The first is that the Federal Reserve is going to wait to increase rates until the last possible moment, in the hopes of spurring greater investment and therefore job growth. This means that inflation is expected at some point this year. This inflation means that factor inputs will increase in cost. Larson can gain advantage over competitors if it can hold its wholesale cost stable in the face of an increase in the cost of factor inputs, since competitors may be forced to increase their prices. Careful control over its cost structure will allow Larson to do this while maintaining profitability.
Another potential economic consequence is a decline in the value of the Euro. Normally, Larson exporting products from America to Germany would be fairly easy given Germany's current account balance, but the troubles in the Eurozone are putting downward pressure on the value of the Euro. This will make American exports more expensive in Germany, reducing the attractiveness of this or any other European market from an export perspective. It is unlikely that Larson will be able to differentiate its batteries to a degree that would give it pricing power strong enough to overcome the exchange rate disadvantage that it would face vis-a-vis Eurozone producers. The following chart illustrates the decline in the Euro since the crisis with Greece has hit full force:
courtesy Yahoo! Finance
It is recommended, therefore, that Larson focus its energy on the U.S. market. The company should pay close attention to cost control. When the cost of inputs increases, the gains in cost control...
E. In Spain or Italy) Larson's products will be cheaper on global markets. Under this scenario, Larson would be forced to finance its operations entirely from ongoing cash flow. It would also see a slump in the strength of the battery industry. If the industry slumps, this may bring about the oligopoly scenario from Milestone 2. At present, however, a credit crunch would simply limit the amount of R&D that
Non-Price Barriers to Entry In the OEM business, ongoing contracts are a strong driver of future sales. Once Larson becomes the battery supplier for a company, it can build a strong relationship with that company. The result will be a non-price barrier to entry as smaller firms find it difficult to break the relationships that Larson forms with its customers. Without those customers, there will be less room for growth and
Also in terms of trade, it would be recommended for the company to conduct several analyses in order to identify the countries with the highest demand for batteries. India for instance, with its numerous technological applications and in its quality of hosting most of the global mobile telephones -- would be expected to be a large consumer of batteries and could as such constitute a desirable trading destination for Larson
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