Minimum wage laws force an employer to pay its employees above a mandated level. On one hand, yes, this means that workers have more money in their pockets. It means they can now go out and spend money which will, in turn, stimulate the broader economy, right? Wrong! The higher wages paid by the employer have to be made up somewhere.
The profitability of companies is recurrent by nature. We expect to see fluctuations in profit according to what’s high in demand in the economy and the level of demand in particular industries. If the market price of a good is more than the opportunity cost of producing it, producers will increase supply in the long run. Profits and losses ensure that, in a market economy, resources are distributed to their highest-valued uses by rewarding those who create wealth and by punishing those who destroy it. So just as profits reward producers for making things people want to buy at prices they are willing to pay, losses punish producers for wasting resources and producing things people don’t want at a cost consumers are not willing to cover.
As marketer’s decision of reducing on price, which we can consider it as investing on potential customers, to ensure their interest in one specific brand. In one period we consume, in the other time we save for investment. Not to mention, in the time of having high cost of living which leads to the shrinking of consumers’ purchase power, or we can also see the inflation on the price of goods. In this case, by repositioning a company’s brand meanwhile realigning with the perception of value in consumers’ mind is critical for a firm to sustain its brand image amount the publics. Even though this action has caused a short term profitability decline, but for firms’ long-term sustainability, it is vital to keep up with customers’ perceived value, and understanding the core idea of value-pricing strategy.
The knowledge of a firm finding out where marginal costs equal marginal revenue is very difficult so some firms may not be able to profit maximise as they do not have the correct knowledge required to do so. Instead firms may decide to do cost plus pricing, this occurs when a firm sets its price equal to the average costs at a normal capacity output and then they add a certain percentage mark up. So the level of the price is the level of average cost plus a certain percentage which will be the profit gained. They may decide to do this as it may stop attracting other firms into the market as they are not producing large amounts of profits. Another different objective a firm could have could be to revenue maximise.
The value from the information obtained from the market research and having it on hand will outweigh the cost of obtaining that information. It will be outweighed due to the fact that it will clarify the problem and discover possible opportunities. An example of the problem would be the lost of market share and shareholder value, and an opportunity would be, what new products that are appealing in order to retain the existing customers and to attract new ones. With that information, they would also gain a competitive advantage because they will know what consumers are looking for, which will eventually trickle down the chain to raising the shareholder value if implemented correctly. Step Two: Define the Problem The problem is that we do not know what the customer wants in a healthier chocolate option.
The use of activity-based costing reduces the potential for overpricing or underpricing, thus allowing the firm to offer more precise prices to its consumers. However it is much more complex to implement and depends on data that firms may not have access to, which can reduce its utility particularly for smaller firms and those that make less use of information technology (Proctor, 2009). Thus, ABC can be a strong tool for budgeting and costing in some organisations, but is not necessary in others. Activity-based costing, as noted above, is used to precisely identify cost centres for each product or service offered by a firm and build those costs into the price of the product (Proctor, 2009). For example, in a manufacturing plant that produces two dissimilar products, it is likely that these products will use not only different materials (which can be easily directly costed), but different amounts of worker labour, electricity, machine time, human resources and management efforts, and marketing requirements (Proctor, 2009).
This is almost a guaranteed way to lose customers. 5. I would suggest that GLC carefully consider every pro and con of the possible operation. Being able to transport products to the manufacturer in a larger quantity would be great, but does the possibility of losing customers or perhaps not being able to have the project funded by investments put the company in an economic decline be worth
Having a focused-cost strategy means that the goods and services are aimed at a special type of consumer whose offerings cost less than competitors. A focused-differentiation strategy is aimed at a special section of the market that caters to the customers’ tastes and what the customers are looking for better than the competition. The best-cost provider gives customers “more value with average to above-average quality compared to the quality of the competition’s product (Thompson, 2012). The low-cost provider strategy aims at a spacious section of the market at right angles to the competitors and charges an overall less cost than competitors. The quality of the goods are acceptable to consumers and there are few frills.
Something else to be considered is that when a company uses money for share repurchases when it could be paying a higher dividend instead, the company’s management is limiting your control and increasing theirs. As a shareholder in a company that makes uses of share repurchases, you have to rely on management’s ability to judge whether it’s an appropriate time to repurchase shares, whereas with your dividend, you have complete control over that choice. The flexibility of dividends for shareholders is great, because if allows you to direct your flow of income to where you think the best investment opportunities are at any given time. Share repurchases lack that
Other than that, a company can have an advantage in the production cost with a proper and strategic plan. To have a lower cost but higher productivity, a company might outsource a portion of its operation. Lower cost can be an advantage because the company can sell their product with the same or regular price as its competitor from a less capital, so that the profit will be higher. Strategic location is another advantage that can determine whether the business will become successful or fail. The location can be used to predict how many potential customers are available.