Food Capital Budgeting Strategy for Price Elasticity

Major effects of government policies on production and employment

Government Regulations for fairness in the low-calorie, frozen microwavable food industry

Major Complexities in Expansion via Capital Projects & Key Actions

Convergence between the Interests of Stockholders and Managers

Strategy for Price Elasticity

The Price Elasticity is a tool that is used by economists and business to measure exactly the quantity response that is needed to adjust to a change in price. This gives a very good idea of the quantity that is supplied or demanded changes due to a change in the price. This is also defined by the degree of reaction of a demand or supply curve with respect to any change in price. The essentiality of a product often decides the price elasticity of the product and thus varies across a product range. The products that are considered to be necessities are also considered to be more insensitive to changes in price since it is safely assumed that consumers would continue purchasing such products despite price increases. However non-essential products are subject to price elasticity and their demand is expected to change with changes in prices (Ruhm, 2011).

In the case of the low-calorie frozen, microwavable food products, it cannot be considered to be an essential product which people will buy to stay alive. Frozen foods are generally the second choice to fresh foods. In this respect, the company products are susceptible to price changes and are price elastic (Ruhm, 2011).

In a situation of anticipated price increase, the price elasticity of demands says that the demand would be reduced by at least half. An exact fall in demand can be calculated by including the starting points in demands and price changes. Therefore in such a scenario, the company in question requires reducing the production of the low-calorie frozen, microwavable food products to meet the anticipated demands. The production life and the supply chain of the company have to be made flexible and prepared to handle a reduced demand scenario and the company should take all measures to reduce costs in order to tide over the reduced demand period. It can also bring in a change in the price strategy and reduce prices in anticipation of the reduced demand.

2) Major effects of government policies on production and employment

The state and the federal regulatory agencies extensively regulate the U.S. food processing industry of which low-calorie frozen, microwavable food is a part. While the deferral government and regulations dominate the regulatory oversight, the FDA is the agency that is responsible for regulations of the processed food industry. The regulations range from quality to marketing and advertising of food products.

The policies and regulations of the government impact the production as well as the employees of the low-calorie frozen, microwavable food company in a major way. The regulations and strict control on processed food such as frozen food by the FDA in particular and the local states agencies, in general, mean that the company has to maintain a strict regimen of food quality that it dishes out to the market. Government policies on taxation can also impact the production process of the low-calorie frozen, microwavable food company. In the case of a rise in the price of major ingredients which can be a result of the rise in taxes applicable to them, the costs of production would increase. Similarly, when the government increases taxes or levy on power, the costs of production is impacted.

The government also formulates several policies for the employees especially with regard to the work conditions and financial benefits. Changes in these aspects impact employees directly. Changes in taxes on income has a direct bearing on the take home money of employees. Employees are also indirectly impacted by changes in production and demand caused by government policies. A reduction in demand and increase in the cost of production would leave a company with less revenue which would impact the future of the employees working in the company.

3) Government Regulations for fairness in the low-calorie, frozen microwavable food industry

Various industries are government by regulations formulated by governments. There is ample evidence that the low-calorie, frozen microwavable food industry is governed by rules and regulations enacted by the government. It is necessary for the government to intervene in the said industry to ensure fairness.

One of the major ways that the government can and does intervene is by regulating the industry mergers and acquisitions to ensure fair competition. The competition commissions...

Moreover, the government also keeps an eye out for unfair trade practices used by any of the players in the industry to gain an undue competitive advantage. The prevention of malicious and misleading advertisement and marketing campaigns is one such example of the government using legislative powers to maintain fairness in the industry (Alderman, Ivory, McLoughlin & Vaughan, n.d.).
Predatory pricing undertaken by some companies to attract more customers is also prevented by regulations by the government. Strict anti-corruption laws and regulations where companies can resort to bribery to get favors out of government officials or regulators are strictly prohibited by law. These measures and regulations and interventions by the government add to the environment of fairness in the low-calorie, frozen microwavable food industry (Stossel, 2012).

In recent times, the government has blocked mergers and deals between companies in various fields. For example, there were outcries from consumer rights group about a proposed merger between Comcast and Time Warner Cable which would have controlled one-third of the cable network and internet market in the U.S. The government interjected and did not allow the deal to go through to prevent partial monopoly of the industry and to provide a level playing field for the other companies in the business. Communications giants announced the buying of T-Mobile in June of 2011. However, the Department of Justice formally announced that it would seek to block the deal to stop the monopoly of the market by the two companies merged as one. In a similar move by the government, the Department of Justice intervened to stop a proposed merger of the Nasdaq and the New York Stock Exchange to protect consumer interest and maintain incentives for competitive pricing and quality of service ("4 Corporate Mergers Shot Down By the Government," 2014).

4) Major Complexities in Expansion via Capital Projects & Key Actions

Some of the major complexities in expansion via the capital projects route include the very large costs that associated as such projects aim to build upon, add and improve by way of capital expenditure. Efficient management of the capital project is one of the challenges for the low-calorie, frozen microwavable food company. It has to ensure that enough capital would be available to fund the entire project before it decides to start with the project stalling midway due to the paucity of funds would be detrimental. Elaborate planning is also a challenge for capital projects as huge costs are involved and proper utilization of the finances require meticulous planning. The management of the low-calorie, a frozen microwavable food company must have an immaculate budget with phased evaluation options to assess the success of the project and make changes, if necessary, midway. This can ensure that the project gets completed in time and there are no cost escalations.

Another challenge is in the execution and implementation of a capital project. Since the project is large by standards of costs and planning, it is essential that the company has the human resources to efficiently implement the project. Adequate human resources is another challenge for the low-calorie, frozen microwavable food company. This can be overcome by identifying, and, if necessary, recruiting, people with enough knowledge about the various processes of implementation of the project and formation of teams to implement the project.

5) Convergence between the Interests of Stockholders and Managers

There has always been and will be a conflict between the interests of the stockholders of the company. While the company managers would look for quality stockholders would look to reap financial profits. It has been observed that managers try and get a job done without being too worried about the costs or the budget or always demand a larger budget. One the other hand stockholders would like to see the company use as little money as possible to get the best financial gains. In the case of a conflict between the two, there is a need for convergence of the interests of the two groups of stakeholders of the company (Gunay, 2008).

Initiating a system of rewards for the managers is one of the ways to align the aims and interest of the stockholder with those of the managers. The managers could be provided some form of financial or stock incentive for completion of targets within the costs and estimates that would make the stockholders satisfied. Giving stock to the managers can translate into the managers now having the same aim as the other stockholders -- maximizing profits from as little investment as possible (Gunay, 2008).

Many of the banks and large…