Question 1:
Mulberry operates in a market structure that is monopolistic competition. In this type of market, there are many firms (luxury bag companies) competing by offering differentiated products (unique designs, materials, brand image) to attract consumers. However, there is also competition from other luxury bag companies, which limits the ability of each company to set prices arbitrarily. Mulberry has some degree of control over its prices due to brand loyalty and perceived product differentiation.
Question 2:
Mulberry's line of handbags is more likely price elastic. This means that a change in price will lead to a proportionally larger change in quantity demanded. When Mulberry decided to increase their prices to align with other luxury bags, it led to a decline in sales. Luxury goods, including high-end handbags, tend to be more price-sensitive because they are not essential items and consumers have more discretion in purchasing them. Question 3:
Mulberry's line of handbags is considered a superior product due to its high quality, craftsmanship, and brand prestige. Mulberry ensures that 50% of its leather items are manufactured throughout England, ensuring standards of craftsmanship and quality, two critical traits the brand prides itself on (Mulberry, 2016). Luxury handbags are often considered symbols of wealth and status. They are exclusive and highly
desired by many consumers.
Question 4:
Besides price, other factors that affect the level of demand for Mulberry bags include changes in consumer tastes and preferences, fashion trends, economic conditions, and the effectiveness of the brand's marketing and promotional activities. Another one is the economic recession of 2008-2009 where consumers were not willing to pay exorbitant prices for designer brands and were instead rewarding themselves with affordable luxury brands perceived as innovative and capable of communicating through social media.
Question 5:
A weaker British Pound can be advantageous for Mulberry in several ways. Firstly, a weaker currency can make the company's products more affordable to international customers. As Mulberry's products are priced in pounds, a weaker pound would mean that they would become relatively cheaper for customers
paying in other currencies. This could lead to increased demand from tourists and international buyers, which in turn could boost sales for Mulberry. Additionally, a weaker pound could help Mulberry increase its profit margins from international sales. As Mulberry's production costs are mainly in the UK, a weaker
pound could mean that the company's profit margin would increase when its products are sold in other currencies. A weaker British Pound could benefit Mulberry by increasing its sales and profit margins.
Question 6:
Trading in local currencies would likely increase sales for Mulberry. When Mulberry trades in local currencies, it eliminates currency exchange risks for its customers. This makes the pricing more transparent and eliminates the uncertainty associated with fluctuating exchange rates. As a result,
