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Long Term Investment Decision By A Firm

2013 words - 9 pages

LONG TERM INVESTMENT DECISION BY A COMPANY

The producers of low calorie microwavable food have been expecting a change in price and they want to choose the price strategy which would make their product less elastic and responsive to changes in the prices, then the company should make careful analysis of the entire market situation. The company should look for the substitute goods in the market and their pricing strategy. Higher the number of substitutes are available, higher will be the chance of rise in elasticity of our low calorie microwavable food. The buyers should not have many options to buy from the market. However, if there are only few substitutes available, then the producers ...view middle of the document...

It is the policy related to the money supply and the interest rate in the market. Higher the money supply in the market, higher would be the chance that people would be able to buy more of their product. This is because people would have more money in their hands to spend in the market. Higher the interest rate charged by the bank for borrowings, lower will be the investment in the market. Therefore, producers should not look for any expansion of their business unit under such conditions. (Lister, 2011)

If there has been anticipation by the producers that prices would rise in the future, then they may like to make their product simply unique in the market either by introducing some scheme or free offer or by increasing its quality. For example, people who like to consume pizza (which is a low calorie microwavable food) in restaurants; they take out pizza from restaurants and grocery stores; they make their own at home; and they buy frozen pizza for quick, convenient meals. Sales of pizza products are increasing in the U.S. at a rate of 11 percent annually and sales top $30 billion, up from $17 billion in 1994. As a result, developing and introducing a new pizza product requires sophisticated marketing and marketing communication. Since, after 2008 crisis, the unemployment rate has not reach to its pre-crisis level, but it’s still rising. Unemployment rate is related to the inflation rate in the economy through the Phillips curve. Higher the inflation rate in the economy, lower will be the unemployment. Reduction in unemployment rate would have effect on the productivity level. Therefore, in anticipation of price increase in the future the firm should start cutting down their cost from now onwards so that they won’t face much problem of sales in future. For that, they may reduce labor employment in the firm. (McKinsey, 2013)

The U.S. government has set many business regulations in place to protect employees' rights, protect the environment and hold corporations accountable for the amount of power they have in this business-driven society. Government may regulate the business only when it thinks that there is some problem caused by the business to the society or to its employees. Most important government regulation is in terms of laws pertaining to the employment and the working conditions. In case of low calorie microwavable food item, there is not much need of government regulation as these laws would add to the cost and the production time of the items. Such laws pertain to minimum wages in case the wages given to the workers are not according their efforts. Moreover, in case safety and health conditions at workplace are not properly maintained then als government interferes in the production unit. Government set up laws which firm owners need to follow to make the production process smooth. Some of these regulations stand out more significantly than the others because of their relevance to every U.S. employee and consumer. Some of the...

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