Summary: As more competitors are entering the market and people are going online to compare prices, companies have been fighting to lower their prices. However, some companies have chosen to raise their prices and give the appearance of a premium brand and appeal to higher end shoppers. This is breaking down many existing business and distribution models because of how different companies are responding to competition. In addition, startup companies are having an easier time reaching out to customers and growing their business than already established brands through the internet. Amazon is also hurting prices by allowing customers to compare different brands online. Yet, big companies still have the advantage of the established brand name over smaller companies, and they can appeal to customers through advertisements and loyalty programs.
Analysis: In this example, because the number of suppliers are increasing, the supply curve is shifting right and more goods are being produced. Consequently, there will be more related goods. While the demand curve will shift right, some people would still be willing to pay more for what they consider to be name brands or higher end products. In addition, while some shampoos or razors are necessities that can be higher quality or better suited for certain individuals, I feel that most shampoos are similar enough and the companies with pricier products prey on customers’ insecurities through advertisements that will make them think that only their shampoo or razor can make them as beautiful or handsome as the model in the advertisement.
Questions:
How does this relate to what we are learning in economics right now?
Do you think smaller companies or larger companies have the upper hand? What are the advantages of each?
Link: http://money.cnn.com/2018/02/20/news/companies/household-goods-products/index.html
1 comment:
This situation is an example of how the price changes for shampoos, razors, and other similar products will create a change in quantity supplied of these goods, as the fluctuating prices are slowing down sales for these bigger companies. Despite this, I think that larger companies still have the upper hand because of their more widespread reputations. Even though smaller companies have an advantage in their ability to use the internet and online websites, giving them a direct link to customers, I think that larger companies ultimately have the bigger advantage in their marketing capabilities and long-lasting brand names.
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