Long-Term Investment Decisions - Assignment Example

Question one

The low-calorie frozen, microwaveable food industry operates under a monopolistic market structure. The reason being that the products offered in this company have unique qualities and different prices can be charged reflecting on this uniqueness. Research shows that the industry is contracting and therefore, the management should ensure they remain to be competitive by continuous improvement of production processes and strategic planning (Howard, Hunter & Wislo, 2011). The industry can be competitive by the use of product differentiation strategy as well as compete on their capabilities and endorsements. In the process of raising product`s prices, it is important for companies in this industry to ensure they implement strategies that will result to attracting new customers and retaining old ones at the same time maximizing the profits. The plan managers in the low-calorie microwaveable food industry need to implement include various strategies in attempts to make prices of their products as inelastic as possible.

The first step is to create a cost - based strategy which involves low cost operations, marketing and distribution of products. This strategy will ensure the cost incurred in these business practices are low and therefore, increase in the prices of products will not hit the company that much. This is a strategy many companies are adopting as the commodity`s prices and the cost of production continues to rise. Companies should plan a low delivery cost tactic in its anticipation to cut down the costs. The company needs to consider procedures to cut the production cost and as the same time maintaining the customer expectations. For instance, the company may come up with a method of using a recyclable paperboard to keep the frozen food so as to minimize the cost. By doing this, it will help the company`s production costs to be low. Additionally, this will make the company to have a competitive advantage with environmental friendly customers. There will also be a benefit to the firm from using a cost-effective marketing strategy as it will help the company to focus on additional markets, and gain new customers (Is frozen better than fresh?. 2013). In this, the company will have increased the pricing power; if there will be a significant increase in sales.

Question two

The effects of government policies and regulations depend on the way these policies affects the cost of producing various commodities. In addition, it will also depend on how these costs connect to final retail prices and effect on influence of the preference for the products by consumers. The first category of these policies are the farm assistance schemes such as the federal price, income support programs and also the producer-funded marketing orders as well as the research and promotion conformities. These programs have affected the supply of many foods. Some of marketing orders sets up quality standards for the supply of products and the efforts of promotion programs influence the commodities’ demand. Food safety regulations are other policies that affect production of commodities. These include the inspections of processing firms and their products and the approval process. These regulations can have an impact on the availability of products and their prices and can also affect the products demand. The information on regulations such as labeling requirements, the advertisements boundaries, the standards of the identity and the products grades are the other policies. These influences the information customers get about the products thereby affecting the demand. The other policies include the worker safety, trade policies or even restrictions on mergers. These may also influence the availability and the prices of particular products.

Government policies may also have an impact on the employment in that companies are expected to recruit experts in specific fields. For instance, in a food industry, employees have to be professionals in the field failure to which will lead to the closure of the industry and banned from operating. Other policies include the equality in the employment process in that any qualified person should be given the opportunity regardless of the race, gender and other forms of employment discrimination. Working conditions should also be accommodative for every employee. This ensures the health and safety of employees have been addressed to minimize the negative effects on them (Donsophon, Jhundra-indra & Raksong, 2015). Child labour is also unacceptable in the employment acts and there is no trading of commodities where this behavior existed. The government policies are important as they lead to production of products of high standards that are free from health effects on the consumers. On the other hand, these policies can have negative effects on the company in that high costs will be incurred in ensuring these standards have been adhered to. In addition, there can also be losses incurred since products produced not following the stipulated standards can be result into wastage by being banned to be sold to local customers or traded in the foreign countries.

Question Three

Government should continue with its process to regulate the food industry. It is difficult for competition to function effectively when there is no both well structured and well managed market place. The government is the only entity that can ensure there is maintenance of the market place in a better condition (Radu, 2013). The government regulations give a solid legal foundation, which ensures there are patents, contracts and the property rights in the business world. In addition, government regulations provide an opportunity for a stable currency as well as the national security. When there is national security, companies are protected from receiving threats from foreign countries which disrupts their operations. In the economy, private companies are regarded as teams in the field, but it is the government duty to ensure it controls their operations. Government plays a crucial role in maintaining the market place and it is true that no any other entity can manage to do this.

Government regulations are required in the frozen food industry so as to avoid monopolization. For example, Heinz and Kraft planned for a merger which might have a major effect on the frozen industry (Howard, Hunter & Wislo, 2011). These regulations ensure that companies function in accordance to the standards of products production. Furthermore, this will minimize the costs incurred by the company in case it is held responsible for a case involving effects from its poor production outcomes. Government regulations also prevent conflicts that may occur in between the trading companies demanding their products are the best. Setting up the standards will ensure the products that fail to meet them will be disqualified. Government policies should be present in any food processing plant such as Heinz, Kraft, Kellogg, Sara Lee, General Mills, Campbell Soup, Heinz, Hershey, ConAgra, McCormick, Ralcorp among others.

Question Four

Financing any project can sometimes be complex depending with the type of the project. Getting enough finances to run the project can sometimes be hectic and the process of acquisition can be difficult to comply with. After the cash has been acquired, the other problem comes in the management of these funds. In many companies, there is misappropriation of funds which is a challenge in the process of project implementation. Many times, the cash set aside for project implementation is always misused thus making the project to last for so long without being completed. Another problem comes in the allocation of duties to project participants (Final Report, 2008). Although experience and professionalism can play a major role in determining the position of each and every person in the project, there can be complexities when it comes to allocation in sensitive departments such as cash management. The company should ensure it employs qualified individuals during the early planning stages of the project. There should be a preparation of a qualified design program to develop the project plans and specifications. The company needs to give more refined estimates at the design process so as to develop the budget in a precise manner.

Management needs to review the design plans as well as the specifications to ensure the clarity of the design given. In addition, reviewing of the project elements to make sure they are made in the most cost –effective manner. Ensure the selection of project contractors has been made in a better manner. The company also needs to monitor and evaluate the project after it has been completed to see whether the outcomes are as it was expected. The disadvantages associated with the project are such as time consuming, limited liability on the project designer to assess costs and the schedule during the development stage of the product. The failure of assessing the project costs and schedules may result to the final product being more costly. There are also claims by contractors over the design and the constructability issues of the project; which can result in to adversarial relationships instead of coordination and cooperation among the contractor, designer and the state agency (Final Report, 2008).

Question Five

Both managers and stakeholders play a crucial role in the organization. Stakeholders are the owners of the organization or people who have direct or indirect influence on the firm. Their duty is to ensure the organization is running effectively and ensure value maximization (Stančić, Čupić, & Stančić, 2012). On the other hand, managers play the major roles of controlling, planning, organizing the organization to make sure everything runs smoothly. A company cannot operate without a manager and in the same way the stakeholders are important since without them there would be non existence of the organization. Managers require their decisions to be followed by the people they lead since they are leaders of the company. They also initiate change and anticipate for it to be positively adhered to by employees.

Generally, stockholders are unaware of the amount of profits that can be generated by the firm. Therefore, they are forced to look for both divided and price appreciations. The management of a company is usually not held for maximization, but manages the company in a way that will satisfy the stakeholders the process termed as satisficing (Donsophon, Jhundra-indra, & Raksong, 2015). There is a possibility of divergence of objectives between the owners and the managers of a company. As stakeholders may be interested in increase in the firm`s value, the managers on the other hand may be having other interests. Managers may in a way be interested in their own returns and perquisites. In addition, they may be interested in the revenue growth instead of profits. In the interest of their security, managers may be more conservative in running the company and may end up foregoing the investments with a great potential that may encompass some of the risks.

Managers can end up believing that it is unnecessary to endeavor in to maximizing the company profits since, the ownership in a company is greatly dispersed making individual stakeholders to have a little power. Managers own only a small portion of the company`s stock, therefore, they may not be much interested in maximizing the corporation’s value. They may also fail to take the decisions to increase returns, as a severe reverse in the business fortunes may result to losing their positions and jobs. There are various instances that will create a convergence in between the interests of both the stakeholders and the managers making managers to participate in the process of maximizing the corporation`s value and profit. The fact that the corporation`s shares are owned by the large institutional holders, these organizations have a crucial role to engage analysts to regularly study the stock performance. Unfortunately, non performing companies can be sold from these institutions portfolios` resulting to decrease in stock prices. The poor performing companies are taken over by others, resulting to dismissal of the current management. Pressures brought by competitiveness may also result in to decline in stock pile for a poor performing company resulting to take over. In addition, the management remuneration is tied to the performance and managers are continuously awarded stock options that have value as there is rise in share prices. This pay for performance strategy makes managers to be interested in maximizing the welfare of stockholders (Stančić, Čupić, & Stančić, 2012).