Larson Scenario;Running head: Larson Scenario;Milestone 2: Business Recommendations Based on Economic Projections;Milestone 2: Business Recommendations Based on Economic Projections;Recommend an appropriate course for your chosen organization to make;business decisions based on the projected economys stage in the business cycle;and the projected macroeconomic condition. Cindy Busch;1;Larson Scenario;2;Note. There is no word count guideline for this assignment. However, you must fully;address all of the required components of Milestone 2.;--------------------------------------------------------Milestone 1: Business Recommendations Based on Economic Projections;Review of Larson Inc.;The slowdown in the current economy has created a major problem for Larson;Diminished liquidity. Banks previously exposed to substantial credit risks are much less likely to;invest. Larson must therefore develop an edge, or competitive advantage, by leveraging its;strengths as seen in the below data;Comparative Analysis;Data;USA;Germany;Cost;T.C. = $110.F.C. = $30.;T.C. = $135.F.C. = $40.;Mark-Up;35% (110*0.35) +110 = $148.50;25% (135*0.25) +135 = $168.75;Competition;More;Less;Product Differentiation;Difficult;Difficult;Economy;Major Slowdown;Slight Slowdown;Liquidity;Very Low;High;Exports;Difficult (Dollar is high);Easy (D.M. is low);Larsons American branch is in a position to initiate an aggressive pricing strategy and;maximize profits based on the favorable economic conditions in the U.S. The purchasing power;of the average American citizen (2008 GDP per capita) is exponentially higher ($32,560 in U.S.;versus $34.20 in Germany). The compound effect of a lower unemployment rate in America;(9.9% in U.S. versus 10.8% in Germany) translates into more citizens employed with more;money available to spend on Larson batteries. Additionally, the relatively lower costs for raw;Larson Scenario;3;materials and production ($80 in U.S. versus $95 in Germany) allow the American facility to;mark-up price at a higher rate while offering the product at a lower price ($148.50 versus;$168.75).;Preliminary analysis of the data suggests a course of action that would allow Larson to;regain its financial footing. In a proactive effort to prepare Larson for future economic changes;Team A has identified potential changes that would affect the company and made;recommendations of appropriate business decisions. Specifically, the Team has offered pricing;strategy recommendations, recommendations for overcoming non-price barriers to entry, and;ideas concerning product differentiation.;Provide pricing strategy recommendations;Larson will try to gain a price advantages and opportunities by setting up a strategy and;structure. Larson needs to communicate how much lower the US price is compared to Germany;and also explain how the raw materials are so much more reasonable. Larson can promote their;unique affordable price levels and all areas are a huge benefit when it comes to prices and the;current markets on profitability.;Some other areas Larson can gain strategy over our competitors is if Larson offers;convenient locations, bundling, unique products that are not offered by other companies;penetration, economical pricing, optional, and psychological.;1. Locations Geographical makes a difference in how prices change around the world.;2. Bundling Group some items together like a package deal and the customers will see;that you get more at Larson by paying less.;Larson Scenario;4;3. Unique This is pricing rare items that are hard to find and only available through;Larsons product offering.;4. Market Penetration Prices start low and once market share is high, the prices Larson;can raise the products that prove reasonable and fair.;5. Economical Accommodate what the average customer wants and can afford in todays;global economy.;6. Optional Customers will buy more if versatile products are offered and that;complement each other. Extras add to the overall sales, therefore Larson can reach;maximum goals and in turn, make the customers feel like more was received than;expected.;7. Psychological Delivery, product size, and speed can be attractive and individuals will;buy from Larson due to ease of use and appealing product lines.;Non-price barriers to entry;The first market, America, is very competitive. The second, Germany, enjoys less competition;but has a smaller population, which translates to fewer sales. In order to maintain a competitive;edge in both markets, it is necessary for Larson, Inc. to develop strategies that will deter newer;firms from entering the market and creating greater competition. This concept is known as nonprice barriers of entry. It is better defined as those factors that allow incumbent firms to earn;positive economic profits, while making it unprofitable for newcomers to enter the industry;(Lutz, 2010, p. 21). Some of the greatest barriers for new entrants are, capital, access to;distribution, and strategic action (Lutz, 2010, p.31). For Larson, Inc., the problem is not;Larson Scenario;5;gaining access to the market place, but rather to keep potential entrants out of the market and;ultimately to carve out a greater market presence for themselves. Because Larson, Inc. is an;international company, they have already managed to create a foothold in the industry of both;countries. They have developed their capital and distribution structures. However, strategic;action can be developed better. It is the recommendation to increase a competitive foothold in;both markets, a new, more aggressive marketing campaign needs to be launched. Currently, in;the American market commercials, are serious and rarely aired. In the German market;commercials have a more humorous tone and are coupled with magazine ads. Larson, Inc. needs;to develop their brand and create differentiation in the minds of their consumers.;Ideas for product differentiation for the organization;To understand the real effects of product differentiation some basic assumptions were removed;from the principal model elaborated in the economic literature. Particularly, multi-dimensions;characteristics space was introduced. Differentiation has been shown to impact firm performance;positively both theoretically and empirically. Differentiation primarily impacts performance;through two mechanisms;1. Reduced price sensitivity: Consumers may become willing to pay a premium;price for the differentiating factor(s);2. Reducing directness of competition: As the product becomes more unique;categorization becomes more difficult and hence, draws fewer comparisons with;its competition.;References;Jonathan, B., (1997). Bureau of Economics Federal Trade Commission on Product;Larson Scenario;6;Differentiation. Retrieved August 15, 2010 from;http://www.ftc.gov/speeches/other/bakst.shtm.;Lutz, C., Kemp, R., & Gerhard Dijkstra, S.. (2010). Perceptions regarding strategic and structural;entry barriers. Small Business Economics, 35(1), 19-33. Retrieved August 14, 2010, from;ABI/INFORM Global. (Document ID: 2064648961).;McConnell, C. R., Brue, S.L., & Flynn, S.M. (2009). Economics: Principles, problems, and;policies (18th ed.). New York: McGraw Hill/Irwin.;NetMBA Business Knowledge Center. (2010). Marketing and Pricing Strategy.;Retrieved August 14, 2010, from http://www.netmba.com/marketing/pricing/.;University of Phoenix, (2010). Larson Inc. Scenario. Retrieved July 31, 2010, from;https://ecampus.phoenix.edu/secure/aapd/materials/MBA.
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