This paper will include economic analysis section of a business proposal with will address the market structure and the elasticity of demand for the death care business, based on economic principles addressed in the textbook used for ECO 561 class. Hypothetical data will be presented in this paper based on real world products related to the death care business to estimate fixed and variable costs.
Death Care Business Overview
According to Center for Disease Control, the United States national death rate has been steadily increased since 1935. Approximately 8 out of 1,000 people will die per year, and the national death count is exceeding $2.5 million in 2011. (Center for Disease Control, 2011).
The death rate has remained the same as preventative health care, and medical research has prolong people's life, therefore, the number of funerals has remained at a 5% up or down trend over the years. The baby boomers are approaching the age where an increasing amount of death will be foreseeable as the new decade approaches. With pre need sales being a large part of the business; this portion of the business has been able to keep the industry revenue at a steady climb.
Market Structure of Death Care Industry in the United States
The death care business in the United States is highly fragmented, over 75% of the funeral providers are independent operators with majority of these providers have been in the business for generations. Service Corporation International (SCI), based in Houston, Texas is the largest publicly traded funeral services provider which have acquired second largest group known as Stewart Enterprises in 2012 to command over $2.5 billion in annual revenue. According to SCI's 2013 annual report, the company employs approximately 40,000 employees, and operates over 3,800 funeral service locations has made several service price increases during the year and will continue to raise prices with...