Principles of Economics
In the New York Times article on E-Cigarette Industry, Waiting to Exhale, the author explains the economic factors affecting the future growth and expansion of NJOY Company. The company has introduced a new cigarette brand in the market which, will utilize an advanced eco-friendly technology. The cigarette has a competitive advantage over the conventional cigarette brands because instead of nicotine smoke, the e-cigarette produces a vapor (Richtel, 2013). Moreover, consumers can comfortably smoke in the public, as well as, in buildings and other social facilities. The brand has previously attracted a number of consumers, and its sales revenue amounted to 1.7 billion dollars. This is relatively low, compared to the sales revenue of standard cigarettes, which is currently, at 40 billion dollars. However, the high sales revenue for standard cigarettes is an indicator of the potential market in the economy.
The article also addresses factors that would affect and influence the success of the brand in the market. Smoking in public is a social vice. Therefore, this has affected sales and marketability of cigarettes in the past. However, with the new brand, problems associated with marketing and social smoking will be eliminated. The presentation of a safer cigarette product than conventional brands positively influences consumer preferences towards the e-brand (Richtel, 2013). In addition, the author asserts that the e-cigarette brand will also have a ready market because smokers are likely to change their brand. The e-cigarette brand will also be designed in such a manner that it will create familiarity for the consumer. However, the company faces challenges of competition from new entrants in the market providing similar products.
Elasticity is a measure of the effect changes in variables have on the subject product. Elasticity can take many forms including the price elasticity of demand, income elasticity of demand, price elasticity of supply, and elasticity of substitution (Taylor and Weerapana, 2012). An elastic variable changes with any change in other variables. For instance, an increase in price of a product would lead to a decrease in demand for the product. On the other hand, an inelastic variable varies less than proportionately to changes in other variables. The market for cigarettes is elastic in terms of substitutability. An introduction of e-cigarettes in the market will significantly affect the demand of conventional cigarette brands. On the other hand, substitutability of the two cigarette brands will considerably increase the demand for e-cigarettes.
Market structures involve the characteristics and nature of competition in the market for a given product. The number of firms producing a certain product significantly influences the market share of the companies involved. A market structure can take many forms including monopolistic competition, oligopoly, perfect competition and monopoly (Mankiw, 2011). The market for e-cigarette is an oligopoly market because a number of firms have a similar product. Moreover, there are new entrants in the market, but the market is not yet flooded. The nature of competition in the market is considerably favorable for the company. Moreover, the demand and consumer base for the product is high, and it is expected to increase over time. NJOY has an added advantage because it has already launched its brand and attained sales amounting to millions of dollars. I agree with the author’s point of view because the concept of e-cigarettes is attainable. The product has a ready market, which is expansive and can include international markets. Moreover, the product eliminates the health hazard concerns associated with ordinary cigarette brands.
References
Mankiw, N. G. (2011). Principles of economics. Mason, Ohio: Thomson South-Western.
Richtel, M. (2013, October 26). The E-Cigarette Industry, Waiting to Exhale. The New York Times. Retrieved from http://www.nytimes.com/2013/10/27/business/the-e-cigarette-industry-waiting-to-exhale.html?ref=business&_r=0
Taylor, J. B., & Weerapana, A. (2012). Principles of economics. Mason, OH: South-Western Cengage Learning.
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