Erica Gordon Roberts
October 7, 2014
Centennial Farms Dairy: Business Proposal
Centennial Farms Dairy has served the southeastern portion of the United States for over 25 years. While its primary customer has been the 220 traditional Kroger Stores, we are looking at expanding our market share by acquiring additional customers in the region. The plant has been presented the opportunity to tap into the Sprouts Market who is new to this area but has projected a rapid growth plan over the next fifteen years. Recognizing the specialization of products that Sprouts sells, Centennial will need to consider utilizing one of its smaller plants that is currently inoperable to support the demand.
Taking into consideration the characteristics of a market including the quantity and strength of buyers and sellers, levels of competitiveness, product differentiation and the ability to enter and exit the market, the market structure of the dairy industry is a monopolistic competition. In fact Centennial produces some of its competitors’ products on site. The dairy industry is characterized by high product differentiation. While our private label does not capitalize on the market, our ability to acquire Sprouts will allow us to potentially become a monopoly of private label organics. With the established brand image of the company’s private label we will be able to enter into a new market.
Price Elasticity of Demand Dairy as an entire market is viewed by most as a necessity for health purposes. Whether it’s fluid milk, cultured yogurt, or cheese, the dairy market is elastic in relation to price. Elasticity in economics is reflective of supply and demand. If we make adaptations to quantity based upon price then the supply is elastic (Hall, n.d.). On the demand side, demand is elastic if the level of demand is impacted by changes in price. There is competition
References: Every Kitchen Table(2009). Sustainable Food on Every Kitchen Table. Retrieved from http://everytable.wordpress.com/2009/10/16/changing-top-10-grocery-items/ Guo, Vivian (2012). Price elasticity 101: the necessities and your pricing strategy. Retrieved from http://blog.priceintelligently.com/blog/bid/154374/Price-Elasticity-101-The-Necessities-and-Your-Pricing-Strategy Hall, Shane (n.d). What is inelastic in economics? Retrieved from http://www.ehow.com/about_7238546_inelastic-economics_.html