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ACC 561 Analyzing the Four Financial Statements

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Acc 561 Week 4 Assignment Larson Inc
Larson Inc. must consider the alternative economic futures for their
industry. In any market, economic conditions will change over time. The
company must be able to adapt and change with the economy to remain
successful. The company needs to find solutions for the changing
economy to keep increasing their revenue and decreasing their costs.
The economy may go through a recession, expansion and peaks over
their years in business. Larson, Inc. needs to analyze the difference
scenarios and determine the best course of action for each type of
economic future. Also, the company must consider the economy’s stage
in the business cycle to make well-informed decisions.
Economic projections
The business cycle will have continual change and fluctuate over time.
History has shown us how the economy goes through peaks,
recessions, troughs, and expansion. It is important for all businesses to
understand the concepts of macroeconomics and how the business
cycle is affected. Larson, Inc. can plan for the changes to remain
successful and innovative. The business cycle is determined by the
changes in GDP or gross domestic product. The change in the GDP can
occur from economic reasons such as changes in demand, taxes and
interest rates. It can also change from non-economic reasons such as
war or natural disasters.
The company must be aware and analyze the different indicators of the
changing economy. The recession, in which Larson Inc. is currently
experiencing, is a normal part of the business cycle. It is said that fiscal
and monetary policies can help decrease the peaks and recessions of
the business cycle. The government would step in with fiscal policies.
The government can provide more funding for private sectors and cut
taxes to help stimulate the economy in a recession (www.frbsf.org).
Monetary policy is controlled by the Federal Reserve Board. This agency
can increase and decrease interest rates across the country to change
investing and spending among consumers and businesses. Both policies
show us how government spending and investing to help businesses fall
into and remain in the expansion phase of the business cycle. As an
international company, Larson Inc. will need to consider the economic
future for the United States and Germany. With the United States

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currently in a recession, the company must determine how to create an
upward slope toward expansion. In the current market of monopolistic
competition, the company needs to concentrate on their product
differentiation and advertising to go into expansion. In Germany, the
company also needs to expand their market to remain successful. An
oligopolistic market in Germany would allow Larson Inc. to work on
expanding their marketing and streamline their products.
Alternative Economic Futures
Larson Inc. needs to have contingency plans for all the market
projections over the next few years. The current recession is the largest
economic downturn the United States has seen since the Great
Depression, and thus less predictable than the mild recessions between.
If the current recession persists and expansion comes slower than
predicted, Larson Inc. should prepare to make adjustments to not only
survive, but to come out of the recession more capable. The first issue to
consider is branding. It is imperative that Larson establishes a strong
brand name and image if it is to compete with an ever growing field of
competitors, but while profits are down a full advertisement campaign is
not feasible. A modest marketing strategy based on packaging and store
signage will be an achievable first step in introducing Larson as a quality
product, and not just your standard battery. Larson Inc. should continue
the research and development of new products and improvements, but
limit those endeavors to developing technologies implemented in more
"necessity" items such as laptop computers and cellular phones. In fact,
the only areas to experience growth in consumer electronics in 2009
were Hi-Def DVD players, laptops, and LCD TVs (Savitz, 2010). Another
way to combat the recession and to maximize sales, Larson Inc. should
engage in perfect price discrimination, because the monopolist practicing
perfect price discrimination will produce a larger output than the
monopolist that doesn't (McConnell 2009). Larson can achieve this by
charging a premium price for the batteries while circulating discount
coupons directed at non-business consumers. This has the effect of
selling the batteries at a higher price to buyers with inelastic demand, but
also offering lower prices for the same product to more elastic buyers.
This strategy will help ensure that Larson Inc. continues to build a strong
brand image, and deriving the most sales from both inelastic and elastic
consumer segments.

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If the economic situation should gain strength and move into expansion,
Larson Inc. should poise to be much more aggressive in marketing.
Again, the priority should be building Larson Inc.'s brand image and
recognition. If the economy s expanding Larson should invest heavily in
advertising, as well as packaging and store signage, to establish itself as
the trusted name in electronics batteries. Another benefit to an
expanding economy is the likelihood that slower markets such as
recreational electronics will likely grow. Research and development
teams should begin to incorporate technology aimed at personal gaming
devices, personal readers, and digital video recording devices. This will
allow Larson Inc. to offer a technologically advanced battery that meets
the requirements of emerging technologies. The perfect price
discrimination strategy should still employ, but with less discounting with
coupons.
Once the economy has reached its peak, and Larson Inc. has had
success with its branding and marketing strategy, advertisement should
be able to decrease. The saved revenue from a smaller advertising
budget could be used to acquire a manufacturer of lower quality
batteries. This could be a second product line for Larson Inc. to explore.
Since they have already marketed the company as a quality product, the
addition of regular AA and AAA batteries could be highly profitable.
Larson will be able to profit from name recognition while not needing to
invest heavily in research and development. This new product line
should differentiate from the premium products as a base product and
priced very competitively. This new addition to the company will give
Larson Inc. a broader market, and less susceptible to market
fluctuations.
Future Recommendations
The battery industry that Larson Inc. is a part of can go many different
directions in the next few years. Larson has operations in both the
United States and Germany, there are different microeconomic factors
that affect each directly and separately but a general trend will occur. In
this recent economic downturn there is no doubt that consumers and
battery dependent industries will require new technology, innovation, and
cost-effective manufacturing processes to return to a thriving industry.
Businesses have many possible future outcomes in this industry but
three can be seen much more likely; the first being some major firms will
be able to capitalize on investment in research and development,

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