ABC Complete Kitchens, Inc. has a plan to develop framework and strategy of building a new plant in six months within a Midwestern U.S community. The previous presentation has shown the whole activities for this establishment. However, due to the world economic crisis, we must carefully consider the effect of the economic factors to the operations of our new factory. Therefore, due to limited time and resources, only some major macro and micro economic factors that could directly impact on our plant operations such as inflation, unemployment and financial issues, will be discussed in this paper. Besides, legal considerations including crime, torts, liability and foreign legal system which possibly cause bad effect to the operations are also described.
I. The effect of macro and micro economic factors to the new factory:
Macroeconomic studies the behavior of the economy as a whole; it is primarily concered with two topics: long-run economic growth and the short run fluctuation in output and employment that are often feferred to as the business cycle (1).
Microeconomic: Today’s market economies reply mainly on the activities of consumers, business and resource suppliers to allocate resources efficiently. Thoes activities and their outcomes is the subject of microeconomics (1).
The world economy is in a hard time and recession. The US is not different. Although Obama President has mainly focused on economic rehabilitation to help the US escape from the crisis, generally the US still has a long way to go with high inflation rate and unemployment and the US economy looks a bit more pallid (2). In this situation, there are also some factors which can have effect on the operation of ABC kitchen Inc.
1. Possitive effect
As a company having a stable capital and product market share, ABC Kitchen Inc. still plans on expanding the business with a new plant in despite of the economic crisis. Simultanously, this period is a suitable time for strong companies to expand their production and control the new market when the economic is rehabilitated. Although we are going through the crisis, ABC Kitchen Inc. still can take the advantage of the following factors:
- A lot of companies went bankrupt and had to dismiss workers to cut down spending which made the unemployement rate in the US increased, during the second half of last year the economy still managed to lose more than a million jobs (2). Therefore, labour market has been extended. Although a huge number of workers are unemployed, there are still a lot of skillful ones. Hence, if the recruitment is well prepared, ABC Kitchen can find qualified and experienced workers with a reasonable cost. With these skilled workers, the new plant can promptly adapt to the new operation and minimize unstable working time. Besides, company can reduce cost of training, transferring and other unexptected cost during training time.
- The economic crisis also makes the market smaller and the competitors meet more difficulties. It is a suitable time for ABC Kitchen to control new markets and areas of its competitors. Moreover, we can rearrange company’s structure to improve its operation such as focusing more on effective areas and products.
- Material suppliers and construction companies are going through a hard time and they have to reduce the price to keep the business. Thus, the initial cost for new plant in the economic recession will be less than it can be in stable period. Accordingly, ABC Kitchen can lower the price to compete against other competitors. With the new plant, we can prove its stability and financial potentiality to customers and business partners in order to improve marketing activities, company’s prestige and competitiveness.
- Many companies are trying to keep their market share by lowering the price which is an advantage for us to negotiate with material suppliers to get a better price. Moreover, if we are able to get a...
Please join StudyMode to read the full document