Supply and Demand of Your Firm
In this SLP assignment, we will examine the supply and demand of the good or service that your firm produces. Write a 2- to 3-page essay on the following issues: 1.Consider what your firm produces. What are some things that would change the demand for your product? Discuss at least two factors. 2.What are some things that would affect changes in supply? Discuss at least two factors. 3.How can quantity demanded be changed? 4.What kind of demand (elastic or inelastic) does the product that your firm produces have? Explain.
SLP Assignment Expectations
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Use concepts from the modular background readings as well as any good-quality resources you can find. Please be sure to cite all sources within the text and a reference list at the end of the paper.
Length: 2–3 pages double-spaced and typed.
The following items will be assessed in particular: •Your ability to explain the difference between changes in demand and quantity demand using an example of your choice. •Some in-text references to the modular background readings (APA formatting not required). •The essay should address each element of the assignment. Remember to support your answers with solid references.
Upload your paper to the SLP 2 dropbox when it is completed.
Thomas McMillan Jr
Module 1 SLP Assignment
Dr. Paul McMaster
01 NOV 2015
1. The firm I had chosen is Hampton by Hilton. These are a group of mid prices hotels which are now operating successfully in more than 90 countries. Hampton by Hilton, formerly known as Hampton Hotels, is a brand of hotels trademarked by Hilton Worldwide. The Hampton hotel brand is a chain of moderately priced, upper midscale hotels with limited food and beverage facilities. Most Hampton hotels are independently owned and operated by franchisees, though a few are owned and/or managed by Hilton Worldwide. Hampton by Hilton is one of the largest hotel franchises in the country. The Hampton franchise includes more than 2,000 hotels throughout the U.S. and 16 other countries.
The reason why I preferred to choose this firm is given as below- originally, the hotel was founded in 1984 as Hampton Inn, a budget hotel by the Holiday Corporation. The first hotel was a two-story, exterior-entrance building with 128 guest rooms located in Memphis, Tennessee. After some financial difficulties, in late 1989 Holiday Corporation prepared to sell its hallmark Holiday Inn hotels and started the holding company Promus Hotel Corporation which included, Hampton Inn, Embassy Suites and Homewood Suites. With this change, Promus re-invested in the Hampton Inn brand and began its change from a budget hotel to a middle-market hotel to compete with their freshly sold former brand. The hotel chain was the first of the mid-price hotels to offer free continental breakfast and the first to introduce the “100 percent satisfaction guarantee.” By 1990, the Hampton Inn chain included over 220 properties with more than 27,000 rooms. Hampton Inn and Suites was introduced in 1995, which featured two-room suite style hotel rooms complete with living room and kitchen areas.
In 1999, the Promus Hotel Corporation was purchased by Hilton Worldwide for $3.7 billion dollars. In 2004, as a major aspect of the $100 million “Make it Hampton” activity, Hampton started updating its inns including the generation of a wake up timer which highlighted a simple to-set caution and a mp3 player attach. Different changes made amid the redesign were the change to white sheet material, adding hot sustenance things to mainland breakfast choices and free fast web to rooms. In 2012, under the “Ideal Mix” activity, the organization finished moves up to the entryways of its inns including more social space. Hampton kept on redesigning its spaces with a battle presented in 2013, coordinated towards more youthful customer base that incorporated into room small scale ice chests, new bedside tables with force access, upgraded bathrooms, and overhauled lodging outsides.
The way Hampton group changed its planning as per to meet and compete with the growing market changes and demands and implementing their plans as per that, this inspired me to choose this firm. Now we can see after all those hardships and ups and downs, this firm has earned a place in the top 100 fastest growing enterprises.
2. If we are thinking of starting a new franchise than we have to meet the following opportunity costs. The franchise fee for any new franchise is 75,000$.
And the number of employees required to run a franchise unit is 25. This is the minimum number of employees required and it may exceed depending upon the needs of our or any new franchise.
Also the new franchisee may require some start up cost that would be necessary to start its own group of hotels initially. Either the franchisee would like to set up new hotels or suites on its own or it would like to own existing hotels which are not approached or operated by any other franchisee. Than it would require equipment cost which would include several technology as well as other items such as furniture and household items which are required in a hotel rooms for daily living. It would also require several electronic goods such as TV, Washing machine, Air-conditioners and elevators. Also, now day Wi-Fi connectivity is ensured in each hotel. So these all would come under equipment cost.
These costs can be handled by the franchisee himself or it may look after any other third party that would tie up with this new franchisee which would supply their sectors of equipments at a special price and that would benefit both the group, our franchisee as well as their party. The cost of inventory for setting of a new Franchisee will be quite less in this case. As ours is a running group of business unit and hence requires very less space where we would like to store anything that would be useful in the near future. Hence a small building nearby to the existing hotels would be nice.
Also the servicing fees which it would pay to its employees as well as the utilities need to be taken care of that would come under the payroll.
These are the probable opportunity costs for setting up any new franchisee.
3. The three fundamental questions that are always asked in microeconomics are what to produce, how to produce and for whom.
What to produce
When it comes to our firm, here to produce something does not imply we are producing goods. We are providing services. Here produced goods means Services which are intangible unlike produced goods. We provide services to satisfy the need and want of the consumers. In our firm the only service we are providing is luxury, comfort and satisfaction.
How to Produce
Opportunity cost is the value of the next best alternative that is given u as a result of making a particular choice. How to produce a good depends on opportunity costs of labour and capital, and the productivity of land and labor. In our firm the opportunity costs of labour and capital is much more significant than the productivity of land and labour. This is because we are not producing any goods that would depend on the quality of land or labour. What our firm deals in is providing services which require good capital investments and skilful labours to provide good services. There are many factors to consider when producing goods and services. As a business owner, you need to decide whether to produce everything yourself or going to an outside source. You also need to determine if sales should stay in your country or if you would have products and services available in other countries.
This question focuses on how we organize our society to meet people’s wants and needs. We do this by categorizing into 4 groups:
Cooperative – decides together as a group
Custom – Tradition decides
Command – People in power decides
Competitive – Economy decides by supply and demand
Since our franchisee is owned by the parent company or firm but the entire operations will be handled by us, hence we choose a competitive group. This is because our client’s needs and wants completely depends upon the market condition and competition, thus the people in charge of this must act as per that.
4. There are three basic resources or factors of production: land, labour, and capital. In our firm the factor Land is not that valuable because we don’t deal in producing something out of the land. But yes the location of the land that we choose for setting up our hotel units is very crucial for our firm. We must choose a site where the density of population as well as the market is very high that would attract our customers and clients easily. If targeting some remote location, we must select a piece of land that would distinguish itself from others in that locality.
Example- If we are thinking of setting up a hotel unit besides a sea then we must select allocation from where the entire sea beach site should be viewed easily and it should be pleasurable.
In our firm labor factor is also not that significant. In terms of manual labour all we need is some skill full employees who must be efficient in handling hotel operations and must be well behaved and thus they must be recruited as per that. Capital investment is one of the most important factors of production in our firm. Since we are targeting to run a series of hotels under our franchisee unit and these types of firms always seek expansion, thus it would require a huge amount of capital inflows mostly during its initial days of operations. Once it is set up then it may look after whether to expand or to take care of its existing units. The capital investment may be done by the franchisee owners or they may also look for some third party investors who would be ready to invest in our business or firm taking into look our detailed business operations and risks and challenges that may be faced.
1. Lancaster, K. (1969). Introduction to modern micro-economics.
2. Krugman, P. (1990). Increasing returns and economic geography (No. w3275). National Bureau of Economic Research.
3. Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly journal of economics, 65-94.