Macro And Micro Economic Factors That Influence Plant Activity

1366 words - 5 pages

This paper will first discuss factors that describe and analyze the macro- and micro-economic factors that could directly or indirectly influence plant operations here at ABC Complete Kitchens. Next, it will explain legal considerations that our organization must be prepared for, which are also relative to obtaining credit, having reliable market conditions, and avoiding product liability
Capital Investment
One of the most important concerns to our organization is capital investment. By investing profits back into our machinery we can stay competitive by increase productivity. Each worker must have available to him/her the proper equipment to complete tasks with ease. The newest technology available to the industry must also be provided to workers in order to compete. Training for our employees (as mentioned in a memo sent earlier this year) will increase human capital which is an invaluable asset. (Riley, 2006)
Economies of scale
Therefore, by updating plant equipment ABC Complete Kitchens can gain competitive advantage through scale economies. Scale economies are caused by lowered cost of production due to an increase in output. By investing in machinery our company can increase production, lower cost per unit, and therefore gain higher profits. Pricing for our industry will be determined by price elasticity of goods needed to for production.
Price Elasticity
Prices on goods needed for production will strongly influence prices of goods produced. Supply and demand determines how elastic prices will become. When supplies become minimal and demand stays regular prices are forced upward.
According to Smith, T., 2010:
Consumers will buy more of a product when its price declines and less when the price increases. The sensitivity of consumers to a price change is measured by the products price elasticity of demand. Demand is elastic if a specific percentage change in price results in a larger percentage change in quantity demanded. Demand is inelastic if a specific percentage change in price produces a smaller percentage in quantity demanded. (p.3)
Supply and Demand
As mentioned previously supply and demand play very important roles involving the pricing of goods and services. Economic conditions play a large part in supply and demand because when there is a shift in economic growth; consumers are weary of purchasing goods. This inevitably leads to a never-ending vicious cycle of prices rising and sales dropping. Here at ABC Complete Kitchens, supply-chain management will be based on lean –manufacturing with a “just–in–time” approach.
Just-in-time or JIT is a term dealing with a system that “gets raw materials, parts, and components to the buyer “just in time” for use, sparing companies the cost of storing large inventories.” (Business Strategies, 2012) This approach will save our company the cost of warehousing large quantities of inventory and will also cut down on waste.
Along with the JIT...

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