Example case study 1

There's Always Money in the Banana Stand: A Case Study Scenario: Based on the show Arrested Development, I wanted to see whether the infamous Bluth Banana Stand would be able to survive even though there are some obvious flaws to its business model. The stand would sell frozen bananas with options of dipping sauces and toppings. While this may seem like an outlandish idea, frozen bananas are a staple in some areas of California and are often revered as local landmarks for tourists to enjoy. Because I would like to pretend we are not currently pandemic, it is important to note that any and all numbers that I have mentioned below in terms of foot traffic, supply costs, and land fees were all taken from a pre-pandemic world. Market Definition: The Bluth banana stand is located on the fictional Oceanside Wharf of Newport Beach, thus, for the purposes of this case study, I have decided to shift it to its filming location in Marina Del Ray. The banana stand is meant to be treated like a convenient oddity or a treasured landmark. Broadly, the market would be those looking for a relatively cheap, cold, and (somewhat) healthy snack that is conveniently located within walking distance. The Bluth Banana Stand offers a limited product (frozen bananas) and does not even carry water, thus there are no decisions to be made across multiple markets. Though the market for a frozen banana near the beach may seem niche, there have actually been many successful variants in California that have managed to attract a large consumer market and even a loyal fanbase. In order to estimate the average consumer foot traffic
to the stand and total potential consumers in general, I took the average daily foot traffic to one of Newport Beach's piers (taken from Newport Beach Ca.gov) and divided it by 35 as my best guess would be that only one in 35 people would want a frozen banana. While this data would vary slightly depending on several factors such as the time of year or weather, I estimated that an average of 2,500 people would want a frozen banana. In terms of other producers, there are currently 2 frozen banana carts in the area including the famous Dad's Donut and Bakery Shop, which would be the largest competitor. Broadly, there are several ice cream shops, juiceries, and popsicle stands (google maps link found on works cited page) that people may flock to for a quick and convenient cold snack. More specifically, there are currently 2 frozen banana carts in the area including the famous Dad's Donut and Bakery Shop. This means that the banana stand is not necessarily offering a unique service to the area, its presence is more of a convenience thus pricing must be the same. The Firm's Problem: In terms of inputs for production, several factors do need to be considered and thoroughly evaluated in terms of both ingredients and equipment. In order to assess which fixed inputs are needed, I loosely relied on a startup plan for an average ice cream stand. This included rent, plasticware, utilities, wages, signage, permits, certifications, and insurance. Relative to the variable costs, the fixed costs are much higher. This is mainly because of the permits that vendors in Newport Beach must often pay in order to operate. After some calculations based on the average wholesale cost of these ingredients (Costco and Walmart links listed below), I concluded that the average variable cost per banana sold is about .50 cents. By using average prices for permits and certifications in Newport Beach (found on Newport Beach
Gov. website linked below), I was able to gather that the average fixed cost would be about $7,000 per month. This, however, does not include the equipment fees that the business will likely have to pay in order to ensure product quality. After looking at the average price of chocolate warmers, freezers, and storage containers (links below), I estimate that initial equipment costs would be around $3,500. Because there is no direct way to price discriminate in an accurate manner, a loyalty program might be the best way to price discriminate in a situation like this. This allows for those who enjoy the product to continue coming back and eventually earning a reward. Additionally, price discrimination can be done by sending out coupons to those in the area. The Consumer's Problem From a firm like this, we can expect the customers to want several basic things including convenience, moderate prices, and quick serving times. More broadly, we can say that this market is primarily based on two things: novelty and convenience. While the latter might make more logical sense, the power of the former is an important tool that can be used to the advantage of the firm. For example, if frozen bananas were somehow a popular food choice of travel bloggers or if the firm was located near an area that looked good in pictures, many would flock there in order to fit in with a crowd. Market Equilibrium In regards to elasticity, this firm's demand is slightly elastic. This is mainly due to the fact that the banana stand is in perfect competition and thus, if it were to increase its prices even slightly, most customers would simply just flock to another firm that offers the same product for
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