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ECO 561 Business Proposal






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Business Proposal
ECO 561
Business Proposal
Understanding the economy, and how changes within the economy impact an
organization is essential to success. SunShine Credit Union understands this need and has
formulated a business plan that focuses on expansion while acknowledging key aspects of
economic analysis. The credit union will focus on collateralized lending expansion in 2015 by
addressing efficiency weaknesses and necessary technological advancement through the
integrative product of Automative Loans that streamlines the lending process. Automative Loans
offers online loan application, approval, and closing process, supplying the member with a Visa
card specifically designed for high dollar purchases. The proposal includes market structure
identification and product elasticity, along with rational on pricing decisions, barriers to entry,
and the impact of increased operational efficiencies on costs.
Market Structure
The market structure for SunShine Credit Union is monopolistic competition. According
to McConnell, Brue, and Flynn (2009), the characteristics of monopolistic competition include
differentiated products and services, control over pricing within a limited range, relatively easy
entry, and a heavy level of advertising with a focus on brand name and trademarks. SunShine

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Credit Union’s, along with other financial institutions, differentiate products and services by
appearance or features. However, often the products are similar in terms and functionality. The
control over pricing is limited, as most financial institutions use the prime rate to set interest
rates consumers will pay for short-term loan products. SunShine, along with other credit unions,
relies heavily on local advertising with focus branding. Entry into the market is relatively easy,
but there are some barriers. Further discussion on this topic occurs later within the proposal.
Loan Portfolio Background
As the economy fell into a recession, the borrowing members of SunShine credit union
decreased. In addition to the economy, inefficient processes drove attractive borrowers to
competitors offering a high level of convenience. The Asset and Liability Management
Committee exasperated the problem with the decision to eliminate the booking of long-term
mortgage loans in response to plummeting rates. As shown in the chart below, the loan portfolio
peaked in 2007, and began to decline dramatically from 2010 to 2013.
The credit union is seeking innovative processes to recapture borrowers within the field of
membership thus reestablishing the loan portfolio.
Automative Loans Product
The addition of Automative Loans technology will assist the credit union in rebuilding
the loan portfolio by streamlining processes and adding convenience to the borrower. The area
of focus is consumer loans, to include secured and unsecured loans. For example, currently if a
member applies for a collateralized (car) loan the application, approval, and closing occurs at
individual stages. This requires three separate interactions between the credit union and the

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member, not including multiple trips to the dealership. These inefficiencies provide the dealers
the opportunity to capture the members loan through convenience.
Automative Loans permits the member to apply via phone, online, or in-branch, receiving
a loan decision immediately. If approved, the credit union immediately supplies the member
with a disposable Visa card with a line of credit for the loan amount or immediate funding into
his account. This permits the member the freedom to purchase at any dealer, with negotiating
power and immediate purchasing power. Additionally, all loan documents are available for
electronic signature and storage. This convenient process would transition smoothly into
unsecured loans as well.
Price Elasticity
There are two key factors of price elasticity of demand for monopolistic competitor
organizations, “the number of rivals and the degree of product differentiation” (McConnell,
Brue, and Flynn, 2009, p. 225). Automative Loans is similar to other lending products in regard
to an auto decision process, immediate notification of loan status, electronic signatures, and
automatic funding to an account. However, the issuance of a disposable Visa card with higher
daily approval limits for large purchases is unusual and adds value to the product. Unfortunately,
this product is not a necessity but a luxury for the member. In time, some of the numerous
competitors will offer a similar product. In the short term, the product is less elastic, but in the
long term it will transition to a higher level of elasticity.
The product of Automative Loans is elastic, thus pricing is a key factor in the quantity
demand of the product. However, as with any monopolistically competitive firm, in the short
term the credit union must focus on maximizing profits by determining the production output
that permits marginal revenue to equal marginal cost (McConnell, Brue, and Flynn, 2009). In the

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