Larson Incorporated has retained a group of graduate students from University of Phoenix to review the company’s current busnesss plan. The team is to make suggestions to the corporate office on how the company can increase profits. The team’s instructions were to look at pricing strategy, nonprice barriers to entry, and product differentiation to make the company more profitable. The team used research that was gathered on the company’s factories in Germany and America to come up with short term goals to increase company profit.
The results of the graduate teams recommendations are outlined below and are to be reported to the corporate office of Larson Incorporated for futher consideration. After review of relative factors that influence production and profit in both Germany and the United States, Larson’s managers will restructure the company to maximize profit and production in both countries. This will be done by reducing the production of the German factory and increasing the production of the United States factory.
In the United States, the population and GDP are much greater than in Germany this should provide a larger market for the product and could increase sales (University of Phoenix n. d. ). To increase sales in the United States a decrease in the price of the product is needed, so it is suggested that the price be reduced by 5%. In the short term the price cut will reduce Larson’s profits in the United States from 35% to 30% (University of Phoenix n. d. ).
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Although the company will see a 5% profit reduction in the United States, the company will remain profitable as there is a greater profit margin and GDP in the United States. The increased population of the United States with its larger GDP will guarantee that if Larson increases its market shares it will also increase its profits. We expect that the lower production rate will not affect the profit margin in Germany and it should remain at 25% (University of Phoenix n. d. ). Larson Incorporated will address non-price barriers to entry by borrowing funds from Germany to buy capital in the United States.
This increase of capital will allow the United States factory to increase production and help compensate for the loss of profit form the price reduction in the United States market. Profits anticipated in the United States will ensure any international transactions are low risk. With the purchasing power in the United States more than three times that of Germany it is estimated that funds borrowed would be repaid within three years (University of Phoenix n. d. ). To gain product differentiation, it is suggested that Larson redesigns the product packaging to make it easier to open the batteries and easy to reseal them.
The new look will incorporate a cardboard box using recycled cardboard that looks similar to a small crayon box, it will have a plastic cover that has a red pull tab strip that permits easy opening. The new packaging will be introduced in a new advertisement campaign using Horatio Caine (David Caruso) from the TV show CSI Miami to advertise the product with the new packaging and lower price. The new packaging will take minimal retooling of the current packaging lines and the material will be supplied by the current supplier at a lower cost than the material currently used.
The new advertising campaign will incorporate magazine advertisement as well as television advertisement and focus on serious emergencies that show the product as vital to the customer. It is suggested that the new advertisement campaign should be introduced into the growing Asia market. This new market could increase sales and may open new opportunities for consumer and business development throughout Asia. In review the graduate team recommends that Larson reduce production in Germany and increase production in the United States.
The team suggests that Lawson borrow money from the German banks to cover the capital needed in the United States. It is suggested that Lawson expand the sale of its product into the Asian market. It also suggests Larson redesign its packaging to make it easy to open and close. Finally it is suggested that Larson use a celebrity to market its product using magazine and television advertisement. According to the business news report, the United States’ economic freedom score is 78. 0, making its economy the 8th freest in the 2010 Index.
Its score is 2. 7 points lower than last year, reflecting notable decreases in financial freedom, monetary freedom, and property rights. The United States has fallen to 2nd place out of three countries in the North America region. It only shows that the economy is inconsistent and may greatly affect the business. Since we are suggesting that Larson should increase production in United States where business competition seems to be tough, we also think that benchmarking may be applicable to increase the company’s competitiveness and profitability.
It is more likely that five years from now many new business ventures that may be tough competitors will enter the market. It is better that as early as now we will equip the company with productive plans. In our present generation, businesses can now harness the blizzard of transactional information generated by their IT systems to gain substantial insights into emerging profit opportunities. The company should take advantage of the new technology in implementing product differentiation.
In the near future, the preferences of the consumers will definitely vary depending upon the trend of the business industry. Creating an interactive website that would adhere to the target customer’s wants and needs would definitely increase the consumer’s awareness towards the product. Implementing a research and development team may increase the consciousness of the company about the present situation of the economy. This will also allow Larson to implement an effective product development and product advertising. Customer retention is more difficult than customer acquisition.
Five years from now the company may have expanded drastically and may have reached out to a larger population of consumers. The challenge is how can Larson retain their customers and also obtain more. By implementing the suggested ideas, we believe that the company will be able to achieve a higher rate of profitability and competitiveness. It will also help them to face the future economic challenges. Being equipped with the right resources is very important to kill the competition. Reference University of Phoenix (n. d. ). Economics. Week Three: Larson Inc. Scenario. Retrieved May 4, 2010.
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