JustCookBooks.com Firm’ Market Structure and Strategy

Demand curve

Q = 40,000 – 500P

Retail price of books (P) Number of cookbooks sold in a month (Q)
(40,000 – 50 * Pi)
25 27500
26 27000
27 26500
28 26000
29 25500
30 25000
31 24500
32 24000
33 23500
34 23000
35 22500

Demand curve

Demand curve
Figure 1. Demand curve

The graph above shows that there is a negative relationship between the price and quantity demanded. This association is consistent with the law of demand.

Calculation of costs

The table presented below shows the calculations of total cost of the business.

Amount
Variable costs
Average cost ($20 *22,000) 440,000
Fixed costs
Technology 5000
Equipment 4000
Overhead 1,000
Total fixed costs 10,000
Other costs
Postage and handling 1,000
Miscellaneous 3000
Inventory of cookbooks 2000
Total other costs 6,000
Accounting cost 456,000
Opportunity cost -job 50,000
Economic cost 506,000

Based on the information in the table above, the total accounting cost of the business for 22,000 books is $456,000. If opportunity cost of $50,000 is added to accounting cost, then the resulting economic cost amounts to $506,000.

The decision on whether to the business is worth pursing so far will highly depend on the amount of profit that is earned from sale of 22,000 books. Calculation of both accounting and economic profit is presented below.

Amount
Sales revenue ($30 * 22,000) 660,000
Expenses
Average cost ($20 *22,000) 440,000
Technology 5000
Equipment 4000
Overhead 1,000
Postage and handling 1,000
Miscellaneous 3000
Inventory of cookbooks 2000
Total expense 456,000
Profit (revenue – expense) 204,000
Opportunity cost -job 50,000
Economic profit 154,000

The resulting value of accounting profit is $204,000. If opportunity cost is deducted from accounting profit, then the resulting economic profit is $154,000. Therefore, it can be observed that so far the business has generated positive accounting and economic profit. It is viable and worth pursuing.

Market Structure

The company, JustCookBooks.com, will operate in the oligopolistic market structure. The company has unique operational strategies which can be equated to the ideals of ‘oligopolistic’ strategies, characterized by few competitors dominating the online based cooking books sellers (Bowden 69). The company’s strategy for operating in the oligopolistic market will be focused on utmost premium brand quality that customers demand to create a unique niche is this market that has limited competitive forces (Cheverton 27).

Strategies to Guarantee Success in the Market

In order to be successful in the dynamic oligopoly market, the business will create an integrated marketing mix that balances the aspects of product, place, price, and promotion as part of market segmentation. Due the unique characteristics of the company’s industry of operation, it is vital to balance the elements of intangibility, inseparability, and heterogeneity in the 4Ps (Kotler and Keller 34). Therefore, it is important to establish means and ways of reaching the potential market consisting of sensitive clients. Since the company sells cooking books online, it is necessary to properly outline the place element in the marketing mix. To achieve this, the company will segment and differentiate its target market along consumer-based market segmentation procedures. Specifically, the company will use the online kiosk model to keep in touch with the target segment. Moreover, the company may enter into strategic partnership with other companies to advertise its products in different online and offline platforms (Liebermann and Sinl 295).

The competitive business strategy of the JustCookBooks.com will function within the parameters of brand momentum, market innovation, and product excellence. Under the brand momentum, the company will create an effective system for maintaining visibility and product strength to position the online brand as a market leader. As a result, the elements of attractiveness, digitalization, brand recognition, and direct market interaction will become part of the company’s business culture (Malhotra and Agarwal 346). For instance, the company’s logo will be designed to easy to identify in the market.

The element of product excellence ensures that the company is in a position to create and maintain quality in its entertainment centers through continuous focus on core icons of heritage and innovative product design. The product excellence strategy will be implemented in the online platform through creating of a series of multiple products based on the period of subscription and number of book orders per purchase. This strategy will be instrumental towards product hierarchy control. The company’s market innovation strategy will functions on the pillars of actual market expansion through innovation, brand connection, and leveraging the content of its brands. For instance, the company will have different discount packages to individual, corporate, and institution customers interested in different cooking books (Rhim and Lee 173). As a result, the JustCookBooks.com will become the market leader in digital business platform.

The JustCookBooks.com will also develop a highly structured marketing distribution channel that is relevant to the targeted market. As a result, the company will be in a position to capture the fastest growing consumer subdivisions such as the family, restaurants, and food retail segments. The company will successfully used the above business and generic strategies to guarantee competitive advantage over its rivals in the market (Malhotra and Agarwal 345).

Pricing Strategy

The JustCookBooks.com will use the ‘good, better, best’ pricing strategy comprising of discounts for every product sold during the period of market entry. The ‘good, better, best’ is a pricing strategy in which the price of the same item increases with slight changes that are made to the product. Applying the ‘good, better, best’ pricing strategy requires that the business should have different prices for different quality of products to a certain minimum in order to attract customers (Kotler and Keller 18). However, this price may be revised once the management is satisfied that the objective has been attained. The company will offer discounts to customers who buy the two categories of the cooking book packages.

Through this pricing strategy, the company will be able attract customers from the targeted market segment and achieve the aim of quantity maximization by increasing number of products sold at a discount. The standard product (comprising of a single cooking book) will be priced as ‘better’ while the executive product (a single book with free six months subscription to the company’s cooking magazine) as ‘best’. The standard product will retail for $20 and sell for $25 as the ‘better’ price. On the other hand, the executive product will retail for $25 and sell for $35 as the ‘best’ price. The price of $25 and $35 for the two qualities of the product will give the customers an opportunity to choose from either the standard or the executive products. This will ensure that the upper and lower economic ends customers are accommodated by the company’s products (Kotler and Keller 25). The superior quality of the cooking product package will enable the company to survive competition. Since the retail price is almost 30% above the production cost, the company has an opportunity to expand within profitability levels after three months of active business.

Works Cited

Bowden, John. “The Process of Customer Engagement: A Conceptual Framework.” Journal of Marketing Theory & Practice, 17.1 (2009): 63-74. Print.

Cheverton, Philip. Key marketing skills: Strategies, tools, and techniques for marketing success, London, UK: Kogan Page, 2009. Print.

Kotler, Philip and Kevin Keller. Marketing management. 14th ed. 2012. New Jersey, NJ: Pearson Prentice Hall. Print.

Liebermann, Young and Stashevsky Sinl. “Perceived Risks as Barriers to Internet and E-commerce Usage.” Qualitative Market Research 5.4 (2009): 291-300. Print.

Malhotra, Kim and John Agarwal. “Internet Users’ Information Privacy Concerns (IUIPC): The Construct, the Scale, and a Causal Model.” Information Systems Research 15.4 (2004): 336-355. Print.

Rhim, Hosus, and Chan Lee. “Assessing potential threats to incumbent brands: new product positioning under price competition in a multi segmented markets.” International Journal of Research in Marketing, 22.1 (2005): 159-182. Print.