Comprehensive Management Economics Analysis of TSG Pharmacy Report

This report provides a comprehensive analysis of TSG Pharmacy from a management economics perspective. It begins with an introduction to business dynamics and the application of economic tools to assess market forces, focusing on microeconomic concepts such as supply and demand. Part A delves into sales forecasting, elasticity of sales, price elasticity of demand, and income elasticity, providing calculations and interpretations of these key metrics. Part B explores the market structure of Next PLC, comparing perfect competition and monopolistic structures, and offers recommendations for business improvements based on these analyses. The report concludes with a summary of the findings and references.

MANAGEMENT
ECONOMICS

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
a)..................................................................................................................................................3
b)..................................................................................................................................................4
c)..................................................................................................................................................6
d)..................................................................................................................................................7
e) .................................................................................................................................................8
f) ..................................................................................................................................................9
PART B..........................................................................................................................................11
Brief History of Next PLC.........................................................................................................11
Company can opt Market structure which is perfect competition.............................................12
Company using Monopolistic market structure.........................................................................14
Similarity in both the structure..................................................................................................15
Nature of industry in which Next PLC operates........................................................................16
Recommendations......................................................................................................................16
Conclusion.....................................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Business dynamics is an integral part of an organization which will further helpful for an
enterprise in assessing the business performance of an enterprise. The economics has improved
the existing business of an entity by utilizes its unique concept. TSG Pharmacy has been selected
for this project report in which economical tools and technique are used in order to ascertain the
major market forces such as supply and demand of the products offered to the variety of
customers. This project report is all about explaining the role of the business in accordance with
the external market approaches followed by the business entity. This report is stresses on the
microeconomics approaches such as supply and demand of a product. This project has
emphasized on the prices of a product or income earned by the business enterprise. The business
is based on the external market operations as the customers are pleased in order to provide
benefits to purchase the products by strengthen the existing business capabilities and
performance linked with market practices conducted by an organization. This report is also
tresses on the different market structures which will modify the future business action as per the
current action taken by an entity owner in order to enhance their further business positions.
PART A
a)
As business consultant of TSG pharmacy business which produces TSG caplets in order
to lease variety of customers by catering different services (Bindi and Nunes, 2016). The sales is
regarded as one of the important tool in the business which showcases the ability of an
enterprise. The sales are forecast in order to seek future business opportunities by relying on the
current skills and abilities in order to generate higher amount of sales and the revenue. The cost
reduction strategies are framed by the individual in order to save the business from external
market impact that affect an entity's performance.
The term elasticity is a measure which helps in defining the quickness created in the
variables in relation with the external market turbulence (Ljungholm, 2016). It helps in assess the
changes created in the variable with the increasing effect of the external market. This particular
method will identify the existing capabilities of the business in order to create significant

changes in the price of a product or services. This elasticity is a quantitative proportion of two
variables in the percentage forms.
The current business is based on ascertaining the price elasticity of demand of the caplets
produces by TSG in order to form their business decision without getting affected with the
external increase or decrease. This is regarded as the micro economics concept as the demand
and the price of a product or services are properly explained in the current business.
The current problem of this business is assessed the business ability in order to predict the
changes takes places in the existing sales level of an entity.
Elasticity of sales=% change in sales/Percentage change in the sample population
% change in population= New population-existing population(Old population)*100
=(140000-130000)/130000*100
=7.69%
Elasticity of sales= % change in sales/Percentage change in the sample population
=0.80= %change in sales/7.69%
=% change in sales= 7.69*0.80
= 6.15%
It has been observed from the above analysis which is based on defining the new increase
or decrease in the existing sales level of an enterprise (Chatterji, Jager and Rima, 2016). The
above mentioned analysis has shown that the increased in the population will result into increase
in the level of sales by 6.15%. It is clearly seen that the customers are essential in order to
increase the existing sales level of the business. The business produces their products or services
in order to cater the needs and expectations of different set of customers. The TSG needs to focus
on getting higher level of customer satisfaction among the customers as this can enhances the
existing level of the business of an enterprise.
b)
The price elasticity of demand will know the level of changes takes places in the existing
level of demand in relation with the minute differences incurred in the demand among the
customers (Oyer, 2016). The price elasticity of demand is a framework that defines the measure
of responsiveness which test the dependability of one variable with the changes incurred in
another variable.

Price elasticity of demand= Percentage change in quantity demanded/Percentage changes in the
price level.
There are various factors which affects this price elasticity in relation with the demand generated
for a particular product or services which are given as below:
Substitutes- The availability of different medicines of same content may create competition for
TSG caplets. The availability of these products will attract the interest of most of the customers
due to their affordable pricing and relivable medicine content.
Changes in income level- The changes takes places in the existing income structure of a person
ill shift its demand of a product from normal goods to the luxury level and on the contrary, it
shifted from inferior goods to the normal level of goods.
Price- Another important factors that affect the existing level of price set by an entity with the
external market changes. The recession in the outside entity may increases the price of a product
or services offered by an enterprise.
% change in price=(New price-old price)old price*100
=(£8.50-£7.50)£7.50*100
=13.33%
Price elasticity=% change in quantity demanded/%change in price
= -0.85 = % change in quantity demanded/13.33%
=% change in quantity demanded= -0.85*13.33
=-11.33%
It has been observed from the above that the negative price elasticity of demand of TSG is due to
the negative figures of quantity demanded (Nalini, Srinivas and Prakash, 2016). This results
shows that the features incorporate by the management in their products are less attractive which
is not able to meet the demands of the variety of customers in increasing the demand from one
period top the another period.
Increase or decrease in revenue
EP= % change in quantity demanded/13.33%
=-1.1=% change in quantity demanded/13.33%
% change in quantity demanded= -1.1*13.3%
=-14.66%

The negative price elasticity of the demand will not able to increase in the revenue of an
enterprise as it will also increase the overall quantity demanded from the earlier years. The
business has incurred loss in the current year due to the negative figure of quantity demanded.
The business need to suggest different strategies in order to reduce their existing burden of cost.
c)
Income elasticity is hat measures which is used in assessing the relationship between two
variables such as change in quantity demanded and changes takes in the income level of an
individual. This kind of measure will ascertain the current level of changes arises in the income
of a person from its previous years.
Income elasticity= %change in quantity demanded/%change in the income
The changes take places in the current level in the different ways which are given as below:
Positive income elasticity-This variable is used in evaluating the performance of the changes in
the income level of an entity. This shows the relationship among the demand of a product with
the income level of person (Vogl and Leidl, 2016). This value shows greater value than the zero
which sates that quantity demand of a product will get increases with the rise in the income level
of the business.
 Income elasticity greater than one- The quantity demanded is greater than the changes
takes places in the income level of the consumer. This shows that the quantity of product
will not create any significant changes with the income level of a person.
 Income elasticity equal to 1- This value of the income elasticity shows the equal
changes takes places in both the variable such as quantity demanded and the income level
of the individual.
 Income elasticity less than one- The percentage changes in quantity demanded for a
particular product offered to the different set of customers are less than the changes takes
places in the income of an individual.
The above income elasticity curve also shows the negative values by showing inverse
relationship among income earned by the consumers and the expenditure spent on purchasing the
product by raising or decreasing the current level of quantity demanded.
The present business situations of TSG pharmacy which deals in producing caplets in
order to earn high amount of the sales and the revenue in order to increase its existing business

conditions. The existing income elasticity value generated by this business is 0.75 which falls
under the category of income elasticity less than one. The business needs to increase its existing
level of the business in order to achieve its existing goals and the objectives in a given time span.
The quantity demanded need to be increase along with the changes positively incurred in the
business. The income level of an individual will shift the overall demand from inferior to normal
goods and normal to the superior goods.
d)
Assumptions
TR = $800Q - $0.2Q2
TC = $38,000 + $2,50Q + $0.2Q2
MR = (TR / Q) = $800 - $0.4Q
MC = (TC/Q) = $2,50 + $0.4Q
Number
of units
produce
d (Q)
Price
per unit
(P)
Total sales
and revenue
(TR)(in 000)
Addition
al
Revenue
(MR)
Total
expen
ses
(TE)
(in
000)
Marginal
cost
(MC)
Averag
e Value
(AV)
Total
amount of
profit (TP)
(In 000)
Marginal
profit
(MP)
0 800 0 800 38 250 0 -38 550
100 780 78 760 65 290 650.05 13 470
200 760 1520 720 96 330 480.03 56 390
300 740 222 680 131 370 436.68 91 310
400 720 288 640 170 410 425.05 118 230
500 700 350 600 213 450 426.02 137 150
600 680 408 560 260 490 433.35 148 70
700 660 462 520 311 530 444.28 151 -10
800 640 512 480 366 570 457.51 146 -90
900 620 558 440 425 610 472.23 133 -170
1000 600 600 400 488 650 488.01 112 -250

Interpretation
The above results of the above analysis will be based on the above mentioned equation
which will results into initially positive and higher position (Kumar and Kumar, 2016). This
higher position will shift towards the negative figures. This process is all about defining various
means in order to maximize the amount of profit earned by the business. It emphasized on the
Total revenue that states the total amount of profit earned by an entity during the years. The total
revenue of the business has increases constantly with an increase in the quantity and at the same
time decreases the price of the products (Goebel and Weißenberger, 2016). This also stresses on
another important components such as average revenue which helps in determine the total
revenue divided by the quantity held in the business. The average value of this particular
business has increases at different quantity level held in the business with less amount of speed.
This is lesser speed can be due to the decrease in the level of the prices offered to please the
customers. The above analysis has shows the relationship between the price of a product in
relation with the quantity demanded by the consumers. The price sensitive customers will
increase their demand for reduced prices. The TSG pharmacy has reduces their existing level of
prices which further increases the total quantity. The quantity of the products are increases with
the increment of 100 units over the period which further raises the level of the business.
e)
Interpretation

The above mentioned graph is a visual presentation of the overall business conditions of
an organization which is presented to the external market to make significant changes in the
current level of the business (Vogl and Leidl, 2016). The TSG pharmacy has assessed its existing
business enterprise on the basis of three components which defines its overall cost incurred in
their business which needs to be improved. This improvisation of the overall cost is essential in
order to make actions in the business for the beneficial of an enterprise. These components which
helps in judging the current performance of an entity such as marginal revenue, marginal cost
and the average cost incurred in the business. The marginal revenue is declining over the years
which states that every additional unit produced in the business will result into higher amount of
the sales and the revenue or suffered with loss. The average cost is showing fluctuating positions
without showing any stable position of an entity. The average cost is surpasses both the variables
as it cut the graph values of marginal revenue and average cost.
The profit maximization is that particular process which is a measure used in determining the
total profit incurred in the business in order to make god business decisions. The profit
maximization is the primary motive of the manager who are responsible to increases the overall
wealth of the shareholder's.
The profit-maximization is further segmented into two different approaches such as profit
increasing or decreasing which is decided by an entity (Kumar and Kumar, 2016). The business
operations conducted by an organization with a clear motive to reduce their existing expenses
which will imposes as an additional pressure on an entity.
Profit-maximization-The middle point of intersection at which an entity will earn higher
amount of profit at the revenue of 600 caplets produces by this particular organization.
Average cost minimization- The business entity will reduce their overall burden of the cost
incurred in this business entity at the price level of 680 to 600 in order to reduces their overall
cost burden which will further reduces their overall obligations.
f)
In the existing business world the role of all the business operations has increases along
with their primary aim to improve their existing business objectives and goals. The cost
reductions strategies need to be framed which in turn increases the overall profit-maximization.

The modernized economic theory applied by the firm is to enhanced their existing profit of the
business which will in turn reduces the cost burden which can become cost death for an entity
when an entity will not able to impose proper control on their existing business.
This particular theory has suggested some assumptions in order to satisfy all their business needs
which are given as follows:
Marginal cost= Marginal revenue
Marginal cost curve cuts the MR curve from below
From the above graph it has been observed that an entity can increase their existing
amount of profit by equalize their cost and the revenue in the same kind of the business. This
both the above mentioned assumptions have seen clearly in the above graph. This graph
showcases the ability of the business in order to achieve their goals and the objectives. The
increased business profits will be used as one of the measure in order to decrease their existing
market obligations (Oyer, 2016). The surplus can be used by an entity in order to reduce their
overall expenses which is higher than the existing average cost of production. The planning of
different expenditure incurred in the business with a clear aim to reduce their expenses. The
approach followed by an organization is to reduce their short term and long term profit by
prioritizing expenses in advance. The advanced evaluation of all these expenses will improve the
quality of the business entity that reduces the overall pressure on an enterprise.
Cost function (TC) = $800Q - $0.2Q2
Revenue function (TR) = $38,000 + $2,50Q + $0.2Q2
MC = $800 - $0.4Q
MR = $250 + $0.4Q
MC = $800 – (0.4*687 units)
= $800 – ($274.8)
= $525
MR = $250 + $0.4Q
= $250+ (0.4*687)
= $525
Maximum profit = Zero MP = (MR = MC)
MP = ($525 = $525)

= Nil
The above mentioned two theories such as profit-maximizing and the average cost minimization
are explained properly with the help of above mentioned equation which presents the true market
conditions reflected in the business working.
PART B
• Considering the nature of the industry in which the firm operates, would you suggest
greater/lesser government intervention? Discuss.
Brief History of Next PLC
In modern times there are a several market structure which are following by the
companies. These market structure influence the firm's behaviour which shows the company
status that whether it is efficient to generate the level of profit to beat in the the market (Baldwin
and Scott, 2013). There are four types of market structure i.e. perfect market, monopoly market,
monopolistic market and oligopoly market.
Next PLC is a international and public limited company. The nature of business of this
company is retailer which deals in clothing, footwear and home products and has a biggest chain
in the world. This company has around 700 stores in the world, 500 stores are in U.K and 200
stores are located in the continental East. This company was establish in 1864 and listed on
London stock exchange. The store of this company is divided into two complementary activities
i.e. catalogue sales and retail stores. The company expand its business all over the world and
after its expansion the company closed its seven companies owned foreign stores, including its
five in U.S. The products of this company is sold only in its own retail stores and through
catalogue sales only. Next PLC company has another business also which started the concept of
Next interior concept. This company follow the perfect competition market structure in which
there are so many number of buyers and sellers are there in the market (Kumar and Siddharthan,
2013). The main objective of this company is that to increase the number of customers by
improving the quality of the product and maintain the price strategy to sale the product in the
market, it focuses on the level of customer satisfaction and services in retail stores etc.. The
mission of this company is that in which the business is dealing and who are the customers of

that company. The next mission of this company is to provide a quality product in cloths, home
products above the expectation of the customers.
Company can opt Market structure which is oligopoly competition
The market structure tells about the the characteristics of organization's in the market
which affect the nature of competition and price. Next PLC company follows the oligopoly
competition market in there are a few number of buyer and sellers are there. In this market there
are barriers if entry but it is less than the monopoly market(Kvint, 2010). there are some barriers
in the long run to enter or restrain in the market. These may be economies of scale enjoyed by
the large firms, high capital requirements, the existence of unused capacity which make the
industry unattractive etc.. On the other side there are so many competitors of this company which
can beat to company in this market. To adopt this market there are so many befits for the
company which can lead to their competitors. Above mention there are some benefits:
 The company generates a high profits because there is a little competition in the market.
The products and services are controlled by the large majority of shares.
 The consumer can easily compare and choose the best option to offer the goods and
services which can satisfy their needs.
 Through this market structure the company can know about its competitors, how they are
selling the product in the market, what different strategies are to be followed by the
company etc.
 The companies has full control over the market. So company can decide the price of the
products. But it works in a favor of business.
But there some disadvantage for the this company to adopt this market structure:
 the small business competitors fails to establish their brand because this market is already
captured by the large firms.
 New firms cannot easily enter in this market due to various barriers of entry.
 The price are determined by the firms so it become difficult for the consumer to purchase
the product at a high price.
There are many advantage and disadvantage for the company but company have to
maintain its price strategy in the market to attract the consumers. There are so many companies
in the market who prefer the perfect market because they can sale a homogeneous products. If