In a market economy, supply and demand are the basic concepts that help to understand the trends in behaviours of both sellers and buyers. In case a company ignores market trends, it can end up investing its money in undesirable products or losing its clients to the competition. Moreover, unaddressed fluctuations in demand may lead to the deterioration in the quality of rendered services, resulting in the decrease of market share (Jabbarzadeh, Fahimnia, & Sheu, 2017). Thus, company management should be familiar with supply and demand laws to avoid considerable monetary and reputational loses.
Changes in supply and demand can make important impact on businesses. Motorola serves as a good example of managerial miscalculations in predicting economic trends. Failing to recognize the future of smartphones, the company lost almost $400 million (Herzallah, Gutierrez-Gutierrez, & Munoz Rosas, 2017) and eventually went bankrupt. Amazon Kindle, on the other hand, was able to use the managerial insight into the market to its advantage. In order to increase its customer base, the business chose to cooperate with its major competitor, Apple. This coopetition significantly increased sales profits of the company, as well as the number of its clients (Ritala, Golnam, & Wegmann, 2014). Thus, the knowledge of supply and demand laws can help not only to protect a business from financial failure but also stimulate its growth.
To thrive in a market economy, a firm needs to satisfy many factors. However, the economic literacy of corporate management is the most important prerequisite for future success. Companies should monitor fluctuations in economical equilibrium to stay updated on market trends. This way, they can spot changes in supply and demand in a timely manner and use the obtained information to their advantage.
References
Jabbarzadeh, A., Fahimnia, B., & Sheu, J.-B. (2017). An enhanced robustness approach for managing supply and demand uncertainties. International Journal of Production Economics, 183, 620-631.
Herzallah, A., Gutierrez-Gutierrez, L. J., & Munoz Rosas, J. F. (2017). Quality ambidexterity, competitive strategies, and financial performance: An empirical study in industrial firms. International Journal of Operations & Production Management, 37(10), 1496-1519.
Ritala, P., Golnam, A., & Wegmann, A. (2014). Coopetition-based business models: The case of Amazon.com. Industrial Marketing Management, 43(2), 236-249.