Marketing is the process of creating and delivering of a standard of living which involves finding out what the customers want and creating and developing a product that will satisfy their needs, determining the best price, promotion and distribution.
The risks that calibrated might face as a result of increasing profits in order to maximize profits is that the company might reduce its sales because the customers are likely to switch their loyalty to other products that are similar in the market. As result of this the company may experience difficulties in financing its operating costs like the cost of purchasing raw materials for further production and also the cost of paying for fixed costs like rent and electricity that are vital for production to continue.
The company is also likely to record low profit margins as customers will switch their loyalty to other products of other companies that are cheap. In the long run the company will start operating at a loss hence the only prudent thing at this stage for the company to do is to stop its operations. This will be the only choice for the company because there is no company that can operate at a loss and continue with its operations.
Because of the company’s failure to meet its operational costs like salaries the company may face strikes from its workers because of delays in the payment of their salaries and wages. The company may also be at loggerheads that champion for the interest of workers which may end up taking the company to court in order to compensate the workers.
The major risks of calibrate of expanding output rather than reducing demand through price increase includes the following:
Major facts-Expanding output instead of reducing demand may lead to wastages because the company may produce more than what is needed in the market. This will result in to incurring huge losses because those products that are not bought may spoil hence leading to losses.
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Major problems-One major problem of taking this measure is that the cost of production for the company will increase because increase in output should match with the increase in sales for profitability to be realized. Another problem is that the company will spend more to advertise its products as a result of increased output to beat competition and this might increase the company’s operating costs.
Alternatives-The Company can increase its output by reaching other geographical areas and looking for suitable location where the customers can easily identify it. The company can also brand and pack its products in a unique manner to attract customers.
The advantage of increasing output is that there will be no shortages in the market and also and promotion of the company’s products will be easy since those products will reach many areas. The disadvantage of increasing output is that the goods produced maybe more than what is needed in the market leading to wastage.
The choice and rationale of using this strategy depends on how the customers are willing to buy the company’s products. The implementation of this strategy will require additional resources in order to increase output.
Using the strategies and tactics of marketing the major facts are advertising before increasing output. The major problem is that the company’s products may lack a market share due to competition.
The alternatives are to offer good prices for the products, branding and packing in a unique manner to distinguish company’s products with those of competitors. The advantage of this strategy is that sales will increase thus increasing profits for the company. The disadvantage is that additional costs will be incurred before achieving this.
The choice and rationale of this strategy will depend on the available resources the company has and the competition in the market from its competitors. Implementation of the strategy should be as soon as possible if the company is to remain relevant in the market.
