Do Business Well

Companies can increase profit either by cost reduction or by margin improvements. Margin improvement or improvement in the gross profit can be achieved either by increasing unit selling prices or by increasing sales volume (this includes the possibility of reducing unit selling prices in order to be more competitive and increase sales volume).

Selling prices are affected by supply, demand and cost conditions. All companies need to ensure that their pricing policy gives the best opportunity for maximising sales and profits.

1. Keep pace with inflation

The inflation rate is the percentage rate per period that prices are increasing and should provide a guideline to the level of price increases generally. Continue Reading »

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Your first thought might be that “why businesses fail” would just be the flip side of “why businesses succeed.” While there are some similarities, there are also some significant differences.

Ingredients to Business Failure

1. Inadequate capital
2. Product or service not needed
3. Underpricing
4. Excessive overhead
5. Insufficient time commitment from owner
6. Bad luck and/or timing
7. Poor understanding of business
8. Problem location
9. Poor accounting controls
10. Internal theft

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2. Price: High enough, but not too high.

Pricing is one of the trickiest areas of business for small companies and major corporations alike. An inexperienced manager might suppose that simple formulas exist for determining price—say, a certain multiple of costs.

Certainly you can begin calculating a price range as a function of your costs. Indeed, your final price must provide a substantial enough margin over your costs to allow for taxes and profit.

The issue of price is a controversial one business school professors disagree over which factors are most important h determining price. The reality is that price is a function of several interrelated factors: Continue Reading »

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Disadvantages

Retailers have been slow to take up e-Retailing. This is to some extent under standable in the light of the many disadvantages and problems. Retailers, for example, may lack the technical know-how, the substantial investment required or the order fulfilment capabilities. Set-up costs start from around £20,000 fo a small site, up to £500,000 for a large operation. And set-up costs are only th start: Datamonitor estimates that high street retailers are spending more o ongoing costs than on setting up new sites.

DISADVANTAGES OF E-RETAILING FOR RETAILERS

* May lack know-how and technology

• Substantial set-up, investment and ongoing costs

* Complex logistics of fulfilment

• e-Selling less powerful than face-to-face — uptake slow for goods selected by taste or smell

* Fewer impulse purchases

* Legal problems

Less role for traditional high street retail expertise

• Pressure on margins and prices in-store

* After-sales care difficulties

There can be legal problems. For example, if purchaser and supplier are ni_l
different countries, there may be conflict between the laws of the two countries.’
A further disadvantage is that e-Selling is less powerful than face-to-face selling

(it is easier to say ‘no’ to a computer). This viewpoint is linked to a concern of raditional high street retailers that e-Retailing offers a diminished role for their expertise. For example, there are obvious difficulties with products sold by `atmosphere’ — touch, feel, smell — and with impulse purchases. In addition, consumers have a perception of lower prices online. This puts pressure on margins for e-Retailing, and can lead to shoppers expecting consistent low prices in store. Finally, after-care can be difficult, especially if the shopper is overseas.

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`Place’ (Convenience in the 4- Cs) means the elements of the marketing mix that marketers use to enable customers to access the benefits of a product or service. Traditionally, this has meant ‘channels of distribution‘ through (e.g.) various wholesaler and retailer combinations. Viewing from the ‘convenience for the customer‘ (4-Cs) perspective gives a more customer-orientated focus. This is a vital decision area for the e-Business for three reasons. First, relatively small local companies can widen their market and even export (e.g. Botham (www.Botham.co.uk), to be described further in Chapter 9). Second, many e- Businesses aim to gain competitive advantage by using e-Systems to de-layer the distribution chain. For example, Dell (www.dell.co.uk) supplies customers directly, rather than through distributors, wholesalers or retailers. Third, distribution is an area where some e-Businesses have been severely criticized for failing to deliver customer service (see Chapter 9 for more details).

Place elements of the marketing mix have been changing rapidly over recent decades, and these changes impact in many ways on the marketing operations of the e-Business. First, the growth of retailer power has involved major retailers taking more control of their supply chains. The involvement of wholesalers has been reduced, tending to give way to contract logistics (under retailer control). At the same time, supply chains have become more efficient, with computer network links between suppliers and retailers — many still based on EDI. Predating the Internet, EDI is based on privately owned third-party computer networks. Stock levels have been reduced using techniques such as JIT and Enterprise Resource Planning (ERP). Control of the physical distribution, ordering, invoicing and payment systems, particularly for major retailers, is often still carried out using EDI networks such as Tradanet (www.gegxs.com/gxs/ products/product/traser). Increasingly, though, retailers such as Tesco are allowing Internet access to their suppliers for real-time electronic point-of-sale (EPOS) data. Trusted supplier partners can thus respond more quickly to changes in customer demand. Continue Reading »

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