Industry, Supply & Demand | My Assignment Tutor

1Session 5: Industry, Supply & Demand (P2- part 2)1P2: Explain the size and scope of a range of different typesof organisations.Dr Reza Aboutalebi Industry includes all organisations that do thesame business such as automobile industry (allcompanies in the world that manufacture, sell orfix automobiles) According to the United Nations’ IndustryClassification there are 416 industries that can becategorized into 21 sectors. A sector is group ofindustries that are related to each other.22Characteristics of Industry Structure•Structural attributes – Enduring characteristics giving anindustry its distinctive character•Variations among industries involves examining• Concentration – Extent to which industry sales aredominated by only a few firms• Economies of Scale – Savings firms within an industryachieve due to increased volume• Product Differentiation – Extent to which customersperceive products of firms in industry as different• Barriers to Entry – Obstacles a firm must overcome toenter an industryIndustrial structures and competitive analysis3 4Five Forces Driving Industry Competition3 Demand is the quantity of final goods andservices that individuals and organizations arewilling and able to buy at each and everyprice, all other things unchanged.5 Aggregated/Total Demand is the quantity offinal goods and services that individuals andorganizations in an economy are willing andable to buy at each and every price, all otherthings unchanged.The level of demand (aggregate demand)depends on: The price level Households’ incomes Households’ and firms’ expectations (whichwill affect their spending) Government spending The level of spending on exports and imports647 Supply is the quantity of final goods andservices that firms are willing and able toproduce at each and every price, all otherthings unchanged.8 Aggregate/Total Supply is the quantity offinal goods and services that firms in aneconomy are willing and able to produce ateach and every price, all other thingsunchanged.5The level of supply (aggregate supply) dependson: The price level The level of technology in an economy The size of the labour force and its skills The amount and state of capital equipment The skill of management to combineresources and use them effectively9106 An increase in demand is likely to increaseoutput and prices in any industry A decrease in demand is likely to decreaseoutput and prices in any industry An increase in supply is likely to increaseoutput and reduce prices in any industry A decrease in supply is likely to decreaseoutput and increase prices in any industry11 Balance/Equilibrium in an economy occurswhere total/aggregate demand equalstotal/aggregate supply Demand is downward sloping in relation toprice. A higher price level for a given level ofincome reduces the quantity demanded. Supply is generally upward sloping in relationto price.12713 An increase in demand will usually lead to anincrease in price and output. The relativeimpact on price compared to output dependson the price elasticity of supply.14Price elasticity of supply shows the responsiveness of supply to achange in price. It is important for a firm to know how quickly it canrespond to price.8 Size of OrganisationObjectivesProducts/ServicesMicro (1-9 staff)gathering familymembers/ friends,being own bossProducing one or twoproducts or providingonly one set of serviceSmall (10-49 staff)implementing newidea, job creation forrelativesHaving a range ofrelated products orservices from thesame industryMedium (50-249staff)serving niche market,increasing salesHaving different rangeof products from thesame industryLarge (250 and more)profitability, growth,market dominationHaving diversifiedproducts/services thatmay related to morethan one industry 15 Scope ofOrganisationObjectivesProducts/ServicesLocalServing local people,serving niche marketHaving a limited range ofproducts suitable for localNationalDominating nationalmarket, job creation forfellow citizens, brandingHaving wide range ofproducts that fellowcitizens like themInternationalIncreasing sales beyondnational border, accessto better resourcesHaving a range ofproducts that can bedifferent in variedcountriesGlobalPresent in all continents,having globally knownbrand, getting very largeHaving relatively similarproducts/services in allcountries 16


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