Managerial Economics, and Globalization

Operations Decision

Deborah Grant

Strayer University

Assignment 2

ECO 550 Managerial Economics, and Globalization

Dr. Camille Castorina

Summer 2015

Abstract

This paper consists of seven sections related to operations decision according to the assignment. Each section addresses the problems in the order of questions. The first section deals with the oligopolistic market structure and corresponding models. Some adjusting steps are suggested on the ground of the Cournot Model. Afterward, two major factors of possible changes are described. In the third section, the relationship between output and variable, fixed and total costs, as well as dynamic of marginal and average total costs are discussed. Then, the comparison of the total revenue and the total cost is made for obtaining the monthly profit. Some ideas of discontinuation and cost reduction were obtained. Section 5 provides interesting computation results performed under the Cournot Model for the oligopolistic market. Section 6 suggests a plan based on the combined results from the previous sections. Finally, a two-step action plan is recommended for operations decision.

Keywords: market structure, oligopoly, Cournot Model, cost function, operations decision, diet industry, low-calorie frozen, microwavable food

Operations Decision

The subject of this research is the US market of low-calorie frozen microwavable food, which has faced tough times recently. As the reports of The Wall Street Journal, National Journal, Bloomberg Business, and Fortune have stated, the whole diet industry is on the verge of tectonic changes and reorientation. After unsuccessful advertising campaigns, some leaders are considering to quit the market or to discontinue several products. Such decisions may cause significant changes in supply and as a result in the market structure as well. Probably, selling environment will shift from perfectly competitive to oligopoly or another imperfectly competitive structure. This paper provides an analysis of a scenario of market evolving from one stage to another, reveals theoretical mechanisms of price strategies in the new environment, and suggests recommendations for the decision-making process in future operations.

As for now, the market of low-calorie frozen microwavable food is highly competitive. Many manufacturers and their widely promoted brands are presented there. Nestle’s Lean Cuisine, Healthy Choice of ConAgra, South Beach Diet of Kraft Foods, Weight Watchers, and Smart Ones of H. J. Heinz Company are on the national scale. Safeway’s Eating Right, Easy Meals, Optislim, Artisan Bistro, Kashi, Amy’s Kitchen, Swanson, Hungry-man, and Michelina’s are on the local arena.

Nevertheless, the situation with firms’ revenues is becoming worse every year. The Fortune’s report restates Euromonitor’s results in the following: