Capital Budgeting helps with the purchase of assets and expansion. Looking at the long term investment decisions will help determine the productivity6 level, cost, and future cash flow. The plan is to expand the low-calorie frozen, microwavable food company which is currently facing increased cost for the major ingredients of the product. This paper will outline a plan that managers in this company could follow in anticipation of raising prices when selecting pricing strategies for making the products response to a change in price less elastic. Next, this paper will examine the major effects that government policies have on production and employment, predict the potential effects that government policies could have on the company, determine whether or not government regulation is needed to ensure fairness along with identifying the major reasons for government involvement in a market economy, provide two examples of government involvement, examine the major complexities that would arise under expansion via capital projects and propose key actions that the company could take in order to prevent or address these complications. Lastly, this paper will suggest the substantive manner in which the company could create a convergence between the interest of stockholders and managers and indicate the most likely impact to profitability of such a convergence.
Outline a plan that managers in the low-calorie, frozen microwaveable food company could follow in anticipation of raising prices when selecting pricing strategies for making their products response to a change in price less elastic. Forecasting is a crucial part in the anticipation of raising prices and selecting pricing strategies. Analyzing what triggers a change in price elasticity is vital as well. In order for the outcome to be at its best, the company’s manager must have a plan. When forecasting for a long period of time, the chances are very high (Silva, J. 2014). The plan that managers can follow in anticipation of raising prices is to first determine what the price it is going to be in the long run by using either qualitative or quantitative methods which uses past data and historical data to determine the future data. Next, the manager should analyze their competition, product and the pricing strategies that they are using. In last week’s lesson we discussed how most of the time, other companies that are competition with each other in terms of product follow suit of pricing techniques. The last step of the plan would be to implement the pricing strategy based on the forecasting that the manager concluded to when conducted the forecasting and analyzing of previous techniques.
Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company. The government has created a plethora of policies n businesses in relation to production and employment. Business usually have to tailor make their policies to match that of the government to ensure full compliance. The most common regulations come from federal, state, and a local level. The idea of these regulations are meant to protect mainly the consumers who use the product. One of the major effects that government policies have on production and employment is, it provides the business with production restrictions which has a snowball effect and restricts who they can hire for specific positions. One example is, Prop 65. Prop 65 simply states, that any product that has a certain amount of listed chemicals in it, has to have a label informing the consumer. The label says, “This product has chemicals known to the state to cause cancer or reproductive toxicity”. The effect that this would have on production would be that companies including this one will have is, they would have to include the labels during the production process which may cause spending a little bit more money. This also means that there is research that needs to be done to see if the product needs any labels regardless if it does/doesn’t fit under a certain proposition or regulation. Products also would have to go through additional testing to ensure they meet federal, state, and local regulations. Government regulations can also control the way businesses operate and merge in a sense. The regulations could control taxes that businesses pay during the production process such as imported or exported goods and even through trade regulations. The effect that this will have on employment is, the hiring process would need to be reviewed. Right now, the government controls what pay we start our employees off at. Another word for this is called, minimum wage. Now due to the government regulations that causes taxes and pricing, businesses are most likely to pay these fees and in turn produce a reduction in employment in order to save money. Also, employees may come in under paid. On the other hand, some government regulations may increase the number of job in the economy.
Determine whether or not government regulation to ensure fairness in the low-calorie, frozen microwavable food industry is needed. Cite the major reasons for government involvement in a market economy. Provide two (2) examples of government involvement in a similar market economy to support your response. From every point in history, it is shown that a balance of government regulation and deregulation could help the economy vicariously. Since there is no book or roadmap, the government provides legal structure within the business economy ensuring property right are good, contracts are not abandoned, and that products meet a certain quality for consumers – it is determined that government regulation is needed to ensure that there is fairness in this low-calorie , frozen microwaveable food. These are just some of the major reasons. Quality holds a high value in the food industry. There are FDA and other regulations that set standards for a perishable product like this to be produced at a certain quality. Hassan Y. Aly from Ohio State University states that, “Our legal system, the FDA, the FED and SEC are examples of how the government fulfills this task”. Simply put, they need to ensure that the economy is balance in all aspects. Most recently, the government started to control healthcare in the options of Medi-Cal and Medi-Caid, and the most infamous, Obamacare. It is now the law that everyone has health insurance or it will cost them.
Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities. Capital projects are generally created to produce benefits to the company over a period of time. There is a ton of planning and effort that goes to the execution of capital projects. There a few major complexities that could arise under the expansion through capital projects. One of the complexities is, there are not enough resources to expand the capital project. This could mean that the forecasting was wrong and the amount of resources needed was miscalculated. On the other hand, the money needed to fund the resources may be depleted. This could be that the strategic planning did not match the financial planning outlook. These are major complexities that would cause the capital project to come to a halt. Key actions that the company could take in order to prevent or address these complexities is to find out what the strategic plan is and then create a financial planning module to fit it. The strategic plan would come from the company executives. The company should allocate more than enough resources and set aside more than enough funds so that the project could see completion. Having an all inclusive capital budget could be a fix to address these complexities altogether. This means that there is a budget that covers all expenses and address additional needs if necessary.
Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response. Substantive manners in which the company could create a convergence between the interest of stockholders and managers is to have a plan created, have them both review and provide input. Allow suggestions and feedback to allow for input and implement where applicable. The most likely impact to profitability of such convergence will cause the profitability of the company to go up because of the expertise and feedback given. For example, there is a company who includes their stakeholders in all their strategic planning. They do this so that they (stakeholders) are in the know and so that they have a say so in the company’s decision. In result, the stake of the company increased and the product flourished a little bit more than previously. Another instance is collaboration from the two shown at my previous company that I worked for. There was collaboration with the stakeholders which gave them the ability to use our product and to spread the word of our products success to incur more business and more success. This turned out in favor of the company. Long term decision making includes a lot of factors. It takes forecasting properly, strategic planning with a big view in mind, financial planning to cover more than enough, and involving both the managers and stakeholders. Without having a plan or a vision, the long term goal will be hard to achieve.