Every business is continually working towards growing its profits. Through profit maximization, businesses can find the best price levels to achieve its profitability goals. This method allows companies to set different product at prices that return maximum revenue and profitability. Profit maximizing prices are important because they have a positive long-run effect on profit, rather than markdowns, which create excitement but inevitably have a negative long term profit effect. In order to find this equilibrium price, a company must determine its consumer’s price elasticity or price sensitivity (Chapter 14 slides).
The concept of the value chain first came into being when Michael Porter described it in his 1985 best selling novel “Competitive Advantage: Creating and Sustaining Superior Performance”. The value chain is a model that describes a series of value adding activities connecting a companies supply side with its demand side. The value chain model gives managers the opportunity to analyze and redesign their internal and external processes to improve the firms effeciency and effectiveness. The main objective of the value chain model is to identify vital processes and information that exchanges between suppliers and customers and to improve the information flows through the various processes. This ideology was built upon the insight that an organization
The profit margin is the value that’s captured and created by a company: Value Captured and Created – Cost of Creating that Value = Margin If a company creates more value, it is likely that the company would be more profitable. By providing more value to the business’s customers, will build a competitive advantage for the business itself. Hergert and Morris (1989) stated the following: “The Fundamental notion in the value chain analysis is that a product gains value as it passes through the vertical stream of production within the firm. When created value exceeds costs a profit is generated.” Primary activities can be directly related to the maintenance and support of a product or service, physical creation, sales and distribution after-sales service. More defined this involves the inbound logistics, operations, outbound logistics, marketing and sales and after-sales service
Both these employees have shown their innovative approach at work and more than efficient attitude. As for Humbolt, he suggested the best project for the company by acquisition of Schnapps Brand. While the project investment is under the limits of capital budgeting, it is also enticing in terms of profitability and diversity to approach the varied class of customers. On the other hand, it was Morin who designed the price war and was the lead advocate, is yet another deserving candidate to lead the
A simple definition of competitive advantage is as follows: when a firm is able to accrue a larger difference between the willingness to pay and the average costs compared to competitors in the medium to long term (Giarratana, 2016). But, to understand the ability of a firm to exploit its competitive advantage we must firstly underline its capability to create and capture value. The skills of a firm dedicated to the improvement of costs and formation of product benefits are two main types of competitive
STRATEGIC OBJECTIVES: The objectives of the company are based on the value it delivers to its customer. The value delivery process of an organization is a core competitive advantage in today’s marketplace. Thus, companies put people and values first than their profits. The values of IFFCO are a strategic design pattern as PIECE; People, Integrity, Excellence, Consumer and Entrepreneur. PEOPLE: Organization's
2.7 Competitive advantage Competition forms an integral part of any business. It is the reason why companies constantly innovate and perform better as it is a determinant in defining a company’s success or failure. A competitive strategy will enable a company to position itself better from other forces that determines industry competition (Porter, M. E., 1985). Two key concept surrounds a competitive strategy: attractiveness of industries for long-term profitability and factors affecting it and determinant of relative competition within an industry. 2.7.1 Porter’s five forces Porter’s five forces affect the attractiveness of an industry and those forces are to be considered when devising a strategy for the firm: • Threat of entry of new competitors:
In addition companies need to deliver their products while keeping cost effectiveness in consideration. If they understand the perceived benefits of their target audience and are able to engage with them on a personal level, they can attain customer satisfaction and ultimately can have increased sales. In conclusion, conveying Unique Value proposition clearly to the customers could be a complete win/win for any business. Brand equity Formal Definition: The commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself. Alternative Definition: Brand equity refers to a value premium that a company generates from a product with a recognizable name, when compared to a generic equivalent.
CHAPTER 1 INTRODUCTION 1.1 Introduction Previous studies (Abor & Biekpe, 2007) proof that corporate governance mechanisms have the relevant relationship with firm’s performance. Thus, to achieve the firm’s goal which is to maximizing the shareholder wealth, both management and stakeholder must have good relationship so that they can co-operate with each other. The stakeholder, such as shareholder should have the active monitoring function so that the management will do their best to achieve profit. In making sure the firm’s performance is good, the management will do their best way to get their goals for business operation. The management of the firm should have to strong management skill, especially managing the operation in order for the
The Competitive Advantage of Nations Competitive advantage is a business concept which describes to us the characteristics necessary that allow an organisations to outperform its competitors. This can be achieved through many avenues such as providing consumers with greater value by either lowering prices or providing a product or services that justifies a higher cost .Prevailing attitude on this subject matter would suggest that factors like labour cost, interest and exchange rates and economies of scale are principal factors in determining national success. However, we learn from Porters article that real Competitive Advantage is developed by innovation applied to the Diamond Model or The Diamond of National Advantage, which in essence are four characteristics that both individually and as a system collectively form the Diamond of Nations. These Characteristics are: Factor conditions, demand conditions, related and supported industries firm strategy, structure and rivalry. Factor Conditions: This is a nation’s position on factors of production such as skilled labour force or infrastructure that is necessary in order to compete in a given industry.