Expansion Opportunities Abroad Essay Example for Free

Expansion Opportunities Abroad screenWith the proposed expansion of CPI in another(prenominal) countries like Brazil and the some European states, we need to learn three things 1) the market share of heavyweight corporations in the same business, 2) the high societys capital sizing, and 3) the cost pushover 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 whitethorn influence 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-off by backing 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 well as maximizing the limited consumer base (semi-urban areas have a considerable consumer size). The companys capital size should also be considered.Capital provides a firm the working materials to produce goods and services to the public. Capital and assiduity make up the so-called inputs of production of a firm. Therefore, if the company is going to expand overseas, it must initiative negotiate on the volume of capital that is needed for expansion (and of course, the associated assay). In this case, 5 to 20 % of the companys capital will be used 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 paradox 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 generally become stable and more or less inflexible once prices also become inflexible. The implication those companies with large capital bases will tend to work those with small capital bases will either merge to survive or exit in the market. take down if the company set-up subsidiaries in semi-urban places to prevent competition, there is no assurance of success. Below we shall discuss nature and comment of price elasticities. There are two primary types of elasticities price elasticity of film 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 changes. 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 expect , 2007). General relations of price elasticity of demand If PED 1 then collect 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 manufactured by CPI, specifically Super lave, it generally experiences the tercet 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.