Long-Term Investment Decisions
Assume that the low-calorie frozen, microwavable food company from Assignments 1 and 2 wants to expand and has to make some long-term capital budgeting decisions. The company is currently facing increases in the costs of major ingredients.
Use the Internet and Strayer databases to research government policies and regulation.
Write a six to eight (6-8) page paper in which you:
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. Provide a rationale for your response.
Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company.
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.
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.
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.
Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Propose how differences in demand and elasticity lead managers to develop various pricing strategies.
Analyze the economic impact of contracting, governance and organizational form within organizations.
Use technology and information resources to research issues in managerial economics and globalization.
Write clearly and concisely about managerial economics and globalization using proper writing mechanics
**ASSIGNMENTS 1 & 2 ARE ATTACHED**
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Long-Term Investment Decisions
Plan that could be followed by managers in the company in expectation of increasing prices
A plan that the managers of low-calorie, frozen microwaveable food corporation may follow in expectation of increasing prices specifies a pricing strategy which would not have any impact on how the customers perceive and purchase the company’s products. Such demand, as Coglianese et al. (2010) pointed out, is usually seen in situations wherein the products are essential and end users are not able to do without them, although not in the case of the products provided by microwaveable food company. It is worth mentioning that the demand function for microwaveable food is mainly dependent on the product’s price, the substitute products, income of the end users, as well as advertisement overheads. The elasticity and demand function show that the market for microwaveable foods is one that has a monopolistic competitive tendency.
The demand for the products produced by microwaveable food company is not highly elastic. The company needs to ensure that its products remain as inelastic as possible, and in this plan outline, it can achieve that by differentiating its products from similar products provided by competitors. This will make the company’s products somewhat different from other similar products in the marketplace and consumers may not easily substitute the company’s products with others (Ozyasar, 2011). Through effective product differentiation, the company may be able to gain a larger market power and market share, which will in turn boost the company’s bottom line in terms of profitability.
Effects of government policies on employment and production
The main effect of government policies on employment as well as production is that it limits and in some situations it promotes production which is of great importance in creating jobs for the expanding economy. Amy (2011) noted that government policies may serve to limit or enhance growth; these policies could intervene and influence the production process positively or negatively. For instance, assuming that a particular product is harmful and detrimental to the citizens of the country, the government will regulate the production of that particular product to limit its production for the purposes of protecting its citizens/the public. In so doing, involvement by the government would serve to reduce the production, which will in turn affect employment in some way by reducing employment in the industry in which that product was being produced (Amy, 2011). Conversely, if a certain product is beneficial to the public, the government may promote its production, for instance, by offering subsidies or financial support, which would in turn increase the manufacturing of that product. As a result, the production of that product would increase and more employment opportunities would be created in that sector (Amy, 2011). Through such government policies, Wales (2010) pointed out that the operations within the market economy are set to reflect not just the customer needs, but also the greater good of the country.
The potential effect that government policies could have on microwaveable foods company pertains to quality of the foods manufactured by the company. Microwaveable foods company produces foods which are thinly processed and packaged in an appropriate manner. Government intervention is essential to ensure that this company produces food products that are actually of satisfactory quality; foods that are fit for human consumption and would not bring harm to the consumers. It is therefore important for microwaveable foods company to adhere to the relevant government regulations and rules pertaining to the manufacture of quality foods. If the government does not interfere to ensure the production of quality foods, microwaveable food company may produce food products of substandard quality that may be damaging to the general public. As such, government interference/involvement is necessary to ensure the least satisfactory quality is maintained by the company. If microwaveable foods company does not follow the government regulates for instance by producing food products of acceptable quality, the company may be closed and render the company employees jobless.
Government regulation is needed to ensure fairness
Regulation by the government to ensure there is fairness in the frozen, low-calorie microwaveable food industry is needed. If there is no regulation by the government, cartels as well as other sorts of organizations may exert monopolistic power, increasing the costs of entry, and restricting the development of infrastructure (Coglianese et al., 2010). If the industry is unregulated, companies could produce harmful externalities without any consequence. In turn, all these would result in stifled innovation, diminished resources, as well as minimized trade. Through regulation, intervention by the government addresses these issues directly (Coglianese et al., 2010). Moreover, the government intervenes to ensure fairness in the industry through minimum wage laws and anti-discriminatory laws. These laws ensure that companies cannot employ and dismiss people because of their age, gender, or race. Minimum wage laws ensure that people are not exploited and paid slave wages; they ensure that a worker is paid fairly for his or her work, hence promoting fairness (Amy, 2011).
Government attempts to fight market inequities through subsidies, taxation, as well as regulation. The key reasons for government intervention in a market economy are to promote general economic fairness and to promote other objectives for instances advancement and national unity. Maximizing social welfare is in fact the best understood and most common reason for government intervention in markets. Two examples of this include regulating negative externalities such as pollution and breaking up monopolies (Amy, 2011). Moreover, the government also intervenes in order to reduce the damage that naturally occurring events cause. Inflation and recessions are essentially part of the natural business cycle and they could have a destructive effect on people. In cases such as these, the government intervenes through subsidies and by manipulating the supply of money in order to reduce the harsh, unforgiving impact of financial forces on its citizens (Coglianese et al., 2010).
Complexities under expansion through capital projects
Capital projects are understood as projects which would create benefits over the long run. For example, building a new manufacturing facility or purchasing a new office buildi...