CASE STUDY OF SPICY BOX DAGUPAN

INTRODUCTION

The spicy box was opened and positioned pricing with a lower margin. For the past 3
weeks the sales is increasing but its overhead is eating the profit.

Since it was catering to students, these people would mind if the owner tends to increase
pricing giving a lesser number of walk in customers.

Hence, the owner of the business tends to introduce a “budget meal” but it is risky that, it
may increase the number of walk in that the owner have but relatively afraid that people will go
for the budget meals instead of regular items. Of course as the business owner introduce the
budget meal there goes as well part of the profit.

The sale is peaking up but I need more walk in, have limited resources.

STATEMENT OF THE PROBLEM

1. What are the good decisions in terms of pricing?

2. What is the demand and supply? How does affect to its business?
3. What are the possible outcomes in introducing the new product? How does it affect to the
regular items?
4. What is the market structure of the business?
5. What are the ways to consider on how to increase the profit?
6. What are advices you can share to the owner of spicy box?

PURPOSE:

To determine the factors and strategies on how to control and manage the business efficiently
and wisely without causing decrease number of profit and sales.

 DEMAND AND SUPPLY

Demand is an economic principle referring to a consumer's desire and willingness to pay
a price for a specific good or service. Holding all other factors constant, an increase in the
price of a good or service will decrease demand, and vice versa. Think of demand as your
willingness to go out and buy a certain product. For example, market demand is the total
of what everybody in the market wants.

Supply is a fundamental economic concept that describes the total amount of a specific
good or service that is available to consumers. Supply can relate to the amount available
at a specific price or the amount available across a range of prices if displayed on a graph.
This relates closely to the demand for a good or service at a specific price; all else being
equal, the supply provided by producers will rise if the price rises because all firms look
to maximize profits.

In business, it is prior to well known the demand and supply in economy because
this takes a great impact to business owners. Like for example, the increase of gasoline
which can affect almost of the products because of transportation. That is why it is
required to be always alarm to their cases. If there is an increase of rice,this might affect
your business so you should know how to get control on it; if you are going to increase
your product or not. Same also to the operation of business the demand and supply of
your business; you have to take control to the demand of your selling products to which is
more increases the sale; then you have to cook many in order to sustained the needs of
 your customers. Same also to the supply of your products; if your one item was not that
gaining sales then you have to take control on producing on it.
Sometimes, it also affects the weeks of the month especially to some food chains
like for example if it was 15 day salary or monthly salary; most of the people go out with
their family and eat together. With these, you should add your supply which sells the
most because you already forecast the condition wherein there is an increase demand.
This situation is an example of superior demand which means when income increases;
the demand also increases.
There are also non-price factors that would affect the demand: preference; location;
population; competition; income; expectations; and beliefs.

TABLE OF NON-PRICE FACTORS AFFECTING DEMAND IN SPICY BOX

CHARACTERISTICS SPICY BOX OUTLINE

Preference It was good since it was spicy commonly
likely the students love spicy food.
Location It was near the school and mall.
Population The target customers are the students;
employed workers; unemployed; kids and
others
Competition Fast food Chains in NEPO MALL, food
restaurants; canteens and street food
vendor.

Always remember the equation of demand and supply PROFIT = SALES – COST
meaning it increases price; increase sales but decreases cost. Gross profit is the profit a company
makes after deducting the costs associated with making and selling its products, or the costs
associated with providing its services. Gross profit will appear on a company's income statement
and can be calculated by subtracting the cost of goods sold (COGS) from revenue (sales). These
figures can be found on a company's income statement.
Gross profit may also go by sales profit or gross income.
POSSIBLE SOLUTIONS:

 PENETRATION PRICING - Penetration pricing is a marketing strategy used by

businesses to attract customers to a new product or service. Penetration pricing includes
presenting a low price for a new product or service during its initial offering. The lower
price helps to lure customers away from competitors. This marketing strategy relies on
the idea of low prices making a customer aware of a new product. The price entices the
customer to try the new product.
Since the spicy box started with the penetration pricing which gain low market
shares to the profit. Within 3 weeks of operation, the sale of the business is increasing but
there is a problem with that because the overhead is eating up the profit.
When it comes to pricing, it is not that easy to price certain items most especially
if the target customers are students. More often, the budget allowance of an ordinary
student would cost P100 a day minus the fare. If underestimating this case, if the fare cost
P40 back and forth, the food allowance of each student would cost around P60. This food
allowance would be the bases on how to price the product item.
In such cases, for the past 3 weeks, the operation of the business is increasing
otherwise it eats up the profit. Probably, after 3weeks the business had surely gained the
trust their customers. Why not increase the product item in a little bit cost? With this
circumstances, the customers most especially students wouldn’t react too much or change
their mind if it will just increase in a smaller amount. As long as, the business will assure
the same service that had given to each customers. Treating customers with respect and
having clear ambiance as a seller will make customers be comfortable with the business
and surely the customers will always return back again and again. Until such time, the
customers will introduce it to their friends and makes the sales of the business remain
increasing and stable.
 INTRODUCING NEW PRODUCT (Budget Meal)
You want to bring a new product or service to market. It is not easy to introduce
another product most especially when you are just starting in operating the business.
Hence, this following tips or procedure helps the business to increase their profit:
1. Study your competition. Many business marketing classes teach
participants how to perform a SWOT (strengths, weaknesses,
opportunities and threats) analysis. You have to start by taking a serious
look at your competitors. Make a list of the businesses that offer
products or services similar to the one you plan to launch. Even if you
think your new product or service is entirely unique and without
existing competition, it's important to put yourself in your prospective
customers' shoes and imagine what they might buy in lieu of what you
plan to offer.

2. Target the ideal customer. To successfully launch your new product

or service with minimum financial outlay, it's essential to focus
exclusively on the prospects you believe are most likely to purchase
from you. These may be customers who are currently buying something
similar and will appreciate the additional features your new product or
service provides. Your best prospects have a perceived need for what
you offer, can afford to buy it and have demonstrated a willingness to
do so--probably by purchasing from your competition. Bear in mind,
it's always easier to fill a need than to create one.
3. Create a unique value proposition. At this stage, you should have a
clear understanding of what you must offer in order to stand apart from
your competition and who will want to take advantage of your offer.
But do you know why customers will want to buy from you vs. the vast
field of competitors out there? What benefits and features will you
provide that your prospective customers will value most? The bottom
line is that your product or service "bundle" should be unique and meet
the needs and desires of your best prospects.
 4. Test your concept and marketing approach. With all the money it
takes to bring a new product or service to market, it's foolhardy to rush
headlong into the launch phase prior to testing.

For me, I advice that it is appropriate to introduce another product even if

it will take your main dishes into risks because I can say that when you are into
business the only thing that is most important is to do is have profit. Although
there is a possibility to have opportunity cost to the main dishes, think to the
positive ways that will cause you in introducing this new product. Since the target
market here are the students, that is why it might attract them to buy and they
won’t already go into other food chains around Dagupan.

As I have observed, I recommend to not just introduce another product but

also make the other dishes cost in affordable price because the target customers
are students which means their daily allowance are just enough to survive their
lunch in one day. Make other dishes or make your dishes into smaller one that
will only cost P50; you are not going to sell what you had sell before otherwise
you are just going to innovate into affordable price.

In addition, it is necessary to introduce budget meal because it will surely

get hit once the students recognize about these product. And be careful if you are
going to decide what would be the price of the product make it affordable and
valuable to the students in order to maintain their trust to buy on spicy box.

 WAYS TO INCREASE PROFIT

In terms of business, there are some instances that there are chances of having
problems to the stable process of profit and sales. This business encounter problems in
terms of profit and sales since the overhead is eating up the profit so this means you have
to make a solution with this dilemma. The following procedures are ways to increase
profit:
1. Change Operating Procedures

You need to generate more sales while reducing expenses. To increase your sales,
try cross-selling—offering new services or goods that complement your current
offerings. Another operational change that can increase profits is incentivizing new
customers to try your product with specials deals, discounts, or short-term giveaways.

2. Stay Visible and Connected

Accreditations, licenses, and certifications—for your business or individual

employees—can set you apart from your competition. Take your reputation online,
using social media, your website, and a blog to connect with clients and make
strategic alliances.

3. Maximize Your Cash Flow

One of the best ways to achieve a stable cash flow is to offer pre-paid retainers or
ongoing payment plans for your clients. Like for example, giving or offering some
promos during special days to customers that can attract customers.

4. Make Everyone a Salesperson

From telephone to email to face-to-face meetings, every employee has the

opportunity to spread your company's message and engage in potential sales-
generating behavior. Everyone needs to pitch in to help: cutting costs, selling,
networking on the web, marketing, and more.

Remember, it pays dividends to reward your employees that seek continuing

education, or who make an extra effort to represent the company inside and outside of
work.
 MARKET STRUCTURE

MONOPOLISTIC COMPETITION- Monopolistic competition characterizes an industry in

which many firms offer products or services that are similar, but not perfect substitutes. Barriers
to entry and exit in a monopolistic competitive industry are low, and the decisions of any one
firm do not directly affect those of its competitors.

 The market structure of spicy box is monopolistic competition which offers different
products in a same place. In other words, they sell different menus and let their customers
decide what they are going to buy. But the exception here is there main dish which is the
spicy box chicken.
CONCLUSION:

I therefore conclude that this case analysis can be helpful and reliable for the owner of the
spicy box to give them some hints or ideas on how to solve their dilemma and improve their
business. In business cycle that we have learned, we all know that we will encounter different
phases which we need to surpass on it most especially the trough phase. Always keep on our
mind if there are hindrances we encounter; there is always success over it. Just keep you trust on
yourself and believe into yourself that you will succeed on it as long we have perseverance and
self confidence into our mind and thought.

Always remember Success doesn’t come overnight. The ascent toward your vision is
long and steep, but only you can see it, so don’t be so hard on yourself. Start climbing and you’ll
realize you’re on a never-ending hike. Strive for constant improvement, not perfection that was
according from Lindsay Mullen, Prosper Strategies.

As entrepreneurs, we're going to work 100-hour weeks and get little thanks. So we have
to be clear about our "why." If you can think of anything else you'd rather be doing with your
time, then what you're doing today is not right. When you fully, deeply commit to your "why,"
the grind is just part of the game. My "why" is to breathe life into the dreams of entrepreneur.
 Republic of the Philippines

Commission on Higher Education

Colegio De Dagupan

Arellano St. Dagupan City

CASE STUDY IN MANAGERIAL

ECONOMICS

Submitted by:

Erika Jean C. Pimentel

12- BSA 03

Submitted to:

Mr. B. J. Go