Current market conditions analysis competitive analysis

COMPETITIVE MARKET ANALYSIS COMPETITIVE MARKET ANALYSIS Introduction In business, staying competitive can be one of the key things. This will enable the company to counter competitors products accordingly making continued returns. When a business is engaged in a competitive sector, having a wide product line helps to spread the risks and uncertainties. Analyzing how competitive the market can be allows business make important decisions with regards to whether to introduce a new product or not to maximize profit. This paper seeks to analyze the relationship between diminishing marginal productivity and both labour and capital.
The relationship between the amount of labour & capital employed and the law of diminishing marginal productivity
The relationship between the amount of labour and capital employed with regards to the law of diminishing productivity helps management in various ways. The management can be able to alter levels of various inputs in a bid to adjust productivity usually upwards. The main issue that faces management can be deciding what the best level of input is to maximize profit as opposed to maximizing production. As firms vary the number of workers in a bid to vary labour, the addition of more workers strains the small work space and tools. This ultimately leads to down slope in the marginal product of labour. Since land and Capital are the only fixed factors of production, labour would be the only factor varied here.
Cost structure
The most substantial effects of the diminishing marginal returns for a company can be its effect on the cost of production. Productivity of labour gets determined by the variable cost of labour. When productivity of a worker goes up the cost of production goes down but when a firm goes through diminishing marginal returns, the productivity goes down. The cost of extra units also begins to raise this, therefore, results in low profits. (Becker 2007)
Although making profit may be the key goal for many firms, finding the best way to maximize profits without altering so many inputs in production can be important. Analyzing the best mix of the factors of production varying labour will eventually lead to maximum profits and opportunities for firms. Analyzing primary competitors’ production strategies can also help in evaluating the best way to handle competition.
Becker, G. S. (2007). Economic theory. New Brunswick: Aldine Transaction.