Example Of Research Paper On Ling-Term Investment Decisions
Type of paper: Research Paper
Topic: Politics, Government, Company, Finance, Business, Investment, Law, Money
Government Policy and Irregulation in Relation to Low Calorie Frozen, Microwavable Food Company
The managers in the low calorie, frozen microwave Food Company should follow the plan of getting the elasticity of demand. It shows the responsiveness of quantity demanded in respect to the changes in price. Demand of a product is dependent on the pricing strategy that a company follows in addition to other factors. The factors include the luxury or necessity, availability of close substitutes, the cost of switching off, tastes and preferences of others (Nguyen, 2012). A necessity product has an inelastic demand. It refers to a state of affairs whereby a unit increase or decrease in price of a commodity leads to less than one dollar change in the quantity demanded of the commodity (National Intramural-Recreational Sports Association, 2009). The order of a luxurious commodity elastic. It means that a unit change in the product price leads to change in the amount demanded of a product by greater than one unit. For example, salt has inelastic demand whereas jewelries and cell phones have an elastic demand. The price elasticity of low-calorie microwave food items provided in the preceding assignment was -10.Price elasticity is given byOwn price elasticity (ep) = ∂Q∂P × PQ ∂Q∂P = -10, P = 8000, Q = 131000Where:P is the priceQ is the quantity demandedOwn price elasticity= -10 x 80000131000
A one unit change in price leads to -0.61 changes in quantity demanded which is less than one. Therefore, the low-calorie microwavable food has inelastic demand. It means that change in price does not cause a huge shift in the quantity demanded (Freeman, 2010). Despite the inelastic demand, the company must consider other factors before raising the prices. Presence of substitutes can affect the request for a commodity in case the rates changes. There are many sellers of low calorie in the market though they have distinguished features. Customers can switch off to those other commodities in case of price increase of a product that has substitutes. Before the company decides to raise the price, they should consider the available alternatives and make a rational decision from there.
The government sets many rules and regulations that guide the businesses. Companies change their operations in case the government changes their rules and regulations. The policies and regulations made by the government have influence on the competitive advantage and the profitability of a business (Nardon, 2010). The business owners ought to conform to the rules established by the state and local government.
The government policies can affect the interest rates. An increase leads to increased cost of borrowing in the business community. It also leads to decreased consumers spending. Reduced rate of interests increases the investments, and the company increases their production. Printing of more money by the government leads to inflation and businesses are low in high inflation (Freeman, 2010).
The government raises money through taxation. Increase in borrowing and taxes imply increased spending. Increase in taxes discourages investment (Kendrick, 2009). Increase in spending reduces savings and less money directed towards private investment. In turn it leads to a reduction in private investment that reduces the production of goods and services. It later leads to the reduction of job.
The trade regulations, requirements for permits and licenses, and the federal minimum wage influence the government. Businesses spend a lot of money complying with regulations. It proves to be less efficient and unnecessary. Fair and effective controls, on the other hand, promote growth of the business.
The government policy is dependent on the current political culture. Plan formed in a country with a stable government differs from those built in an unstable state. A steady political system can make business-friendly decisions. They promote local enterprises and attract foreign investors. A weak system offers challenges that compromise the government ability of maintaining law and order. It creates adverse impacts on the enterprise environment.
Some policies implemented by the government changes the social behavior in the business climate. For example, the government can grant subsidies for companies using renewable sources of energy and impose taxes on those using carbon based fuels. It can also underwrite the development of current technology that brings appropriate changes. Imposition of more taxes and duties makes investors loose interests in those sectors. Exemption from taxes and obligations triggers investments that generate growth.
Favorable government policies will have positive effects on low-calorie frozen company. Reduced rates of interests will lower the rate of borrowing and thus it will encourage the company to invest more. Reduced taxation will mean more money for spending and thus increasing the job opportunities of the enterprise. Trade regulation ensures that the company complies with the set standards. The company will produce up to date products and thus attracting customer loyalty. Maintenance politically stable environment will encourage investors and thus promoting the company.
In the determination of fairness in the low-calorie frozen business, the government regulation is required. Intervention of the government in the markets addresses the issue of inefficiency. In case of an optimal efficient market; there is perfect allocation of resources to those that t need them in relation to the amount they require. The size of inefficiency is different because some may have excess of the resource whereas others do not have. It can take various ways. Their government, therefore, tries to curb these inequalities by regulation, provision of subsidies and taxation. Many of the governments may have a combination of different objectives when they intercede in the market.
Involvement of the government through business regulation helps in maximizing social welfare. Cartels and other types of organizations can yield monopolistic powers in unregulated inefficient market. It leads to increased costs and limits infrastructural development. Lack of regulation can result in businesses producing negative externalities without consequences (Nguyen, 2012). It leads to reduced resources, muffled innovation in addition to reduced trade and the corresponding benefits. Intervention of the government through regulation directly addresses these issues.
Intervention of the government minimizes the damage caused by naturally occurring economic events. They include inflation and recession that have severe effects on the citizens. Intervention of the government involves subsidies and manipulation of the money supply. It minimizes the punitive impact of economic forces on its constituents.
Government intervenes so as to provide public goods. Any individual does not own depletable commodities such as roads (Freeman, 2010). There is no price attachment to the use of public property and have collective use. There can be quick depletion of such resources, and intervention of the government ensures no depletion of such resources.
Involvement of government in the business promotes economic fairness. The government tries to relocate funding from the wealth to those in need through welfare programs and taxation. It also used the employment laws to protect particular segments of the population. It also regulates the manufacture of certain commodities so as to ensure the wellbeing and health of consumers (Temasek Foundation, 2013).
Government can intervene in the market in promotion of other goals like national unity, and advancement majority of the people believe that the government ought to provide a military for protecting the citizens (Nardon, 2010). It signifies a form of intervention. Growth of a vast and impressive military increases a country’s security and also acts as a source of pride. Such an intervention is very cherished able by the government officials.
Examples of government involvement are the compulsory KEBS mark in all the foodstuffs and Diamond Mark of Quality to ensure that the quality of the products is up to standards.
Firms may have inadequate funds. A capital project requires a significant outlay of cash to build, maintain and improve an asset. It includes assets like structure, intangible investments like portfolios for an information technology firms and equipments. Capital investments are necessary for growth within the company and a unit of government as a state. Low calorie frozen company can avoid the problem of insufficient funds. Funding such as bonds and loans are necessary for covering the investment associated expenses (Kendrick, 2009). They involve a calculated risk undertaken hoping that the asset will pay off.
Some highly capital intensive projects end up backfiring causing massive losses. A capital investment needs not be necessarily equipment or land. It can be in different forms. For the low calorie frozen company, they can set aside some mere amount of money in interest bearing account. The resources will not be used to cover the expense incurred by the business and, therefore, generates additional revenue by accruing interest rates. The initial amount used to open up the savings account is the capital asset, and the realization of benefits will be each year that makes the asset to be a capital investment.
The convergence of the interests of stockholders and shareholders depends on many forces. It makes the managers have interests of maximizing a corporation’s profits. Introduction of competitive pressure leads to decline in the price of stocks for the companies that are not performing. It later leads to proxy contests and takeovers. The remuneration management for many corporations remuneration has connections with the performance. Managers are regularly awarded us stock options that gain value with an increase in the price of shares. It encourages them and gives them the interest of maximizing the stockholder’s welfare. The shares of the corporate owned by many shareholders and large institutional holders of banks, mutual funds, pension funds and insurance companies. Such organizations employ analysts, and there is a regular study of stock performance. The non-performing companies taken out of the institution’s portfolios that caused reduced price of the stock. It later produces the dismal of the current management. Such a convergence increases the profitability of a company. Many companies who have engaged in convergent interests between the shareholders and the managers have realized high profits.
Boubaker, S., & Nguyen, D. K. (2012). Board directors and corporate social responsibility. Basingstoke: Palgrave Macmillan.
Elms, D. K., Low, P., World Trade Organization., & Temasek Foundation. (2013). Global value chains in a changing world.
Freeman, R. E. (2010). Stakeholder theory. Cambridge University Press.
Kendrick, T. (2009). Identifying and managing project risk: Essential tools for failure-proofing your project. New York: AMACON.
National Intramural-Recreational Sports Association (U.S.). (2009). Campus recreational sports facilities: Planning, design, and construction guidelines. Champaign, IL: Human Kinetics.
Steers, R. M., Sánchez-Runde, S. C. J., & Nardon, L. (2010). Management across cultures: Challenges and strategies. Cambridge [etc.: Cambridge University Press.