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Introduction
The low-calorie frozen microwavable food company has an oligopoly market structure. This company plans to expand. Thus, it has to formulate long-term budgeting decisions. However, it is facing increased costs of major ingredients. Therefore, this discussion has to outline a plan that managers can follow in anticipation of the rising prices. It will examine government policy effects on production and employment before determining the relevance of government regulations in ensuring fairness in the industry. In addition, the discussion examines major complexities that are likely to arise under expansion via capital projects before suggesting ways to create convergence between the interests of stockholders and managers.
Plan for Managers to Raise Prices
The fact that the low-calorie frozen microwavable food company is experiencing price increments in its major ingredients implies the likelihood that the companys profitability will be negatively affected. In particular, the company is experiencing expense increment. Hence, it may have a forced option of raising its products prices for it to assure itself of profits. However, the issue of price elasticity puts the option of increasing its products prices unviable. Therefore, the company has to formulate a plan to follow in raising the prices. Choosing the pricing strategies will enable its products to respond favorably in the less price elastic context.
First, according to Lewis (2011), the company needs to revisit and examine the history of consumer behavior in the event of fluctuating products and services prices. This strategy will help it to gauge the level of customers willingness to pay more for the products. The plan will enable the company to regulate its prices in a manner that it will not be too high to a point where customers may not be able or willing to buy.
Precisely, the company has to make a decision on the acceptable pricing rates that will be comfortable to its consumers while at the same time making profits. Therefore, the company has to decide to set prices that avoid high elasticity (Becker, 2013). Concisely, the company has to make sure it increases its products prices. It has to make consumers realize and acknowledge the situations that have led to the increase in prices. The company may communicate the same matter to consumers telling them the circumstances that have led to the raising of prices. If the company does not create this awareness, it will lose customers loyalty and preference to its few competitors in the industry (Borychowski & Czy|ewski, 2015).
In addition, failure to communicate will make customers think that the company no longer cares about them and that the increment is a way of exploiting. In the same way, the company has to improve its products qualities to beat its competitors in terms of product quality. When the prices are increased, clients expect the quality to be higher or better. Customers are attracted to products that are of high quality. Even if the prices are higher than the prevailing market charges, they may go for quality in disregard to price.
Government Policy Effects on Production and Employment
Traditionally, policies that governments impose on production and employment influence their operations. Governments regulate the criterion of product processing and production. In addition, it regulates employment strategies to be followed by companies. For example, governments have the mandate to formulate policies on specific ways that some foods should be processed as a way of protecting consumers from harm related to the foods.
Therefore, the low-calorie frozen microwave company is obliged to meet these food-processing standards set by governments. In case the company contravenes the policies, it may attract lawsuits. Verdicts thereof may impound the company to pay heavy court fines and/or even be forced to close business. Similarly, the company has to put issues of public health and community social responsibility upfront. For example, it has to manage its solid, liquid, and gas wastes according to the set policies to avoid pollution to environment or causing harm to the ecosystem.
Government policies affect employment. These policies affect companys selection and recruitment of its employees. For example, forms of discrimination in terms of gender, disability, and race cannot be entertained. In terms of remuneration, governments have set remuneration levels to be awarded to employees. Illustratively, a government may come up with minimum wage and other benefits endowed to employees where all companies must observe these regulations.
In case they contravene, then they may be subjected to law proceedings. In addition, governments have guidelines that protect employees against dismissals and infringement on their rights, protection against employing minors, and work environment safety. For the low-calorie frozen microwavable company to have smooth operating environment, it must comply with these policies. This move will influence its reputation positively.
Government Regulation and Fairness
As a way of government having power over any operations under its jurisdiction, Bernstein (2015) reveals how it also makes rules and regulations that administrate companies and organizations activities. Government involvement in any given industry promulgates fairness in terms of competition among the players in the industry. Because companies in an industry have different capacities, they may use their capabilities to obliterate unfairly against their competitors, especially when they are left to act without government intervention. Hence, government regulation to ensure fairness in the low-calorie and frozen microwavable food industry is needed.
For instance, the industry may come up with dubious and unfair competition strategies. Some may choose to engage in pricing strategies that are aimed at predating for customers. For example, a company that enjoys large economies of scale may set prices too low as a tactic of attracting many customers, a move that may be unfavorable for the survival of other firms. Since such practices threaten other companies, they may cause them to exit the market. Therefore, the government is needed to come up with rules and regulations to shield smaller companies from unfairness posed by giant businesses.
Additionally, the government comes up with a set rules and regulations that prevent some companies that may opt to seek favors that may permeate their success in certain fields of their operations (Bernstein, 2015). For instance, such cases arise when a company gives bribe to government law implementers and enforcers to either evade public scrutiny or gain some favors. This situation disfavors small companies that may not afford to bribe for such favors.
Thus, they are disadvantaged. In any given field, corruption is illegal and unethical. It leads to unequal resource distribution. Companies that are in a position to bribe law regulatory offices have an advantage against small ones that do not take part in such practices. They misuse power by taking advantage of corruption loopholes. Therefore, the government must formulate rules and regulations to make sure that all resources are distributed equally to stop corruption (Callan & Thomas, 2012).
It must also ensure that it prosecutes companies and individual associates of corrupt practices. On the other hand, companies must uphold good practices by avoiding corruption and unfair strategies, which they have adopted to maintain their reputation. As a result, they will avoid brushing shoulders with the law. Another way that governments must get involved in setting rules and regulations to ensure fairness is through shielding consumers from exploitation.
Capital Projects Complexities
Capital projects are long-term investments that are undertaken aiming at adding, building, or refining capital-intensive ventures. These projects have numerous complexities. First, compared to other investments, they require large investment costs and thorough planning. To manage its capital project, the low-calorie frozen microwavable food company must consider this complexity. Specifically, the company must gather enough capital to cater for its expansion before it can start rationalizing on the capital project option (McGuigan, Moyer, & Harris, 2014).) Contrary to this case, the company may come up with white elephant projects due to capital constraints.
As a result, capital projects necessitate sufficient capital. With poor planning, a company cannot complete its capital projects. Therefore, the low-calorie frozen microwavable food company must first consider planning to attain positive results in all areas before engaging in the projects. Hence, it must budget for proper resource utilization and ways of supplementing the budget in case of deficits. In addition, planning will enable the company to predict any problems and shortcomings that might inhibit its success.
Planning enables not only timely project delivery but also help in avoiding unnecessary wastes. Highly knowledgeable and skilled personnel are essential in effective management because the projects technicality and execution complexities cannot be successful, unless on-board qualified personnel are available to handle the venture. Therefore, the low-calorie microwavable food company must consider taking highly skilled and qualified personnel to be in charge of the project. As a result, the company will achieve the best results.
Creating a Convergence between the Interests of Stockholders and Managers
Conflicts of interest have always ensued between stockholders and managers. Often, the conflicts make it hard for the affected company to achieve its objectives and goals. Therefore, it is prudent for companies to arrive at a convergence between stockholders and managers interests. A strategy that the management can employ to guarantee convergence involves remunerating managers on performance basis. Particularly, stock options can be awarded to the company to make sure it focuses on growing shareholder value.
Hence, when share prices appreciate, the value of stock improves, leading to high profits and hence high dividends in line with stockholders interest. On the other hand, managers may opt for various priorities pertaining to organizations direction. For example, when they are also given stock, they must ensure its growth in value. They are also turned into stockholders. This situation aligns their interest with that of the initial stockholders.
As a result, both managers and stockholders will harmoniously work to achieve a common goal (McGuigan et al., 2014). When the above strategy is applied, it creates a smooth working environment. It also translates into excellent performance. Thus, the company will be in a position to harness more stockholders. As a result, expansion funds will be available.
Conclusion
The discussion has highlighted various ways the low calorie-frozen microwavable company can take to effect its expansion plans. It is clear from the discussion that this company has to regulate prices and improve the quality of its products and profitability. Government regulations are there to safeguard it from market unfairness. Therefore, the company must adhere to the set rules and regulations. To reach managers and stockholder convergence, the companys management must align its interest by giving managers stock options for them to become stockholders. Lastly, for the company to solve the issue of capital project complexities, it must employ highly qualified personnel while at the same time doing project strategic planning through budgeting and contingency planning.
Reference List
Becker, G. S. (2013). The economic approach to human behavior. Chicago, IL: University of Chicago Press.
Bernstein, M. H. (2015). Regulating business by independent commission. New Jersey, NJ: Princeton University Press.
Callan, S., & Thomas, J. (2012). Environmental economics and management: Theory, policy, and applications. Boston, MA: Cengage Learning.
Lewis, M. S. (2011). Asymmetric price adjustment and consumer search: An examination of the retail gasoline market. Journal of Economics & Management Strategy, 20(2), 409-449.
McGuigan, J. R., Moyer, R. C., & Harris, F. H. (2014). Managerial economics: applications, strategies and tactics. Stamford, CT: Cengage Learning.
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