After an in depth conversation with Consumer Products Inc. (CPI) chief financial officer (CFO), it is necessary to look into the requirements that would be necessary to consider for expansion. In this paper it is my goal to present ideas on how CPI may use micro and macroeconomic concepts to assist companies in their consideration of expansion strategies, what it would require to expand, and possible obstacles that may need to be conquered.
In addition, identification of companies will be necessary to understand which ones have the potential to sell products from CPI, where the attractive markets are, and what considerations for finances and economics CPI would need to identify. It is important to get a good understanding of micro and macroeconomics. In my understanding of CyberEconomics (Schenk, 2008), micro economics takes a look at consumers and companies to understand how they interact. People make purchasing decisions, while companies determine price for profit levels, and place their focus on specific markets.
Macroeconomics takes into account the entire economy as a whole. It is an examination of causes, such as inflation, comparison of growth rates internationally, and it effects on how economic growth is effected by the national debt. CPI has developed an outstanding reputation in the western United States therefore that can be coupled with the reputation of the brand, enabling CPI to branch out across the entire United States. For this reason CPI can open the door to establishing itself nationally, as well as potentially expanding into internet sales and eventually to global sales, as opportunities for retail sales are expanding to new heights.
If CPI is to compete nationally there are significant changes that must take place at both the strategic and operational levels. CPI would need to expand its infrastructure, technology, and would need to invest in more human resources. Overall strategies would need to change, as well as the mindset of employees and the company as a whole in an effort for CPI to be a competitor with much larger, successful companies like Proctor & Gamble. New companies may have difficulties making it because of the competitive nature of the industry.
Cost and pricing are also critical areas that are often difficult to contend with. It would be necessary for management to consider operational improvements in an effort to create the best operating margins to ensure a competitive edge. Financial resources would be also necessary to implement advertising companies nationwide, which may be difficult for a company that is relatively small. CPI would want to make connections with nationwide chains like Costco, Target, Albertsons, and other similar chains.
This would act as the company's primary method of distribution, as it yields the greatest opportunity for mass quantities of product on the store shelves. It would also be wise for the company to develop a strong network with distributors for smaller national retail chains. The distributor generally caters to multiple retailers within certain areas. The company has likely already developed these bonds in the west coast cities and could use that standing to further develop into new areas.
It will be necessary for the company to understand their own finances, as they will need to evaluate their financial standing to ensure they have adequate funding to support a plan for expansion. Areas, such as human resources, marketing, and infrastructure would need to be evaluated to ensure they have enough to invest. The company would also want to improve its current network for distribution by adding more warehouses and distribution centers, which would require significant funding.
Another area for the company to consider would be ecommerce. In this society, a lot of company's also sell their products online. This would also require additional advertising monies. CPI would want to look into a technology infrastructure upgrade by adding an ERP system. "ERP's main goal is to integrate data and processes from all areas of an organization and unify it for easy access and work flow" (Tech-FAQ, 2009). This will enable the company to run a larger size operation more smoothly.
In addition they will need more personnel to adequately run the newly expanded company, which will require HR to acquire more personnel for the company. Other areas for them to consider financially would be advertising, promotions, and marketing to propel the company from being a small regional chain to a national competitor. Economic factors also play a role in the success of an expansion project. If the economy is not good then business does not fare well, however if it is good the company needs to be prepared for economic downturns.
For instance, the recession we are in currently would need to be considered, as to whether the company could cut costs while maintaining a positive operating margin to be able to compete with large corporations. There are many factors that CPI needs to consider when looking at expansion into other regions and markets. The company needs to evaluate and understand not only their finances but the state of the economy and their competition where they are looking to expand. These factors will dictate whether CPI can be successful in their new venture or not. The biggest question then, is can the company overcome the obstacles they are faced with?