Week 3 Questions from “Class or Mass”
A. Some of the cost and supply side factors were things like fuel costs for the vessels, market rate for the seafood, supply levels in allowed fishing area, logistics costs associated with moving/selling the fish. Cost forecasts were easier to predict in terms of fixed costs. However, when looking at the variable costs or the “possible” cost associated with a new brand it is not as black and white. The supply drivers are the technology of these new vessels and the innovation of new ways to make the same supply better, like building tuna ranches. The supply elasticity was very inelastic. I say that because they can raise prices without really having to sell more. That is part of their identity as the high-end seafood company. Technology has really done a number on this industry and that is why the increased supply is permanent (somewhat). This is going to drive prices down because I am sure they are not the only ones with this problem. Some of the possible solutions will need to address the short term costs such as this excess inventory, as well as, the long term costs like how they plan make sure this doesn’t continue to happen.
B. There were several influences to demand, value and price. The biggest was the excess inventory its self. They really didn’t mention if this was industry wide but I’m guessing it is. The company that challenges it’s self to be proactive and innovative with their resources is going to be the profit king. I like how they are forecasting demand by looking for innovative ways to capture more business and not stealing market share. This is smart business on their end. The demand elasticity was elastic because price will affect demand. The problem is how much the industry can take and there is not magic number here so no exploring that route would be ideal. If they lower prices, it will affect their brand loyalty. Seafood faces some challenges because there are multiple...