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A Risks Analysis - Essay Example
Pages 2 (502 words)
Losses in sales and market share, aggravated by problems with the labor force, have called for the need to rethink the business strategy of Suprema Cars. A Management Consultant has provided 7 possible options that can be pursued to increase business profitability…
Raise the prices by 20%
capital costs is significant due to purchase of machinery and losses in production opportunity time due to installation of the system, training of personnel and repairs in the working environment. In effect, payback period may be unsustainable.
fluctuations in interest rates of the lending institution can affect business profitability; transportation costs and custom duties may result to higher sales price; competition with local products afforded with tax incentives and "patronize local products" edge can be unsustainable
Option #5: Set up a joint venture with an overseas car manufacturer. An engine manufacturer in an unstable country in Southeast Asia has expressed interest in a joint venture to build all the engines for Suprema Cars. If they do this, Suprema would have to send out a team of engineers to the country to supervise production in the early stages.
Transportation costs and custom duties may be too high; fluctuations in exchange rates are high in an unstable country; high Occupational Safety concerns for engineers sent to the country for supervision; quality of engines can be compromised
significant capital investment for research and development; lost production opportunity time due to new system of production and training of personnel; competition with other cars with the same qualities maybe unsustainable
From the details of the benefi ...