The Supply and Demand Management of Al Ain Dairy - Assignment Example

Al Ain Dairy Name Institution Question 1 Al Ain Dairy is a market leader in the cow and camel milk industry, the juice, and the dessert industries (Balakrishnan, 2011). The management of the supply and demand forces depends on the evolution of the market nature with regards to the geographical scope. Furthermore, it depends on the perspective changes expected within the market shortly. Arguably, each product category is under the influence of the demand and supply factors. For instance, the milk demand schedule is different from that of juice (Guide, Teunter& Wassenhove, 2003). The affirmed consistency in juice demand and supply in the United Arabs Emirates is associated with the affiliate factors that influence the consumers to respond to the product’s availability in the market holding all other factors constant(Balakrishnan, 2011). One factor is that of climatic seasons that are mandatory across the operational year. The Al Ain Dairy is subject to forces created by the changes in seasons. For instance, during the summer seasons, the volume consumed increases in a substantial amount. However, during the cold seasons, the volume of milk consumed reduces slightly. Accordingly, the demand for the milk product influences the behavioral approach of production of the milk product during these seasons (Guide, Teunter& Wassenhove, 2003). For instance, summer seasons in the United Arabs Emirates are usually soaring compelling the company to focus more on daily productions. Unfortunately, this demand for the product is not satisfied since cows reduce their productivity during this period. Therefore, the Al Ain Dairy products have to be increased to facilitate enough supply of the raw material. The issue of religion is also another facilitating factor with regards to the demand and supply of the products. For instance, the season of Ramadan affects the demand for the products. The season demands that the Muslims should fast (Balakrishnan, 2011). The Muslims are obliged not to eat anything until it is dusk. The initial weeks incorporate a high level of demand for milk. The dairy products including yogurt and Laban are in consistent demand. Therefore, the company has to ensure that it satisfies the demand by adequate product supply. The demand for Carmel milk is determined to increase abundantly from a global dimension (Balakrishnan, 2011). The industry on had two companies within the United Arabs Emirates that produce the Carmel milk. Therefore, the products get increasing produced for international and domestic consumption. Analytically, the company is making plans in consideration of the hiking demand for the product. For instance, the case implies that the company actively prepared for the increase in national consumption. Some of the arrangements include facilitating the investment in state of the Carmel milking parlor (Balakrishnan, 2011). The concept is expected to facilitate increased production. The other factor is population or the market size. The market size is a demand and supply factor that plays a direct role or influence on the changes that take place in product sales. The United Arabs Emirates market is increasing (Balakrishnan, 2011). Therefore, the demand for the products increases hence forcing the company to make future arrangements of expanding the production scale. The trend of working hard to fill the shelves with the dairy product is a historical and prospective approach. Accordingly, one way through which the supply and demand are affecting or influencing the dairy products is that it is changing the consumer habits. Similarly, it is affecting or influencing the company’s behavior especially with regards to the process of availing the products into the market. The supply and demand factors are the basis for any future changes or adjustments that are likely to be made in the industry (Guide, Teunter& Wassenhove, 2003). For instance, the changes in the demand and supply necessities in the United Arabs Emirates dairy market and similarly, there are other natural occurrences that the company can manage to facilitate in the course of Al Ain Products (Balakrishnan, 2011). For instance, the factors are likely to challenge the company into improving future technology, plants and mergers in a bid to satisfy the rising demand for the products. The factors are an essential point of reference for the future adjustments that the company may decide to make. For instance, the company will use the factors to make necessary changes that may help the company sustain the demand levels especially in the context of seasons. There are seasons that do not favor the availability of the raw materials. However, the demand increases without a sufficient supply of the same. Question 2 First, there is a substantial deal of application of the economies of scale and scope in the entire production of the company (Christensen & Greene, 1976). Al Ain Dairy has an extensive portfolio of products that it produces. The epicenter criterion of considering these factors is that they are usually an aspect of affirmative performance by the respective company. From a definition point of comprehension, economies of scale and scope are similar but differ slightly (Economies of scale and scope, 2008). For instance, economies of scale refer to the cost merits that most enterprises achieve or obtain to size, scale and output with regards to operation. The cost per unit decreases. The cost either reduces directly or indirectly in the case where the subject company is making large volumes of sales despite the fact that the cost is still high(Balakrishnan, 2011). Alternatively, economies of scope refer to the scenario where a company opts to produce a wide range of products together (Christensen & Greene, 1976). That implies that the company possesses centralized functions including finance, marketing, amongst others. One major concept that applies here is that of diversification. Arguably, the Al Ain Dairy is a practical example of what these concepts feature. First, the concept of scope applies in the context of the company engaging in the production of variant products. According to the elaborations provided within the case, Al Ain Dairy majors in the production of milk, juice and dessert products (Balakrishnan, 2011). The case indicates that the company managed to venture into a business that it could offer a wide variety of products that are high quality and safe seeking affordable prices. Therefore, the general capacity to diversify its products is expressed very precisely. The company enjoys the benefits accrued by the economies of scope. That is; the company manages the production of the three products from a central point of administration. The finance department amongst others operates from one center of command for all the products. The company is also engaging in activities that support the aspect of economies of scale. Remember, an economy of scale is a plus to the economic performance of the company (Balakrishnan, 2011). Al Ain also capitalizes in this economic approach. For instance, the company is identified to acquire products from other independent firms to satisfy the expected volumes that that the market demands. For instance, the 30 percent of the milk supplied in the name of the company is acquired from these local independent farms. Further, the productivity of the company is quite complex. It might be assumed to be one of the demerits of diseconomies of scale. However, it is one strength that a company that is competent can earn reputation and capitalization power. For instance, the company manages to run two shifts per day. That implies that the company run or manages 40 differentiated types of products. Concurrently, 110 stock keeping units are facilitated to ensure that the company produces large volumes of products at a typical cost expected in a day (Balakrishnan, 2011). The immediate merits of the economies of scale are that there is increased value in the course of production. Concurrently, the sales elevate equivalently, and the aggregate profits hike. Professional analysis of the status of the company implies that the company managed to engage the market forces fully. For instance, the demand by consumers is effectively accomplished or satisfied. Concurrently, the supply levels demanded are easily achieved through the intensive production activities meant to save cost and facilitate the growth of the company. The growth of the company depends on the economic professionalism expressed by the founders and the concurrent management of the company. Al Ain commenced with an objective of ensuring that it wins large market coverage within a short period. Accordingly, the merging of economies of scale and scope is viewed to facilitate the market dominance and general growth of the company (Economies of scale and scope, 2008). For instance, the fact that the company embraced diversity in production facilitates merging with other local companies and increasing the production scale twice is enough to express the devotion of the company in practicing economies of scale (Balakrishnan, 2011). Question 3 The Al Ain Dairy is one company that is dominant in this industry within the United Arabs Emirates. The company according to the case study has only one competitor named Emirates industry for Carmel milk. Therefore, the market structure of the company is Oligopolistic (Mazzeo, 2002). From a business and market structure point of understanding, the oligopolistic market structure applies where there are few competitors in the market. However, the alternate demand is very high. That implies that the firms dominate the market thus setting personified policies that facilitate market dominance. This case features that there are only two firms in the industry (Mazzeo, 2002). These are the Al Ain Diary and Emirates who dominate the market intensively. The demand for the products that the company offers is very high. It is imperative to note that the company operates on a platform where its products are experiencing a wider GCC market than expected (Balakrishnan, 2011). The fact that the only competitors expected supplement Al Ain Dairy’s products by 30 percent means that entry to the industry is highly restricted. Therefore, it remains expensive for these firms to enter (Balakrishnan, 2011). Al Ain Dairy certifies to belong to the oligopoly market especially with regards to the fact that it had sound dominance in the market. Secondly, it faces little competition from an only competitor, Emirates. Alternatively, the market is intensive. That is; the buyers are numerous considering that they all depend on the supply made by the few companies in the market (Mazzeo, 2002). Arguably, it appears that entry in the industry is hard. Therefore, the Al Ain Dairy regulates its price with slight consideration of the close competitor as elaborated in the kinked demand curve of oligopoly. References Economies of scale and scope | The Economist. (2008, October 20). Retrieved from http://www.economist.com/node/12446567 Balakrishnan, M. S. (2011). Al Ain Dairy: managing demand and supply. Mazzeo, M. J. (2002). Product choice and oligopoly market structure. RAND Journal of Economics, 221-242. Guide Jr, V. D. R., Teunter, R. H., & Van Wassenhove, L. N. (2003). Matching demand and supply to maximize profits from remanufacturing. Manufacturing & Service Operations Management, 5(4), 303-316. Christensen, L. R., & Greene, W. H. (1976). Economies of scale in US electric power generation. The Journal of Political Economy, 655-676. Read More