Market Competitiveness, Risk and Economic Return: The Case of the Limassol Juice Company

Abstract

This paper evaluates the strategic options available to a juice drink manufacturing company in Cyprus who is facing serious problems of survival in an aggressive and rapidly changing market environment. Following an initial screening of possible investments, based on a qualitative evaluation of the market, the two most promising strategies are formulated and appraised for financial and economic viability. The financial appraisal analyses the projected cash flows from the owner's and total investment perspectives. The economic appraisal is then presented along with the workings for the derivation of the economic discount rate, foreign exchange premium and several economic conversion factors for Cyprus. The distributive analysis identifies the externalities generated by the two alternative strategies and allocates them to the various affected groups in the economy. The investment decision is further enhanced by the application of sensitivity and risk analysis which compares the risk profiles of the two strategies.

Keywords: Project Appraisal, Environment, Economic Analysis, Risk Analysis, Competitiveness

JEL Classification: G31, H43, C15, D62, O13, M31