(economics) assignment has two parts and both two parts have to be Essay

(economics) assignment has two parts and both two parts have to be explained in assignment - Essay Example Mars is challenged by biggies like Nestle, Ferrero, Cadbury etc. in the bars market. Sugar happens to be the one of the key ingredient as far as production of Mars Bars is concerned. In these competitive times profit margins have shown a shrinking trend. Now if the sugar supply falls short as a result of unfavorable weather conditions, the obvious fallout will be severe constraint in the procurement chain to maintain the levels of production. Sugar prices are bound to increase, resulting in an increase in production costs. Had there been no competition, Mars Inc would have resorted to a hike in prices of its bars. But the moment the company increases prices, competitors will grab the opportunity to further widen their market base, even if that meant subsidizing the product. Rival companies would resort to such a step, hoping that once the weather conditions improve, the supply will normalize and then they can fill the revenue gap by using the increased market base. As the adverse con dition is a temporary occurrence, therefore, even under these conditions, Mars bars will continue to be made available with the same price tag. There could be somewhat less number of products in the market. Some amount of cost could be recovered by way of cutting advertisement and market communication costs, as the company would be content with effectively serving its existing market only. The shortage is worldwide therefore almost all companies in the business will be equally affected. If the shortage stays for longer then only the company will start thinking about a step like price increase. The direct fallout of increased wages will of course be on the cost of production, which is bound to go up. As a result the profit margins will be under pressure and the company will have to try really hard to maintain the previous levels. But at the same time, increased wages will act as a motivational force for the workers who will now work with more zeal