GROUP #15 Presented by: Connie Jones, Darren Coslov, Brian Watson and Luis Rosales Overview of Context Connie: History of Target, Law Of Demand, Economics Darren: Advertising, Scarce Resources, Target Corporation Brian: Budget Constraint, Opportunity Cost, Target’s Opportunity Cost Luis: Income Effect,Substitution Effect, Market Structure, Price Taker History of Target Unlike most other mass merchandisers, Target has department store roots. In 1961, Dayton’s department store identified a demand for a store that sold less expensive goods in a quick, convenient format. Target was born. In 1952, the first Target store was opened in Roseville, Minnesota. They were the first retail store to offer well-known national brands at discounted prices. Today the are presently expanding their corporation even further, by opening their first Super Target store, which combined groceries and special services with a Target Great land store. Law of Demand The law of demand states that as the price of a good increases, the quantity demanded decreases. Also as the prices of a good decreases, then the quantity demanded increases. Target has many popular competitors such as Wal-Mart, and K-Mart. So Target must be careful when it is setting prices, due to the tough competition. If Target charges a higher price for a good, then the quantity that the consumer is willing and able to buy decreases. Therefore Target may be losing some of their business to other leading competitors. Target has also expanded its access to the Internet. It is an even more convenient way to grant access to their customers. The website www.target.com has brought even more customers into their corporation, especially by meeting peoples needs and lowering their opportunity cost. What is Economics?? Economics- social science that deals with the way society chooses to allocate its resources in order to satisfy it wants and needs. Keeping in mind that resources are limited, as well as wants and needs. (Scarcity of choice). Target uses the basic assumptions of economics to evaluate their franchise. It takes into account the scarce resources by choosing where to build its facilities. The time and amount managers clerks and stockers are willing and able to work. When determining how big and how accessible to make a store they would use the scarcity of choice method to provide the answer. ADVERTISING • Target uses advertising as non- price competition to let people know that they are a store that offers low prices. • Target will also advertise their low prices to attract attention to people. Advertising makes a point to the customers, that they can receive the same quality products, that are found elsewhere, and possibly have lower prices. • Other firms competing, will be well aware of this fact as well. SCARCE RESOURCES TARGET uses the basic assumptions of economics to evaluate their franchise. It takes into fact the scarce resources by choosing where to build it’s facilities. The time and amount managers, clerks and stockers are willing and able to work. Along with the equipment needed to make the store work, security systems, cash registers etc, It was must also take into account the skill needed to be in a managerial position, a sales rep, marketing executive. It splits people into sections that their knowledge of a particular category is specialized. CORPORATION TARGET is a corporation because people own stock in it, and have only to lose what they put into it. Because TARGET is a corporation with employees, it has advantages because it can lower its transaction cost by having material produced with in the company rather than spending time to find a reliable source. BUDGET CONSTRAINT TARGET faces budget constraints like anyone else. The managers in charge must face the constraint of how much of a good or service they can afford to order or get while taking into account they have to pay their workers. They have to pay to get things refilled such as (gumball machines). They have to sacrifice a large amount of money for bills they have to pay. They must face this constraint and use all combinations before deciding what and when to make a transaction. Opportunity Cost What is given up when taking an action or making a choice. The next best alternative. All production carries an opportunity cost: to produce more of one good, society must shift its resources away from something else. Target’s Opportunity Cost o Target faces opportunity costs everyday. They must decide what they are willing to sell and advertise the most of. o By placing emphasis on selling one good more predominantly, it may take away sales from other goods. o When Target decides that one good will sell more than they will produce more of that good. By producing more of one particular good they are limited their resources to that specific good, and giving up producing something else. o By doing that Target will increase the opportunity of producing more of that particular good. Income Effect • Relative prices • Prices before compared to lowered prices • Total expenditure decrease so total income increase • Example: nails • Increase demand Substitution Effect • Buy one item because it is extremely cheap and use it for other things • Example: sweat pants Market Structure • Actions taken = influence how much and what their buyers will choose to buy and influence how other companies will react and sell their products Price Taker • In an oligopoly: – Kmart, Wal-mart • Has perfect knowledge – Knows consumer needs and wants – Thus, maneuver and adjust sales and items to maximize profit •ANY QUESTIONS?
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