This proposal is based on developing a new product offering for the postharvest industry. Currently there are only two competitors that have product offerings for this industry. Most products developed by these companies serve the purpose of fresh fruit preservation with emphasis on shine and weight loss control. Through significant research and development and field testing, it has been proven that this new product offering will differentiate in performance significantly as compared to the remaining two company’s products. The average market price or marginal revenue for existing products of similar performance is ~$12 per gallon on average.
The market structure for companies that manufacture postharvest applications of preservation coatings can be classified as Oligopoly. According to Mc Connell, Bruce and Flynn (2009), “Oligopoly involves only a few seller of a standardized or differentiated product, so each firm is affected by the decisions of its rivals and must take those decisions into account in determining its own price and output” (Chapter 9, p. 177).
The elasticity of demand for current products is considered to be highly elastic due to the fact that the competitor products can serve as quick alternatives. The greater number of alternative products, the greater the price elasticity of demand. While the price relationship may be dependent on the competitors, a decrease in price will result in an increase in revenue, which is indicative elastic demand.
Pricing for this product will depend heavily on differentiation from competitor products in order to add value and shift away from elastic and become more inelastic in demand which can be considered as a barrier to entry. At the moment all competitor products have been noted to have a weakness for film strength. With current postharvest practices changing towards greater efficiency and faster processing of fruit, more fruit has been...