Eco 561 - Business Proposal

Business Proposal

ECO/561 - Economics

May 3, 2014

Business Proposal

With an entrepreneurial and enterprising spirit coupled with strong business acumen and over 25 years of managerial experience, Jane Doe believes she can offer affordable consulting and guidance to struggling e-commerce businesses that will lead to rapid growth and profitability for both organizations. This affordable consulting service will be achieved by utilizing Google’s low cost applications for business, remotely and economically from her home office. Although Ms. Doe has had some varied success in this arena thus far, her technical and business process skills far outweigh building and maintaining a successful start-up business. Using personal experience and information acquired from research this economic analysis business proposal will assist to serve as the background and research necessary to identify the market structure and pricing elasticity of the service, as well as how pricing and non-pricing strategies relate to elasticity of the service. Other determinants include how changes in pricing of the service will affect the quantity supplied. Finally, an analysis of how changes in operations may alter the mix of fixed and variable costs may impact the strategy.

Market Structure and Elasticity

For a new business idea or prospect understanding what market structure the business is categorized in provides great insight to pricing strategy decisions. In 2013, there were approximately 103,000 e-commerce retailers in the United States generating sales of $263.3 billion, an increase of 13.5 percent over the previous year and growth continue to be strong is this business sector (U. S. Census Bureau, 2014). The E-Commerce Times reports that over 50 percent of e-commerce startups fail within the first few years. One major reason for failure is the business has not sought sound advice and consultation for success (di Stefano, 2010). Based on these data and research, offering business and technical consultation to e-commerce retailers would be considered a monopolistic competition market structure defined by an industry containing many different firms with similar product offerings. Although, initially this new and niche market could be considered an oligopoly where competition is limited, but could rapidly grow into a monopolistic competition. With the ability to keep fixed and variable costs low by working from a home office and using low cost, high quality web based tools, and video conferencing Ms. Doe believes that demand of her services would be elastic. Elastic demand is shown when a decrease in the price of the service increases the total revenue (McConnell, Brue, & Flynn, 2009).