This report’s focus is on analyzing the factors that affect the supply and demand of the products. There are several variables that can affect the supply and demand of a product, including consumers’ income, prices of substitute products, costs of inputs and so on. The product discussed for this report is Acuvue, I will analysis how the factors affect the supply and demand of Acuvue. Acuvue is Johnson & Johnson’s Vision Care Product. It is one of the most popular eye contact lenses products for nearsighted correction and eye color alteration.
Acuvue has a serial of products that depend on different replacement schedule, such as daily disposable, two weeks disposable, colors and so on. All ranges of the lenses of Johnson & Johnson’s are regarded as comfortable, convenient and good eye health product. (Johnson & Johnson, 2008 )1 In 2007, as a leader and pioneer of eye contact lens producer, there was a sales increase by 17. 6% prior to 2006.
The annual expense for normal glasses is $200 dollars but the Acuvue daily disposable is about $480. Take China for example, the GDP of 2007 increased 11. 4% (Wiki, 2008)1, people earned more than before. When people’s income increased, those who could not afford to buy the Acuvue in the past can had enough money to afford it. Moreover, as income increased, people tend to replace their contact lenses much more frequently than before, and the demand of Acuvue increased accordingly.
Also, nearsighted people may have much higher requirement for their life quality; so, for those who are tired of wearing glasses or who seek convenience by wearing eye contacts may try to change to use eye contact lenses, therefore, demand for the eye contact lenses will increase. Consumer Preferences Consumer preference is a significant factor which affects the demand of the Acuvue. People have different preference for lenses for nearsightedness correction, such as replacement schedule, material (hard/ soft), and safety.
Some people prefer Acuvue Daily for its convenience, and it has no daily maintenance like other types of contact; the user can just throw it away after one day. (Bausch & Lomb, 2008) For some people, they prefer soft contact lenses to hard lenses. In addition, many people care about the safety of eye contact lenses, and daily contact lenses are regarded as the safest and healthiest way, so those people may choose the Acuvue Daily, and thus, the demand of the Acuvue increases. On the contrary, people who are afraid of getting keratitis (wiki, 2008)2 by wearing contacts will buy the glass, and then the demand of the Acuvue will decrease.
Moreover, if the nearsightedness’ preference is more favorable to Acuvue, which probably means they have more loyalty to the products, so the existing consumers will seldom change to alternatives and more and more people will buy Acuvue. Price of Substitutes The Substitutes of Acuvue eye contact lenses are glasses and surgery. As compared before, wearing glasses is a more economical way to correct nearsightedness, and there will be lower risk of being involved in keratitis(wiki,2008)2 or other eye problems. Moreover, in the recent years, correcting nearsightedness by taking an eye operation became more popular in many countries.
The costs for the surgery are high, and the average for getting the LASIK nearsightedness correction surgery is $2105 in 2008. (All about Vision, 2008) If the price of the surgery decreases, there will be more people choosing eye surgery instead of wearing inconvenient glasses or eye contact lenses; so, there will be less demand of Acuvue. Price of Complementary Goods If the complementary goods of Acuvue increase, the price of the Acuvue will increase accordingly. Complementary goods for Acuvue are the solution of the eye contact lenses or drops for eyes.
For the past two years, with the rapid economic growth in China, people have more money to purchase eye contact lens, but if the average prices of the solutions increased dramatically, people who could afford to buy the lenses felt burdened to buy the solution. Advertising Promotion Advertising is a way of communication, Johnson & Johnson get more advertising is to try to persuade potential customers and consumer to purchase more Acuvue(wiki, 2008)3. Johnson & Johnson has released a series of advisements and promotions for Acuvue.
They provide free trial pairs of eye contact lens for the potential consumers who can just fill a Free Trial Pair Certificate (Vision Care Inc. , 2008) from the Acuvue official website. In addition, when the “Acuvue 2 colours” entered the mainland China market, they chose an unknown model to perform the advertisement first, and the sales for the Acuvue 2 was unfavourable. However, then the Johnson & Johnson invite Chinese pop singer Angela Zhang for promotion on TV, then, this product became familiar with lots of youth in China, and more and more people known about the Acuvue and bought it.
Consumer Expectations Johnson & Johnson is a well known and trusted company by millions of consumers all around the world. It pays much attention to the safety of their products. So consumers are confident with the Acuvue and more and more people buy it. When the AMO Complete Moisture Plus Muti-Purpose Solution (Anapol Schwartz, 2008) was recalled in May, 2007, people were concerned about the eye safety. From that time, people tented to buy less and use less eye contact lens in order to avoid infection.
Number of Buyers If there are more and more potential consumers of Acuvue, demand for Acuvue will increase. For recent years, more and more people in the world have access the computer, and they use computers much more frequently and longer than the past. People are more prone to get nearsightedness. From Johnson & Johnson’s research, there are about 3 million new eye contact wearers in the US every year (Vision Care Inc. )2, so the number of potential buyers is increasing for consuming eye contact lenses year by year.
In addition, with the development of technology, the material of contact lenses is getting better and safer, so more people will be confident with the eye-contact lenses so more potential buyers will buy the Acuvue, then the demand for buyers will increase. But if there is new technology that can take place of eye contacts lenses, the nearsighted may give up wearing contacts, so the number of potential buyers decrease which indicates the demand of Acuvue will decrease. Variables of Supply Costs of Inputs
The world economy was very unstable since last year, and the price of raw materials kept on rising. Fortunately, there is no news about the raw material price fluctuation for eye contact lenses. If the price of storing contact lenses increases, the Acuvue’s producer Johnson & Johnson must find ways to control the production costs. The company may choose to reduce the production volume of the product and wait for producing that good when the price goes down, therefore the supply of Acuvue will decrease.
However when the materials for making the eye contact lenses decreases, Johnson & Johnson will have more capacity to produce more eye contact lenses to increase its supply. Number of competitors The more competitors there are, the less the supply. Due to the property of the vision care industry, the requirement for entering this business field is fairly high. For the current market, there are four main producers and other several smaller producers which produce eye contact lenses. Johnson & Johnson is the largest eye contact lens producer in the world, making sales of $2. billion around the world (Johnson & Johnson, 2008) 3. In China, eye contact lens manufactures are increasing in the market, competition became fierce, raw material for making the contact lenses increased, and the market share became dilute, so although sales of Acuvue increase in China very year, the growth is not as large as expected. New Technology As we know Johnson & Johnson Vision Care first introduced the soft disposable eye contact lens for the world (Wiki, 2008), and this revolutionary product helped the Johnson & Johnson opened a new product field and access to expand their market to over 50 countries in the world.
If there is new cheaper material for producing Acuvue, Johnson and Johnson will be capable of producing more Acuvue by the same investment as in the past, which means the supply of the Acuvue will increase. However, in the future, with the development in technology, some existing materials for making eye contact lensse may have potential risks for our eyes. When the Johnson & Johnson found that potential risks really do exist, in order to guarantee the product safety, they had to pay more for preventing the risks harmful to contacts wearer, or even reduce the supply of those products.
Suppliers Expect that Future Sales Prices In recently years, there is a trend that more and more reports show that wearing daily disposable eye contact lens is much more comfortable, healthier and safer, because daily replacement lenses are healthier than other replacement schedule. With the expectation, the market for the Acuvue Daily disposable has much more potential than other Acuvue disposable lenses, and Johnson & Johnson will decide to produce more Acuvue Daily in according with the potential increase of the demand for Acuvue.
Conclusion To sum up, those variables discussed above with the supply and demand of Acuvue finally affect the price of the Acuvue. As we know, the market price is the equivalent of the supply and demand. It is determined by an “invisible hand’ of both supply and demand. Therefore, it is impossible for those factors discussed before to singly handedly affect the supply and demand, because the market is complex, all those variables together contributed to our market price.