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Long-Term Investment Decisions

Updated on June 22, 2016

Plan for Raising Prices

It is evident that low-calorie, frozen microwaveable food company is facing increases in the costs of major ingredients. This is likely to impact on its profitability. Specifically, the company is facing increased expenses. With this being the case, it may be forced to raise the prices of its products to ensure its continued profitability. However, this may be challenging considering the issue of price elasticity. Basically, it is essential for the company to come up with a plan in anticipation of raising prices when selecting pricing strategies for making their products response to a change in price less elastic.

For one, it is essential for the company to consider or examine historical consumer reaction to any change in price of its products and services. This will enable it to determine how much customers may be willing to pay for its products. For instance, it may be able to avoid setting the price very high to the extent that consumers may be unwilling to purchase. Specifically, the company will be able to decide which rate is acceptable to consumers. As a result, it may be able to avoid high elasticity or a situation where consumers find the price too high for them.

In the same regard, the company must ensure that the increase in prices in called for. Particularly, consumers must be able to understand the factors that led to the increase in prices. For instance, the company must be able to communicate to consumers the reasons that have led to price increase. Failure to ensure the same can lead to the company losing its loyal customers to its competition. Essentially, consumers will not understand why the raise is required. As such, they may develop the perception that the company is exploiting them.

Similarly, the company must ensure that its products are of quality as compared to the competition. Product differentiation is of the essence. The benefits associated with the products must be worth the price. Basically, consumers must realize the value for their money. Normally, consumers do a cost benefit tradeoff to determine on whether or not a product is worth consuming. Products with costs that outweigh the benefits are deemed unattractive to consumers and vice versa.


Effects of Government Polices on Production and Employment

Government policies normally have great impact on production and employment. Specifically, governments stipulate how products are produced as well as which employment strategies are employed by a company or organization. For instance, governments come up with policies that stipulate how food products must be produced to protect consumers from any harm. The low-calorie frozen microwavable company must ensure that is adheres to the standards set forth by the government when producing its food products. Failure to comply with the policies can result into it facing lawsuits. This can also result into its closure. In the same regard, it must handle other activities associated with the production process in the desired manner. For instance, it must dump its waste products as stipulated to avoid, for instance, environmental pollution.

Government policies also affect employment. In particular, they affect the way companies recruit and select their employees. For instance, any form of discrimination during the recruitment process may not be tolerated. Correspondingly, they determine the level of remuneration offered to customers. For example, a government may set the minimum wage offered to employees. Every company or organization must adhere to the provision failure to which it may be prosecuted in a court of law. Governments have also come up with policies that state ground for employment termination. Essentially, a company cannot fire or terminate the employment contract of its employees without following the due process. The low-calorie frozen microwavable company is also impacted by government policies. It must ensure that it follows the policies set forth by the government to avoid problems with the law. For instance, it must consider the minimum age one is allowed to work or be employed. Basically, this must be done failure to which the company may face child labor charges. Generally, it is in the interest of the company to comply with government policies as they impact on the way it operates. This also impacts its reputation. Basically, organizations that respect the law earn a good reputation.


Government Regulation and Fairness

Governments normally come up with rules and regulations to govern the activities of companies and organizations in different industry. For example, it is evident that the government has enacted rules and regulations to govern the low-calorie, frozen microwavable food industry. Government’s involvement in the industry has let to fairness in the industry. For one, it has let to fair competition among industry players (Alderman, Ivory, & Mcloughlin, 2013). There are companies in the industry that may use their position and power to engage in unfair competitive strategies that may lead to unfairness. For instance, there are those that can engage in predatory pricing strategies. This entails a company setting prices very low with an aim of attracting more customers, hence making its hard for competitors to survive. This is a strategy that is normally applied by large and well established companies that enjoy high economies of scale. Basically, they are able to maintain the low prices with ease. Small and medium sized companies may not be able to apply the same pricing strategy as this can result into losses. As a result, they have no choice but to exit the market leaving the large companies enjoying monopoly. Essentially, such strategies are deemed unfair to companies that cannot pull them off. The government sets rules and regulations that ensure this does not happen.

Correspondingly, the government sets regulations that prohibit companies from using their positions to solicit favors that can lead to their success in a certain industry or market economy. For instance, there are companies that can bribe government officials to gain favors or avoid public scrutiny. Small and medium sized companies may not have the ability to engage in such behavior. This also means that they are left at a disadvantage (Loayza & Serven, 2010). Corruption is not unethical but also illegal. Generally, it leads to unequal distribution of resources. Some companies gain favors at the expense of others. Those in power misuse their positions to gain an advantage over others. Basically, it is upon the government to come up with rules and regulations that ensure equal distribution of resources. Those found guilty of engaging in corruption are prosecuted under the court of law. With this being the case, companies avoid such behaviors to avoid problems with the law. Equally, they avoid the same to maintain a good reputation. Fundamentally, they embrace legal or fair strategies that do not result into unfairness. The low-calorie, frozen microwavable food company is able to enjoy fairness as a result of the regulations governing the industry. As such, it has an equal chance of achieving great success as long as it is able to play its cards effectively.

Governments also involve their self in the market economy to protect consumers from exploitation. For instance, they ensure products and services offered to consumers are safe for consumption. In the same regard, the government enacts rules to ensure market efficiency. Likewise, governments enact rules and regulations to govern international trade. For example, they can control the quantity of foreign products available in the market. This may be done to protect local companies from unfair competition from multinational companies.


Complexities Associated with Capital Projects

Capital projects relate to long-term investments made with an aim of building upon, adding, or improving on capital intensive project. Such projects have been associated with a number of complexities. For one, such projects are associated with large cost as compared to other investments that require less planning. This is complexity the low-calorie, frozen microwavable food company must consider to effectively manage its capital project. Particularly, the company must ensure that it has enough capital that can be used for expansion purposes before determining on whether or not capital projects are the best option. Failure to ensure this can lead to the company starting the project only to end it before it is completed. Basically, it may not have enough capital to complete it. As a result, it will have consumed its resources for no reason.

Consequently, capital projects require adequate planning. Essentially, there is no way a company can be able to complete a capital project with poor planning. The management at low-calorie, frozen microwavable food company must take it time planning for the projects covering all areas to achieve good results. For instance, it must come up with budget plans to ensure it is able to utilize its resources in the desired. It is through planning that the company can ascertain any problems it is likely to encounter while implementing the projects. As a result, it will be able to come up with strategies on how it will handle the issues to achieve success. Planning also enables the management to deliver projects within the stipulated time. Basically, the company in question is able to avoid time wastage as everything goes as planned.

Capital projects also require a highly skilled and knowledgeable team that can manage it effectively. This can be attributed to the complexity and technicality involved in the execution of the projects. The management at low-calorie, frozen microwavable food company must also be able to recruit and select the best talent in the market with the right skills and knowledge to effectively complete the projects. This will enable it to avoid failure. It will also enable it to achieve the best results.


Creating a Convergence between the Interests of Stockholders and Managers

Managers and stockholders have always found their selves in conflicts in regards to their interests. Specifically, managers may have different interests as compared to the interests of shareholders. In most cases, this can make it hard for the company in question to achieve its goals and objectives. Essentially, it is imperative for the company to create a convergence between the interests of stockholders and managers.

One strategy that can be employed by the management in a company to ensure convergence is teeing managers’ remuneration to their performance. Specifically, the company can be awarded stock options to ensure they are working hard to enhance shareholder value. The stock options normally gain value with an increase in share prices. Basically, stockholders are normally more interested in enhancing the value of their stocks. They are also more interested in high profits as this leads to high dividends. On the contrary, managers may have other priorities in regards to the direction the company or organization may take. Giving managers stock options leads to them developing an interest in ensuring that they gain value. This makes them stockholders. As such, their interests are aligned with the interests of other stockholders. This also implies that they will be committed to serving the welfare of stockholders. For instance, they will ensure that they increase the profitability of the company to enhance its share prices.

The application of the above strategy leads to the creation of a harmonious working environment. This is also a strategy that leads to high performances. The company is question is able to compete effectively with other competitors in the industry. Equally, it is also able to attract more stockholders; hence its ability to raise funds that can be used for expansion purposes.


References


Alderman, N., Ivory, C., & Mcloughlin, I. (2013). Managing Complex Projects: Networks, Knowledge and Integration. New York, NY: Routledge.

Anderton, A. (2006). Economics. New Delhi: Dorling Kindersley.

Gunay, S. G. (2008). Corporate governance theory : a comparative analysis of stockholder and stakeholder governance models. Bloomington, IN: iUniverse.

Loayza, N., & Serven, L. (2010). Business regulation and economic performance. Washington, DC: World Bank.

Nijsen, A. ( 2009). Business regulation and public policy : the costs and benefits of compliance. New York, NY: Springer.

Pearce, J. (2011). Organization and Management in the Embrace of Government. Boca Raton, FL: Psychology Press.

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