One of the main purposes of a leader of a business is to select the best course of action out of the available alternatives when it comes to the process of decision-making. Clearly enough, it is impossible without a thorough understanding of a company’s business environment. When it comes to entering the market with the goods for the purchasers’ consumption, the one theory that specialists often take to is the supply and demand theory. This theory is utilized to understand the customers’ buying behaviors and help managers strategize the product in the market in accordance with them. For instance, a lack of demand for the product signifies that supply needs to be shortened – and vice versa: when there is an increase of demand, it is reasonable to enhance supply of goods as well. Additionally, a supply and demand analysis helps in pricing: if the demand for the product is high, buyers are more likely to accept price increases an keep on purchasing it. With the low demand, however, prices should be sufficiently affordable; otherwise, the producer will suffer losses.
There are various strategies to make the supply and demand model work to one’s advantage. Dayton cites an example of De Beers – a company specializing in creating diamond jewelry. Their vaults are filled with diamonds – but they manage to maintain high prices for gems by limiting supply. Thus, diamonds keep staying a rare commodity, for the acquisition of which as a status symbol purchasers willingly pay. Another organization using the supply and demand theory to their advantage is Zappo. Dayton states that the company’s primary idea of selling shoes online – that is, with no option of trying them on beforehand – did not seem like a good one. However, Zappo became a success story by having gained control over supply – their enormous assortment, excellent customer service, and a favorable return policy make buyers choose them time and time again. Finally, there is Apple – a renowned giant of the technology market. Their building of anticipation for the release of a service or a product is a manufacturing demand that makes purchasers feel like they are a part of something bigger than simply another gadget’s market entry. In conclusion, a supply and demand theory can definitely be used as a tool for navigating the market – one only has to search for appropriate ways to use it to their product’s advantage.