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Assume you own a pizza shop close to the campus at Monroe College. You have owned and operated your pizzeria for more than 10 years. During that time, your annual operating costs have increased from $28,000 per year to $91,000 per year. At the same time, revenues have increased from $250,000 per year to $350,000 based mainly on increasing the price of a slice of pizza from 75 cents to $2.00 per slice. As the college community has grown, so has your competition. Two new pizzerias have opened in a 3 block radius and the college cafeteria now sells a subsidized pizza and soda lunch special for $2.50. Although revenues have increased, your profits are now only 10% of revenues vs 30% you enjoyed in your 1st three years. You are preparing your operating budget for next year and realize that the profit margin will decline even more over the next 2 years to the point where you could lose money in the third year. Should you close in the short term or try to find new ways of operating?

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Answer:

At first the shop that you possessed was the just one giving Pizza. Which implies that you delighted in imposing business model in the market. Therefore your benefit proportion was a lot higher. In any case, as the new participants go into the market you are at last loosing your benefit rate to your rivals since now you have new contenders to accommodate the all out interest of pizza in your area. Commonly such monopolistic circumstance likewise helps in procuring unusual benefits. Be that as it may, as new contestants go into the market you should take a lot of cautious choices like you can't charge more or probably your rival will bring down their cost and exploit it. This implies over the long haul you will procure typical or normal bookkeeping benefits. As rivalry expands the decision among the purchasers increments and your business will rely upon the decision of the shoppers. In this way as opposed to closing down the business in the short run you should make business modules over the long haul like giving and designing some novel pizza styles which will be just your patent and will give something inventive to the clients. So also giving the clients new supper alternatives, redesigning the pizza house in order to pull in more clients. Parting with complimentary gifts, taking requests through web, giving free home conveyance and so forth ought to have the option to pull in new clients for you and keep up brand dedication of the current clients. This will help in expanding benefit over the long haul. Further you may consider in holding hands with all or any of your rival. This will help you in getting a charge out of economies of scale with bigger requests, chopping down the work costs and so on. These thoughts will help in setting up for the since a long time ago run advertise and win long haul benefit.

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