How Can I Capitalize on Situations with Unmet Demand? Strategic Management and Decision Making (BAS) - Online

How Can I Capitalize on Situations with Unmet Demand? Application in CAPETDHE. What happens when a product generates high demand but does not have enough capacity to meet demand? Unfortunately for the company in question. this leads to a stockout where the company runs out of inventory for the product. The company will lose sales that should have been its. but. even worse. customers hungry to buy the product will now turn to competitors' products. Because companies produce on a monthly schedule. stock-outs can occur in any given month. If each company in the industry is short on supply during any month. a seller's market emerges. In a seller's market. total demand cannot be met. so sellers have the freedom to make different marketing decisions. How can you be sure of a seller's market? You w-l su-n III-w ou- an- In u- Igl \"Io-v I-n- sun-m n-nl can't, LIf'llE-SS- WU are Ill-1 un- :53 oi.- oi halal tron-d \"til-":IFDHJI w In W Hr \"HI-I _ _ :=: a ::: as :: ::: cm ::: use :::: :1: 2 oertamthatmdustw a s ::: as: a :: ::: cm ::::s c ::: :1 : capacity. includinga 1': \"5 E15! m _M if It" HIE H? H .32". tl E 5 second shift.cannot meet demand for the segment. In a seller's market. there are a few things a company can do to reduce demand while remaining profitable: increasing prices and reducing marketing budgets. Companies can increase prices outside of the regular segment range because there is unmet demand regardless. No company can meet the needs of the entire segment. so anyone can raise prices to maximize profit on each unit sold. Additionally. they can reduce their spending on promotions and sales because customers will demand the products regardless. Real-World Application In the following midt- luxury fashion retailer Hermes is discuss ed. As Hermes handbags require specic high-grade leather. production is a timely process leading to a low supply. Marissa N. Stempien. the fashion editor of JustLLLxccurn said. "The Birkin is an extraordinarily wellmade bag. Each one is handmade by trained craftsmen and can take oyer 18 hours to make. and that number can be doubled if working on exceptional pieces such as those accessorized with diamonds." Itill-"hen supply is low and demand high. prices skyrocket in response. Like situations when you don't haye enough capacity to meet demand. Hermes is limited in the number of handbags they can produce. To offset the opportunity cost associated with this issue. Hermes handbags hayea much higher retail Ivalue. This will driye down demand (to ensure they can / \\ supply enough} and drive up its prots