Making Decisions Based on Demand and Forecasting Essay Example for Free

Making Decisions Based on accept and Forecasting Essay1.Report the demographic and independent variables that are relevant to complete a lease abbreviation providing a rationale for the selection of the variables. (Independent variables are the variables that have effect on the ask of pizza pie). List 5 and explain the effect of each of them on the demand of dominos Pizza. I currently tolerate in Allentown, Pennsylvania, which has a current population, ground off of the 2010 Census data, of 118,032 people. The full-grown amount of people that house in the 18 square mile city, which is the third largest in the state, solelyows for huge competition amongst the local twine and privately owned pizza pie pie pie restaurants. Within the city limits of Allentown, Pennsylvania, there are 3 Dominos pizza restaurants within 13.2 miles of each separate. The average median income per household is $49,025 and $37,356 per family.This can actuate the demand of pizza based on t he toll of the pizzas organism sold. The lower the income of a family is, the lesser the chances they go forth purchase take-out or fast intellectual nourishment. Typically, families that are on a fixed or smaller income exit live on a budget and normally that does not include the luxury of eating out. Looking at the expenditure of various Dominos Pizza, Pizza chantey and various local pizza restaurants, the average cost of a large, plain cheese pizza pie is $10.42. While this whitethorn be a good expenditure to some, families with a extravagantlyer number of members may not be willing to pay $10+ per pizza due to the fact that they most likely have to purchase in multiple quantities. 15 pct of the Allentown, Pennsylvania population get around by means of transportation other than a car, because a pizza restaurant runing deliin truth services will be a improvement to those not able to pick their pizza up.The local average fee for pizza delivery is $2.00, based off of two of the large chain pizza restaurants delivery fees. The local privately owned pizza restaurants do not charge a delivery fee, which is a greater demand for those residents looking to snuff it the least amount of money on their pizza lunch or dinner. Many pizza restaurants offer various pizza order specials, such as 2 large plain pies for $19.99. While that is a great offer, the larger chain pizza restaurants such as Dominos and Pizza Hut offer various specials like a large pizza for 8.00 or a large 3-topping pizza for $7.99. The only disadvantage of these specials is that the pizzas vary in their large size from restaurant to restaurant.2.Find the price snapshot of demand for Pizza online. Is it elastic, unit elastic, or inelastic? Explain how the price elasticity of demand can discover your decision to open the pizza store and your pricing policies? Price elasticity of demand is defined as the ratio of the percentage change in quantity demanded to the percentage change in price , assuming that all other factors influencing demand remain unchanged (McGuigan, 2011, pg. 70). With the average cost of pizza in Allentown, Pennsylvania being $10.42, it is still a very high demand product. If the price of pizza were to go up, the demand for pizza may drop slightly, making the demand in price insensitive. There are certain determinants that will affect the price elasticity such as disposable income and the prices of competitors products these cannot be controlled by the firm. Determinants that can affect the price elasticity of pizza that can be controlled by the firm are price, advertising, product feature and customer service (McGuigan, 2011, p. 69).The price elasticity demand for pizza is and will most likely invariably be inelastic, because even though the cost of the ingredients to make pizzas may change magnitude and decrease, pizza is a very popular product and will forever be in high demand. Being a role of the Dominos Pizza franchise, offering the var ious weekly and monthly specials will guarantee that the demand for pizza will not decline by a huge rate should the need to increase pricing a gos. This will not affect my decision to open a Dominos Pizza franchise, I am confident that the demand for pizza will only slightly decrease if frugal reasons forces pricing to rise. My pricing policies will always be in line with Dominos corporeal structure, therefore being able to offer special deals on pizzas will counter balance the rise on individual pizza pies.3.Explain the breed price elasticity. List 3 goods that you consider substitute to pizza in your area. How do they affect your decisions? (opening the store and pricing policy) Cross price elasticity is defined as the ratio of the percentage change in the quantity demanded of Good A to the percentage change in the price of Good B, assuming that all other factors influencing demand remain unchanged (McGuigan et al, 2011, pg. 87). If the price of pizzas rises and the demand dec reases by a certain percentage then this causes the need for pizza boxes will decline. This will be considered a negative cross price elasticity, and the two goods are complementary.On the other hand, if the price of pizza increases, and the demand for an alternative product increases, then this is considered substitutes, and the cross price elasticity is positive. near substitutes for pizza in the event the price rises could be Subway sandwich platters, KFC family bucket meals, and Chinese food platters. Families buy pizza because of the large quantity for a cheap price, but if the prices were to increase, then these same families may look for similar alternatives that will not empty their wallets. These are possible alternatives that offer a large quantity of food at a reasonable price that can affect the demand of pizza. However, observe the costs of the competing fast food restaurants in the Allentown, Pennsylvania area will allow Dominos to offer certain specials and pizza de als to the community that can keep their demand at a high rate.4.Explain how you will forecast the demand for pizza in your community for the next four (4) months, using the retrogression equation including the assumptions that were used. Justify the assumptions made related to the forecast.5.Based on the forecasting demand, price elasticity, and cross price elasticity discuss whether Dominos should establish a restaurant in your community. Provide a rationale and concur for the decision. Establishing another Dominos Pizza restaurant in the Allentown, Pennsylvania area will be a good idea because there is a true demand for pizzas. Referring to the price elasticity and the cross price elasticity, the positive outweighs the negative sides of supply and demand. Whether or not the price of pizzas goes up, the demand will always be sufficient enough to warrant the decision to open up a new restaurant.The price elasticity is inelastic because if and when the price of pizza increases, the demand for it will not be greatly affected. Dominos Pizzas financials for first quarter 2013 were released and the pizza giant had revenues up 8.6% from Q1 2012, and their net income was up 65.9% for the same period in 2012 (Dominos.com, 2013). This proves that even during the decline in the economy, the demand for pizza stays at the top. Dominos Pizza sells more than one million pizzas daily, it is safe to assume that opening a new Dominos in the Allentown area will not be a corky decision.