Analysis of Tiffany & Co article

Elasticity refers to the measure of the sensitivity of a variable to the change in other variables. It is the relationship between price, demand and supply in the market and how a change in one of them leads to a change in the other aspects .In the case of Tiffany Co, the introduction of the jewelry for about $ 100 had a ripple effect in the demand of this products as customers especially the teens rushed to buy (Byron, 2007). The introduction of the low-priced bracelet was driven by the change in market demand where the trend was customers’ preference for affordable luxury. The demand increased as a result of the introduction of low priced silver bracelets. However, when the company increased the price for the jewelry pieces popular with teenagers, there was a gradual decline in the demand for these products. Price elasticity of demand is seen where the   change in prices resulted to decline in revenue for the company.

Since the company operates in a monopolistic competition market, the appropriate strategy should focus on providing differentiated products in terms of features and prices. Given that demand of the low priced jewelry decline gradually with increment in prices, Tiffany & Co should focus on prices so that to increase the demand and cater for that market segment. Choosing to focus only on the highly priced jewelry may cost the company eventually, since there are many substitutes for this product. There should be the introduction of the various ranges of product so as to cater for the low class customers who are sensitive to price and the higher-end customers. To prevent the decline in value of its brand, the company should separate the business to focus on each class of customers. 

Reference

Byron, E, (2007). Fashion Victim: To Refurbish Its Image, Tiffany Risks Profits --- After Silver Took Off, Jeweler Raises Prices to Discourage Teens. The Wall Street Journal