Finance and Marketing Strategies - Assignment Example

Finance and Marketing Strategies Introduction The finance department is a need of immediate actions in order to boost the company’s profits. For instance, the management has opted to adjust its internal transfer prices in relation to the finance department’s costs. They have made the internal transfer prices to lie in the range of 1-2. Such case will make it easy for a company to adjust profits between different units. Additionally, it would help the business operation of the company benefit from different tax rates between countries. It is evident transfer pricing decisions influence the amount of tax that the firm has to pay. The paper shall discuss important financial decisions that could help positively influence the company’s decisions. 1. Transfer pricing It is inevitable in the company. The company has branches in Asia, Europe and the USA. The Companies trade with each other, and they establish a price for transaction. According to financial experts, it is a method that tries to minimize the overall tax bill and increase the general profits. To remain competitive and compliant, the company must manage effectively the issue of transfer pricing. The finance section’s tax department has a comprehensive solution that helps in management of every step of transfer pricing step. The company should improve its software provisions because transfer pricing depends heavily on data. Good software will assist the parent company in the US to manage both the external and internal sources. 2. Pecking order theory in reducing long term debt It is a model that demands the company to finance its own operation using internally generated funds. Managers prefer this model because it reduces the risk of under investment, which could result to long-term debt problem. There are scenarios where the company does not have sufficient funds to run its internal operations. Such case will see the company issue debts to finance the operations. Using pecking order theory, the company will avoid financing its internal operations using the external equity capital, which could cause long-term debt. 3. Share issue The company grants shares to the members of the public. In the US where the parent company operates, the government introduced Financial Accounting Standards Board. The board demands corporations to operate in restricted stock. It means the company has to value shares theoretically when granted. Literature reviews that concern finance indicates how there is no clear definition of increase in earnings and stock prices after aligning the interests of the employee and the employer in connection with share’s long-term effectiveness (Hinde & Sloman393). Shares are very important in the company, and shareholders should have pride in their holdings. The finance department has to come up with the best method to avoid losing of share value and how to manage the shareholders’ options. The best way for managing shares is for the company to hold its shares to near expiration. Additionally, the company should reduce risks and take profits when the stock moves up. It could do this by selling the outdated-traded calls or purchase puts verticals. The finance section should ensure the purchase of puts verticals occur in individual’s retirement accounts with interesting tax consequences. Finance experts argue that gains are tax-free while the losses are taxed. By waiting until the expiration date in order to sell the shares will reduce the value of options because, they have made premature exercises. If it happens in the company, there will be fortification of remaining time premium because of premature exercise. The method will be advantageous to the company because it will reduce the company’s liability to the shareholder when the company receives back the forfeited time value. Moreover, the company shall receive an early cash flow equal to the exercise price (Hinde & Sloman 393). 4. Dividend payments According to statistics, the numbers of companies that pay dividends have reduced over the years. Economists argue that it is reduce in the profits and increase in debts that cause the low payment of dividends. Additionally, the reduction in the propensity of companies to pay dividends is the cause of this reduction. They came to a general conclusion that the companies have started financing their operations using the pecking order theory. The pecking order theory prevents companies from financing their financial deficit using the external equity capital. To avoid seeking external capital is by reducing the amounts of dividends paid to the company’s shareholders. Pecking order theory will enable the company to reduce the propensity of paying dividends. Such measure will reduce the company’s amount of debt that finances the operations. Question 2 Marketing 1. Introduction The company is looking for marketing tools that would help in business simulation. Marketing will boost the company’s performance in the markets. The paper shall cover various marketing strategies such as pricing strategies, promotion strategies, logistic priorities, market segmentation, and product life cycles. 2. Pricing strategies The company may rely on penetration pricing. Such case will see the company setting low prices to increase sales and market share. Reduce in the price shall not stay for long, because once a company has taken over the markets, it increases the prices. The company may decide to reduce the price of tech1 manufactured in the US, in Asia. Tech1 goes well with the American market; however, it is not well in Asian markets (David 27). The marketing section has an option of skimming pricing. It happens when a company has set high prices in the initial stages and then reduces the prices as time goes by. It is a method of making the goods be available to a wider market. Experts argue that this is a means of skimming profits off the market, layer by layer. Furthermore, competition pricing is another alternative. The company may set prices in comparison to the competitors (Graham Et.Al 164). The company could use cost based pricing. The finance manager of the organization accounts all the cost of production and distribution. He then decides on which product would be for profit generation. It would be very effective in the Asian markets because the industry is volatile. Prices regularly change in Asia, and there is no set price for goods (Graham Et.Al 164). 3. Promotion strategies There are various types of promotion. The company could use advertising to market its products. The company has priorities. Advertisement would make these priorities be accomplished faster. For instance, if Tech 1 is from USA, the company has to do advertisements in Asia and Europe to market the products. It will increase the sales in the business after some time (Graham Et.Al 107). Apart from advertisements, the company may opt to use public relation as a means of promotion. It will be possible if the company develops a positive relationship with the public. Sales promotion would also serve as a promotion tool. However, it is only intended to increase sales in short term (John&David 5). The marketing section may use personal selling as a means of promotion. The employees of the company participate in selling the products one to one. Direct mail is another promotion option. It happens when an organization sends a publicity material to an individual within the company. Furthermore, internet marketing is cost effective form of marketing. The company will get a variety of options on the internet, such as banner advertisements and social media (Kotler&Keller 50). The table summarizes the promotional mix and how it will lead to an integrated marketing program (Stark). 1. Logistic priorities The company has specific priorities, For instance, the company would choose to deliver Tech 1 products to the US first because of various logistic strategy. Experts argue that, in order to implement effectively logistic priorities, the managers have to admit they would not be good to everything. By choosing to supply Tech 1products first in the US, the company will not serve the end-customers present in Asia or Europe. The company does so because it has priorities such as reliability and speed. It will see the level of profitability increase in the end. However, with an increase in profits, the company will experience long term damage to the supply chain’s ability to compete (Kotler & Keller100). The company has an obligation of considering cost versus service. To keep the customers happy and market the products of the company, the company has to lay down logistic strategies. The company should take advantage of good economic times to boost customer service. Such case will see the company distributing Tech 1 products equally among the three markets. The company will turn their attention to customers’ satisfaction during this period (Kotler & Keller100) Market segmentation There is a variety of ways in which the markets could be segmented. The marketing department should be in a position to determine the segmentation strategies that would benefit the company according to (Graham Et.Al 164). For the company, they would segment the markets according to cultural difference, features and quality, and price sensitiveness. The market can be divided as per the cultures of the people. The company shall use this segmentation strategy in the US. For instance, in the US, most people like to shop a lot. Such case could be pivotal for the success of the company, for example, the firm would opt to increase the supply of goods to the US markets (Graham Et.Al 212).The company would increase the quality of goods that go to the European markets. The management would categories the goods according to the European people’s favor as well as persuasive appeals. To make this easy, the company will just improve the quality of goods gong to European markets, and increase the features (Kotler & Keller100).The company would be sensitive in terms of prices when it comes to Asia markets. The company is aware the Asian economy is relatively behind the American economy. Therefore, the company has to understand the levels of income of the Asian people. It would then make prices affordable in the Asian markets (Kotler & Keller100). 2. Product life cycle It is a concept in marketing. Product life cycle describes the stages of production of a product (Riley 3). After understanding the concept, one would understand why some products do not reach the final stage. An organization could effectively implement the concept of product life cycle. The production team of the company would develop and launch a given product. After development, the team takes the product to the markets. It will see the growth of the product in this stage. The team will then experience maturity of the product. It is the stage where the sales of the product are almost in the highest stage. After going through all the stages, the team will experience drop in the sales of the product. It is the decline stage (Berk, Demarzo & Harford 300). There are strategies that would prevent a decline. These are marketing strategies. They will constitute the product extension. The marketing strategies include advertisements, price reduction, exploring new markets, and adding value. 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