Production Labor 800,000
Total Variable Cost 8,000,000
Price to Consumer $10
Quantity Sold/Yr 1,000,000

 

 

Note: Assume no excess inventory

 

  1. (I-1) Calculate total revenue for the company (Show work)
  2. (I-2) Calculate the margin for this company. (Write down the equation and solve the problem)
  3. (I-3) How many units (Chocolate boxes) must this company sell to breakeven? How many years will it take? Show your work.
  4. (I-4) Does this feel like a good business for your client to be in? Yes, No, or Unclear. Explain your reasoning for what constitutes a “good business.”
  5. (I-5) Your employee tells you that the cost of building the factory for the company has lowered the margin for the product. Does this make sense? Why or why not?
  6. (I-6) What is the unit margin for this product in dollars?

 

 

Part II. Use the following model to answer questions in this section. A Starbucks regional manager in Chicago collected data on annual sales per store. Data was collected by running experiments at comparable stores in the market. After collecting data from the stores, he ran a regression model to determine the effect of several variables on Quantity Demanded.  

(Note: Coefficient values are in raw Dollar and quantity terms, NOT percentage form)

 

Annual Quant. Demanded of Starbucks Coffee (Thousands) in the market =

500

–           157 (Price of Starbucks Coffee)

+          52 (Average income in geography)

+          62 (Price of McDonalds Coffee)

+          20 (Price of dairy creamer)

–           30 (Price of Baked Goods at Starbucks)

–           15 (Avg. Age of consumer at store)

 

Assume that our model is a complete model of the factors affecting Qd.

 

  1. (II-1) Are you able to interpret elasticities directly from this model? Explain why or why not.
  2. (II-2) Is there a coefficient in the list of variables that doesn’t make intuitive sense to you? What is it saying literally? Why or why not?
  3. (II-3) What are the independent variable(s) and dependent variable(s) in this model? (You can label them on the equation)
  4. (II-4) What is the relationship between Baked goods at Starbucks and Starbucks Coffee? Explain.

 

 

Part III.

 

  1. (III-1) Imagine that Pepsi has a monopoly in the market. For the holidays, they offer one soda can at the normal price and a “special edition” to celebrate the new Harry Potter movie in theaters. Pepsi charges a 20 cent premium for the Harry Potter can over the the price of a regular can. In a different promotion at a different store, Pepsi offers a discount on the original can to individuals who can prove that they have served in the American Military. Are these examples of the same type of price discrimination?  Answer “Yes” or “No” and explain the why they are the types of price discrimination that they are.
  2. (III-2) For the military discount example above, explain why this move results in more (or less) profits for a monopolist compared to a monopolist engaging in first degree price discrimination. Explain why.
  3. (III-3) Trader Joe’s charges $2 / bottle for its house brand of wine in California and $3 for the same bottle in Chicago. Provide one example in which the price difference is due to price discrimination and another in which it is not.
  4. (III-4) Is a first degree price discrimination strategy generally easy or hard for a firm to execute? Why?
  5. (III-5) Is product bundling an example of second degree price discrimination? Explain why or why not.
  6. (III-6) Why are price discrimination strategies generally only executable by companies with pricing differentiation (Monopoly) in the market?
  7. (III-8) True of False: A monopolist manufacturer pricing with a monopolist intermediary generates more profit than a monopolist intermediary who sells directly to the market. Explain why or why not either in words or graphically.

 

 

Part IV. Please use the following pricing schedule to solve this problem. The following table contains willingness to pay data ($) for printers and printer ink across two segments of consumers “A” and “B.” Note: the numbers for Ink represent willingness to pay for the first, second, third, fourth, and fifth unit of ink, respectively (e.g., Segment A is willing to Pay $15 for the first ink, $12 for the second, etc.).  The unit variable cost of producing a printer is $50. The unit variable cost of a single ink cartridge is $1.

 

Printer

WTP

   INK          1                             2                         3              4            5
SEG A) 250 15 12 10 5 0
SEG B) 110   16 12 11 0 0

 

 

  1. (IV-1) Ignore the price of ink for a moment. If only the printer were being sold in the market, what price should they be sold for to maximize profits? Who will buy the product at that price?
  2. (IV-2) Given what you were taught about metered pricing in class, under why market conditions would a company bundle Printers and Ink together? Explain.
  3. (IV-3) TRUE or FALSE: From a product demand perspective, it is always more profitable to create more versions of a product to reach a higher number of consumer segments. Explain.
  4. (IV-4) TRUE or FALSE: Consumer surplus refers to the amount of total value that a company gives to its consumers. Explain.
  5. (IV-5) TRUE or FALSE: In a product line pricing problem, we can calculate expected revenue by conducting research on each consumer segment’s willingness to pay for each product version and charging that price. Explain.

 

Part V. Please use the following price schedule for the first two Questions in this section. Imagine that you are trying to sell the showing rights of three movies to three television channels who have the following willingness to pay for each movie.

 

  Movie 1 Movie 2 Movie 3
Customer A 8,000 2500 6000
Customer B 7000 3000 1000
Customer C 6,000 6,000 8000

 

 

  1. (V-1) If you sold the movies separately, what price would you charge for Movie 1 and Movie 2, respectively, in order to maximize profits?
  2. (V-2) What is the maximum price that you could charge for a bundle of BOTH movies in order to maximize profits? Does it make sense to sell the products separately or as a bundle?

 

 

Part VI. Basic Economics

 

  1. (VI-1) Imagine that there are consumers who currently use epi-pens to treat life-threatening allergic reactions. What is the key market factor that explains whether they have a relatively steep or flat demand curve for epi-pens?
  2. (VI-2) Is a demand for a brand of coffee more elastic or inelastic than the category of drinks generally? Explain.

 

 

Part VII. Hedonic Analysis (Use the following Equation. Units are in Dollars)

 

Imagine that you are hired to help a small Yogurt company (Noosa) enter the high-end Greek yogurt market where Chobani has established itself as the market leader:  You decide to conduct a conjoint/hedonic analysis on potential consumers that examines the difference between Noosa brand yogurt and other competitive yogurts. Prices paid in the market are depicted by the following model:

 

Price Paid = 2.00 +  0.50 (Chobani) + 0.40( Size = “Large”) + 0.15 (Flavor = Lemon)    

 

The Reference product is as follows:  Brand = Noosa, Size = Small, Flavor = Vanilla

 

  1. (VII-1) What is the price of the reference product? What is the price paid if the product is a small, vanilla, “Chobani” product?
  2. True or False: A regression model with a positive and significant coefficient for Chobani always means that on average consumers value the Chobani brand name more than the Noosa brand name. Explain.

 

Part VIII. Case Analysis

 

  1. (VIII-1) Think back to the Heineken case: imagine that a consultant told you that the best solution for that case was to improve the product formula/taste in order to become competitive in the global market? Is this a good idea or bad idea? Why?
  2. (VIII-2) Imagine that the Sealed Air Case took place during the growth of the Euro zone trading area. Is that good or bad for Sealed Air’s current market position based on what we learned in the case? Explain.
  3. (VIII-3) Think back to the Tweeter Case. Based on the case discussion, should Tweeter keep the Automatic Price Protection (APP) program? In your answer, be sure to explain how competitors in the market would respond (This question is worth 2 points)
  4. (VIII-4) In the Lipton Brisk case, we calculated the cost per thousand views (CPMs) adjusted for engagement levels. Please calculate ROI for TV and Viral based on information in the case.

 

 

Part IX. Consumer Psychology and Brand Strategy

 

  1. (IX-2) What is the difference between a “lexicographic” decision-making rule and a weighted-additive model in consumer choice?  Which do economists assume that people use? Is this a practical assumption?
  2. (IX-3) Sony decides to sell a new line of donuts under the sub-brand “Sony Heavenly Donuts” – based on your basic understanding of when sub-brands are or are not effective, please indicate whether this is or is not an appropriate application of a sub-brand.
  3. (IX-4) If Tesla is an atypical member of the sports car family and Porsche is the typical member, what does categorization theory tell us about

 

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