The Information and production data are used to generate ways to increase revenue, maximize profit (through marginal revenues and marginal cost theories), finding the right price and non-price strategies and estimating the costs and revenues. Creation of barriers to entry is essential to any entity, and deferent ways of doing this are discussed. Cost saving strategies and product differentiations are fundamental aspects that have not been left out. Increment of revenue and determination of the profit maximizing quantity A two-fold strategic approach for each goal Is followed to increase revenue and maximize refits.
Increasing revenue is the goal and continuous effort of any company regardless of how the economy Is doing. Investing In other market segments can increase the revenues of Thomas Money Inc. For instance, a subsidiary in the medical field would be an Ideal Investment. Here, the focus would be on construction for on new buildings, as there is a need for hospitals in the health industry, with all the construction equipment FIG has It can contract its equipment to an organization who does construction.
There has been a reduction of 30% for the need for new homes and business financial services. However, investments into other already existing segments like, medical financial services are increasing. This will increase revenues and add a third market of financial service to Thomas Money Inc. The processes of mergers and calculations of already existing firms cushions the potential risks to be encountered by a new entrant. Thus, the best suggestions would be to diversify into another financial market segment, as the company has done effectively in the previous periods.
I In analyzing the products of Future Growth Inc. (FIG), as a subsidiary of Thomas Money Services, there is a concern for the production quantities and the variable sots associated with those quantities. Primary issues that need attention Include fixed costs and variable costs, growth of revenues and profit minimization. A review of the data shows that FIG should consider shifting consumer focus from those who want new equipment to those who want used or refurbished equipment.
By temporarily doing this, and by liquidating the 500 units repossessed, revenues for FIG will Increase substantially, since there are no variable costs for those units The marginal benefit of increased revenue is another benefit from the liquidation of the While FIG should not stop production of new equipment altogether, the level of production should decrease since this is the current economic trend, such that the subsidiary retains a normal or an economic profit. Calculation of the maximum profit is directly associated with fixed and variable costs obtained by the highest possible quantities of output.
Using the short run production analysis, FIG can maximize its profits under the total revenue (TRY) and the total cost (ETC) approach. TRY= P (price) = $2,200 and ETC=$I ,262. The economic profit is thus $968 before being affected negatively by the law of diminishing marginal returns. Using the method by McConnell, Bruce and Flynn (2009), marginal revenue (MR.) = marginal cost (MAC) = price (P). Using the production data given, profit minimization can be attained at five units. Total average cost (TACT) $252. 4 * $1,262 while The economic profit $938.
Creation of price and non-price strategies, and barriers to market entry Pricing strategies The aim of a seller or producer in any market structure is to minimize costs. This is done by reducing marginal costs and maintaining an acceptable pricing strategy for products and services. An increase in marginal costs is transferred to the final price ND this may in turn decrease the demand and consumption of that good or service. The most critical component of pricing is looking at customer expectations and keep the price in tandem with the market price levels.
The pricing decision of the consumer and cost of searching for the good or service should be considered, and in this case put below the market price. Non-pricing strategies Non-pricing strategies are also important aspects of competition in an effort to increase profits and revenues. Suggested ways of doing this are advertising, funding research and development, acquisition of technological advances and even engaging n corporate social responsibility. The company could also implement some consumer oriented programs to show appreciation to its consumers.
Thomas Money Inc. And FIG don’t need to do all these but they need to test all these methods and find out what works best. It is difficult to appraise the benefits of non-pricing strategies since most of the benefits are intangible. But some research firms can do the monitoring and evaluation for Thomas Money Inc. To determine the impacts of advertising. Other strategies like corporate social responsibility works to the benefit f the company as it endears itself to the community it serves through its valuable programs.
Barriers to market entry In terms of creation of barriers to entry, this is done with an objective of maintaining a large market share and customer base. Companies that have effectively barred others from entering a particular product market are called monopolists. Creation of brand for Thomas and FIG is the key to maintaining an effective barrier. It may also decide to obtain patents for designs or even copyrights for its written documents. Product differentiation Product differentiation is a strategy used primarily by globalizes entities.
Different products are packaged and market differently according geographical location and target consumer. This is done with the goal of meeting the firm’s organizational goals products to consumers with specific needs. It is the key to maintaining a competitive advantage as Thomas will be able to distinguish its products from those of its competitors. Another way of differentiating technique suggested is the value added method. By adding more value to consumer products, Thomas will give its customer more satisfaction and simplifying their interactions with the company (Yuan & Han, 011, p. 8). Cost saving methods Some costs saving measures include elimination of unnecessary areas of production that are likely to incur additional costs to FIG or Thomas Money Inc. And product development. Technology has also been shown to cut down costs, since it automates most of the work. Thomas Money Inc. Should shift from the centralized control to a decentralized approach that encourages creativity, innovation and quality through the use of Job groups. Human capital management, whereby employees are trained and motivated appropriately is a method that is likely to reduce costs.