Managerial Economics

CLA 2 Comprehensive Learning Assessment 2 – CLO 2, CLO 5, CLO 8

Please read the following scenario and answer the questions below by providing the analysis based on the relevant theories and applicable examples.

If your business earns superior profits, existing and potential competitors will do their best to get a piece of the success. It is essential for firms to examine a variety of business strategies to enhance the prospects of sustainable profitability. Out of all factors that impact an industry’s sustainable profitability, this CLA2 assessment focuses on the most damaging threat to sustainable profit, the entry of competitors into the market.

 Entry into the market heightens competition and reduces the margins of existing firms in a wide variety of industry settings. For this reason, the ability to existing firms to sustain profits depends on how barriers to entry affect the ease with which other firms can enter the industry including the formation of new companies (Wendy’s entered the fast-food industry in the 1970s); globalization strategies by foreign companies (Toyota entered the U.S. automobile market the middle of the last century), and the introduction of new product lines by existing firms (computer manufacturer Apple now also sells the popular iPhone).

Your CLA2 is a paper of a minimum of eight pages, APA formatted, including one Industry Report and one Company Report that you recommend to the CEO of a company how to create a moat and prevent the threat of entry to the market.

1. Industry Report

Please select an industry and write a rigorous industry report for your selected industry that incorporate the followings:

• The market structure of the industry by determining the concentration ratio in the industry and how market structure affects the entry into the market 


• The nature of the industry and the network effects


• The production structure of the industry, initial capital requirements, sunk costs, and economies of scale


• The prospect of the industry in the future in regard to technological innovations

1. Company Report

Now assume you are managing a company in this industry and are asked to write a Company Report about the long term strategic decision making of the company. The purpose of this report is to recommend a few policies to the CEO that assures a sustainable competitive advantage and long term profitability for the company.

 Please include the following variables in your Company Report:

• Sustainable market share and how it can be achieved


• Branding, reputation, and a considerable base of loyal consumers


• The managerial efficiency in strategic decision making regarding:


• The integration and merger activity, vertical and horizontal integration


• Preventing the entry of rivals by pricing and cost policies such as limit pricing, predatory pricing, and raising rivals’ fixed or marginal costs