• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Sony,the Japanese company, is involved in insurance and on-line banking as well as computers, electronics and computer games. a) Explain why a company might wish to produce a diverse range of products rather than specialise.

Extracts from this document...

Introduction

Q. Sony,the Japanese company, is involved in insurance and on-line banking as well as computers, electronics and computer games. a) Explain why a company might wish to produce a diverse range of products rather than specialise. [A Level 2003 Paper 4] Ans. Diversification involves production of different products by the same company or country. Specialization is the extreme opposite as it means to concentrate in the production of one type of product with the resources available. With reference to the Japanese company, Sony, it is likely that it has diversified in its production because the electronics market has rapidly changing market conditions. This is because of the fierce competition among the large electronics-producing companies as well as the fast development of technology and hence product development. For example, in all the cell phone market, recently there has been a demand shock arising as a result of the release of the new model of mobile phone 'k-800i' by Sony Ericsson.The company benefited from massive sales because of the advanced camera features added to the cell. However, only later did the drawbacks involving small memory capacity begin to be realised among the consumers. ...read more.

Middle

Therefore diversification helps to reduce risks of decline in the company the result of which could be serious once unemployment, trade deficit and reduction in incomes occur. Diversification helps in promoting brand name, increase profits and market share. b) Sony is a large company that can influence the price of its products. Discuss whether imperfect market structures which allow such companies are beneficial. A. Sony is operating in an imperfect market structure as the company is a price-taker. Since the company also differentiates its products, promotes its products through advertising, has a large number of competitors; it is likely that Sony is operating under monopolistic competition. Fig. 1 The diagram figure 1 shows the costs and revenues of a firm under monopolistic market structure. Firms under this imperfect market structure produce output level where MC=MR i.e. marginal cost equals marginal revenue; but fixed price on the demand curve which is equivalent to the average revenue curve. As a result, the company is able to increase revenue if it had priced where MC=MR. Due to this consumer surplus i.e. the difference between what price consumers are read to pay and what they actually pay; reduces. ...read more.

Conclusion

This result into net social welfare and allocative efficiency because resources are allocated in ways society will benefit due to an improved environment. Imperfect markets therefore are beneficial to the producers from some perspectives and is also beneficial to the consumer from some perspectives. It is beneficial to producers because they are able to earn abnormal profits by being able to set prices and gain market shares by non-price competition. However, producers who want to set up their own firm may lose out because the find it impossible to cross the natural barriers or even artificial barriers to entry to be able to gain a share in the abnormal profits being made in the industry. Consumers gain because of greater varieties of products brought about by research and development by firms. Consumers too get better information about products and be able to enjoy sovereignty and variety. They can be suffering though due to high prices of products that may not fully reflect the value they place on the product. Firms may also practice anti-competitive practices such as force potential entrants out of the market of the market or collude with other firms to exploit market and earn high profits at the consumer's expense. Whether imperfect markets are beneficial or not depends on the firms' activities and consumer sovereignty and the economic efficiency attained. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Case Studies and Analysis section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Case Studies and Analysis essays

  1. Unit 12 - International Dimensions of Business Task 1

    whether or not these are helped to be met the an international presence. Become established as Europe's leading low fare airline As I mentioned earlier in this task, because RyanAir cannot compete in terms of quality and service with the world's largest airlines, they make their name and obtain their

  2. The main purpose of this research is to know and analyze whether the Olympic ...

    well as to conform and test the efficiency of the workers or guides and to train them how to take care of the visitors. It is been mentioned that if the activities of Olympics gets succeed then there may be 25% growth in tourism.

  1. PEST is a planning tool which is used by a business to evaluate and ...

    out of refrigeration and not exceed this rate, this means that if they are travelling long distances to distribute their good they will have to make sure that have refrigeration for their good. Otherwise it could lead to great problems for Ginsters as they will have lose customers as people

  2. NETFLIX CUSTOMERS SATISFACTION

    Customer satisfaction is ?n import?nt issue in ? business bec?use it drives revenues, m?rket sh?re, ?nd competitive strength. Org?nis?tions often think the w?y to me?sure customer satisfaction is to ex?mine the number of customer compl?ints. The problems with this method is th?t it is re?ctive, it only responds, if ?t

  1. Business plan. The business that I am going to produce is a personalised logo ...

    this a risky option for businesses that need a lot of investment. This is the dance logo for my company PDW' I think that I may have to change a few slight things to make it unique and promising to all customers, this needs to be a stunning attraction to

  2. The Theory of Scientific Management.

    The disadvantage of having this aspect is that Waitrose are again spending their profits in order to keep their employees motivated. Annual bonuses, discounts, benefits and paid holidays are also a motivator to work for Waitrose as the company shows their employees that they are needed.

  1. Unit 32 P3 explain how the developments in the consumer market have impacted on ...

    such as fast food stores like KFC and McDonalds, where if the service is not exceptional it may lead to a loss of customers and potential customers because of the reviews the customers give on the internet or to friend and family, the importance of quality of service is so

  2. Unit 32 P3 Explain how developments in the consumer market have impacted on food ...

    Also those who have specialist diets will be those from the high affluence category where they are purchasing the high end quality products which are included in their diet and will look for products which have low calories and less chemicals in order to help their specialist diet to progress.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work