Week 3 - Competitive Environments

Ethics and the Competitive Environment

Introduction

• Edited by Matthew Martell and E. Anne Macdonald.

• Authors: Lawrence J. Gitman et al.

• OpenStax "Introduction to Business," published September 19, 2018.

• Available online under Creative Commons Attribution License.

Learning Outcomes

• Microeconomics: Concepts of demand, supply, and pricing.

• Market Structure: Types of market structures (four types).

• Retail Operations: Various retail types.

• Pricing Strategies: Different strategies and emerging trends.

• Ethics: Influence of personal philosophies on ethics in business.

• Corporate Social Responsibility (CSR): Encouraging ethical behavior and meeting social responsibilities.

• Trends in Ethics: Current trends in ethics and CSR.

Microeconomics: Demand and Supply

Nature of Demand

• Demand: The quantity of goods/services consumers are willing to buy at various prices.

• Example: At $100, demand for snowboard jackets is 600 units.

• Demand Curve: Downward slope indicates inverse relationship between price and demand.

Nature of Supply

• Supply: The quantity of goods/services suppliers are willing to produce at various prices.

• Example: At $100, supply of snowboard jackets is 800 units.

• Supply Curve: Upward slope reveals that higher prices increase quantity supplied.

Interaction of Demand and Supply

• Equilibrium: Where quantity demanded equals quantity supplied. Example: Equilibrium price at $80 for 700 jackets.

• Surplus and Shortage: Changes in prices lead to adjustments in demand/supply.

Market Structures

Four Types

1. Perfect Competition: Many firms, similar products, easy entry/exit.

2. Pure Monopoly: Single seller controls all market sales.

3. Monopolistic Competition: Many firms, close substitutes, product differentiation.

4. Oligopoly: A few firms dominate.

Table 1 Summary

• Characteristics, Ability to Control Price, Barriers to Entry, Product Differentiation.

Competing and Pricing Strategies

Pricing Strategies Overview

• Price Skimming: High initial price, decreased over time.

• Penetration Pricing: Low initial price aimed at high volume sales.

• Leader Pricing: Below-cost pricing of select items to draw customers.

• Bundling: Grouping related products to enhance appeal.

• Psychological Pricing: Odd/even pricing to influence perception.

• Prestige Pricing: High prices to denote quality.

Corporate Social Responsibility

Definitions and Responsibilities

• CSR: Obligations beyond profit, including ethical and philanthropic duties.

• Responsibilities to Stakeholders: Employees, customers, communities, investors.

• Examples: Starbucks’ FoodShare program, Salesforce volunteer initiatives.

Trends in CSR

• Strategic corporate philanthropy linked to business objectives.

• Evolving social contract between employers and employees.

• Emphasis on global ethics when operating internationally.

Summary of Learning Outcomes

Key Concepts

• Demand and supply dynamics determine pricing and market equilibrium.

• Understanding market structures aids in recognizing competitive landscapes.

• Retail operations vary widely but can be categorized as in-store or nonstore.

• Pricing strategies must align with perceived value and market conditions.

• Ethics and CSR are integral to business operations and stakeholder relationships.