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Universiti Teknologi MARA
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The president of Royce’ company is Yasuhiro Yamazaki. Royce’ company is a famous chocolate maker which is located in Hokkaido, Japan. The beginning of Royce's company is simple. It was because the nearby neighbours attracted by the smell of baked cookies and spread out. Then, our company started to take order through telephone. Our company was established in July 1983 and produced many types of chocolate which are less sweet, feeling softly and have a lighter texture compare with other European chocolates. In the production lines, our company strives for an exacting cleanliness standard and a high quality control. Furthermore, the expire time of our chocolates is after 1-3 months, which implies that our chocolates do not contain any additives and preservatives and are produced freshly. Our company ensures to supply the freshly and high quality products to all customers[ CITATION ROY17 \l 17417 ]. The products that provided from our company includes Nama Chocolate, Potato Chip Chocolate, Nutty & Fruit Bar Chocolate, Chocolate Wafer, Pure Chocolate, Baton Cookies and so on[CITATION Roy \l 17417 ]. Besides, our company also branched into others businesses since 2005. For examples, insurance sales, arts and craft sales, restaurant management, coffee brands, liquors sales, food and beverage processing machines, and food and drinking water sales[ CITATION Div \l 17417 ]. As for the business, the top 10 stockholders of our company are Parametric Portfolio Associates LLC, Canada Pension Plan Investment Board, Capital Research & Management Co., Fisher Asset Management LLC, Ironwood Investment Management LLC, Quadrant Capital Group LLC, Ignis Investment Services Ltd., Envestnet Asset Management Inc., Mellon Investments Corp., and Private Capital Group LLC[ CITATION Top \l 17417 ].
Royce use both fixed and variable input to produce its product and service. In economics, input is the factor that causes the production of a product or service, such as raw materials, employees, information, money, or other resources.[ CITATION Fac \l 1033 ] All enterprises, whether for-profit or non-profit enterprises, need basic resources to operate. In other words, in order to produce goods and services that can be sold and generate revenue and profits, firms must buy or hire limited inputs, which are their factors of production which fall into four categories: land, labour, capital and entrepreneurship.[CITATION The \l 1033 ] These factors can be fixed or variable.
Fixed inputs are the inputs whose quantity is remain same for some period or constant for short run production function.[ CITATION Wha1 \l 1033 ] Typical fixed inputs include premises such as its office spaces and factories.[ CITATION The \l 1033 ] Royce has a lease
for specific period of time. Whether if the business of Royce is doing not well or for whatever reason they shut down all production, they still have to pay for the rent under the terms of their lease. If they decide to produce more products, the landlords have not the privilege to ask for more rent. Royce has a lease, it is a contract and that same payment came out every single month.
Variable inputs are input whose quantity can change, even in the short run or for short period of time. [ CITATION Wha1 \l 1033 ]Variable inputs are also those that do change with output, which means more are employed when production increases, and less when production decreases. Typical variable inputs include labour, energy, and raw materials directly used in production.[ CITATION The \l 1033 ] If the businesses are going really well, Royce can really quickly hire some new workers. Therefore, they're going to have to pay more in their labour cost. They can buy some new machines. Since there will be more workers and machineries, the purchases of the quantity of raw material that directly used in production also will increase. If the businesses are not going so well, Royce could certainly lay off a few workers, or sell off some of their machines. They also will decrease the purchases quantity of raw material that directly used in production
Royce as a chocolate manufacture company has various competitors in the market. Their main competitor are mainly also chocolate manufacturers such as Godiva, Hersey and Nestle. Godiva is a chocolate manufacture that also sells premium chocolate to public in the market and it also has various same products that been produce as Royce such as chocolate bars, liquor chocolate and chocolate treats. Furthermore, the pricing and channel of distribution is same for Royce and Godiva as being similar pricing of premium chocolates and having to be distributed to people using the boutique method. As for Hersey brand, its main focusing in on middle class people by selling it on various channels such as selling in convenient stores, supermarkets and shopping malls. Hershey applies a micro-marketing concept to its businesses, which means that it markets certain products to small target audiences, tailoring its products to meet these audiences’ particular demands. Hershey thus aims to give its customers a larger range options by personalizing their products at higher prices.[CITATION DIA \l 1033 ] Lastly, Nestle being on the world’s mmultinational food and drink company has a variety of product to be sold in the market. Chocolate being one of their various products are being sold to the public with a cheap and affordable prices comparing to Royce chocolate. Thus, Nestle has a more upper advantage in pricing and wide customer
when setting the price, sales target and advertising budget. Royce in an oligopoly market, which always needs to face fierce competition. This makes quality and advertising become certainly important. The entry barrier of the market is high as it needs high capital and expenditure to set up the firms. Also, there is only few big players in the market for the premium range of chocolate. If Royce reduces their price in the market, they would gain a big increase in the market share. The demand for chocolate will be increased by a small amount only. Then, the demand for the chocolate product is inelastic as the price decrease. If Royce wants to increase their price in the market, they will lose a large share of the market because they will become less competitive for other firms or companies. The demand for the chocolate product is elastic as the price increases. This will make the price of the chocolate product more rigid in this market. In the long run, Royce gains an economic profit. This is because of the number of sellers are less and similar cost condition compares to all sellers such as Godiva. Royce colludes and agrees to a certain price due to maximizing their profits. Royce gains a profit- maximizing quantity of chocolate where is the marginal revenue (MR) equal to marginal cost (MC). There is an allocatively quantity in the profit situation where is the price (P) equal to marginal cost (MC). Productively efficient quantity show in the diagram is the minimum average total cost (ATC). Figure 1: The diagram show the kinked demand curve.
Figure 2: The diagram show the profit situation in long run.
The factor likely to change the profit situation in the long run is tastes of consumer. If there is any changes in consumers’ taste, there will trigger changes in demand of chocolate as well. For example, the chocolate market in Malaysia slowly becomes bigger and the demand of chocolate is increasing based on the consumers. Besides, the income of consumers is also another factor that change the profit situation in long run. Royce’s chocolate products belong to normal goods. The consumers’ income increase, their demands towards premium chocolate will increase. According to Malaysia Gross Domestic Product, GDP of Malaysia has increase about 4% in year 2018 (RM 354,348 Million) as compared to year 2017 (RM 314,708 Million). This is related to the income of the consumers in purchasing the normal goods. The price becomes one of the key element in deciding the purchasing power of the consumers. According to Prime Industries Minister Teresa Kok Suh Sim, she stated that there is a potential to develop cocoa and chocolate industries in the downstream level. This is because Malaysia’s chocolate products are in the high demand status. When the government plans to increase the price of cocoa, the demand of cocoa will be immediately decrease in the following week. The powerful of advertisement effect in promoting the products. Royce has a good reputation in premium fine chocolate due to the ultimate quality and effort in advertised the products.
Economic
Course: Economics
University: Universiti Teknologi MARA
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