The Cheese and its Determining Factors on the Market
Economy in the real world is not just a subject in the university, but the major basic of a modern day business.
“The large set of inter-related economic production and consumption activities which aid in determining how scarce resources are allocated.” (Investopedia.com, 2014)
The report describes the cheese market in the United Kingdom. Highlight the relationship between wine and its compliment, the cheese and how the actual market responsive to economical changes, such as demand, supply, elasticity and equilibrium.
Table of Contents
1.The aspects which influencing the amount of cheese…………………..5
2. About Elasticity and Inelastic…………………………………6
3. About Equilibrium……………………………………….7
4. Example for the cheese` prise changing…………………………..8
5. Recently used marketing strategy……………………………..9
This report created by the Author –Mr. Istvan Csuha– on the request of Northampton University on the behalf of its subsidiary the London School of Business and Management and their lecturers in respect Prof. Bruce Johnson to clarify the position of the cheese market in the United Kingdom, the key economic factors which influences marketers and consumers in the decision making process.
- The aspects which influencing the amount of cheese
The aspects influencing the amount of cheese that shoppers request can be categorised four main parts (Begg, D. & Ward, D., 2007, P.26-32), such as:
- Costs of surrogates: relates to researches (Fitday.com. 2013). there are some options to alternate cheese, but the prices of those merchandises is higher and do not give back the same taste, as cheese, therefore only a small amount of clients will leave “the cheesy side”.
- Salary of the clients: an investment banker demand is completely different, then a street cleaner and one of the key motivator is what they can afford; ASDA have been closely monitored and the finding is, individuals can purchase cheese products from £2 up to £20, therefore cheese products widely accessible to everyone (ASDA.com. 2014).
- Various flavours: Every single human being different from the other, so as their tastes and conclusion of that, they required different products.
- Value: is the product worth the sum of money what the retailer asking for it; if the answer is yes, then highly possible the quantity demanded by a consumer is higher.
- About Elasticity and Inelastic
The characteristics of the magnitude of cheese that manufacturers and retailers supply is strongly related to the previous part of the report, but a new economic term has to be considered, Elasticity:
“Price elasticity of supply measures the relationship between change in quantity supplied and a change in price.” (Tutor2u.net. 2014).
There are Inelastic is the modification in the price indicates a proportionately minor modification in the quantity required. (Begg, D. & Ward, D. 2007, P.35)
Elastic is the modification in the price indicates considerable larger modification in demand. (ibid, P. 32-35)
There is another very important factor what every supplier have to consider regarding the amounts need to supply and is called a well-known PESTEL analysis -macro-environmental aspects, what a supplier cannot change, only can adapt to them.
Assuming there are alterations in the purchasers “tongs”:
- Consumer demand decreasing= retailer profit decreasing also.
- Overcome on that retailers has to start manufacturing products, therefore they have to enter a new segment of the market. Avoid failure Porters five forces advisable to considered, -designed to evaluate the possibilities of the company upon entering to a new market and/or segment.
Assuming there are modifications in the manufacturers technology, -that is a technological factor from the mentioned PESTEL analysis-:
- In that occasion the retailer or the consumer only can adapt to that factor, in that case keep purchasing products, but less quantity (if the technology is not as cost-effective anymore, therefore the price of the product rising too), or find a substitute (either retailer or substitute product).
- Therefore price elasticity applied.
- About Equilibrium
Equilibrium of “cheese market wise”, when the manufacturer selling the product for the price, what a retailer is demanded, or the distributor selling the merchandise for the price, what a consumer demanded. (ibid, P.76)
According to worldwide known economists and authors of many books the forces that drive the market in the direction of its equilibrium are:
- The connection between the alteration of need and supply and prices: if the need of cheese products rising, supply has to follow, then retailers raise their prices too, therefore the equilibrium will balanced again. Need for cheeses falling, then traders have to reduce their activity, therefore prices will fall too. That is the optimal market scenario. (ibid, P.88)
- Example for the cheese` prise changing
Assumption: a hypothetical situation, when the price of wine increases. First we have to clarify the right questions.
The author of these report was that fortunate, came from the family which have long-lasting history –and himself spent over ten years as well- in the Hospitality and Catering Industry; worked from kitchen porter through sommelier assistant to night manager in various countries and several high-end catering event as well (for example: wine-waiter at the House of Parliament in Hungary), therefore to clarify and answer this questions was his table.
- Why wine and cheese related to each other?
- How the supply of wine and cheese will change?
- How the needs of wine and cheese will change?
- Will the prices of cheese change?
- Are the amount of cheese and wine supplied and demanded will change?
The answers are the following:
- Many countries –especially the ones with long-lasting histories and more mature cuisine i.e.: France and the United Kingdom- use cheese, as a substitute of desserts, also another reason possibly, because the weather colder than for example Italy and Spain. Those countries, consuming mostly wine for/and throughout the meal, if their choice for the dessert is any sweet, -such as ice cream or crème bulee-, they choose a light and sweet liquor, or a dessert-wine; but when they choose cheese, then the wine has to be semi-dry, or dry light white-wine.
- When the price of wine increasing, in the short term the supply will be the same, until marketer realise the equilibrium turned into a disequilibrium –at this occasion the proper term is surplus, when the supply of goods greater than its demands-, and they want to balance again; therefore marketers reducing supplies.
- The needs of cheese and wine at the event of the price of the wine increase can be:
- The increase of the price will be minor, therefore only small amount of purchaser decide to discontinue consuming those products, therefore inelasticity occur.
- When the needs of cheese and wine reactive to the price change, then “massive” amount of purchasers decide to discontinue purchasing products= elasticity occurs.
- The price of the cheese can be reactive to the wine price (elastic), or non-reactive (inelastic).
- The quantity of demand reactive to the price change: yes= elasticity;
- The amount of need non-reactive: no= inelasticity;
- Marketers want to balance the equilibrium, yes, when the demand decreases, the quantity of supply has to follow, therefore the price will change to; when equilibrium reached, demand is increasing, supply increasing, prices increasing.
5. Recently used marketing strategy
Companies nowadays like to use a new marketing strategy. Organisations evaluate the demand and the quantity of demand, they producing less quantity of product, therefore artificially create shortage and they can raise the prices too, i.e.: entry-tickets for pop-concerts. (ibid, P.85-86)
The report found the cheese market very responsive for price changes, which is depending on various factors. Found also the definition of economy; clearly concluded the meaning / variations of elasticity, moreover described the definition of equilibrium.
ASDA.com. (2014). Asda Groceries. Available: //groceries.asda.com/asda-webstore/landing/home.shtml?cmpid=ahc-_-ghs-sna1-_-asdacom-dsk-_-hp#search/cheese/7/price_asc. Last accessed 11.12.2014.
Begg, D. & Ward, D. (2007). Economics for Business. 2nd ed. New York: McGraw-Hill. p26-p32.
Begg, D. & Ward, D. (2007). Economics for Business. 2nd ed. New York: McGraw-Hill. p32-p35.
Begg, D. & Ward, D. (2007). Economics for Business. 2nd ed. New York: McGraw-Hill. p76.
Begg, D. & Ward, D. (2007). Economics for Business. 2nd ed. New York: McGraw-Hill.p85-86.
Begg, D. & Ward, D. (2007). Economics for Business. 2nd ed. New York: McGraw-Hill. p88.
Fitday.com. (2013). Substitutions for Cheese. Available: //www.fitday.com/fitness-articles/nutrition/healthy-eating/substitutions-for-cheese.html. Last accessed 11.12.2014.
Investopedia.com. (2014). Definition of Economy. Available: //www.investopedia.com/terms/e/economy.asp. Last accessed 11.12.2014.
Tutor2u.net. (2014). Elasticity of Supply. Available: //www.tutor2u.net/economics/content/topics/elasticity/elasticity_of_supply.htm. Last accessed 11.12.2014.
LON 15403546Mr. István Csuha