Introduction.
Differential calculus seeks to establish reasons behind the extent of changed in variables that are subject to disturbances by underlying forces in the situation.
As a way of example, in any market situation, various forces will bring about changes in the way operations will be conducted. A few of this are discussed to shed light to the calculations in this paper.
- Competition: this shows the extent of market rivalry amongst the participants in any market niche. The unwritten rule of any business enterprise is to wrestle with its peers for the sake of building its success hence brightening its long term prospects.
- Size of the niche under competition.it has been observed that the size of the market will issue a very important guideline to the players on how to conduct their penetration strategy. In cases of a small niche, it will be imperative for any player in the industry to be aggressive since any form of laxity will cost the victim dearly. Contrary to this, when the niche is larger the situation can be compensated by approaching new customers to make up for the lost part of the existing portfolio.
THE STUDY.
I have chosen Lidl stiflung and co. Metro supermarkets.
My reason for choosing these two companies emanate from the fact that they are direct rivals in the manner in which they conduct their business. This means for one business to survive, it has to master most of the strategies adopted by the other company so as to retain its customer base at the same time trying to reach new customers.
This creates a series of game plans between the key payers with patterns that will indicate the dependence of the two in the market place. Even though each player will keep most of their secrets highly guarded, due to various reasons and market trends some will leak to competitors triggering counter strategies.
The fact that both of the supermarkets are from one country (Germany) makes their business rivalry more interesting and direct to establish.
Such level of interdependence is very important in the model I have developed down here.
Annual stocks of the companies (of Metro & Lidl)
(Taken on basis of number of items sold by the two companies to their customers)
Metro Lidl L.
Units sold ‘000’ ‘000’
May (2) 2,124,000 2,089,000
September (3) 2,137,560 2,143,285
December (4) 2,156,280 2,241,565
Note:
The above summarized data has shown the outward movement of different items of stock in the supermarkets named above. The figures have been rounded to the nearest tenth value since the study will be a little bit simpler, at the same time not causing unnecessary variances on the modeled function.
Variables adopted.
X1 represents the market share of Metro
X2 represents the market share of Lidl
X represents total market for all the products sold through big supermarket chains.
X3 represents all the products from supermarkets that find their way to the market through other related players.
Market share of Metro = X1/X*100.
Market share of Lidl= X2/X*100.
Percentage of goods supplied by Metro =X-X2-X3/X *100
Percentage of goods supplied by Lidl = X-X1-X3 /X*100
The above generated equations brings on board the following facts:
- X3, which represents sales that are generated by other large stores (supermarkets) has been established as a common rival by both Metro & Lidl. Hence for each to have a commendable market share, a strategy to tap in customers from the peripheral players should be established (separately for the two super markets though)
- Having been singled out as the key players in the economy under consideration, A closed model will work best since open economy where one can freely export will distort the relevance of the developed model.
- Lidl and Metro are the remaining pace setters in the supermarket industry in the economy under consideration. Depending on the blend of short term and long term strategies will determine who will be the market leader and follower respectively.
Supply equation in the mentioned economy
Y= B+ ax1+ex2+dx3+C
Whereby:
- Y is the total supply made through supermarkets in the country. It is a depended variable.
- In the equation, a, d, e represents internal factors of the individual companies that affect the supply chain strategies.
- B is the level of products that can be sold in the economy through supermarkets on the worst economic conditions possible.
C is a constant which denotes the standard error, as well as any other observable variation brought about by factors outside this equation.
Scenarios5.
In the above quarterly supplies by the different firms, the below coefficients (market shares), total supply in the economy can be effectively determined.
A =.045
D =.38
Then
E = (1-.45-.38) = 0.17
Substituting coefficients in the equation, the supply equation will look as follows:
Y= B+ .45x1+.38x2+.17x3+C
With the above figures, any modeling to suit the prevailing conditions in the market is possible using Euler’s theorem.
CONCLUSION.
- Internal strategies will go a long way in determining who the best in the supply business is. Hence factors like capital structure, operational efficiency to mention a few should be stream lined so as to derive maximum benefits from the business.
- External regulations do not give any player an upper hand in any business, but overall improves the performance of each player.
