Local Market Power
Local Market Power
Bulls Eye department store specializes in the sales of discounted clothing, shoes, household items, etc. similar to the offerings at a regular Walmart or Target. Bulls Eye is the only department store in Show Low and the nearest other discount retailer is Target, located 49 miles away in Eagar. Bulls Eye, therefore, has some market power in its local area. Despite having some market power, Bulls Eye is currently suffering losses. An analyst at Bulls Eye is recommending to the manager to raise prices, so that profitability can be improved. The manager is unsure of this strategy as recent data points to increasing numbers of individuals shopping more and more. What are the pros and cons of raising the prices at Bulls Eye and would that strategy be profitable?
It is hard to say what is pros and what are cons when we do not know what losses Bulls Eye are suffering from. Before they raise any of the prices, they need to do an analysis to see what product(s) they are not selling well. Another area they may want to look at is, how low their prices are compares to Walmart and or Target. If they haven’t done this already, they might considered doing price comparison like most stores does now a day, like most stores, they only offer to those stores within 50 miles radius. So they would be competing with Target since they are 49 miles away. This bring me up to another question I was wondering about, since they are so far away, is it possible that their suppliers charge them more to get the products to their location? If so, they should adjust their prices to make up for the losses.
The pro for raising the price is the oligopoly markets. The oligopoly markets for this supplier would be the convenient of location and some buyer are restricted to their location. Another possibility are the loyalty of the customers who are willing to pay higher prices. This will increase their profits but again, they need to look and see what it was that lead them
Bulls Eye department store specializes in the sales of discounted clothing, shoes, household items, etc. similar to the offerings at a regular Walmart or Target. Bulls Eye is the only department store in Show Low and the nearest other discount retailer is Target, located 49 miles away in Eagar. Bulls Eye, therefore, has some market power in its local area. Despite having some market power, Bulls Eye is currently suffering losses. An analyst at Bulls Eye is recommending to the manager to raise prices, so that profitability can be improved. The manager is unsure of this strategy as recent data points to increasing numbers of individuals shopping more and more. What are the pros and cons of raising the prices at Bulls Eye and would that strategy be profitable?
It is hard to say what is pros and what are cons when we do not know what losses Bulls Eye are suffering from. Before they raise any of the prices, they need to do an analysis to see what product(s) they are not selling well. Another area they may want to look at is, how low their prices are compares to Walmart and or Target. If they haven’t done this already, they might considered doing price comparison like most stores does now a day, like most stores, they only offer to those stores within 50 miles radius. So they would be competing with Target since they are 49 miles away. This bring me up to another question I was wondering about, since they are so far away, is it possible that their suppliers charge them more to get the products to their location? If so, they should adjust their prices to make up for the losses.
The pro for raising the price is the oligopoly markets. The oligopoly markets for this supplier would be the convenient of location and some buyer are restricted to their location. Another possibility are the loyalty of the customers who are willing to pay higher prices. This will increase their profits but again, they need to look and see what it was that lead them