Economic factors that may influence the plant’s operations and legal considerations. On a macroeconomic level, according to a United Nations’ study, “The recovery of the global economy continues, with strong output growth in developing countries and weaker economic performance in developed countries. ” (UN, 2011)Even so higher energy and food cost are contributing to rising inflation rates. These indicators are mitigated by a stronger world trade of goods and services in 2010 compared to the year of 2009, it should be noted that Asian countries account for most of this growth.
According to the above cited UN report, some of the risks witch may hamper the growth that is currently taking place may be the problem regarding the sustainability of public finance of developed countries, including the collapse of the dollar due to continued volatility of commodity prices. This doesn’t take in consideration the unpredictable area of policy making which outcomes cannot be accurately predicted.
Because the financial situation is more favorable internationally ABC Complete Kitchens, Inc. hould consider capitalizing on the international market while at the same time mitigating its production costs in the United States by outsourcing a larger part of part of products. These will naturally lower overheads, labor and any other cost associated with production, so that in the eventuality of a double deep recession the company will still be able to compete based on the price affordability of its products as well as the flexibility of not having to carry the load of overheads and all other cost associated with running a factory of this magnitude.
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Concerning microeconomic, given the slow recovery of the economy and consumer confidence about buying American products the picture of demand and supply appears favorable to business. The affordable prices of ABC Complete Kitchens, Inc. will give it an edge compare to its competitors. ABC Complete Kitchens, Inc. prices are on average 10 percent lower than its competition. For example a box of disposable utensils cost $90 at ABC Complete Kitchens, Inc. and an average of $100 with competitors.
This price difference means that provided that other factors are taken into consideration, such as opportunity costs, marketing effort to give the company great visibility, however because of the unpredictable economic situation of the country and the world, there could be a demand elasticity which is described by investopedia as “The change in the quantity of coffee bought by the consumer as the price changes is called demand elasticity. ” (Investopedia, 2012) Demand elasticity may affect not only the stability of the company, but also the bottom line because as ABC Complete Kitchens, Inc. lients face unpredictable world events that cause fluctuations in prices.
Such as the crisis with Iran over their nuclear ambitions which is causing an oil price hike which may cause a situation of opportunity cost whereby consumers have to choose between buying gas and vacationing to a resort. The US Department of States declares regarding US Economic Policy and Asia Pacific, “We especially have focused over the past year on how we ensure that American business can compete on the basis of fair international rules and practices in situations where state-owned or state-supported companies receive preferential treatment. (Hormats, 2011)
In contrast with the US department of States, ABC Complete Kitchens, Inc. is strategically position to leverage the positives to negatives aspects of world economy because by outsourcing parts of its operations to China, it is able to mitigate the economic downturn in the US by adjusting at will to any fluctuation in the demand and supply (by adjusting I mean that given the economic risks of operating a business in such an unstable environment, being free of the heavy burden of a production and a large factory can facilitate an exit strategy in case of hoopla. )
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