Copper and Water Rights

The scarcity of minerals is a challenge for the Miler Freeport. The company is planning to expand and increase production, but faces various challenges that include conflicts, competition, and water unavailability. The company incurs high production cost due to scarcity of water, which is vital in the mining of copper. The surrounding community also needs water for various activities like farming. The majority of companies mine copper in arid areas, where water is a scarce resource. Therefore, the company spends a lot of money for the water management programs. Moreover, the competition in copper producing industry in other continents affects the prices. Thus, the Miler Freeport Company needs to find a way of minimizing input costs to expand production and increase profits. The essay seeks to prove that Freeport Company can control the scarcity of water through a number of choice that enable them expand and compete in the market.

The primary inputs of a company include labor, land and capital. Capital consists of physical and financial capital. The physical capital entails machinery and equipment’s available. The non-physical assets include the rights of water access. The latter resource was a threat to the Miler Freeport Company. Water management costs are adding pressure to the management of Freeport Company and other businesses in the industry. The change in prices due to a weaker demand contributes to the problems. Although the economy went down, copper prices are resilient due to quality deposits and low power of substitute as it is required in a wide variety of goods, such as water pipes and iPhones. Thus, Miler Freeport is not at risk of closure. However, the increase in input spending of water increases the final cost. The unavailability of water can prevent expansion or cause premature closures of departments. The company had to buy 250 acres of ranchland from Richard Kaler to gain freshwater rights and expand production. The increase in expenses for water as an input causes marginal cost of product to decrease. Therefore, the output of the product decreases due to the high cost of water, hence forcing prices to go up.

More labor, time and water are needed to extract copper. The company periodically extracts lower grades of copper. The less the copper grades, the more the labor, water, and time are needed to improve the grades. The labor includes employment of more workers and machinery to extract required amount of copper on time. The indirect costs incurred by the company result from the fact that Miler Freeport is committed to training 16 Apaches every month and converted the local school into the training center. The additional direct costs include factors for the new employees that are employed to complete the daily activities. In the future, the company is expected to incur higher expenses in human resources. Also, other escalating costs include manufacturing expenses. There is an increase in direct costs due to demand for quality grades of copper, which causes the growth in input cost hence increasing prices.

The company expansion promotes an increase in production; hence the input levels rise. The increase in production results in higher profits and enables the company to avail new products to the demanding market. The high-quality copper attracts more customer loyalty due to the satisfaction. As a result, the demand increases and pushes the company for growth of supply of high quality products. However, prices slide due to the competition in the market. There is high competition from other companies that manufacture copper overseas. The factor affects the prices in a negative way fort the Miler Freeport Company. The copper prices were at the maximum in 2011; but since then, the price decreases from time to time. The competitors that manufacture in China do not have investment shortage and incur lower costs of production; hence they have less input costs compared to Miler Freeport. The pressure of water shortage has led to changes in production processes that increase the cost of inputs that affects the income negatively.

The conflict between the company and other consumers of water, such as farmers, challenges the operations. Therefore, water costs are increasing due to the competition of property rights. There is also less rainfall available in the area. The company’s strategy aims discovering where to buy private land and making deals with water rights. The organization also invested in desalinization plant and pipeline to remove salt from ocean water. The company builds the desalination plant to abide by government regulations and provide fresh water needed for the production of copper. Miler Freeport has bought additional land areas for the past five years to acquire water rights. The company has also agreed to pay for the opportunity costs to the local people to increase its water supply for a short run of three years. The expense that the company incurred to buy water rights reduces equity, but increases the output level that Miller Freeport Company requires. The increase in the output means more mining due to the availability of water. The efficiency in acquiring water for the short run contributes to the expansion of the company. The business growth of Miler Freeport increases the level of employment and stabilizes the prices.

In conclusion, the Freeport Company choices to build a desalination plant and buy land to gain water rights have been able to solve the supply problems in a short run. However, there is a concern for the future progress of the Miler Freeport. The company needs to find a long-term solution for water shortage to continue mining and compete with other copper producers. The long-term solution should aim to decrease the input costs that affect output. Thus, the strategy should target the decrease of prices. Finally, the training and employment program is effective but should consider every employee distance from and to work.

African Beer

SabMiller and Diego PLC have dominated African beer market due to the low prices. The companies negotiate with the government on a tax break that has had a significant contribution to the manufacturing and distribution of cheap beer. The aim of the government when negotiating the deals with beer companies is to eliminate illicit brews from the market. However, African economy is growing rapidly, and the income of the people is rising too, contrary to the situation with the developed countries. Moreover, the health experts have a concern of excessive drinking in the countries. The high consumption of beer is beneficial to the business of farmers, who produce the inputs required for the beer manufacturing. The essay seeks to substantiate that achievement of the low cost of production by SabMiller and Diego companies in Africa has a competitive advantage in the market.

The success of SabMiller and Diego companies is due to the trade off as they negotiate the tax breaks with the majority of African governments. They secure tax deals by using local ingredients to make the low-cost beer. The state bodies also guarantee payment of the difference in case the tax revenue drops. The excess demand occurs when the price of beer is set below the equilibrium price. The quantity of demand increases as a result of a change in prices compared to the competitors in the regions. Thus, when the price is low, the customer has a higher demand for the goods. Therefore, the customer consumes more beer at a less price. In Kenya, the government reduced the tax on Senator Beer, which is a product of Diego’s East African limited. The aim of tax reduction by the government was to combat the consumption of harmful local liquors through producing similarly-priced legal alternative. The result was high demand and increase in sales of Senator Beer because of the low prices. Therefore, the government achieved its objective of combating the sales of illicit liquors.

There is pure competition in the market of beer. However, the leading multinational companies like SabMiller and Diageo companies are privatizing state-owned breweries and buying the leading private beer makers in Africa. The acquisitions increase value generation and tax gain for the companies as cost efficiency improves. SabMiller and Diageo also increase the market share in the acquisition of other breweries; hence generating high revenue. The companies enjoy low price and have advantages over their competitors by removing packaging and tax input costs. In an example, East African Breweries Ltd (EABL) sells beer straight from kegs and has slashed the packaging costs. The lower price, according to a bartender Elizabeth Nyamworu, has pumped up the beer sales at her bar. The demand in the market is perfectly elastic. The reason is that the demand is affected to a greater degree by the change of price in the market. SabMiller’s and Diageo’s low-cost beer is an available substitute for the legal expensive beer. The SabMiller and Diageo have also been able to beat the unfair competition of local brews though advertisements and government help as they may be harmful for consumption.

Farmers benefit in the resource market on the production of low-cost beer. The beer manufacturers require resources, such as sorghum, that is a locally grown plant. The two companies manufacture a low-cost beer, thus, creating employment opportunities. The result is the job availability in Africa to the farmers producing the ingredients. The increase in demand for the low-cost beer results in the higher demand for the ingredients the farmers sell to the company. The farmers, therefore, sell more ingredients to the company. The local manufacturers increase their income and contribute to the growth of the economy. However, health workers are concerned by the excessive drinking of alcohol. Isaac Ansah, who is a worker at Remer Association rehab clinic in Ghana, does not like the government tax incentives. The economic policies mean cheap beer, hence high consumption of alcohol.

In conclusion, SabMiller and Diageo have edged the competitors in the market by the achievement of low cost of production. They have cut the package costs by supplying beer straight from kegs. The two companies also have tradeoffs with the government, as the local administration helps them reduce production and opportunity costs. They have gained the market share by the acquisition of other breweries makers. The two businesses help the government to eliminate illicit liquors, which are harmful for people. However, the government should consider a way of reducing excessive drinking by raising the price as income levels improve. The long term perspective of the companies looks bright as the consumption of the beer increases due to the rapid growth of African economy. Therefore, SabMiller and Diageo will aim to compete for the market share in other countries in Africa that are not covered by the companies. The expansion of the companies results in the increased revenue. The two organizations have also created employment both for farmers and the workers in the companies raising income levels in the country.