Expansion Opportunities Abroad Essay

With the proposed expansion of CPI in other countries like brazil nut and the some European states, we need to consider three things 1) the securities industry parting of giant corporations in the equivalent business, 2) the orders nifty coat, and 3) the damage elasticity of the products to be salmagundi (in those countries). While all these factors be of boldness 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 baffle considerably the companys operations as much as the presence of giant corporations in the business.The presence of giant corporations in the same business can be staved- get through by setting commercial offices in places that are without the presence of these corporations. For example, if giant corporations are well concentrated in a particular city, the company should establish subsidiaries in semi-urban areas. This would stave off competition as we ll as maximizing the limited consumer etymon (semi-urban areas have a considerable consumer size). The companys capital size should also be considered.Capital provides a firm the working materials to reach goods and services to the public. Capital and labor make up the so-called inputs of employment of a firm. Therefore, if the company is going to expand overseas, it must first conduct 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 apply for expansion. This is a fair evaluation of risks involved in the venture as well as the proposed distribution of capital in host countries.The real(a) 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 non be the same when it goes international. set elasticities chiefly become stable and some inflexible once prices also become inflexible. The implication those companies with large capital bases will tend to survive those with small capital bases will every 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. Below we shall handle nature and definition of price elasticities. There are two aboriginal types of elasticities price elasticity of submit and price elasticity of supply. Here we are concerned only with the former since the companys expansion foreign depends on the sensitivity of consumer demand to price changes. Price elasticity is specify as the measure of responsiveness of a factor or variable star to another factor or variable (Buchholz, 1996).Price elasticity of demand is defined as the measure of responsiveness of mensuration demanded to a change in price, all other things held constant (ceteris paribus) (Price Elasticity of Demand, 2007). General transaction of pr ice 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 Inelastic In the case of products manufacture by CPI, specifically Super find fault, it generally 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 borderline presence of giant corporations, Super Clean would be able to envision minimally the prices of its product due perhaps to the relative inflexibility of consumer demand. This would increase 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.