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Otter Box Company was established in 1998 by Curt Richardson and has a trademark for waterproof electronics. These are its main products. The company’s main objective is to create protective solutions to handle manufacturers. It helps consumers who frequently break their devices to have utter protection for their phones when engaging in active lifestyle. The company has its headquarters in Fort Collins, Colorado with Brian Thomas as the president and Chief Executive Officer.
Otter Box Company is a privately held corporation which operates as a ‘separate legal person’ and whose shares have no public market. The founders, management and private investors are among the owners of this business. Otter Box Company deals in phone cases whose market demand rises day by day. This is because of consumers’ current lifestyle and the development of technology. They expose hand-held gadgets to damaging components and are willing to buy more phone cases even if the prices increase.
The wide-tax burden on sales offered by Otter Box Company can be levied on the seller. It is only in completely inelastic or elastic cases where tax burden is levied on either the buyer or the seller. The phone cases have a completely elastic demand hence creating an inelastic supply. This forces their sellers to shoulder majority of the tax.
The demand for phone cases is derived from the market demand for smart phones. More smart phones in the market create the need for phone cases. As a result, this demand is not a primary demand but derived. The idea of creating a company that provides phone accessories to consumers, therefore, came from the increased demand for smart phones.
Otter Box competes in an oligopolistic market structure where few companies offer phone cases thus leading to high prices. The company’s innovation came up in 1998 and has since dominated due to few companies in the same industry. A report in communication done by Syracuse University in 2001 showed that there were few companies which manufactured phone cases despite the increasing demand (Sharp, 45).
Otter Box experiences external economies of scale where the size of an industry determines the prices of phone cases (Luxembourg, 86). The company is large in size hence produces more phone cases as compared to others. Fixed costs are, therefore, shared in the sales of numerous phone cases. This company can increase its economy of scale by increasing the size of raw materials and hiring a production and maintenance manager.
If I were the owner of Otter Box, I would produce 300 phone cases every month. Assuming my manufacturing cost would be $18 for each, I would sell them at $26 each to achieve a gross profit of $24000 per month. This lies within 31% profit margin.
Due to a high demand for phone cases, I would hire a production manager to keep operation perfect. This would increase production to 6000 cases. Another additional worker that I would consider employing is a full time Maintenance-manager to work on the machines instead of contracting outsiders because it is relatively expensive.
Through the innovative spirit of its founder, Otter Box has proved to be the best provider of phone cases. It is able to provide competitive wages to its employees due to the increasing demand of phone cases and the oligopolistic market structure. The external economies of scale create a potential for future growth hence the company is at a stable economic state.
Economies of Scale. Luxembourg: Office for Official Publications of the European Communities, 2000. Print.
Sharp, Nancy W. Communications Research: The Challenge of the Information Age. Syracuse, N.Y: Syracuse University Press, 2001. Print.