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Institution of Affliation
THE FASHION INDUSTRY
The consumer demand in this market is influenced by some key factors and among these are as follows ;( Smith, 1962)
- Type of market
- Income levels of the consumer
- Inelasticity of the demand
- Price level of the commodity
- Utility derived from the use of the commodity
- Taste and preference for the fashion.
The above factors affect the supply and the demand for the fashion commodity. The dress department store of the industry has the cost of $100 dollars and that for the fashion stores is $30.
The supply curves for the clothing dress and fashion in March.
P supply curve for dress
Supply for fashion
FIGURE 1 two demand curves for two departments
Given the prevailing prices, the consumers will more of the fashion which is relative cheaper $30 as compared to the dress department which charges $100.the consumer prefers a situation where their needs are maximized by gaining more.
The dress department will face a decline in the sales .the firm should then apply a strategy to ensure it remains competitive by revising the prices downward to the point where
Price for dress =price for fashion, under this case the two firms will share the profit equally
- Two curves hypothetical analyses
Q department stores (sac fifth avenue) Q Fast fashion (Zara)
If there were shocks in the financial market, the strategy firms should take on the price,
Given the shock in the market, the firms should lower the prices to enable the consumer be able to purchase. The low prices in the short run will increase the demand due to income effect by consumers. The firms too should decrease the supply of their products, this will enable make the demand to rise for the two commodities in the long run;( Smith,1962).
2) Case of two competitive firms, the Gap and The banana, there is no major rivalry.
Game theory matrix
Under competitive market, firms are price takers and thus no firm can control the price.
There is also perfect information to traders and consumers in the market and thus consumers make informed choices( Turner & Hunting ford.1986)
There is free entry in the market and each firm can leave at the will.
The two firm’s specialty for instance the gap and the banana are under the completion till there is equilibrium
High price 10,10
Using the game theory, the action of one firm depends on the action of another firm. If one firm starts earlier it will reap all the profit in the market If the two firms are charging the same price, they share the profits equally (10, 10) .if the firms are in such a way that the Gap stores is charging higher than the Banana stores then Banana store will make more profit than the Gap(25,5).to be able to gain the Gap store reduces its price to the equilibrium(10,10).if the gap lowered its price lower than equilibrium, it will make mare sales than the other competing firm(25,5),this will force the Banana to lower prices to the same level so that they share the gain(25,25)this is known as Nash equilibrium.
If the government set it that the two firms starts the sale the same date, it is possible that the firms will operate under equilibrium price set by the government, since an action by one firm to rise price it will lose its gain and if to lower the other firm will follow the same hence no firm can gain in this market by price factor hence they explore other factors to distort the condition and seek monopoly.
3) Fashion driven market
The demand for fashion is high at the entry point to the market due to people’s preferences and as a result the price for the product is high. Due to high demand the adopter will purchase the fashion at a very high price as implied by the curve with continuous lines.as the product reaches the early majority, the demand increases and the product is developed and thus the price declines as shown by the dotted curve, as price declines more people can afford hence the low prices. The product goes to the late majority and in this stage the number of consumers have increased and the fashion is now approaching its last stage lagging and thus price of the commodity falls further as sown by red line ,this occurs due to consumers utility will have shifted to other new products.
As the results keep the demand for fashion high and prices high new trends are introduced to the market and this leads to high utility and satisfaction and thus demand is maintained with prices high .the trends again gives the firm an ability to compete with other firms.
4) Fashion makes more profit compared to music and firm industry that is governed by patent rights.
The fashion industry deals with garments which are basic commodities that every individual needs in one aspect to another.cothing being a primary need covers large market and thus the demand is assured. When the prices of given type of fashion is increased consumers substitute to the other form of the products and in doing that the industry still gained.it has an inelastic kind of demand. On the other hand the firm industry faces a lot of changes ranging from copyrights and thus cuts on the profit. Music and film has got small customer share as compared to the cloth industry. Most people who are interest in music are urban youths who are not many thus small market shares. When prices for the latter are increased the demand falls drastically since people have got alternative by attending the live concerts. A fall in price for clothing it calls for more sells and thus profits margin expands.
Fashion industry as a monopoly
Fashion industry has the monopoly power in the market and is able to enjoy massive profit in this market. The industry has the ability to exercise the price discrimination by charging different prices to those commodities in various market or customers (Christopher, Lowson & Peck. 2004).
The fashion industry has ability to charge the price above the equilibrium due to ability to vary the brands .the firm can charge price which is lower or below equilibrium in one market where consumers have low in come and maximize on the sales .the firm still can charge high prices to given fraction of the customers to earn more profits.
The monopoly is as a result of having product differential, incomplete information and these conditions enables firms to vary prices as shown by the above curve.
5) World trade
This refers to the trade between two countries. For trade to take place the two countries should have a diverging demand of which one country acts as an exporter and the other as importer of the commodity. From the map the world trade can be trade between two countries, commonly referred to as bilateral trade or among more countries which is known as multilateral trade.
Christopher, Lowson & Peck. (2004). Creating agile supply chains in the fashion industry. International Journal of Retail & Distribution Management, 32(8), 367-376.
Smith,(1962). An experimental study of competitive market behavior. Journal of political economy, 70(2), 111-137.
Turner & Hunting ford, F. A. (1986). A problem for game theory analysis: assessment and intention in male mouthbrooder contests. Animal Behavior, 34(4), 961-970.
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Originally posted 2017-08-12 15:59:13.