Economics and Management of Competitive Strategy Assignment

Economics and Management of Competitive Strategy - Assignment Example Likewise, in terms of the cost per movie of the movie studios who are the movie rental supplies, the total cost is the cost of producing the movie. However, to determine the supplier value, it is equal to â€Å"the difference between the payment the firm makes to the supplier and the supplier’s cost† (Spulber, 2009, p. 206). Their cost could be estimated by determining the cost of using their assets; or by calculating their operating profit. Likewise, the costs per movie of the movie rental chain are, therefore, the total costs or expenses that the movie rental chain is willing to pay to deliver the total value to the consumers. Thus, the value created per movie of the movie rental chain is the â€Å"total value created a net of customer value and supplier value† (Spulber, 2009, p. 210). (ii) The retail price per movie is the price paid by the customer per unit of renting a movie; while the wholesale price is the price in volume, of say, renting movies in batches of 10 or more. The factors that affect retail and wholesale prices include transaction cost per unit, direct labor, and overhead costs. Consumers’ surplus is determined by the net benefits from purchasing the goods; while producers’ surplus, also known as operating profit is the supplier value, defined as â€Å"the difference between the payment the firm makes to the supplier and the supplier’s cost† (Spulber, 2009, p. 206). ... lowering supplier cost; (2) providing greater benefits to customers by improving products and services; and (3) developing innovative transactions that offer new value to the market† (Spulber, 2009, p. 210). Likewise, the movie rental chain can increase the value that it captures either through the increase of prices to customers; reducing payments to suppliers, or making more effective use of its assets. (iv) In a rent or sale of DVDs alternative, the movie rental chain should take into consideration the following factors: (1) the costs of paying suppliers (supplier value) for the DVDs to be sold or rented out; (2) direct costs (labor and overhead); and (3) the perceived customer value from either renting or buying DVDs.  Ã‚