Question

1) The price of Material A is RM2.40 today. However, 2 days ago, it was RM 2.20 and last week it was RM 2.05. (i) As per your knowledge and understanding, explain in detail why there is a fluctuation of price of about 15 cents within a week and name those responsible behind this. (ii) If it's you have the right to decide the final price of a material, what are the details that you will consider before finalize the price. 2) Your friend wants to open up an Engineering Company but lack of knowledge on current economy challenges and current financial issues. Help your friend to identify what are the DOs and DONTs before start up an Engineering company. Your discussion should be mainly in the context of Economy and Finance.

Answer 1

1)

i) The fluctuation and rising trend in the price of material may be caused because of the following reasons:

a) Increase in the demand & shortage of supply of the material in the market

b) Perceived increase in the price of the material

c) Decrease of the price of complementary material

ii) For setting the final price of the material, following pointers would be kept in mind:

a) The minimum support price to ensure the supply continue to exists

b) Whether the material is the material of mass consumption

c) The degree to which the material is used in the production & supply of public and private goods

d) The effects on environment and extent of negative externalities that production and consumption of material produces

e) The transportation cost, electricity charges, maintenance charges, security expenses, labor charges, legal expenses, administrative charges, operating costs incurred in ensuring production & supply of the material

2) Dos for setting up an Engineering company

i) Do a market survey

ii) Fix location set-up that is easily accessible to banking facilities, economic infrastructure, connectivity via roads, railways & air flight

iii) Get hold of existing firms in the market and their respective reach

iv) Study economic, political, social, cultural, natural and competitive environment

v) Work on goals & objectives and craft a vision and mission statement

vi) Estimate the budget for setting the plant including estimation of costs to be incurred for purchasing machines

vii) Study the skill set required and design the hiring process

viii) Consult lawyers and seek information on the kind & extent of government clearances required

ix) Perform consultation with appropriate vendors both on backward and forward linkages

Donts for setting up an Engineering company

i) Do not hurry in planning & designing

ii) Do not panic or think of quitting based on short-term perception

iii) Never deviate from vision and mission statement

iv) Never park profits rather put to investment and expansion of scale of operations

v) Never launch without a budget for marketing