Economic Analysis Of Timberland

Economic Analysis

History of Timberland

The birth of "Timberland" begins with Nathan Swartz, a young boot making apprentice 'stitcher' in 1918. At ten years of age the owner of the Abington Shoe Company took a chance and hired a much-needed young helper to learn the craft of boot making. Nathan's job responsibilities included stitching seams, cutting leather, attaching soles and perfecting the art of boot making. Thrity-four years later, Nathan furthered his interest in boot making by purchasing half of the Abington Shoe Company. In 1955 he purchased the remaining 50% of the company and made it a family owned business.

From 1918 to the late 1950's waterproof boots were not quite waterproof. Think about it, can a boot really be waterproof if someone had to stitch the soles by hand? The Swartz family patent and introduced a new injection-molding technology that revolutionize the shoe industry. This new technology all but eliminated the stitching process. This technology fused the soles of the shoe with the upper leather of the shoe thus producing our first real waterproof shoe.

In 1973 the name 'Timberland' was born. Originally 'Timberland' was the brand name for the waterproof boots, but because of the boots popularity the company changed its name to The Timberland Company. Throughout the next couple of decades the range of products produced by Timberland grew to include casual and boat shoes and then clothing; all meant to reflect a rugged outdoor style.

The popularity of Timberland boots have risen and take a on an urban image since the 1990's. This image has been created and helped by various hip hop and rap celebrities such as Busta Rhymes, 50 Cent, and Missy Elliot. Still, Timberlands will always be functional and useful as trail and hiking wear and the urban jungle is not the first wilderness that comes to mind when we see a pair of Timberlands.

Price, Equilibrium, Supply and Demand

Prices play an important role in the determining efficiency. Producers and consumers rely on prices as a strong indicator to help bring balance to a market. Economists have theorized that the price of something will move toward a point where the quantity demanded is equal to the quantity supplied. This price is known as equilibrium price or market-clearing price, because it eliminates excess supply or excess demand.

Equilibrium is based on the law of supply and demand. As the price of a product increase, consumers demand less of that product. If the price is too high, the supply will be greater than the demand, and the producers will have an excess of inventor. On the other hand, as the price of a good goes down, consumers demand more of that good and producers will reduce supply entering the market. If the price is too low demand will exceed supply and some consumers will be unable to obtain as much of that good as they would like at that price. We say that supply is rationed.

Here is an example to illustrate the law of supply and demand. For a particular weekend night, we examine the willingness of restaurants in Woodbury, NJ to supply a dinner for two and the willingness of couples to dine in Woodbury, depending on the price of the dinner.

There are three restaurants with the capacity to seat 40 couples. One restaurant provides a nice dinner for $15 a couple, but another requires higher prices for a similar meal. It is more likely that everyone would show up at the restaurant with the cheaper offer but remember there are only 40 seats available.

There are 250 couples willing to go out for dinner, if the price were as low as $12 a couple. Twenty couples would be willing to pay as much as $80, but everyone else requires lower prices. See chart below.

$ Dinner for Two Restaurant meal offered Consumer Demand

$12 0 250

$15 30 200

$25 60 140

$35 60 60

$45 90 50

$65 120 40

$80 150 20

The next section will have a more detailed example of supply and demand as it relates to The Timberland Company.

Price Elasticity of Demand

The Timberland Company is one of the largest producers of boots and premium apparel and accessories for men, women, and children. It is synonymous with prestige, quality and excellence. Timberland is the name of their original waterproof leather boot and because of its vast popularity, the name of the company was officially changed to the Timberland Company. Because the Timberland boot is the top seller, we will focus on that particular product in this portion of the paper.

The Timberland has always been a very popular boot and is still one of the most popular brands of boots. Not only are Timberlands popular amongst many blue-collar workers such as construction workers, exterminators, plumbers, but they are also popular in the urban community for style and fashion purposes. The city of Philadelphia is a perfect example of a community where the Timberland boot is very high in demand amongst the urban community. These boots are sold all over the city in local and mainstream footwear stores all over the city of Philadelphia in all varieties and colors. Here is the elasticity demand table for Philadelphia for the Timberland boot.

Price Elasticity of Demand for the Timberland Boot in Philadelphia

Total Quantity of The Timberland Boot Demand per Week, in Thousands Price per Pair of Boots Elasticity Coefficient (Ed) Total Revenue, in Thousands Total Revenue Test

1 145 145

2 135 8.25 270 Elastic

3 125 5 375 Elastic

4 115 3.5 460 Elastic

5 105 2.2 525 Elastic

6 95 1.8 570 Elastic

7 85 1.3 595 Elastic

8 75 1.2 600 Elastic

9 65 0.86 585 Inelastic

10 55 0.63 550 Inelastic

As with other products, as the price for the product decreases, the demand for the product will increase. By decreasing the price of the Timberland boot by 10 dollars, the demand for the product will increase by 1000