Demand Analysis Of Nestle

1797 Words 8 Pages
Operations Decisions
In the demand analysis for the firm producing low-calories microwaveable frozen food, we have found the equilibrium price and output from the interaction of the demand and supply curve. We know that the supply function is not relevant in the case of a monopoly. Therefore, the firm in question is not a monopolist. In a perfect competition, the firm faces a perfectly elastic demand curve. However, in our case the demand curve is downward sloping. We can conclude that the firm is not in a market with perfect competition. However, there is some degree of competition. This shall be clear if we analyze the elasticity of demand. Using the regression results of the demand for the product, we have found that the price elasticity
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Nestle SA is a popular name worldwide for food and beverages. However, its frozen foods brands are also no less popular. Around 14.5% of the company’s revenues come from its frozen food products. (IBIS World, 2013). In fact, currently it has the largest market share in frozen food segment, which is around 18.6%, the close competitor in this respect being the Schwan Food Company with a 9.1% market share. Nestle had experienced rise in sales during the recession in 2008. The low cost family meals became quite popular at that time. However, after the recovery, the company started facing stiff competition from other players in this industry. The company has recently increased the health value of its products by reducing the sodium content and trans-fat content of several of its frozen-food products. It has also diversified this frozen food segment by introducing frozen pizzas. Recently the company has decided to launch an ad- campaign worth $50 million along with its close competitors Heinz and ConAgra to revive the demand for frozen foods. (IBIS World, 2013). Nestle has experienced a jump in profit in 2010 when its income rose by 10.5%. Nevertheless, in the next two consecutive years the income figures have fell. Recently, there is a marginal rise in its profits. Profits are expected to go up with an effective …show more content…
The loss has been reduced by $2,380,999. We conclude that, the though the firm is incurring a loss at present it should carry on with its operations so long it covers its running costs. The firm should make endeavors to increase its long-run profitability. This can be done by taking a demand side strategy like product innovations and advertising to popularize the product. In that case, the demand curve will shift leading to an increase in price thereby raising revenue. A supply side strategy will be to introduce cost saving technologies. In that case, the cost functions will shift downwards. With reduced cost, the firm’s profit will

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