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Category: Business and Industry
Date Submitted: 10/03/2011 08:30 PM
Venturing into the Business of Vending
Jennifer Baxter
BUS 640
Managerial Economics
Professor Fanning
July 11, 2011
Executive Summary
When beginning the new venture of forming our own vending business, we learned there were a vast amount of factors that needed to be considered in order for us to be on a path that would help ensure our success in the industry. We learned that the key to our success would entail more than just efficient employees and good financing in order to survive. Thomas and Maurice (2011) contend that a manager’s understanding (or lack thereof) of fundamental economic relations usually accounts for the difference between success and failure when making business decisions (p. 2). Therefore, we had to learn key predictors of success which, we found, were based on economic concepts and analysis that would enable us to make decisions and design strategies during our start-up process. Ultimately, those predictors can help us in determining the price and output level that will return the highest profit to us; Thomas and Maurice define this primary goal as profit maximization (p. 2).
In addition, we needed to have a clear understanding of the economic way of thinking about business decision-making as a valuable tool for analyzing business practices and strategies (p. 3). Predictors of our success would have to weather the first five years of opening, which data shows “four out of five new business ventures fail within due to inadequate financing, a poor business plan, an inability to compete in a difficult market, and too much total debt” (Davis, 2011). We would need an understanding of how to balance our costs in combination with our intended output in order to produce maximum profits. In order to obtain profit maximizing output quantity, we needed to understand that profit is equal to total revenue (TR) minus total cost (TC) (Thomas and Maurice, 2011, p. 89). Thomas and Maurice state that “the optimal level of activity- the level...