Implication of economics theory on SMARTEX

8/15/2019 Implication of economics theory on SMARTEX

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Chapter 01: Introduction

The garments industry in Bangladesh has fourished over the years, making double

digit prot percentages, sustaining groth and surviving cut!throat competition

hile providing attractive returns to investors" #oever, the greed $or more ithout

betting plat$orm and $undamentals brings its on challenges and %uestions in

people&s minds" 'es about the directors and management board involvement in

politics and under!hand deals using goodill raises %uestion about the manager&s

independence in running their operations" It also makes anyone to think hether all

the disclosures in the annual reports and other regulatory paperork are only the

gloing shell over a huge hollo"

(t present this industry comprised by to basic motives among the investors or

entrepreneurs) one is $or e*porting purpose another is to meet the demand o$ the

nation" ($ter 1+th

century garments industry in Bangladesh is gaining morepopularity than other business industries"

The purpose o$ this study is to nd and analye the demand and supply analysis o$

-.(/T) a small part o$ the garments industry" In this report, I sho some graphs,

tables and regression analysis to evaluate 2emand and -upply $unction and create

comparison ith other ell!knon brands that a customer can easily understand

the overall status o$ those brands in Bangladesh"

1"1 3/I4I' 35 T# /63/T

This report is assigned by the course teacher o$ .anagerial conomics as an

academic re%uirement" #ere e $ocused mainly on the demand and supply analysis,

market pricing o$ -.(/T" This report is prepared as a group ork and nally,

submitted to the course teacher on -eptember 17, 8019"

1"8 3BCTI;- 35 T# -Tective o$ study is to gather practical knoledge regarding overall $ashion

house business and its operations considering our brand, -.(/T" Theoretical

classes o$ .B( provide us theories regarding di?erent sub>ects here as practical

investigate gives us the chances to vie those systems and their operations" Theprincipal intent o$ this report is to analye the trends modern customer@s services"

.ore precisely e can identi$y the ob>ective o$ this report as $ollos:

• To $ulll our course re%uirement o$ the course curriculum"

• To increase our creativity and gathering e*perience to ork in practical eld"

• To nd out some ma>or problem area o$ $ashion house in Bangladesh as fos

4overnment policy


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6olitical

5inancial

#ouse /ent

• To study the services o$ Branches o$ -.(/T

• The preparation o$ the report ill enable to greater concepts o$ the 5ashion

house"• To achieve realistic $acts"

• To suggest recommend some necessary steps to solve the e*isting problems"

1"A -C36- 35 T# -Tournals D magaines have been

used"

1.4. LITERATURE REVIEW

-.(/T began producing designed cloth are $or the Bangladesh home market in8008, and secured its e*port activities be$ore that because -.(/T is mainlyunder -. 4roup" -.(/T earned an enviable reputation $or both %uality andvalue" The subse%uent introduction o$ developed and ne product lines to its rangeo$ %uality cloth are has only served to strengthen that reputation" (s one o$ theoriginal e*porter o$ garments in Bangladesh, -.(/T is proud to contribute to thegroth o$ the Bangladesh economy" In a developing country the contributionsaccorded to e*ports and the valuable $oreign e*change derived is signicant" Todayin Bangladesh -marte* is a household name and regarded as one o$ the countryEspremier $ashion house"

1.5. RESEARCH METHODOLOGY

Research Design This report is mainly a descriptive research" The main $ocus o$ this report is to analying the 2emand D -upply (nalysis, 6roduct pricing o$ -.(/T, a $ashion house in Bangladesh"


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S!"rces # C!$$ec%i!n !& Da%a In this research the main source o$ data is primarydata" Fe basically collect in$ormation $rom the customers) outlet managers etc" andalso collect some >ournals $rom internet, magaines" 2ata $rom di?erent publishedsources i"e" research papers) literatures on $ashion houses have been used in thisreport" To ensure the relevance, reliability and timeliness o$ data, necessarychecking and cross checking ere done hile scanning in$ormation and data $rom

the secondary sources"

Da%a Ana$'sis 5or %ualitative and %uantitative analysis o$ data e use somehypothesis based on the in$ormation that e have collect" Fe also try to developsome macro economical study based on this report) like!

2emand 5unction

-upply 5unction

2emand!-upply %uilibrium

Budget Constraints

lasticity

1.(. LIMITATIO)S

There ere a $e limitations $aced hile reaching the ob>ectives o$ this report"-ome o$ these limitations are as $ollos:

Sec!n*ar' In&!r+a%i!n

There as a lack o$ proper secondary in$ormation on -marte*" 5e supports o$ books, >ournals, and other related documents have been $ound on the topics thathave been covered in this report but I canEt get any secondary data $rom the relatedsource"

C!n,*en%ia$i%'

In order to the secrecy o$ the company -marte* is not interested to disclose somein$ormation as they are not legally bound to disclose their in$ormations to anyindividual"

Ti+e Manage+en%:

There is alays a predetermined system imposed limitation o$ time e*ists in anyresearch ork" But $or the proper management o$ my interest it becomes possible

to complete the research ork satis$actory ithin the time limit"


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8"0 -.(/T 6role:

-marte* is an (sian and Festern .i*ed 5ashion Branded 3utt in Bangladesh" It

started its >ourney in the year 8008 ith a vision o$ mass retailing in $ashion

clothing business" To promote the brand loyalty -marte* committed to its customer

$or best %uality and international standard customer service"

-marte* rst store as opened in 2haka in 8008" 'o a days, -marte* sales

clothing and omen accessories over 8A stores in Bangladesh" -marte* does on

its $actory and ork ith around G0 independents suppliers and ith a total

employees over A00 people" /ecently, calculated prot a$ter 5inancial amounted to

Tk" 8G millions"

-marte* o?ers $ashion and %uality at the best price through a ide and varied

range o$ $ashion divided into di?erent concepts" The largest department is .en@s

ear $olloed by Hadies and Children@s ear" 3ur Core 6roduct ranges are given

belo by 2ept" 2i?erent products o?ered to the customers are!

Men T!-hirt, casual -hirt, gabardine pants, Cargo 6ants,

urta, polo, 6an>abi"

La*ies T!-hirt, 2ress, A 6cs -et, -kirt,,urta, pant

-!' T!-hirt, shirt, Cargo 6ant, 6an>abi, polo

Gir$ Apcs set, tops, T!-hirt, 8pcs set, pant, -kirt"

Visi!n e see business as a means to the ell !being o$ the shareholders and allother stakeholders, society as ell as the national interest as a hole"

Missi!n 3ur mission is to provide orld class %uality products to our valuedcustomers, strictly maintain ethical standard in business operation"


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O/ec%i0e 3ur ob>ectives are to conduct transparent business operation ithin thelegal D social $rameork ith aims to attain the mission ith a %uantitative targetin business operation"

C!r!ra%e 2!c"s 3ur vision, our mission and our ob>ectives are to emphasis on thecontinuous development in making value addition to our products $or producing the

higher end products, to keep ell prepared $or competitive orld market"

A"0 (nalysis o$ .arket -tructure

3bviously -marte* is a part o$ the total market" conomist tried to classi$y themarket based on some %ualitative $actors) like! competitors $ocus, di?erentiation,

porters model etc" (nd e kno that the market is basically classied by G basic

types!

1" 6er$ect Competition8" .onopolistic .arketA" 3ligopoly .arketG" .onopoly .arket

Based on some practical knoledge and the characteristics o$ the market e can

assume that -marte* is a part o$ monopolistic market structure" 5actors that help usto decide that -marte* is under monopolistic market are!

'umber and relative sie o$ rms supplying the product)

2egree o$ product di?erentiation)

6oer o$ the seller over pricing decisions)

The relative strength o$ the barriers to market entry and e*it) and

The degree o$ non!price competition"

Based on the $actors listed above, -marte* in considered monopolistic competition

market" -marte* is a brand ith many number o$ suppliers, products o$ smarte* is

di?erentiated every ne season" -marte* has some pricing poer ith very lo

entry barriers"


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Mar3e%

S%r"c%"re

)"+er !&

Se$$ers

Degree !&

r!*"c%

Dieren%ia

%i!n

-arriers %!

En%r'

ricing

!6er !&

2ir+

)!n7rice

C!+e%i%i!

n

M!n!!$is

%ic Mar3e%

.any 2i?erentiat

ed

Ho -ome (dvertising

and 6roduct2i?erentiati

on

8.1 De+an* Ana$'sis !& S+ar%e9

Because each good sold in the product group is somehat di?erent $rom the others,

the demand curve $or -marte* under monopolistic competition market structure is

donard sloping to the right" 6rice and the %uantity demanded are negatively

related" Hoering the price ill increase the %uantity demanded, and raising theprice ill decrease the %uantity demanded" There ill be ranges o$ prices ithin

hich demand is elastic and loer prices at hich demand is inelastic"

The %uantity consumers are illing to buy clearly depends on a number o$ di?erent

$actors called variables" 6erhaps the most important o$ those variables is the item@s

on price" In general, economists believe that as the price o$ a good rises, buyers

ill choose to buy less o$ it, and as its price $alls, they buy more" This is such a

ubi%uitous observation that it has come to be called the $a6 !& *e+an*, although

e shall see that it need not hold in all circumstances"

(lthough a good@s on price is important in determining consumers@ illingness topurchase it, other variables also have infuence on that decision, such as

consumers@ incomes, their tastes and pre$erences, the prices o$ other goods that

serve as substitutes or complements, and so on" Fe attempt to capture all o$ these

infuences in a relationship called the *e+an* &"nc%i!n" 4enerally, it is a $unction

o$ relationship that assigns a uni%ue value to a dependent variable $or any given set

o$ values o$ a group o$ independent variables.

Fe represent such a demand $unction in this e%uation

E:"a%i!n

Qdx J!90p*K896yK18"9IK8000pop!100000iKL0(

Fhere,

Qdx = The %uantity demanded o$ -marte*

• Px JThe price per unit o$ -marte*

• I = Consumers@ income


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• P y JThe price o$ another good =ello, cstasy etc ,

• 6op J 'umber o$ Consumers $or a single period

• I J Interest

• ( J (dvertising

%uation 1 may be read, MNuantity demanded o$ -marte* is a $unction o$ its onprice, consumers@ income, the price o$ other products like) =ello, cstasy, 'umber

o$ consumers) interest rate and (dvertising"

#ere e use the demand $unction hich could be the linear e%uation $or dress

consumption $or the people o$ 2haka per month, here P y might be the average

price o$ 2ress"

The signs o$ the coeOcients on on price negative and consumer@s income

positive are intuitive, refecting, respectively, an inverse and a positive

relationship beteen those variables and %uantity o$ dress consumed" The negative

sign on average clothing price may indicate that i$ dress go up in price, $eer ill bepurchased and consumed) hence less dresses ill be consumed" (s ill be

discussed later, such a relationship ould indicate that -marte* and =ello have a

negative cross!price elasticity o$ demand and are thus complements" #ere all the

illustrations $or every variables are given belo!

Varia$es Eec% !n

De+an*

Descri%i!n

rice !&

S+ar%e9

'egative I$ the price o$ -marte* ill goes up by 1 unit,

%uantity demand $or smarte* ill goes don by 90"

rice !&

Ye$$!6

6ositive I$ the price o$ =ello ill goes up by 1 unit, %uantity

demand $or smarte* ill goes up by 89"

Inc!+e 6ositive I$ the consumer Income ill goes up by 1 unit,

%uantity demand $or smarte* ill goes up by 18"90"

!"$a%i!

n

6ositive I$ the number o$ population ill goes up by 1 unit,

%uantity demand $or smarte* ill goes up by 8000"

In%eres% 'egative I$ the interest rate ill goes up by 1 unit, %uantity

demand $or smarte* ill goes don by 100000"

A*0er%ising

6ositive I$ the advertising ill goes up by 1 unit, %uantitydemand $or smarte* ill goes up by L0"

To continue our 2emand 5unction,

• Consumers@ income is B2T 9P,000

• The price o$ another good =ello, cstasy etc is B2T A000


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• 'umber o$ Consumers $or a single period A00

• Interest "0+

• (dvertising e*penses B2T 9000

In our e*ample, there are ve independent variables in the demand $unction, and

one dependent variable" I$ any one o$ the independent variables changes, so does

the value o$ %uantity demanded" It is o$ten desirable to concentrate on the

relationship beteen the dependent variable and >ust one o$ the independent

variables at a time, hich allos us to represent the relationship beteen those ve

variables in a to!dimensional graph at specic levels o$ the variables held

constant" To accomplish this goal, e can simply hold the other $our independent

variables constant at their respective levels and rerite the e%uation" In economic

riting, this Mholding constantQ o$ the values o$ all variables e*cept those being

discussed is traditionally re$erred to by the Hatin phrase ceteris paribus literally,

Mall other things being e%ualQ in the sense o$ MunchangedQ"

-uppose, $or e*ample, that e ant to concentrate on the relationship beteen the

%uantity demanded o$ the good and its on!price, P x " Then e ould hold constant

the values o$ income and the price o$ good Y and all the others as ell"

5rom the e%uation and a$ter calculation o$ values e get)

Qdx J!90p*K896yK18"9IK8000pop!100000iKL0(

J!90p*K89RA000K18"9R9P000K800RA00!100000R"0+KL0R9000

J!90p*K79000K70000KP0000!+000KG00000

J!90p*K9+P000

-o, nally e get the demand e%uation)

Nd* J !90p*K9+P000


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0

8000

G000

P000

L000

10000

18000

De+an*

2emand Curve

8.; S"$' Ana$'sis &!r S+ar%e9

The illingness and ability to sell a good or service is called supply. In general,

producers are illing to sell their product $or a price as long as that price is at least

as high as the cost to produce an additional unit o$ the product" It $ollos that the

illingness to supply, called the s"$' &"nc%i!n, depends on the price at hich

the good can be sold as ell as the cost o$ production $or an additional unit o$ the

good" The greater the di?erence beteen those to values, the greater is theillingness o$ producers to supply the good"

e ill e*plore the cost o$ production in greater detail" (t this point, e need to

understand only the basics o$ cost" (t its simplest level, production o$ a good

consists o$ trans$orming inputs, or $actors o$ production such as land, labor, capital,

and materials into nished goods and services" conomists re$er to the MrulesQ that

govern this trans$ormation as the technology o$ production. Because producers

have to purchase inputs in $actor markets, the cost o$ production depends on both

the technology and the price o$ those $actors" Clearly, illingness to supply is

dependent on not only the price o$ a producer@s output, but also additionally on the

prices i"e", costs o$ the inputs necessary to produce it" 5or simplicity, e can

assume that the only input in a production process is labor that must be purchased

in the labor market" The price o$ an hour o$ labor is the age rate, or W " #ence, e

can say that $or any given level o$ technology the illingness to supply a good

depends on the price o$ that good and the age rate" This concept is captured in

the $olloing e%uation, hich represents an individual seller@s supply $unction:


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Ns J 800p!906y!1000F!190C!1890!1000i

Fhere, Ns J Nuantity supply $or -marte*

• 6* J 6rice o$ -marte* 6roduct

• 6y J 6rice o$ substitute product• F J Fages

• C J 6rice o$ ra materials

• J nergy 6rices

• I J Interest

#ere e can see that almost every independent variable is negatively related ith

the dependent variable, hich is %uantity supply, but price o$ its on product"

Varia$es Eec% !n

S"$'

Descri%i!n

rice !&

S+ar%e9

6ositive I$ the price o$ -marte* ill goes up by 1 unit, %uantity

supply $or smarte* ill goes up by 800"

rice !&

Ye$$!6

'egative I$ the price o$ yello ill goes up by 1 unit, %uantity

supply $or smarte* ill goes don by 90"

Wages 'egative I$ the price o$ ages ill goes up by 1 unit, %uantity


rice !&

c$!%hs

'egative I$ the price o$ cloths ill goes up by 1 unit, %uantity


Energ'

rices

'egative I$ the price o$ energy ill goes up by 1 unit, %uantity


In%eres% 'egative I$ the interest ill goes up by 1 unit, %uantity supply

$or smarte* ill goes don by 1000"

To continue our supply 5unction)

• 6rice o$ substitute product B2T G890

• Fages B2T 190

• 6rice o$ ra materials B2T 700

• nergy 6rices B2T 9

• Interest "0+


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In our e*ample, there are ve independent variables in the supply $unction, and one

dependent variable" I$ any one o$ the independent variables changes, so does the

value o$ %uantity supplied" It is o$ten desirable to concentrate on the relationship

beteen the dependent variable and >ust one o$ the independent variables at a

time, hich allos us to represent the relationship beteen those ve variables in a

to!dimensional graph at specic levels o$ the variables held constant" Toaccomplish this goal, e can simply hold the other $our independent variables

constant at their respective levels and rerite the e%uation" In economic riting,

this Mholding constantQ o$ the values o$ all variables e*cept those being discussed is

traditionally re$erred to by the Hatin phrase ceteris paribus literally, Mall other

things being e%ualQ in the sense o$ MunchangedQ"

-uppose, $or e*ample, that e ant to concentrate on the relationship beteen the

%uantity supplied o$ the good and its on!price, P x " Then e ould hold constant

the values o$ ages and the price o$ good Y and all the others as ell"

5rom the e%uation and a$ter calculation e get!

Ns J 800p*!906y!1000F!190C!1890!1000i

J 800p* S 90RG890!1000R190!190R700!1890R9!1000R"0+

J 800p* !818900! 190000! 109000!P890!+0

J 800p* ! G7ALG0

-o, nally e get the supply e%uation! Ns J 800p* ! G7ALG0


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8.8 E:"i$iri"+ &!r S+ar%e9

(n important concept in the market model is market e%uilibrium, dened as the

condition in hich the %uantity illingly o?ered $or sale by sellers at a given price is >ust e%ual to the %uantity illingly demanded by buyers at that same price" Fhen

that condition is met, e say that the market has discovered its e%uilibrium price"

(n alternative and e%uivalent condition o$ e%uilibrium occurs at that %uantity at

hich the highest price a buyer is illing to pay is >ust e%ual to the loest price a

seller is illing to accept $or that same %uantity"

(s e have discovered in the earlier sections, the demand curve shos $or given

values o$ income, other prices, etc" an innite number o$ combinations o$ prices

and %uantities that satis$y the demand $unction" -imilarly, the supply curve shos

$or given values o$ input prices, etc" an innite number o$ combinations o$ prices

and %uantities that satis$y the supply $unction" %uilibrium occurs at the uni%ue

combination o$ price and %uantity that simultaneously satises both the market

demand $unction and the market supply $unction" 4raphically, it is the intersection

o$ the demand and supply curves as shon belo"

-o, depending on the both demand and supply $unction e can derive the

e%uilibrium $unction $or -marte*" %uilibrium $unction $or smarte* is!

Nd*J Ns

!90p*K9+P000 J 800p* S G7ALG0

800p* K 90p* J 9+P000KG7ALG0 890p* J 10P+LG0

6* J 10P+LG0890

6* J G8L0


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0 100000 800000 A00000 G00000 900000 P00000

0

8000

G000

P000

L000

10000

18000

2emand

-upply

8.4 Ga+e The!r' Ana$'sis

In game theory the set o$ tools that decision makers use to consider responses by

rival decision makers, the 'ash e%uilibrium is present hen to or more

participants in a non!cooperative game have no incentive to deviate $rom their

respective e%uilibrium strategies a$ter they have considered and anticipated their

opponent@s rational choices or strategies"

In the conte*t o$ monopolistic markets, the 'ash e%uilibrium is an e%uilibrium

dened by the characteristic that none o$ the participants can increase its prots by

unilaterally changing its pricing strategy" The assumption is made that each

participating rm does the best it can, given the reactions o$ its rivals" ach rm

anticipates that the other rms ill react to any change made by competitors by

doing the best they can under the altered circumstances" The rms in the oligopoly

market have interdependent actions" The actions are non!cooperative, ith each

rm making decisions that ma*imie its on prots" The rms do not collude in an

e?ort to ma*imie >oint prots" The e%uilibrium is reached hen all rms are doing

the best they can, given the actions o$ their rivals"

-.(/T! Ho6rice

L0

-.(/T! Ho6rice

90

=ello! #igh

6rice

A00

-.(/T!

#igh 6rice

900

=ello! Ho

6rice

A90

-.(/T!

#igh 6rice

A00

=ello! #igh

6rice

0

=ello ! Ho

6rice

70


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The top le$t solution indicates that hen both -.(/T and =ello o?er the product

at lo prices, -marte* earns a prot o$ 90 and =ello earns 70" The top right

solution shos that i$ -marte* o?ers the product at a lo price, =ello earns ero

prots" The solution ith the ma*imum >oint prots is the loer right e%uilibrium,

here both rms charge high prices $or the product" oint prots are L00 in this

solution"

#oever, the 'ash e%uilibrium re%uires that each rm behaves in its on best

interest" =ello can improve its position by o?ering the product at lo prices hen

-marte* is charging high prices" In the loer le$t solution, =ello ma*imies its

prots at A90" Fhile -marte* can earn 900 in its best solution, it can do so only i$

=ello also agrees to charge high prices" This option is clearly not in =ello@s best

interest because it can increase its return $rom A00 to A90 by charging loer prices"

This scenario brings up the possibility o$ collusion" I$ -marte* agrees to share at

least 91 o$ its 900 hen both companies are charging high prices, =ello should also

be illing to charge high prices" Fhile, in general, such collusion is unla$ul in most

countries, it remains a tempting alternative" Clearly, conditions in oligopolistic

industries encourage collusion, ith a small number o$ competitors and

interdependent pricing behavior" Collusion is motivated by several $actors:

increased prots, reduced cash fo uncertainty, and improved opportunities to

construct barriers to entry"

Documents

Implication of economics theory on SMARTEX