Pricing strategies are extremely important for companies, especially when raw materials for products are rising. Managers want to make sure they effectively price their products while still maintaining demand for said product and a profit. The price elasticity of demand is a measure of the sensitivity of quantity demanded to a change in one of the factors influencing demand, such as price, advertising, promotions, packaging, or income levels (McGuigan, Moyer,Harris, 2013). Inelasticity means when the prices of our product go up the demand will not change much; some examples of inelastic products would be gas, water and electricity. The prices for these products can increase the demand will stay relatively the same. Low-calorie microwaveable foods are affected by price changes. Therefore, managers of the company must come up with effective pricing in strategies to help reduce the elasticity of their products. Penetration Strategy is used as a loyalty-building or market-entry tool (Burns-Millyard, nd). This strategy offers high end products are a much lower price in order to gain customer loyalty.
This would be an effective strategy for the company to use, it would allow them to increase their price later when raw material prices raise and still maintain the demand from customers. Customers will become loyal and continue to purchase their product as long the quality maintains the same. This strategy also allows them to become the pricing leaders within the industry which will hopefully avoid price wars and competition.
Government policies greatly affect how a company operations in regards to production and employment. In regards to employment, the company must adhere to the policies set by the EEOC, Equal Employment Opportunities Commission. The EEOC is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information (http://www.eeoc.gov/eeoc/index.cfm). The FDA, Food and Drug Administration, regulate and enforce the production of the all microwaveable food products. The company must ensure they are following the regulations and policies set forth by the FDA. The low-calorie microwaveable frozen food company must also adhere to the standards and regulations set by OSHA, Occupational Safety and Health Administration. OSHA enforces that all organizations are providing a safe and healthy environment for their workers. Employment Standards Association regulates overtime pay, holiday pay, minimum wage and several other areas in regards to compensation. Government policies are always going to affect the company. They are constantly changing rules and regulations to keep the consumer and employee safe. Therefore, the company must continue to check with the government agencies to ensure they are complying with the standards. If the company falls to comply with any standards or policies set by an agency they could face fines and penalties that could cost the company not only in monetary ways but possible in production time.
Government regulation ensures there is fairness within the food industry to a certain degree. Regulations are a necessity within the industry; however, there are times that the government can cross over the line into where it appears they are trying to run the companies within the industry. Government involvement helps maintain and regulate safety standards that not only affected the company’s workers but also the consumer that buys their product. The Food and Drug Administration is a prime example of government involvement in the food industry. In June of this year, the FDA announced that all food companies largely rid their foods of trans fat within the next three years (Jolanick, 2015). This is a great example of government regulations positively affecting the food industry.
It has been shown that the trans fat they put into their products increases bad cholesterol and decreases good cholesterol which can lead to heart disease (Jolanick, 2015). The Sherman Anti-trust Act was the first anti-trust law passed by the Federal Trade Commission (FTC) in 1890 (www.FTC.gov) The antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case (www.FTC.gov). This act helps ensure that any merger within an industry will not have the capability to monopolize the industry. Government involvement overall has been beneficial within the food industry. It continues to put pressure on the industry to ensure they are properly preparing/producing products in a safe environment that is becoming healthier for the consumer. OSHA is a leading agency that helps ensure that safety continues in the manufacturing plants that produce the products in the food industry. OSHA's mission is to assure safe and healthful workplaces by setting and enforcing standards, and by providing training, outreach, education and assistance (www.OSHA.gov).
Capital projects consist of investments that usually take large sums of capital and labor. They usually are very time-consuming in regards to research and completion time. Growing too fast within an industry can cause problems within an organization. Companies can grow so rapidly that they outgrow their space; this can cause the company to break their lease which could be costly. Rapid growth can also cause the company to expand into an untapped market and find that it provides unacceptable low-profit margins. In order to prevent this from happening, companies must do extensive research of the market areas and long-term planning to reduce costly expansion errors. Expansions require a substantial amount of capital investment. Successfully finding funding for expansions can be a daunting task. The increased amount of capital puts more liability on the company due to the increase in building fees and utilities without the guarantee of success. If the expansion fails to produce acceptable profits the company could lose thousands or millions of dollars depending on the size of the expansion project. The primary contributor to project failure is lack of early planning (Raymond, 2013). Deficiencies in early planning consist of objectives do not align with the business needs, managers and project planners oversell what they can deliver, risks are not fully disclosed to the stakeholders and project planners do not properly plan for costs and schedule overruns (Raymond, 2013). Large capital projects can take years to be complete and many times they do not get completed on schedule; therefore, extra costs continue to accrue that were not originally planned.
One way to avoid this situation is to properly plan in advance and set up an account with extra funding prior to the expansion project for miscellaneous items.
Stockholders and managers hold two different positions within a company and sometimesdifferent goals. Stockholders are the owners of the company; their main goal is profitability. Managers run the company; one of their goals is profitability but other goals could be personal (goals that would better their career and their finances) and making sure their employees are happy. In order to ensure stockholders and managers are working together for the good of the company there are several measures that could be taken. Managerial compensation is a way for the company to align salary compensation, bonuses and stock options to reward superior performance (Baker, Powell, 2009, pg 15). The opposite could be true for poor performance; managers could lose bonuses and stock options. Performance shares also fall under the managerial compensation category; managers can purchase shares of the company at a discounted price if they achieve the performance standards set forth by the stockholders and board of directors. Lowes Inc. is a grea