Challenges of Expansion to a Foreign Location, economics homework help

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Economics

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Purpose of Assignment

This week students will review and revise their Week 3 Research Analysis for Business Signature Assignment based on economic analysis and the feedback provided by their facilitator. Students will also expand their Week 3 analyses to evaluate the challenges of expanding their chosen company's production to a foreign market.

About Your Signature Assignment

This signature assignment is designed to align with specific program student learning outcome(s) in your program. Program Student Learning Outcomes are broad statements that describe what students should know and be able to do upon completion of their degree. The signature assignments might be graded with an automated rubric that allows the University to collect data that can be aggregated across a location or college/school and used for program improvements.

Assignment Steps

Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products.

Revise your Week 3 assignment (FORD), Research Analysis for Business, using the feedback provided by your facilitator. This Week 6 report should only include one conclusion, so you will need to rewrite the conclusion you included in your Week 3 assignment, Research Analysis for Business.

Select a foreign market in which to expand your chosen product. If you wish, you may use one of the countries your team analyzed in their Week 5 Comparative and Absolute Advantage Assignment.

Prepare a minimum1,750-word report addressing the points listed below. The use of tables and/or charts to display economic data over the time period discussed is highly encouraged, you may submit any economic data in Microsoft® Excel® format in a separate file. You may use the U.S. Department of Labor's Bureau of Labor Statistics (BLS), U.S. Dept. of Commerce's Bureau of Economic Analysis (BEA), the Federal Reserve of St. Louis's FRED data, the CIA World Fact Book, World Bank data, and World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library. The new sections of your report should:

  • Evaluate current global economic conditions and their effects on macroeconomic indicators in your selected country. Provide forecasts for population growth, gross domestic product (GDP) growth, GDP per capita growth, export growth, and sales growth.
  • Evaluate any competitors' existing production in the chosen country.
  • Assess sales forecasts in the selected country by using the Federal Reserve of St. Louis's FRED data, the CIA World Fact Book, World Bank data, World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library.
  • Categorize the type of economy that exists in your selected country as closed, mixed, or market. What is the difference between these types of economies and how might this affect your expansion?
  • Assess how your chosen country's current credit market conditions, especially interest rates and the availability of financing, affect demand for your product or service and your planning or operating decision for your production in that country.
  • Analyze the role of the selected country's central bank on that country's economy.
  • Compare the availability, education, and job skills of the work force in the selected country. Discuss any additional challenges of international production, such as political stability, availability of government financing or other incentives, threat of capital controls, and exchange rate risks.
  • Explain any additional supply chain challenges you anticipate if attempting to make your product in your chosen country and selling the product in other countries.
  • Based on the data gathered and analysis performed for this report write a conclusion in which you:
    • Create business strategies, including price and non-price strategies, based on your market structure to ensure the market share and potential market expansions and explore global opportunities for your business in a dynamic business environment and provide recommendations.
    • Develop a recommendation for how the firm can manage its future production by synthesizing the macroeconomic and microeconomic data presented.
    • Propose how the firm's position within the market and among its competitors will allow it to take your recommended action.
    • Recommend strategies for the firm to sustain its success going forward by evaluating the findings from demand trends, price elasticity, current stage of the business cycle, and government.
    • Recommend any comparative advantages your company will have over competitors currently operating in that country, and defend your position, either for or against, expanding your company's production into your chosen country based on your research.

Integrate with the Week 3 Individual Assignment, and incorporate corrections and suggestions from the instructor's feedback. The final report should be a minimum of 2,800 words. 4 graphs

Cite a minimum of three peer reviewed sources not including the textbook.

Include all peer-reviewed references and government economic data sources/references from Week 3.

Format your assignment consistent with APA guidelines.

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Running head: RESEARCH ANALYSIS Research Analysis for Business Vance Marshall ECO/561 April 5, 2017 MR. John Lindvall RESEARCH ANALYSIS 2 As a business consultant at Ford Motor Company, I have to advise the company on the various strategic directions it can take to ensure that it is successful in its current market. The Ford Motor Company operates in the automotive industry, one that is extremely dynamic in terms of product development to meet client requirements and to continually provide a good customer experience with their products (Dopfer, 2005). The company is a multinational company and it operates in the oligopoly market structure. This is because the automotive industry has a large number of potential buyers but very few sellers, the automotive products are homogenous in the sense that they cannot be significantly distinguished from the same products by other companies. This means that the products have the same qualities as products by other manufacturers and therefore the probability of substitution is high. There are also several barriers to entry into this industry and the sellers in this market structure are large while the buyers are few. The market share is a representative of the reported sales of the company’s brands, relative to the total sales in the industry. According to the company’s 2015/2016 sustainability report, it had a 14.7% market share in the United States. In the US, the company’s greatest competitors include General Motors, Nissan, Honda, Chrysler and Toyota. The other competitors globally include Volkswagen, Fiat and Peugeot among others. Most of these competitors are able to provide better models of cars at lower prices. They have taken advantage of producing smaller and fuel efficient vehicles. There are several barriers to entry into this industry which makes the threat of new entrants significantly low. One of the major barriers to entry is the high startup capital that is required to set up manufacturing plants, train employees and purchase the necessary materials to start the business and compete with the other established companies in the industry. Another barrier is the achievement of economies of scale through mass production in this industry. It may be a bit expensive to attain this in order to make the cars affordable to the RESEARCH ANALYSIS 3 clients. Also, there is another barrier that is associated with access to distribution channels in the industry. Given that dealership is limited, a new company may find it hard finding ways in which their products will be distributed in the market. With these considerable barriers to entry, it is very difficult for a new startup to get into this market successfully unless they do it through the already established brands. The strategies of Ford Motor Company should therefore focus on countering the already established competitors like Chrysler as opposed to laying focus on future startups because there is a very small chance that a new competitor will significantly impact Ford’s market in the near future. The company is currently at the expansion stage of the business cycle which is characterized by price increase, an increase in employment, and economic growth (Dopfer, 2005). These are indicated by the current product prices of the company’s products, the employment level and the prevailing economic conditions in the country. The real gross domestic product is a macroeconomic measure of the output value of the economy that has been adjusted for price changes. In the US, real GDP increased by 1.6% in 2016, which was a deceleration from 2015. This is an indicator that the value of the total goods produced in the country increased and Ford Motor Company should positively contribute in terms of increasing production for it to generate more revenues. The unemployment rate in the United States has been ranging from 4.7% to 5% over the past year. Ford could use this information to their benefit by increasing the production capacity in the country so as to be able to employ more people into the company’s workforce. Unemployment is an indicator of the availability of labor and if the company is to use its financial strength to open new branches in other states, this labor could be harnessed to its benefit thus increasing revenues. The consumer price index on the other hand is used to measure the value of the weighted average prices of a basket of goods. This value can be RESEARCH ANALYSIS 4 used by the company to forecast demand. Since automotive products have a smaller number of buyers, it is easier to predict demand for these products relative to other goods that are necessities using the consumer price index to be able to better set up production. The federal funds rate is the rate at which banks lend to other institutions. This rate may be used by Ford Company in in deciding when the best time to borrow from financial institutions is. This corporation is however most likely to use the prime rate as this is the rate at which commercial banks lend to large corporations. The current prime rate in the US is currently 4%. This means the corporation can use this rate to borrow sufficient funds for expansion since it has been earlier established to be in the business expansion phase. From table 1, it can be noted that Ford has the highest demand compared to the other companies also outlined in the table. This has a positive impact on the firm, in that the firm may opt to only improve on their products so that the current clients are retained. Ford 226,746 209,679 8.1% 10,860 9,690 12.1% 237,606 219,369 8.3% Alfa Romeo 57 67 –14.9% Chrysler 24,292 30,930 –21.5% Dodge 49,256 46,578 5.7% Fiat 3,805 3,784 0.6% Jeep 89,654 63,274 41.7% Ram 50,463 48,628 3.8% Lincoln Ford Motor Co. Table 1 Source: sustainability Report, 2013/2014 RESEARCH ANALYSIS 5 The price elasticity of demand measures the responsiveness of the quantity demanded to a price change. When the price elasticity od demand is greater than 1, then the demand is elastic. If it is less than one, the price demand can be concluded as being price inelastic. Ford Motors Company can use the elasticity of demand in predicting the prices of their products in the market and formulating strategies on how well to price their products for the company to avoid missing out on sales. It is an important tool in pricing because the firm is well informed on the types of products on which to raise the price and those not to raise the price. High labor costs, research and development and raw materials are most likely to increase the level of output because these are investments into the company. In other words, they are an input in terms of increasing the capital injected into the business. From the data presented above, I am convinced that the firm should set their prices according to the market rates and those set by the other competitors in the market. This will ensure that customers have a chance to compare brands on quality basis and not price. Future production should therefore be based on the production capacity as the expansion of the production capacity should be based on demand. RESEARCH ANALYSIS 6 References Bureau of Economic Analysis https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm (accessed on 2/4/2017) Dopfer, K. (Ed.). (2005). The evolutionary foundations of economics. Cambridge University Press. Sustainability Report 2013/2014 available at http://corporate.ford.com/microsites/sustainabilityreport-2013-14/blueprint.html
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