To: Professor KomissarovSubject: Current Events #1Date: February 7th, 2011Sales unstable going into 2011As sales increase in the U.S. market, corporate executives are looking on with a watchful eye. This skepticism is due to future projections that are taking into account what the sales are based on now, and looking to how stable of a base future sales may be sitting on. As projections suggest, this outlook is not appearing to be very promising for companies due to the fact that the third-quarter sales in 2010 were mainly based on corporations resupplying inventory.[ CITATION Hag10 \l 1033 ] Other factors contributing to this are slow economic growth, increased prices in raw materials, and waning consumer confidence. What this means is that eventhough sales are marginally increasing currently, all the above factors will make growth very challenging in the upcoming quarters. The way to solve this economic hurdle is to subsidize corporations involved in harvesting raw materials. By subsidizing the market, other companies will have an incentive to join the market which will flood the supply and put a damper on price increases in the raw materials sector. To take a closer look at how this will work, let’s factor in the three main causes of the unsteady sales base heading into 2011 and how lowering the price inthe raw materials sector will stabilize sales. Slow economic growth/unemploymentSales increased in 2010, but the economy is lagging behind. Growing just two percent in the third-quarter (up from 1.7% in the second), economic growth is not happening fast enough to lower unemployment. [ CITATION Hag10 \l 1033 ] This high unemployment rate is also contributing to the next factor, consumer spending.Consumer spending is waningWith unemployment rates still hovering near 10%, the recession that crippled the economy in 2008 & 2009 doesn’t seem so distant. This is having a huge impact on consumer confidence, and overall spending from consumers mirrored the sales trend; spending was up, but the future outlook is looking grim. An example comes from consumer-goods manufacturer Procter & Gamble whose base profit margin dropped from 52.6% to 51.8%(last quarter in 2010) in a year’s time. Consumer trends are indicating that, even on household necessities, the general population is spending very conservatively. Is unemployment and slow economic growth the only two factors that could threaten an already unstable sales base? Although these two factors are contributors, the main cause of the situation is the problem with raw materials.Raw materials are getting more expensive Consumer spending and slow economic growth are part of the problem for Procter & Gamble’s decline over a year in the market, but another problem facing the company is the large increase in paper pulp and plastic resins [ CITATION Hag10 \l 1033 ]; two huge components in the production of their products. In addition to Procter & Gamble, other corporations operating costs have gone up due to increase in the price of supplies. The S&P 500 claims that the funds available to spend on operations will narrow to 8.85% in the fourth quarter; down from 8.94% in 1the third quarter of 2010 [ CITATION Hag10 \l 1033 ]. If this trend continues, it could mean big problems for 2011.The big problem going from 2010 to 2011With the above mentioned main factors to an unstable sales base in U.S. corporations, theproblem is trying to keep the corporations afloat in 2011. With increasing costs, 3M Co.’s operation costs were also affected, but this is more than just one corporation. 3M supplies a coating to LCD TV’s that is utilized by a handful of TV manufacturers. Increasing costs for 3M means increasing prices for the other corporations to buy the coating, and this means increased costs to consumers who are already waning with confidence.[ CITATION Hag10 \l 1033 ] If the trend of increasing raw materials continues through 2011, then the sales sector that was increasing could quickly be on the decline. An additional problem is that the 2010 year had increasing sales which boosted corporations revenue compared to the previous recession years. However, now that sales levels are close to being back up to par, 2011 is going to be extremely difficult without a decrease in operations costs to help boost revenue.SolutionTo control the rising costs of raw materials, the government needs to step in, and start subsidizing the raw materials sector. By doing this, other entrepreneurs will see the incentive for the raw materials market and join the market. In effect, the massive increase in the supply of raw materials will decline and in turn will reduce operation costs for corporations also. Lower operation costs will then provide a more stable base for the corporations and, more importantly, will give the sales sector something to fall back on in the upcoming