May 25, 2015
The frozen food industry has seen a dip in sales in recent years due to the recession. The low calorie, microwaveable frozen dinner industry is adapting itself to these changes. The market structure has changed to a monopolistic competition structure so the top producers can set their pricing for profit maximization instead of following the industry standard. We will look at different factors that will affect our company going forward and ultimately decide whether or not we can afford to stay in business.
Earlier this year our low calorie frozen meal company did a supply and demand analysis to determine what factors are affecting our business. Going forward we are going to assess the effectiveness of our market structure. After analyzing our market structure, comparisons will be made with the two other frozen food companies that we consider to be our direct competitors. This is being done because of our awareness that it is an imperfectly competitive market. More specifically we are in a monopolistic competition market. This analysis will determine whether our company will continue to produce and grow in the low calorie frozen food market or if we should cut our losses and get out of this market altogether.
Our Market Structure
Identifying our market structure as a monopolistic competition market was not very difficult. The definition of monopolistic competition is that many sellers are manufacturing highly differentiated goods. (www.whatiseconomics.org) The characteristics of this structure that we identify with are: 1. There are many buyers and sellers so no one buyer or seller can influence the market to their behavior. 2. The products are highly differentiable. 3. There is a relativity small freedom for entry and exit from this market. 4. A firm can form a tiny monopoly by creating a specific brand.
We believe that our two main competitors are...