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How Specifically Do the Distinctive Features of Zara’s Business Model Affect Its Operating Economics?

In: Business and Management

Submitted By levan0801
Words 438
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Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade Pies. Shelly can supply 2000 pies each month for $4.5 each, netting $1.5 profit per pie with three part-time employees, however the demand is higher than what she can do, so eventually Shelly expanded her operations, borrowing money and increasing staff to four full-time employees. The production time increase to 8000 pies per month with profit soared to $12,000 per month.

As per the chart showed within only six months the demands increased 4 times, and it promises to increase more in the next quarter. It brings challenges to Shelly to consider on these following three options:
1- Maintain current production levels and raise prices;
2- Expand the facility and staff while maintaining the current price;
3- Contract the production of the pies to a national restaurant chain, giving Shelly a percentage of profits with minimal involvement.
Each options have particular challenge that She should consider seriously, the first option seam the best choice because it will help her to increase profit and do not cost more expense on employees or facility, however it will minimize her market segment, when the price raising only the high class can buy pie and other middle or lower class cannot then it will leading to supply over than the demand. Or another case when she increase the price then she cannot competitive with others. On the second option, It’s seem reasonable one because when the demand increase that means the all buyer are willing to buy at this price and other new market share also accept this price then we should expand facility and staff to adapt the market’s requirement. On the third option it is a good idea to contract the production to a national restaurant chain to make it popular for everyone and Shelly can has a percentage of profits with minimal…...

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