ANSWER

Price elasticity of demand is a measure of how responsive the amount of a good that is desired is to a change in price. The percentage change in quantity required divided by the percentage change in price is used to compute it. The following variables affect price elasticity of demand:

The availability of near substitutes makes demand more elastic since consumers are more inclined to switch to them in the event of a price increase.
Inelastic demand is more common for necessities than for luxury items because people will always require them, regardless of price changes. Since customers may readily forego them, the demand for luxuries is more elastic.
Proportion of Income: A product’s demand is typically more elastic if it accounts for a sizable portion of a consumer’s income.
Time Horizon: As customers have more time to modify their behaviour, demand becomes more elastic across longer time periods.

Price elasticity of demand has a considerable effect on a firm’s strategy. For instance, if a company’s demand is elastic, a minor price rise can result in a correspondingly larger fall in amount demanded, which might cut overall revenue. As a result, the company may be able to raise prices without significantly decreasing demand if demand is inelastic, which would boost total revenue.

2. Comparative Advantage: A circumstance where an entity can produce a specific commodity or service at a lower opportunity cost than its rivals is known as a comparative advantage. International trade and specialisation both depend on this idea. In the actual world, nations frequently focus on manufacturing goods and services where they have a comparative advantage before trading with other nations to increase total productivity and efficiency.

3. The Five Forces of Porter Theory: Michael Porter created the Porter’s Five Forces framework to assess an industry’s level of competitiveness and attractiveness. There are five forces:

threat from new competitors
Bargaining The Influence of Suppliers in Negotiations Buyers’ Power
Threat of Replacement Goods or Services
Rivalry Between Current Competitors

This framework aids companies in developing competitive strategies and understanding the competitive dynamics of their industry.

4. Value Creation Theory: According to the value creation theory, prosperous companies add value for their clients by providing goods and services that satisfy their wants and preferences. Businesses can set themselves apart from rivals and even command higher pricing by providing value.

5. Entry Barriers: Entry barriers are impediments that make it challenging for new competitors to enter a market. They come in a variety of shapes:

Economies of scale: Due to their size and production efficiency, existing businesses may have cost advantages.
Capital Requirements: Exorbitant start-up costs may discourage new competitors.
Government licences and regulations may prevent businesses from entering certain markets.
Brand identity: Long-standing companies have client loyalty that is difficult for up-and-coming ones to match.

Comparing the competitive advantages of Dunkin’ Donuts and Amazon

Dunkin’ Donuts and Amazon both have competitive advantages, although they do so in different ways:

Amazon: Amazon’s broad distribution network, customer-focused philosophy, and technology innovation all contribute to the company’s competitive edge. The business employs its extensive infrastructure and resources to offer a wide selection of products, quick delivery, and a seamless shopping experience. The technological prowess of Amazon improves both its consumer engagement and operational effectiveness.

Dunkin’ Donuts: The brand identification and franchising model of this company serve as a competitive advantage. In the coffee and quick-service restaurant industries, the corporation has a well-established brand. Furthermore, its franchise concept enables quick expansion and localization, spurring growth and client loyalty.

Despite the fact that both businesses emphasise competitive advantage, their business models and industries necessitate differing methods and sources of advantage. While Dunkin’ Donuts has an edge because to its brand recognition and franchise network, Amazon has an advantage due to technology and operational efficiency.

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