Ecn 561 Wk 4 Fgi Business Proposal

FGI Business Proposal
Economics 561
March 18, 2013
Instructor Mostafa Baladi, PhD

FGI Business Proposal
Thomas Money Service Incorporated is manufacturers and finance building and forestry equipment under a subsidiary Future Growth Incorporated (FGI).   After over 60 years of consistent increases in profits, recent fluctuations the economy as well as flooding, massive fires and protests from animal activists attributed to a decline in last year’s profits of 30%.   The organization is seeking ideas and suggestions to change their business practices to increase profits.  
Understanding the market that FGI participates will help to narrow the specific areas FGI can focus to efficiently and increase profitability.   The organization operates in a monopolistic competitive market in which many organizations compete with products that have slightly different features and benefits, independent price actions, and perception for substitutions (McConnell, Brue, & Flynn, 2009).   A business proposal has been assembled to help FGI address opportunities to increase to revenues, minimize costs, and enhance profit maximization, product differentiation, and barriers to new competitors.  
Profit Maximization
Price is not completely elastic in a monopolistic competitor market because products have different features and benefits; therefore there are no perfect substitutes.   McConnell, Brue, and Flynn (2009) state, “When price changes, total revenue will change in the opposite direction if demand is price-elastic” (p. 122).   Because of the type of market FGI participates, if FGI increases prices there is little change to the market however demand for FGI’s products would decrease.  
  Therefore, FGI must determine the level of output, not necessarily price, in which...