Expansion Opportunities Abroad Essay Example for Free

Expansion Opportunities Abroad EssayWith the proposed expansion of CPI in other countries akin Brazil and the whatsoever European states, we need to consider three things 1) the market sh ar of giant corporations in the same business, 2) the companys not bad(p) size, and 3) the price elasticity of the products to be sold (in those countries). While all these factors are of salience in the companys operations, it is assumed that the relative complexity of the market is an avenue of uncertainty. Other factors like political stability may influence considerably the companys operations as much as the movement of giant corporations in the business. The presence of giant corporations in the same business can be staved-off by setting commercial offices in places that are without the presence of these corporations. For example, if giant corporations are healthy concentrated in a particular city, the company should establish subsidiaries in semi-urban areas. This would stave off comp etition as well as maximizing the contain consumer base (semi-urban areas have a consider equal to(p) consumer size). The companys capital size should also be considered.Capital provides a firm the working materials to assume goods and services to the public. Capital and labor make up the so-called inputs of production of a firm. Therefore, if the company is going to expand overseas, it must first negotiate on the volume of capital that is needed for expansion (and of course, the associated risk). In this case, 5 to 20 % of the companys capital will be used for expansion. This is a true(p) evaluation of risks involved in the venture as well as the proposed distribution of capital in host countries.The real problem though lies in determining the price elasticities of products to be sold in the market. Although the company fared well by concentrating its sale to regional places, this would not be the same when it goes international. Price elasticities more often than not become st able and somewhat inflexible once prices also become inflexible. The implication those companies with large capital bases will tend to survive those with small capital bases will either merge to survive or exit in the market.Even if the company set-up subsidiaries in semi-urban places to prevent competition, there is no assurance of success. beneath we shall discuss nature and definition of price elasticities. There are two primary types of elasticities price elasticity of charter and price elasticity of supply. Here we are concerned only with the former since the companys expansion abroad depends on the sensitivity of consumer demand to price modifys. Price elasticity is defined as the measure of responsiveness of a factor or variable to another factor or variable (Buchholz, 1996).Price elasticity of demand is defined as the measure of responsiveness of quantity demanded to a change in price, all other things held constant (ceteris paribus) (Price Elasticity of Demand, 2007). Ge neral relations of price elasticity of demand If PED 1 then Demand is Price Elastic If PED = 1 then Demand is Unit Elastic (equal response) If PED 1 then Demand is Price inflexible In the case of products manufactured by CPI, specifically Super Clean, it mostly experiences the third relation.If Super Clean raises the prices of its product by 5%, percentage change in quantity demanded would be less. The implication by setting subsidiaries in places where there is the minimal presence of giant corporations, Super Clean would be able to control minimally the prices of its product due perhaps to the relative inflexibility of consumer demand. This would maximize profit. Even if giant corporations enter, revenues would tend to be stable because consumer demand is stable. This would generally reduce the overall risk of the company.