Decision to make Long term investments

Long-term investment, need organizations to have a number of factor in place so as to prepare for unpredicted challenges likely to occur during their operations. These are factors that have direct effect on the achievement of growth initiatives of any company (Itturalde, Maseda & Arosa, 2011). For example, companies must decide on the effects of price increase on consumer demand or whether problems are likely to be encountered when they expand through capital markets. Companies must make sure they come up with strategic approaches towards the management of cost, price-setting and comply with government set rules and regulations in the industry in which they operate. This paper explains long-term decision plan that can be used by a low-calorie microwavable food company in making capital budgeting decisions such as anticipation of rising prices, government policies that affect their activities, importance of government regulations, complexities associated with expansion via capital markets, and the approaches that the company can use to create convergence between the needs of stockholders and managers.

A Plan For Anticipation of Rising prices in Selecting a pricing Strategy

When the prices of low-calorie microwavable food company products are elastic, it means that if prices are increased, there will be a significant decrease in the amount of demand. While an increases in the cost of raw materials warrants an increase in sales price in order to achieve the required profit margin, it is important that a more strategic pricing strategy should be developed that ensures customers are retained (Heil & Helsen, 2001). The developed pricing strategy should promote high demand for the low-calorie microwavable products and promote the company’s profitability. This can be achieved by increasing value of the products or increasing the amount of utility that customers can get as a result of purchasing the low-calorie microwavable food products from the company. The increase in value can be in terms of nutritional value which differentiates the company’s products from those of its competitors. Pricing can be done with the focus on particular groups of customers such as those who prefer specific taste of the low-calorie foods produced by the company. The willingness of consumers to pay the new price should be assessed before it is implemented when the products are sold so that it is not too high to be paid by the target customers. Finally, the new price should be set if it complies with the requirements illustrated in this pricing plan.

Effects of Government Policies on Production and Employment

According to Ralston (1999), government policies have a direct effect on production in terms of the dietary choices that its population should make. Certain types of foods may be regulated by the government in terms of volumes to be produced. A government can also set quotas in relation to a product to be produced by a company, which directly affects the volumes of production and the resulting level of profitability of an organization. Governments have an impact on employment in terms of the minimum age of an employee that is permitted to work in any organization. Those who are below the minimum age are not able to get employment despite the demand that companies may have for employees. Governments may also set minimum wages that employees should earn. If a company is not able to meet the minimum wage, it will be restricted to employ only a certain number of staffs.
Government regulations have an impact on production and employment at the low-calorie microwavable food company in this case study because it can regulate the volume of food products produced by the company in order to prevent monopoly of the market (Jahanshahi et al., 2011). Government can positively affect production by providing incentives and subsidies that enable the company to incur low cost in production of its low-calorie microwavable products. It can also regulate the varieties of food products to only particular types of low-calorie microwavable products. Finally, the government can impact employment at the company by regulating the age of employees who can be recruited by the company. It can also impact employment by taxes on employee’s earnings which can affect their rate of turnover from employment positions in the company.

Why Government regulation is Important for Fairness in Low-calorie microwavable Food Industry

Low-calorie microwavable food company is an organization that provides consumable products that must be regulated by the government in terms of the quality and safety of the products for consumption. According to Bichta (2003), government regulation is important in ensuring the company does not take advantage of its monopoly in the market and high demand for its products to charge excessively high price which can be unfair to customers. Some low-calorie microwavable food companies may be too monopolistic in their approach towards the production and sales of particular products by preventing fair competition. Government regulation will ensure a level playing ground exists that promote the ability of smaller firms to operate competitively as bigger firms.
In the low-calories microwavable food company, an example of a government regulation is testing the food products for harmful components before they are distributed to customers. This ensures the company is responsible in producing safe products before selling them to their customers. Another example of government regulation in low-calorie microwavable food company is protection of externalities such as pollution caused by waste products from the operations of the company. Government intervention will be experienced in the forms of regulation on the amount of wastes that can be produced by the company and the location in which they can be disposed (Jahanshahi et al., 2011). Government regulation may also be important in prevention of cut-throat competition (Castro, 2011). This is a state where some organizations in the market create conditions that ensures their competitiveness such as by setting extremely lower prices which increases the demand for their products, engagement in price wars among oligopolistic companies, and business practices such as hoarding of products for distribution during low supply periods.

Complexities of Expansion via Capital Markets

A major complexity associated with financing the low-calorie microwavable food company via capital markets is that there will be the need to share the profits with the investors in the company. This situation could be worsened by lack of financial backing in the company in a case where investors decide to withdraw their investments (Acquah-Sam & Salami, 2013). The solution to this complexity is to set aside reserve funds which can be used to acquire the part of the equity owned by investors after a particular duration of operation.
The second complexity of capital markets as a source of funding is that the low-calorie food company will have little control over its activities such as the price paid for the equity and other advantages. The solution to this complexity is to develop decision-making framework which determines the areas of control by the investors and those that are under the control of the management.
There is also likely to be a complexity of conflicts of interests among different investors who have ownership in the company. These conflicts can be brought about by differences in vision, styles of management, and methods in which they operate their businesses. This complexity can be addressed by creating a decision-making framework that promotes fairness in decision making and ensures all stakeholders are satisfied with the direction taken by the company (Schmukler, 2004). For instance, a voting process should be used where the decision of majority investors is implemented in management of activities of the business.

How a Company Can Create Convergence between Interests of Stockholders and Managers

One of the techniques of achieving convergence between the interests of stockholders and managers is the formulation of common goals, objectives, and understanding that there might be different styles and approaches for achieving them. These differences in approaches should be listed and assessed in terms of their ability to promote the achievement of the common goal at least cost (Huse & Rindova, 2001). The most suitable approach should be selected.
It is also recommended that the individual relations between stockholders and managers should first be smoothened. Since each group of stakeholders may be having different perceptions of what is happening in the organization, it is recommended that either perspective should be acknowledged. Each person should be heard by restricting judgments and reactions (Itturalde, Maseda & Arosa, 2011). The presented points of views can be discussed and agreed upon between the two groups of stakeholders to come to an agreement on the most suitable managerial solution.
In case of conflicts of interests in the allocation of salaries, benefits, incentives, and bonuses, the organization should appoint outside directors who are not known by the stockholders or the managers to set the compensations and salaries for managers of the organization. Outside directors are those who do not have managerial roles in the organization and less likely to be biased in their decisions (Huse & Rindova, 2001). When the outside directors have made recommendations of policies, the existing directors can continue with their roles in the company but must implement the recommendations of the outside directors when providing condensations and benefits to employees of the company.

Conclusion

This paper explains the factors that need to be taken into account when making long-term investments decisions in low-calorie Food Company. During setting of a new of price for the products of the company, the focus should be on the competitiveness of the company in the market and the potential of consumers to buy the product irrespective of the increase in price. Government policies have been identified to have an impact on employment and production by regulating the volume of a particular product that a company can produce and determining the minimum wage that employee should be paid. Government has been identified to be important in promoting fairness in the low-calorie food company by preventing unfair competition such as pricing strategies that can result into monopoly of the food industry and creating suitable operating environment for startups in the industry. Operation of the low-calorie microwavable food company via capital markets has been identified to have complexities such as conflicts of interests between managers and shareholders and lack of control of the company by the major investors. However, these challenges can be addressed by developing a principle of decision making that promotes the implementation of the decisions of the majority in the organization. Lastly, this paper suggests that convergence of the interests of shareholders and managers can be achieved by developing common goals and objectives and performing organizational duties that focus on achieving these goals. It also states that points of views of different stakeholders must be allowed after which deliberations can be made to implement the most suitable perspectives.

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