Long-Term Investment Decisions

Plan on Pricing Strategies

In elastic product is a product whose demand is not influenced by the price change. To ensure the product is as inelastic as possible, the company should ensure that there is no competition in the market: the company is the price maker. This can be done by ensuring that the company produces unique products which cannot be substituted by any other product to ensure that the role played by their product cannot be played by any other product in the market. In a situation where substitution is possible, consumers will always go for a substitute when the price of the company’s product is high. Therefore, there is always loss of sales in similarities. Consumers will always go for the cheapest product of the same type, especially if they all have almost equal quality. Therefore, to ensure the highest level of inelasticity, the company should ensure that they produce unique product, with high level of complexity to ensure that it cannot be easily imitated by others. This will ensure that the company’s product is always the best and the only one that can fully satisfy its role to the consumer. Product uniqueness can also enable the company to adopt premium pricing strategy. This is a strategy in which a company can set its prices higher than its competitors especially when their products contain a unique quality or if their product is the first in the industry.

Effect of Government Policy on Production and Employment

Government policies can negatively or positively influence business operations in an area. In most cases, government enacts rules that will make it hard for a company to start its business operations or to continue making high Profits. In production sector, government has enacted rules such as production safety whereby for a company to be allowed to produce any form of goods, it must meet particular safety standards. The 1970 safety and health act also ensures that employers give safe and sanitary work environment via frequent scrutiny and grading scale. Environmental act on the other hand demands for employment of green production processes with an aim of reducing carbon emission in the atmosphere. These regulations increase the cost of doing business since for a company to meet the set standard there are always extra costs to be incurred. Beside this, these regulations keep on changing and thus, they keep on demanding more and new modification on production processes. Government policies also restrict on the number of businesses in an industry. This act as an advantage to the business since the regulation minimizes the development of new competition and thus, making a company operate at monopoly market structure. However, this is not applicable for all industries but for the industries producing more sensitive products that would need high level of monitoring to ensure product safety (Sba.gov, 2014).

Government employment policy restrict on the minimum benefits, wages, working hours, healthy and safety compliance of the workforce. It also defines employees working conditions, privacy regulations, and equal employment opportunities. This restricts on the number of employees a company should employ to be able to meet the government set standards. Therefore, the policy restrict on the level of production since if a company cannot afford a large volume of workers, it cannot compensate this with long working hours. Thus, in most cases, government policies care about the consumers, workers and the environment than it cares about the business owners. Consequently, government policies that also include tax payment increase the cost of doing business. These effects can be experienced in any company and thus, our company is more likely to be affected by safety and health act, consumer act, environmental act, taxation and employment act which are more likely to increase coast of doing our business and thus, reducing the initial level of production and company’s total revenue.

Government Regulation to Ensure Fairness

The production company role is considered as making decision on the best product to produce in the market, how to produce it and the selling strategies to ensure that the company fetches the best price in the market. The company’s works to maximize their income, this pushes them into developing some measures to exploit customers either by overcharging them or producing low quality products. To avoid such instances, the government requires to act as the mediator, regulator, and negotiator of consumers’ interest in the industry. It also requires to play an essential role of checking and balancing especially in consumable goods industries.

Government has tried to intervene in one way or another especially in food industries to ensure fairness in the market. A good example for this is the enactment of Food Safety Modernization Act which was passed in 2011 by the USA federal government. The Act aimed at dealing with a number of food safety associated concerns that were being faced by American citizens. According to  Sba.gov (2014) food industry plays an essential role in deciding the citizen’s health levels and consequently the government healthcare outgo. In this act, the government prohibited some of the unsafe substances that were otherwise regular constituent of an average daily diet of Americans. The full enactment of this bill was expected to reduce heart attack cases by 30,000. The second instance occurred when the government intervened in the food industry. The government ensured double checking on the advertisement claim that exported Olive Oil was extra virgin. This was after a US based Olive Oil producer raised their concern regarding their European based competitor claim that their exported oil was more quality using the term “Extra virgin”. The government took a role of ensuring fair competition in the market, ensuring the right standards are met by all and no false advertisement to fetch more customers. After the above request, the California Agriculture Department stated testing various samples of Olive Oil from different exporters and action was taken over those companies whose product did not accomplish their claim or the established standard.

Major Complexities in Expansion via Capital Projects

Expansion via capital project is one of the major challenges that companies are facing in the world. The complexity ranges from raising of the capital to poor resources and project management.  Normally, there is a huge amount of capital needed to carry out business expansion in terms of immovable and movable properties. Therefore, it is quite difficult to ensure that the two properties are readily available especially for a newly established business or company. The first complex task is to raise enough capital to do the expansion. Although there are a number of ways one can employ to raise the required capital, it is quite a challenge to convince investors that the company has adopted the best business model, its sustainable, and one can easily keep track of business finances. Another complexity involves lack of the best ways to integrate disciplines of the project and to control the project complex flow of information in the team. A recent survey regarding capital projects in major companies indicated that about 30% of huge capital intensive projects cost is wasted. Because of this void, project managers feel pressurized from all sides by issues which are trivial and weighty. Vital ideas get lost, voice and emails message get misinterpreted or misplace. Therefore, ensuring success in such projects becomes quite complicated since, almost every one works under pressure (Wales & Sayavedra, 2014).

To address such complexities, the company should consider using its personal savings, or considering taking loans to raise its project expansion capital. In this case, the company will give its assets as the security and thus, it may not require to convince investors on the dependability of the adapted business model or business sustainability to be able to get enough capital to start the expansion of the project. To solve the issue of poor project management or mismanagement of project resources, the company should consider developing a structure that would guide the flow of power and project responsibility. In addition, good budgeting should be done to assist in limiting the use of resources in the each project stage. The team should also consider defining milestones for each project development stage. This will ensure that resources held in one stage can be released to be employed in a different stage, and thus, reducing the cost of conducting the project. Finally, project collaboration is another essential strategy that a project manager can employ to overcome capital project complexity. This involves working as a team, having regular meetings and developing a good communication flow to ensure that information gets to the right person at the right time and in the right manner. This will reduce chances of message misinterpretation or misplacement (Campobasso, 2009).

Convergence between Managers and Stakeholders Interest

What normally matters for firms, economist and policy makers alike is if ownership structure influences corporate performance. The ownership separation and modern corporations control naturally lowers management incentives to effectively maximize corporate. The convergence between managers and stockholders is initiated by the stockholders interest to obtain better results. This interest helps in maximizing value or profit of corporation (Hu  & Izumida, 2008). Competitive pressures results to declines of stock price for nonperforming company and again in performing company. The convergence between stockholders and managers can be enhanced by developing similar interest where managers are compensated for rise in stockholders awards. Therefore, the managers will be interested in the company after the share gains value since they also benefit from it. Therefore, the company should work to ensure good stock performance and encourage managers’ performance through incentives. Profitability of this form of convergence would result to great company success and strengthening of the bond between managers and stockholders. An example of this includes Enron Corp. and Global Crossing Holding Ltd. and Scott Sullivan of WorldCom Inc. The three companies made a great fortune by developing a convergence between managers and the companies’ stockholders (Martynova  & Renneboog, n.d.).

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