Business_Recommendations_Based_on_Economic_Predictions

The current macroeconomic environment presents several challenges for Larson. Larson must consider whether to enter new markets or develop specialized products. Tightening in the credit markets may limit access to capital, requiring Larson to finance entry into markets with internal funds. One option available to Larson include specializing in green technology products such as developing batteries for hybrid vehicles, which could be funded through government credits. Larson needs to determine a market specialization approach that builds a stable future for the company. Business Decisions Based on Credit Markets Due to the current recession, market stability experienced by Larson Inc. is very low. An important note to consider is that the market is at the trough of the business cycle; upcoming expansion is bound to happen. Until that time, Larson must use the best of their resources provided by macroeconomic policies intending to curtail the full effects of a recession, such as lowering interest rates ( McConnell, Brue & Flynn 2009). It is likely that during this low point in markets, Larson has acquired more debt than normal operation levels would require outside of a recession. Once credit markets have loosened and they have access to more capital and resources, it is important that they maintain a certain level of liquidity and solvency. As previously noted, Larson must look at their internal operations to make certain their revenues increase large enough to regain their health financially. This can be accomplished wholly by investing in new marketing strategies, increased working capital, technological advancement in new products, and more cost-effective production. Larson must dedicate the company’s direction to and reintegrate the idea that they must advance in all forms of their business if they plan to stay competitive in the battery market. It is also important for Larson to plan ahead to future market conditions, because if they are continually a profitable company they will undoubtedly experience more years of economic downturn in the business cycle. Decisions related to trade and specialization An option that Larson has is to move into the car battery field. This can give them a level of specialization. They can focus on the environment and energy savings. More car manufactures are producing hybrid cars and it would be a great advantage to Larson to obtain contracts with some of these manufactures. In return for using our batteries, they could advertise for Larson along with their own advertising. Working their way into the specialized field of energy efficient batteries would improve the image of Larson. Working with manufactures to create an efficient and safe battery will also benefit the car manufacture to meet industry standards in the hybrid specialty. Larson can also do this with major computer companies. If they come together with a computer company and create a cleaner, safer, more environmentally friendly battery to use in the combination sell along with the computer. This will allow the computer company to make a name for themselves as a “green” company, while allowing Larson to get their name out by having their battery included along side major computer companies. Environmentally friendly products are a growing specialization market that is only increasing in popularity and continues to force companies to raise the bar in the products they use in manufacturing their products. Larson needs to create more environmentally friendly products and then present them to the car and computer industry in such a way that they will see the benefit for them by using a product from Larson. Business Strategy Evidence In an effort to further differentiate ourselves in the battery industry, while at the same time making strides in midst of an economic recession, Larson has decided to specialize in green technology. Anytime a business decides to embark on a new direction as ambitious as the one Larson’s current path into batteries that support hybrid automobile the start up costs can be massive. With credit so limited it will be a tough transition. However as previously stated, Larson must use the best of their resources provided by macroeconomic policies intending to curtail the full effects of a recession, such as lowering interest rates (McConnell, Brue & Flynn 2009). For our new chosen path some potential start-up capital might be found in the through the credits that promote green technology development. In reviewing the Reinvestment and Recovery Act of 2009 there are credits that apply, “…to the manufacture of plug-in electric vehicles and their electric components, such as battery packs, electric motors, generators and power control units. The credit may also be expanded in the future to include other energy technologies that reduce greenhouse gas emissions. The Secretary of Treasury must establish a certification program within the next 180 days and may allocate up to $2.3 billion in tax credits” (Clean Energy, 2010) Perhaps this is a path we should explore. The need for Larson to identify strategic partners is also high on our strategic initiatives. “Vice President Joe Biden…announced $300 million in funding from the American Recovery and Reinvestment Act for state and local governments and transit authorities to expand the nation's fleet of clean, sustainable vehicles and the fueling infrastructure necessary to support them” (Recovery Act, 2010). Assuming we have the technology in place to quickly transition our batteries to suit the hybrid car industry I recommend that we should form strategic partnerships with fleets that are awarded these monies. Larson has determined that moving into the hybrid automobile battery market presents the best opportunity for the company. The weakened economy has taken a toll on Larson’s financial position and the current credit market limits access to capital. Larson must work to develop internal financing to allow the company to enter this new market. Although government credits are available, the company will have to fund early development through retained earnings or other capital sources. The company will have to remain in its current markets to ensure cash flow continues to fund future growth until the credit markets loosen. References Clean Energy Aspects of the American Recovery and Reinvestment Act | Renewable Energy World . (n.d.). Renewable Energy World - Renewable Energy News, Jobs, Events, Companies, and more . Retrieved March 14, 2010, from http://www.renewableenergyworld.com/rea/news/article/2009/02/clean-energy-aspects-of-the-american-recovery-and-reinvestment-act McConnell, C. R., Brue, S.L., & Flynn, S.M. (2009). Economics: Principles, problems and Policies (18th ed.). New York, NY: McGraw Hill/Irwin. McConnell, C. R., Brue, S.L., & Flynn, S.M. (2009). Economics: Principles, problems and Policies (18th ed.). New York, NY: McGraw Hill/Irwin. Recovery Act Announcement: Vice President Biden Announces $300 Million in Recovery Act Funds for Clean Cities Program. (n.d.). Electric Drive Transportation Association. Retrieved March 14, 2010, from http://www.electricdrive.org/index.php'ht=display/ReleaseDetails/i/11980