Management Economics: Analysis of Nike's Venture and Market Equilibrium

This report analyzes Nike's venture and evaluates the substitute commodities & complementary goods for the organization. It also evaluates the supply and demand in the target market and the market equilibrium and the various factors.

MANAGEMENT
ECONOMICS- 1

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Describe the venture & its main goods or service..................................................................3
TASK 2............................................................................................................................................4
Identify the demand & market equilibrium which influenced the demand of their goods.....4
TASK 3 ...........................................................................................................................................6
Indicate the elasticity or more elasticity of demand for the certain aspects...........................6
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Economics is the analysis of available resources which are contributing to the economy
of the nation with the aim of having development & growth of the economic aspects.
Management economics is the subject which focuses in the problem solving & the decision
making so that they can rightly implement certain theories of economics(Pacelli and Sica, 2020).
Nike is the American multinational organisation which is engaging in designing, manufacturing,
global marketing and the sales of shoes and other footwear. The organisation is headquartered
near Beaverton, Oregon in Portland metropolitan area. It is established in January 25, 1964 by
Bill Bower-man. This report will includes the analysis of the venture and also evaluate the
substitute commodities & complementary goods for the organisation. Furthermore, it will
evaluate the supply and demand in the target market and the market equilibrium and the various
factors.
TASK 1
Describe the venture & its main goods or service.
Nike is the world's leading supplier of athletic shoes & also the major manufacturer of
sports equipment. It is ranked as the valuable brand among sports businesses. Nike market its
commodities under own brands as well as the Nike Golf. There are working with large number
of workers which is up to 75,400 and operating their business to different market segment and
generating higher revenue and profitability. Further they are operating their business with the
help of their official website nike.com where the potential buyer can choose their product out of
available options.
Chosen Product:
As the organisation is dealing their business in footwear, apparel, sportswear related to
different sports and they are the premium products of the company. It is vital that all the demand
of such products is basically reflected by the income level of the consumer due to premium
pricing strategy used by the company to establish the better brand image in the market.
Explantation of choosing that commodity or product:
Nike is the famous brand for the sportswear that shows the elasticity of the demand in the
target market and this also access in knowing the changing behaviour of the buyer while making
purchase towards the brand and the given products. By this Nike can rightly establish good brand

image in the market and also attract good customer base as well. They are having majorly of high
income people which is tends to buy these products as they are having enough purchasing power
that also shows their status and give the feel of pride of the brand shows with them.
TASK 2
Identify the demand & market equilibrium which influenced the demand of their goods.
Demand is referred as the desire of the individual for making purchase of particular
commodity backed with the sufficient purchasing power as well. All the factors remains constant
and there is inverse connection of the demand and the given prices of the given goods in the
large market.
When the given price of the commodity rises then this will tends to reduce the overall
demand of the given commodity in the large market and vice-versa. In relation to Nike, when the
given price of the shoes rises then the demand of the given commodity falls down due to higher
prices and the customer will always proper low prices commodities. These aspects can be
changed due to changed in the price of the substitute commodity, income of the buyer & the
preferences of the customer.
Equilibrium refers to the schnerio in which the demand of the goods is same to the supply
of the given goods and there is no excess or the less production of goods within the organisation
& there is no such variation in the given prices of substitute product, income of the buyer, taste

& preferences of buyer. This is generally the balance in the demand & the supply of the certain
goods and services. Rise in the supply of goods when the prices of the commodities tends to
decrease and when the supply of the given goods tends to decrease then the given price of the
given goods increases in the large market. When the change takes place in the demand and
supply of the goods then the equilibrium in the market tends to rise or fall-down as per the
change in the demand & supply of the given goods in the target market. In relation to Nike,
when they demand of he goods is equal to the supply of the given goods in the large market by
which they can rightly maintain the market equilibrium. Other factors remains constant is having
the direct influence on the demand of the products & these are given below:
 Price of substitutes- This is refereed to the products and services that can be easily
replaced by the other products due to variation in the various factors. When the given
prices of the substitute goods increase then the demand of the available goods can rises.
Whereas the given prices of the such commodities decreases then the demand for the
current products also reduces as of the higher prices of the goods in the large market. In
relation to Nike, There is no variation of the in the demand of the shoes as these are
belong to the luxury products and with the variation in the prices of the given goods.
When the customer wants to purchase any products then they will stay to the particular
products only even if the prices are high.
 Price of complements- These are the commodities that are used as the conjunction of
other products. There is positive relationship in the prices and the demand of the given
goods. In relation to Nike, leather is the complementary product for the shoes and when
the prices of the leather rises the prices of shoes also increases and eventually the demand
for shoes decreases.
 Consumer income- These are the aspects which is having the positive relationship
between the prices and the demand of the given goods in the large market. This is the
wages and the salary of person which is being generated by doing any kind of work. For
example, when the buyer is having enough purchasing power the they will always move
to quality products and in case of having lower income level the they move to normal or
inferior goods which can be easily purchased in their available income level. In relation
to Nike, when the consumer is having fuller level purchasing power then they move to
branded shows and vice-versa.

 Consumer taste & preference-These are the aspects that can be varied with the change
in the market scenario. As the shoes is majorly preferred in the winter season so the
demand for shoes can be less in summer. Thus, the factors that can defined as the change
in the taste & preferences of the customer tends to implied in increasing and decreasing
the demand of the given goods. Where as the inapporpiate change in the taste & choices
of the customer implies in reducing the demand of the given goods in the large market.
 Consumer expectations in future- these are the aspects that can be changed in the
market as the customer is expecting change in the demand of the given goods of the
particular commodity. In relation to shoes, when the customer is expecting higher prices
of the goods in near future then the demand of shoes tends to rise in current time. When
are not expecting the rise in the prices of the shoes in near future then the demand of such
goods tends to increase.
 Demographics- This is defined as the number of customer which are stick to the
particular brand. Shoes are considering as the premium shoes which are basically used by
the upper class people and also helps in increasing the overall demand of shoes in the
large market. Rise in the number of buyer tends to increase the overall demand of shoes
in the large market and also having better consideration in managing the overall demand
of the Nike.
From the above discussion, it can be said that there are certain aspects that is having the
direct impact on the demand & supply of goods in the target market. This also shows that
changing scenario of the organisation as the change in the overall choices of the customer. In
relation to Nike, when the above discussed aspects is in the favour of the customer then it
gradually leads to increase the overall demand of the commodity.
TASK 3
Indicate the elasticity or more elasticity of demand for the certain aspects.
Price elasticity is refers to the percentage variation in the overall consumption of goods
in respect to the variation in the prices of the goods is known as elasticity of demand. This is
further understand with the help of formula:
Price Elasticity of Demand= % change in Quantity demand / % change in price

It is the general formula for estimating the elasticity of demand for the particular goods in
the target market. This also helps in knowing the how the prices of the given goods impact the
overall demand of the specific commodity. Respective commodities are elastic when the
company or the products is expecting any sort of change in the choices of the customer, change
in income and the future expectations and complementary goods. These are the aspects which
affects the entire demand of the goods in the target market by which the change takes place in the
certain aspects which are existing in the business firms. These are the aspects that is inelastic in
nature as the demand can not be changed with the variation in the prices of the given goods in
the market that includes quality products. The quantity demand can be vary with the change in
the prices of the goods then the overall demand of the goods is said to be elastic and this also
define the nature of the products. These are the factors that is having impact in the variation in
the overall prices of the goods are given below:
 Substitution effects: It is the factors that says that decrease in the sale of the goods that
leads to change of the customers to the other brand or the goods for getting better
products in affordable prices. When the prices of the shoes tends to rise the demand for
products also downfall. Whereas,when the prices of shoes tends to decreases then
demand for such goods also decreases.
Branded shoes comes under the luxury goods and this is not necessary for the survival of
the person and this is basically purchased by the individual for their fashion sense and status
sense, the type of people who are interested in buying branded shoes.
 Income effects: This is defined as the earning of the person that is being eared in return
of some sort of employment. This sis also explained as the variation in the overall
demand of the goods due to variation in the income level of buyer. This also helps in
having better choices between the products. Rise in the income level of the consumer
tends to move to the premium products by the customers. Whereas decrease in the
income of the buyer move yo buy them normal or inferior goods backed with their
purchasing power. In relation to Nike, rising income motivate individual to y branded
shows and vice versa. The demand for those commodities is inelastic in nature as there is
no such variation with the change in the income of the buyer.

There is high level of income spend on such type of gods as these are premium products
that is expensive in nature and the branded shoes are the status symbols and gives more comfort
to the people.
What is the pricing policy that firms employs & why?
There are various venture that are existing in the business environment & they are
operating their business with the use of different pricing strategy by which they can have the
effectively operate in the marketplace. As they do not stay to the to the particular pricing
strategy. This is influenced by the perception of the buyer. These are the aspects which shows
variation in the demand & supply of the goods which reflects the variation in the demand &
supply which also reflects the variation in the pricing policy and the cost of the particular
location, need of the target market & change in the demand and supply of the goods which also
reflects the change in the pricing policy. With the effective use and access with the such factors,
company ensures the higher profitability & various type of pricing are given below:
 Geographical pricing: This is the pricing policy that is being accessed by the business as
per the different location in the market and also evaluate the purchasing power of the
customer. This is generally serve the local market by which they can have the large group
of buyer in an right approach. This also assists the customer to have the better pricing
policy by which they can have more profits and revenue in the target market.
 Price discount and allowance: These are the pricing strategy that is used by the business
in order to attract the large group of potential customer and the main consideration is to
reward the buyers foe their early payment, off-season buying which also includes the
cash discount that is being given to the buyer at the time of easy payment & bulk buying
by the customers.
In relation to Nike, they must use the price discount & allowance by which they can
effective which also cover the huge marketplace and can rightly establish good recognisable
position in the market.
CONCLUSION
From the above report, it is concluded that demand & supply is the major consideration
that is having the great impact over the internal & external factors that are sustaining in the
business firms. This respective report is based on the branded shoes where the law of demand
fails as there is no such variation in the given prices of various goods other than their prices. The

income of the consumer is analysed as the major consideration that also reflects the purchasing
power of the luxury goods. Furthermore, various pricing strategy is being used by the venture
which ensures the effective running of the business in an appropriate manner.

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