• 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. LUFTHANSA: THE GERMAN GIANT

    Together with its partners Lufthansa services over 410 destinations. It has the second-largest passenger airline fleet in the world, when combined with Lufthansa CityLine, Air Dolomiti, Eurowings, Germanwings, Augsburg Airways, Contact Air, and SWISS. The Lufthansa Group operates more than 400 aircraft and employs 105,261 people worldwide.

  2. How has the environment favored the development of Nokia?

    Nokia has favored a great deal from Finland's support to the local telecommunications industry. Together with the superior trade laws of the EU (which Finland is a member of), Nokia's law & regulation environment has supported the corporation very much.

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

    This means that Ginsters might have to employee more staff as they will have less people working on certain days if their employees only work part time, this means that Ginsters will need new employees to work on the days where there are less staff so that Ginsters can still

  2. Unit 12 - International Dimensions of Business Task 1

    The main criteria of this coursework is that one of my two chosen businesses must be known on a global scale whilst the other must work solely in Europe and from this, I have decided to chose Ryan Air (Europe)

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

    However this logo idea I got from, www.trademarkia.com Mission statements- A mission statement is a formal, short written statement of the purpose of the company. The mission statement guides the actions of the business, provide a sense of direction, and look upon the company's overall goal.

  2. Investigating Business Resources

    4 CONCLUSIONS Tarmac takes its responsibilities towards the environment seriously. It locates its business near to raw material sources or to its markets. This is cost-effective and contributes to reducing adverse impacts on the environment. The company focuses on the safety of its employees and community by achieving a balance between its business and the environment.

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

    hurting them and will complete my research work in a successful manner. After completing this research i will provide my valuable views and ideas for the future work without any limitations. 1.5 Introduction Olympic Games is the international multi-sport event which is divided in to two events such as summer sporting event as well as winter sporting event.

  2. Business Studies Company Recruiting

    * South West England. All these office locations are in Bath, these are located at: Gay Street, Edgar Buildings and Corston. * Thames Valley. These offices are located in: Seacourt Tower - Oxford, Gloucester Street - Oxford. Overseas As well as offices in the United Kingdom, Cluttons have several overseas offices, these offices can be located in: * France.

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