Today, people are more concerned with what they eat as they have gradually become conscious of the effects of food on their bodies and the potential effects on health. Low calorie foods are considered healthy making their demand so high. The public and private institutions have their employees provided with healthy foods whereas families prefer them in a bid to prevent obesity and overweight issues in the community. This essay will look at the plan for organizational managers anticipating price increment, government policies effect on employment and production, the need for government involvement in market economies, the complexities of capital expansion and the creation of convergence between stockholders and managers.
Plan for pricing strategy
The company has considerable market power as compared to the competitors within the same industry. They should adopt and use the value based pricing to set the prices for their products. In value based pricing, the customers will not change their views on the quality of the goods and the associated prices. This can be achieved by differentiating the products from others within the industry. Product differentiation will help maintain the customers even when the price changes as they cannot find a direct substitute for the same. This is because the price elasticity of the products is inelastic; an increase in price leads to little change in the amount of the products demanded.
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Effects of government policies on Production and Employment
Governments, through their economic policies and regulations influence the pricing, profitability and the performance of the businesses. The effects that government policies can have on the production of the products include: prices of the raw products, taxation on the products and regulations such as provision of licenses and periodic government inspections on products that directly affect one’s health. These policies are meant to make sure the products being provided by a particular company are safe for human consumption. However, they take a lot of time and money to meet them. As a result, companies may not be able to engage in production of goods if the cost of meeting government requirements is high and the probable selling prices will be low. This may also lead to production of expensive goods leading to reduced demand by the consumers. Companies may also decide to reduce the quantity of product output given the high prices and the potential stall of the products in the market (Shapiro Irons, 2011). On employment, governments set minimum wages for employees and also provide other guidelines such as health insurance and risk allowances. These regulations and guidelines lead to reduced employment rates as companies avoid incurring any additional cost so as maximize profits.
Effects of the government policies on my business
Government policies and guidelines are likely to make the cost of production of the low calorie frozen goods high as it may be a requirement that products are periodically inspected. Acquisition and renewal of licenses may also lead to additional costs which will ultimately lead to the increased price of the goods as the burden is passed on the consumers. Taxation rates by the government will be a basis upon which the prices of the goods are determined. The reduction of sales due to the increased prices and the other costs incurred by the companies can lead to the companying laying off some of the employees so as to avoid making losses.
Need for Government regulation to ensure fairness
The government is required to regulate and ensure fairness in the low-calorie, frozen microwavable food industry. This is because the food industry produces goods that directly affect the health of the citizens. If there was no involvement, there is possibility that companies would produce poor quality goods and tag them with high prices so as to get excessive profits. The governments also play the role of a watch-dog for the consumers who do not have the authority to punish those who produce substandard goods (Coase, 1974). Therefore, the government’s involvement curtails the possible abuse of power by the producing companies. This also helps maintain a healthy citizenry as the food they consume is safe and fit.
The reasons why governments involve in market economies
According to Coase (1974), Governments’ involvement in market economies is due to a number of reasons such as; addressing inequities, ensuring social welfare and major economic factors that business firms cannot control. Inequities in the market economy may be due to skewed availability of resources to some firms in an industry and can be combated by taxation, subsidizing resources and raw materials and regulations that prevent such skewedness. In regulating the social welfare, the governments try to prevent the emergence of monopolistic powers which may secretly obstruct other businesses from entering the market. Cartels may also hinder the development of infrastructure in certain places so that other businesses find the environment not conducive for operations. Major economic factors that cannot be controlled by businesses include economic recession and inflation and they force the government to come in so as to shield their undesirable effects on the citizens. This may be done through subsidies and the control of the cash flow within the markets.
Examples of government involvement in a similar market economy
An example of the government involvement in a food market is the ban by Food and Drug Administration (FDA) on the use of per-fluorinated chemicals (PFCs) in food packaging in January 2016. It was announced by the organization that it had banned the use of the PFCs after a petition by a group of environmentalists. The group cited the length of time the PFCs last in the environments as well as the health implications of the same to the people who eat foods whose packages have the chemicals. Some of the health effects include effects on hormones, neurological systems and the body immunity. PFCs have been used in packaging materials for pizza boxes, pastry wrappers and paper plates
Another example is the alert given by FDA for the detention without physical examination of products from Japan. This alert was issued due to the possibility that the products may have high levels of Radionuclide elements posing a risk to the citizens of the United States. The alert was a result of the suspicion that the foods may be contaminated following the numerous directives by the Japanese government on the bans of foods form areas affected by the earthquake which destroyed the Fukushima Daiichi nuclear plant (FDA, 2016).
Complexities that would arise under expansion via capital projects
Capital projects require a lot of planning, documentation, communication and careful management to pull them off successfully. These projects come with increased costs of production as time goes by. Expanding a business requires high investment in the infrastructure that can adequately accommodate the extra products so as to reduce possible losses. Such infrastructure includes assets such as machinery and packaging, storage and transportation facilities as well as more labor to help meet the requirements. Capital projects require so much money and freeze the business revenue during the period of their expansion and the immediate after expansion period. So as to reduce such complexities and avoid throwing the business into instability, the management should consider research and use of consultants. The use of consultants and contacting qualified people to conduct research helps determine the scope of the business, its ability to cope with the expansion expenses and strains and the predicted benefits of the expansion via capital projects. This should happen at the beginning phase; the planning period of the expansion. Information form consultants and research can also inform the management on the priorities to make when expanding business that the coping strategies they need to adapt during the expansion and the immediate post expansion periods (Capital Investment, n.d).
How a company could create a convergence between the interests of stockholders and managers
Stockholders and the managers are two forces within a firm that greatly determine its success and performance. Time and again, the two groups have diverging interests that put the business at the risk of performing badly or even closure. The stockholders main interest is to increase the value of the firm while the main interest of the managers may not be that. The managers may look to increase their pay, work towards the realization of increased revenue and since they do not own the business they may not risk making high potential investments. Companies need to create a convergence between the interests of the managers and the stockholders and this may be made possible by selling their shares to other large businesses and partnership which will periodically analyze the performance of the business on the stock market. The owners of the business can also decide to pay and reward the management depending on how they perform and the general performance of the business (O’Sullivan & Sheffrin, 2006). Using the two methods would make managers work hard to increase the value of the company so as to earn more and retain their jobs. The convergence of the interests of the managers and the stockholders increases the profitability of the business which will then lead to the increased value of the business; a common goal for both parties. Contracting the managers can also be used where they retain the job on performance basis. The businesses can also employ the use of computerization in their management systems so that the managers will not have the chance to provide manipulated information to the stockholders so as to satisfy their interests.
References;
Capital investments (n.d). Capital Investment Decisions. Retrieved Dember 1, 2016 at: http://www.capitalinvestment.co.uk/capital-investment-decisions.php
Coase, R. H. (1974). The Market for goods and the market for ideas. The American Economic Review, 64 (2), 384-391
Food and Drug Administration. (2016). Import Alert 99-33. U.S Department of Health and Human Services . Retrieved December 01, 2016 at: http://www.accessdata.fda.gov/cms_ia/importalert_621.html
O’Sullivan, A., Sheffrin M. S. & Perez S. J. (2008). Microeconomics: Principles, Applications and Tools. Pearson Education.
Shapiro, I. & Irons, J. (2011). Regulation, employment and the economy: fears of job loss are overblown. Economic Policy Institute, 15
