Managing Production quotas in a cartel market for maximization of earnings Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction:

Market is a place where buyer and seller come to exchange goods or services. The key players of the market are the suppliers and the customers or the potential customers. There are only two parties in the market that play their independent roles in the market. The major forces for the market are demand and supply which are opposite in their nature.

Demand for a good can be calculated as willingness of the buyer to buy goods or services at a certain price level. The quantity demanded changes as the price changes and it, both demand and price are negative proportional as price goes up at the effect demand comes down and vice versa.

Supply for a good can be calculated as willingness of the supplier to sell goods or services at a certain price level. The quantity supplied changes as the price changes. There is a positively proportional relationship between the price and the quantity supplied.

The equilibrium price is price where supply and demand curve meets and at that price the seller and the buyer are satisfied and market is at the level of equilibrium.

(Demand and Supply Curve)

The curve represents that at the price of $5 there is a demand and supply of 5 goods and market is in at its equilibrium.

Cartel market is an agreement between market suppliers on price and quantity supplied to the market in a view to create barriers for new entrants of the market. Cartel market uses many of tactics to fix the price and the production supplies.

Cartel market is mostly found in oligopoly market in which there are only few suppliers.

Cartel market usually exists in case of commodity market which has a huge demand and repetitive demand, the nature can be found in commodity market and the market for necessities.

In cartel; market decision to fix price in the market and individual production limit is fixed by major suppliers of the market because they have power to act. The most common example of cartel market is oil industry in which the main key suppliers like UAE, Saudi Arabia, USA, Russia and many more.

In cartel market the demand is considered before fixing demand and price. No doubt in this case the suppliers try to get more surplus than that of the buyer’s surplus.

Literature Review:

In this part we cover the summary of cartel and its features along with strategies to be used for cartel market. The literature review consists of summarizing, evaluating and classification of Cartel market.

Cartel market came into the existence at the time when many of the independent suppliers came to meet and control on the market with the determination ofcombining power to rule on the market supply and the price. In cartel market there is demand function which is out of the approach of supplier whose power is in the hands of the customer.

The main function provided in this case is by sales and marketing personnel that have direct interaction with the customers and potential customers. They know well about the demand and fluctuations in demand function with a change in the price level.

They are said to be heroes of the market because they know every aspect of the demand and supply function changes effect of the market along with the price changes which market absorbs into it after an interval of changes.

Managing Production quotas in a cartel market for maximization of earnings Case Solution

The reported changes to the market are sent by the sales personnel to the heads and a decision is taken in respect by considering potential demand after a change in price. The review is made to consider the market demand at a price which the market suppliers are willing to charge in the cartel market.

Cartel market is most of the cases found in oligopoly because in case of higher number of firms it may not be possible to have cartel market structure with them. The reason for this arrangement is to protect the interest of suppliers and their profitability motives...........................

This is just a sample partial work. Please place the order on the website to get your own originally done Case Solution