Assignment on Operation Decision

Running Head: OPERATION DECISION
Operation Decision
Name of the Student
Name of the University
Author note

1
OPERATION DECISION
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Answer 3..........................................................................................................................................3
Answer 4..........................................................................................................................................6
Answer 5..........................................................................................................................................6
Answer 6..........................................................................................................................................9
Answer 7........................................................................................................................................11
References......................................................................................................................................12

2
OPERATION DECISION
Answer 1
The market structure of low calorie frozen microwaveable food industry resembles the
feature of an imperfectly competitive market namely monopolistic competition. It is a market
where characteristics of both monopoly and competitive market. The competitive nature is found
from the presences of numerous number of buyers and sellers in the market, each selling a
slightly differentiated product. Healthy Choice, Lean Cuisine are some existing brand capturing a
major share in the market (Schmidt, Spann & Zeithammer, 2014). The monopoly power of the
brands are reflected from their decision taking power regarding own brand. Once the
characteristic of the low calorie frozen food industry is similar to monopolistically competitive
market, a suitable business plan should be aligned with the nature of this kind of market.
When market structure becomes imperfectly competitive, then sellers enjoy some sort of
market power. For any business, knowledge about availability of close substitute is required. In
assignment 1, even when the market structure was assumed perfectly competitive the price of the
substitute product is taken as an important determinant of demand. With monopolistically
competitive market, though the firm has some market power for controlling price the close
substitutes are still available with a differentiated form (Kaushal et al., 2014). Therefore, the
business should have knowledge about competitor’s product. Markets are segmented depending
on the economic status or specific location. The products then should be delivered targeting a
particular consumer group. There are some behavioral differences in the market pointing to
different buying frequency, choice of brand or preferences towards a particular product. All these
should be included in the business plan.

3
OPERATION DECISION
Answer 2
In the imperfectly competitive market, there are possibility of the presence of few firms
in the industry. With reduced number of seller, a greater control over price is realized. Once
major market share of market captured by only few firms, then this can transform the market
structure from a monopolistic competition to an oligopolistic one. The presence of few
dominating firm is one factor causing change in the market structure (Parenti, Ushchev & Thisse,
2017). In the oligopoly market structure few big seller captures a significant share in the market.
In this market, each seller requires to monitor the extent of competition in terms of their pricing,
production and introduction of new products that they can produce.
Various factors can lead to a change in demand. From assignment 1, the likely factors
causing changes in demand are change in the income of customers, own price and price of the
substitute products. As the market structure changes from perfectly competitive to a
monopolistic or oligopolistic competition, the firm should have knowledge about the strategy of
its rival firm (Kirzner, 2015). The strategic interdependence and knowledge of competitor’s
strategy will contribute in profitable operation of the firms.
Answer 3
The operation of monopolistically competitive market is different from that of the
competitive firms. Because of the existence of market power, in the short run price is above the
marginal cost. The optimum price here is determined from equalization of marginal revenue and
marginal cost. The firms in the industry when enjoy a profit above the normal level, new firms
enter in the market (Stiglitz, 2017). The increased supply causes a decline in the equilibrium
price. In view of free entry and exit in the market, firms face a fluctuation in price and demand
situation. In the long run, profit reduces to zero that is firms enjoy only normal profit. The