Introduction
This essay will provide a plan for any manager anticipating increasing prices, analyze the primary impacts of the government on employment and production, examine the fairness of state policies, address the principal complications related to capital projects and offer a recommendation of how managers and stockholders can agree despite their interest.
Plan for managers
Virtually every food outlet from fast food stores to large cafes and schools’ cafeteria are offering low-calorie foods.
A business desires to maintain the price of its commodities as perfect inelastic under all circumstances. Hence, the pricing strategies should not affect how customers view or purchase the specific products (Inelastic, 2004). However, this demand exists in the case of Giffen or essential goods that buyers perceive to be of higher importance. Microwavable foods do not fit in this class of products.
The level of demand for the low-calorie food is determined by the market prices, the existence of close substitutes, the income of the customers and advertisements. Due to its elastic nature, the low calories microwave food lies in a monopolistic competitive market structure. In this market structure, there are always many buyers and sellers. The structure of the market allows consumers to shift from one product to another in the case of changes in price. Nevertheless, a player in this market structure can practice product differentiation to gain customers.
Importantly, the demand for low calories microwavable products is relatively not elastic. If the managers desire to keep the demand inelastic, the companies should strive to differentiate their products as much as possible. If the managers achieve complete differentiation, they will realize a constant demand for the products despite changes in price. The companies should ensure that their consumers do not locate close substitutes with ease. In this case, the purchase of the low-calorie foods will be inelastic.
It is true that a highly differentiated product has a higher chance gaining a significant market share. Thus, companies that want to realize continues sales and increased profits should practice product differentiation.
Impacts of government guidelines on employment and production
Mostly, people trust that the government should control the economy. In the modern world, a market is either regulated or unregulated by the government. According to Boettke (2012), the government should reduce its involvement in the economy. Although some private firms and scholars believe that the state should not involve itself in business activities, there should be some form of government regulation. There are some services and products that the government can offer better than private institutions, for instance, provision of public goods and services, imposing contracts, controlling inflation, creating employment and regulating externalities (Doval, 2011). Despite the functions, there are still discussions on the impacts of the government regulations on jobs and production.
The government policies to offer subsidies to businesses promote production activities leading to the creation of employment opportunities. Establishment and enforcing trading rules justifies the involvement of government in business activities. Also, the state reduces economic disparities for those with poor health or low incomes in the society (O’Sullivan and Sheffrin, 2006). In essence, the economy offers many chances to the citizens, but uncertainties do exist.
Requirement of government regulations in low calories microwavable foods
Government policies are essentials for the low-calorie microwavable foods. Specifically, the government should be involved in the market economy to control monopoly and mergers thereby preventing consumer exploitation through increased prices. It should monitor mergers and regulate the industry to bar the creation of exploitive monopolies. In case there are no government regulations in the low calories microwavable foods, price stability cannot be realized since high competition would result in constant price decrease leading to instabilities. Most importantly, some companies may introduce low-quality products to match the low market prices.
The first example is a case whereby the government regulates companies that produce numerous negative externalities like a firm that emits harmful smog. If the externalities do not pose harm to the producers, the company may continue with the production. Lin (2004), states that China the smog is very dense forcing individuals to wear protective gears. The second example, the state should control banking and exploitive monopolies. These include regulating cases of unfair business practice such as the activities of cartels.
Complexities under expansion through capital projects
At one time in its cycle, a business desires to expand, and it can do so through capital projects. Merging is a feasible method that most companies utilize to grow. Primarily, mergers aim at gaining a larger market share, getting access to a restricted market or inputs, risk sharing and increasing asset base. Additionally, mergers results since companies desire to raise capital for expansion. The complexities that arise in this case include the struggle for leadership between the business management and shareholders. Xie (2010) states that obtaining expansion capital not simple. Challenges include the raising the required amount, the cost of the capital and returns.
The company should consider sourcing capital that does not accrue high-interest rates. Additionally, there should be an explicit agreement between the business management and shareholders to avoid instances of power struggles. Further, the company should ensure to prepare a detailed budget that will help it determine the amount of capital required for expansion.
Convergence between stakeholders and managers
Most importantly, three forces can serve to bring together the interest of executives and stakeholders. The factors include strategic decisions, organization integration, and financial commitments. In any company, the management will have more controlling power than the shareholders. However, these two groups many have a conflict of interests since they strive to realize their particular benefits. The management is always seeking to gain high wages and other remunerations while the shareholders desire to achieve increased profits. The administration may oppose merging since the move may result in job loss. Xie (2010) insists that stakeholders will adopt any idea that has fewer risks.
Managers should earn according to their capacity to generate profits so as to converge the interests of the executives and stakeholders. In this case, the salary of the managers will increase by a percentage that reflects the realized profits in a particular operating cycle. Financial commitment requires the management of the company to be in a position to control the business finances including capital from donors to meet the needs of the stakeholders.
The Securities and Exchange Commission demands a financial statement from companies to determine their status in the market. The financial report also offers the stakeholders a chance to inspect the performance of the enterprise. These methods will help to create transparency and convergence between the interests of managers and shareholders.
Conclusion
Government regulation is vital in the market economy, and it is required in the low calories microwavable foods. Different interest between the managers and shareholders can be converged through the creation of detailed financial statements and paying managers according to their ability to generate profits.
References
Boettke, P. (2012). Is State Intervention in the Economy Inevitable? Ongoing economic woes demand drastic reduction in state intervention into free market, 28(2), 38-42.
Doval, O. (2011). Government intervention in economy and its impact on organizations’ development. Review of General Management, 13(1), 76-87.
Inelastic. (2004). Essential Economics, 134.
Lin, J. (2004). US buys Chinese goods and smog. New Scientist, 221(2953), 6.
O’Sullivan, A., Sheffrin, S., & Perez, S. (2016). Economics: Principles, applications and tools. Boston: Pearson Prentice Hall.
Xie, J. (2010). Board Governance and Managerial Short-term Incentives. Management Science and Engineering, 4(1), 1.
