Business decisions on trade and specialization under future global conditions

Business Decisions Related to Trade and Specialization You Would Recommend Based on the Effects of Future Global Conditions

Larson Inc. Business Decision Recommendations

Course of Action in Light of the Credit Market Evolution

The contemporaneous society is facing the challenges of the internationalized economic crisis. At the global level, most organizations have postponed investment projects and have developed and implemented more prudential approaches to business operations. Extrapolating this trend, it would be advisable for batteries manufacturer Larson Inc. To reduce its expenditures and instead focus on saving its financial resources. This period of economic downturn is beneficial for internal audits of the organization, such as:

Analyses of efficiencies and inefficiencies regarding positions, operations, machineries and so on Assessment of the means in which the past strategies have achieved pre-established goals

Assessments of internal budgets and their adjustment based on current needs.

In other words, just like most other economic agents, it would be advisable for Larson Inc. To delay any investment projects and instead restructure the company in a more efficient manner. This recommendation is not only constructed on the similar trend observed at a global level, but on the realities of the capital market. In this order of ideas, the credit market reveals decreasing values in most shares traded. This means that when Larson would attempt to gather resources through the issuing of shares, it would not be able to sell its stock at real and adequately valued prices. In a context in which the company was to use the respective funds to grow, and the share's value would increase, the value of the dividends would also increase meaning that the "interest rate" on the stock is far too costly. Additionally, the number of interested investors continues to gradually decrease.

2. Trade and Specialization Recommendations

In terms of trade, a first recommendation is that of using Germany as a distribution market, rather than one for production. Germany is a highly cost inefficient region. In 2008 for instance, the German employees were even registering higher incomes per capita than the American employees. This translates into a situation in which operating within the European country is not a sound business decision. Yet, since the products here are well sold, the company should continue to sell to this market, but move production.

In terms of the new destination for the manufacturing operations, Larson Inc. ought to consider China. Aside the cost efficiencies this region would offer, it would reveal yet another benefit -- that of constituting a large consumer base, with a population of over 1.3 billion, most of whom could be perceived as prospective buyers of the Larson batteries.

Also in terms of trade, it would be recommended for the company to conduct several analyses in order to identify the countries with the highest demand for batteries. India for instance, with its numerous technological applications and in its quality of hosting most of the global mobile telephones -- would be expected to be a large consumer of batteries and could as such constitute a desirable trading destination for Larson Inc.

Relative to specialization, this aspect is more delicate, but it would be advisable for the company to become more specialized in the type of batteries most popular within the regions in which it operated. Considering a situation in which Larson Inc. became a batteries supplier in India, it would be advisable for them to specialize in mobile telephone batteries.

3. Evidence and Potential Changes in the Recommendations

The recommendations previously made are all based on the features observable at the international level.

a) the recommendation to save rather than invest is based on the generally unstable state of the global economy

b) the recommendation to not raise funds through the issue of debt is based on the general contraction of the credit market, revealed by the decreasing values of the traded shares and by the decreasing numbers of interested investors

c) the recommendation to take the manufacturing of batteries outside Germany is based on the fact that operating within this country is highly inefficient from a cost standpoint

d) the recommendation to move manufacturing operations out of Germany and into China is based on the emergence of China as a leading economy which provides global players with cost effective, skilled and easily adaptive labor force