Berksire Threaded Fasteners Company Profitability - Essay Example

? Finance Table of Content Introduction………………………………………………………………………………3 Main Body……………………………………………………………………….............4 Conclusion……………………………………………………………………………….8 References………………………………………………………………………………..9 Appendix……………………………………………………………………………….10 Introduction The performance of a company is essential towards its growth. There are various internal, as well as external factors that have a great influence on the success of a business (Albert, 2008). Although, it is practically not possible to control some forces that operate outside a business, such as availability of the capital and the world economic conditions, management need to inspire and guide internal operations in helping ensure a secure competitive position within the marketplace. Moreover, both innovation and adaptability are essential in helping gain market share, and stay profitable in the event of fluctuating economic climates (Hill & Westbrook, 1997). Research show that for a business to remain being competitive in the market, it has to always impress innovative services and products, a market plan and a fair pricing (Hill & Westbrook, 1997). In meeting the high standards, there is need for an operation efficient to be implemented as it helps in keeping the price competitive. For a well-run business, a shared goal is often incorporated with a view to inspire a spirit of co-operation among its departments (Humphrey, 2005). In challenging times, dynamic leadership is crucial for maintaining a profitable business. Excellent performance is credited to increased productivity to the main company. Increased or impressive productivity is the central core of many companies (Menon, et al. 1999). Therefore, the increase in the profitability capacities of a company is placed amongst the central targets of any company (Menon, et al. 1999). In the case of Berksire Threaded Fasteners Company, its profitability is challenged by several factors, amongst them internal policies and external market factors, amongst others. In this paper, an analysis of the impact that can be aroused upon deployment of various actions will be investigated. Body For a situation where the company could have dropped the 300 series as of January 1, 2000, there is an effect that action would have on the profit for the first six months of 2000. In this case, it is noted that consumers often expect value (Armstrong. 1996). These consumers demand an effective customer service given that they are accessible to data alongside product information. Given the internet services, it is possible to make comparison of features and prices. This helps consumer forces companies to change into transparent market machines. The profitability potential accorded to 300 series surpasses the potential exhibited by the other three products. This reflects on the aspects such as the cost of production, as well as the after production expense. Focusing on the initial, 300 series is the most economical in production. This reflects on both the input and the labor cost. The comparison from this dimension indicates that 300 series is the least expensive of the three. While evaluating on a summative angle, the cost of production associated to the three products amounts to $ 3433. A further analysis of this figure indicates that 300 series only accounts for approximately 26 percent, while the other two presumes the rest. 100 series has the highest share with about 40 percent. The only difference in terms of production of the products is the rent cost for 300 series. Over this regard, several aspects of the production line can be isolated. Amongst them is the productivity of the line, as well as the possible future dynamics. This is based on a possibility of equity in the production numbers (Armstrong, 2006). On this regard, a projection can be made in that 300 series is a new product in the market will 100 series is the oldest in the market. Focusing in this argument, it is easy t project the performance of each product in the later future. 300 series is an adjustment of the 100 series, implying that it is better in quality and efficiency as compared to the other two products. However, its performance in the market fails to be impressive as anticipated due to several factors. Amongst them is the marketing tactics adopted by the manufacturer. Several factors can affect this decision. They include the contribution of the dynamics of production, as well as the marketing trends. A manufacturer may choose to market a specific product so as to improve its performance in the market or clear its production. This refers to the produced stock of the product. In the offered example, the manufacturer may be engaged in a similar situation in that the clearance of the stock accrued via the production of 100 series is eminent. This implies that the product wins a greater proportion of the marketing cost. Progressively, it may register increased performance as compared to the other two products. This proposes a predictable possibility in the later future. The performance of the 300 series is destined to improve along the period of trade. This will be attained via several factors, amongst them the continued sales of the other two products. The central aspects that will eventuate into that reality is the possibility of the establishment of comparison power to the clients. The progressive purchase of the other two products will offer an opportunity for the clients to perform a comparison in terms of the products. This will place both quality and efficiency in consideration. Placing inconsideration these aspects, the future can be described as brighter for 300 series. Therefore, a plan to eliminate or terminate its production for the mean time implies a decline in the productivity in the coming future. This is due to the prospected reduction in the performance of the other two products that are currently profitable. Apparently, the 100 series is the most profitable, but it is approaching home stretch. This is in terms of the customer preference, as well as the dynamics of the market. In July 2000, should the company have reduced the price of the 100 series from $2.45 to $2.25? Basing on exhibit 4, the company should have not made the reduction in the price of the 100 series, placing its performance in context. The production dynamics illustrate that the product was amongst the first productions of the firm. This implies that its market potential is already well established. Progressively, its production is in the onset of a faceoff. The performance of the product is now at its vital best. This implies that the profitability of the product should be extended at all cost. This will be of merit to both the performance of the product, as well as the performance of the company in whole. Increased positive performance in the production of 100 series will have cushioned the performance of the other products, especially 300 series. This would have resulted into the establishment of a growth window, upon which the product could have stabilized in the market. The offer of a market incubation period for the novel product implies that the performance of the company is set to improve in the long run. On this regard, a conclusion on the performance of the 100 series points on inappropriateness in the reduction of its selling price. It is evident that Berkshire has the most profitable product line. Basing on exhibit 2, a focus in the profitability of the products produced by the firm focus on their respective profitability ratios. In focus is the elements such as the gross profit, net profits, as well as operating net profits. Analysis of this factors present the margin ratios that can be utilized in the quantification of the profitability of each of the products. The presented data over the firm’s input points on the presence of the net profit. This implies that only ratio margins associated to the presented data can be identified. This orients the focus on the quantification of the profitability of each product via the ratio margins developed from the provided data. The quantification under this perspective focuses on the percentage expression of the net profits against the total sales. Under this perception, 100 series tops in productivity upon registering an average ratio margin of 5 percent. 200 series has posted a ratio margin of -5 percent. 300 series, on the other hand, posts a negative ratio margin of -8 percent. The negative figures implies that the product made a significant loss in performance. This implies that 100 series is the most profitable of the products, and 300 series the least profitable. Advice Mr. Magers Mr. Magers is judging the market performance from an angle of pre-existing notion on the products. He seems to identify with the perception that commodity business is for the failures of the market. This implies that his judgment is rather polluted by the erroneous notion. The 300 products have been in production for a short while, and their performance is dependent on several factors. This includes aspects such as the market saturation, customer preference and the accorded marketing policies. Other factors that may determine the productivity of the product is the policies of production attributed to the product. This could be at either internal grounds or external perception. With reference to the Berksire Threaded Fasteners Company, the poor performance is largely pegged on the internal production factors. This is in accordance to the expenses attributed to each of the product while undergoing the production process. Reduction on the cost incurred in production can be achieved via several paths. Amongst this is the variation of the variable factors such as labor, raw materials, power and repairs. The reduction of the cost incurred in labor can be achieved by reducing the time spent in production. This can be achieved via ensuring the efficiency of the tools and equipments, as well as observing specialization in the production exercise. The regulation of the raw materials necessitated for the production will involve the introduction of aspects such as recycling and reduction of registered wastage. This implies that the cost incurred in the acquisition of the raw material will be lowered. With regards to the expenses incurred under aspects such as power, there needs to be promotion of power efficient tools and equipments. This places focus on the quality of machinery utilized under the production line. Subsequent alteration that would amount to increased power usage should be ironed out. Progressively, the cot of production can be further reduced via the reduction of the frequency of the repairs. This can be achieved via the improvement in the utilization of the equipments, especially the machinery. Another contribution towards this reduction can be fetched on the utilization of the warrant associated to each equipment. This implies that the repair can be conducted at zero or minimal cost. The subsequent results would be the increase in the productivity of the products on the production lines. These rules out possibility of taking drastic measures, or siding with erroneous perceptions. Conclusion Berksire Threaded Fasteners Company has a potential of improving its performance within a short term period. However, the realization of this ambition is based on several factors, amongst them invoke of further regulation in the production process. This is focused on the cost incurred in the process of production, as well as the quality of the products under production. Improvement in the quality of the product implies an increase in the market preference, especially when the market saturation is placed in consideration. Progressively, the reduction in the cost of production offers a window for profit maximization. References Albert, N., 2008. Analysis of Object Oriented and Multi-Scale Image: Strengths, Weaknesses, Threats and Opportunities - A Review. Journal of Computer Science 4 (9): 706-712. Armstrong, N., 2006. Human Resource Management Practice. London: John and Sons publishers. Armstrong.M., 1996. Management Processes and Functions. London. Oxford Publishers Brendan, K., & Tord, B., 2000. Crystallizing knowledge of the historical company performance in interactive, query-able 3D Landscapes. Ney York: Johns and Sons Publishers. Humphrey, A., 2005. SWOT Analysis for Management Consulting. SRI Alumni Newsletter (SRI International). Hill, T. & Westbrook, R., 1997. SWOT Analysis: It’s Time for the Product Recall. Long Range Planning 30 (1): 46–52. Menon, A. et al. 1999. Antecedent and Consequences of the Marketing Strategy Making. Journal of Marketing (American Marketing Association) 63 (2): 18–40. Appendix 100 series 200series total variance standard total standard total standard total Favourable = + unfavourable = - per 100 pcs at standard per 100 pcs at standard $0 $0 labour 0.61 604 0.59 422 1019 1026 (7) rae materials 0.63 627 0.75 535 1185 1162 23 power 0.01 10 0.02 17 27 27 0 repairs 0.01 8 0.01 10 16 18 (2) rent 0.09 88 0.15 109 228 197 31 other factory costs 0.07 65 0.11 76 158 141 17 total 1.42 1402 1.63 1169 2633 2571 62 selling expenses 0.43 426 0.44 317 742 743 (1) general administrative 0.16 161 0.13 90 264 251 13 Depreciation 0.26 264 0.42 296 625 560 65 interest 0.02 25 0.04 28 60 53 7 total cost 2.29 2278 2.66 1900 4324 4178 146 sales (net) 2.42 2416 2.52 1797 4213 4213 0 profit (loss) 0.13 138 (0.15) (103) 181 35 146 unit sales 996859 712102 (100 pcs) quoted selling price $2.45 $2.58 ratio margin 5.711921 -5.73178 0.830762 Read More