Potential expansion

Society of Motor Manufacturers has a potential of enhancing its operations to China and Japan. However, the entity might experience a significant challenge in its attempts to fulfill its vision. The background information indicates that car production reduced by 3% in 2017. This demonstrates that it might not have enough vehicles to meet international demand. The domestic market also declined by 9.8% because of the state’s policy on diesel. However, the overseas market continues to increase since it accounts for 79.9% of all UK car output. Therefore, the expansion plans might not succeed because of financial challenges. The financiers might not also be willing to fund the entity because of its declining performance.

Impact of agency issues

The expansion project might create an agency conflict between the managers and the shareholders. The administrators can support such a move to create a perception that the entity is doing well. On the other hand, the owners of the company can oppose such a move because the company has not been doing well in the domestic market. As a result, it can create confusion regarding whose instructions should be followed. Secondly, conflict can emerge between the management and the providers of debt. This is because the company might fail to pay its repay its loans because of financial difficulties. Therefore, this may eventually hinder the company’s growth prospects. Also, it can hurt the management’s association with the government. In this case, both the Chinese and Japanese government might not give the entity a chance to operate in their nation. One of the reasons is that the firm cannot satisfy the overseas demand. It is because local production has significantly declined. Thus, the corporation’s vision intentions of expanding might not materialize. It can make the company carry out operations in its home country alone.

Challenges and opportunities

The managers may not be able to meet the local demand since it is high. One of the problems that will be created is that customers can lose confidence in the corporation. However, this gives the company an opportunity to diversify its investments to decrease risks. Secondly, suppliers may refuse to deliver items to the corporation. It can give the management a chance to award contracts to other reliable suppliers. It will enable the company to get goods or services when it requires them. Assuming that financiers refuse to give the business loans, this might hinder the company’s chances of expanding. However, the firm might see a great opportunity of sourcing for funds from the members of the public. In this case, the firm can issue a prospectus to invite the public to purchase its shares. The strategy will be better and cheap compared to borrowing bank loans that are not reliable in most cases. The measure can also increase the company’s chances of growth.

At times, the customers may not be satisfied with the quality of products being produced by the entity. This is because it may not match their tastes and preferences. Therefore, the administrators can seize this opportunity and listen to the grievances of the customers. This can create a better association between the customers and the management. As a result, it will increase the customer’s loyalty to the corporation’s products. These assumptions are vital as it assists the firm to identify its strengths and weaknesses in the industry.

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