A business model of an edible oil company in Bangladesh in the context of Bangladesh.

There are two factors that affect the elasticity of demand for your product.

a. close substitutes are available
b. the percentage of expenditure of the product in a consumer’s budget is large

Edible oil is an essential food product that is consumed in all households in Bangladesh. Since we, Bangladeshi’s rely heavily on cooked and fried meals, edible oil is consumed in meals that are served in households and restaurants of Bangladesh. Consumers keep a large percentage in their monthly budget to buy edible oil to meet their cooking requirements. Although people consume edible oil in heavy quantity, there are various substitutes available for the product in the market.

So, for example, if we decide to sell Soybean oil in Bangladesh, although there would be plenty of buyers willing to spend a significant amount of money on Edible oil as various substitute products are available in the market, those expenditures would be scattered through the different options available to the consumers.

Since Soybean oil is elastic in demand. Its elasticity varies depending on price changes and the availability of substitute products. Demand falls when people buy more substitute goods or when price increases.

The most common Substitutes for Soybean oil available in Bangladeshi Market are Mustard oil, Palm oil, Rice bran oil, Sunflower oil, Olive oil, etc. People might choose any of these substitute oils over Soybean oil.

Factors for choosing substitutes may include price, nutrition value, or simply the tastes of the consumers. Since Soybean Oil has less nutrition value some people may choose other oils over Soybean. At the same time, Soybean oil less expensive when compared to Olive oil. Some people may choose to buy Soybean oil because they cannot afford expensive healthy alternatives.

If we want to target all the segments of the consumers, then we have to position the product as such that the product is affordable to most people and also has the necessary nutrition value. Soybean oil has a significant percentage of saturated fat (16%) which is not healthy for regular consumption. We can extract the saturated fat from the Soybean oil and highlight the fact to the consumers so that they are aware of our goods. This is how we can increase the demand for soybean oil and sell higher volumes to gain market share over other substitutes. In doing so, we also have to keep the price in a reasonable range so that the demand does not fall significantly.