Discussion Questions 1-6 participation 7- - Essay Example

I have noticed that the morale of the employees have been down due to the changes, but the employees still working are pleased that the company has kept them on payroll. A few years ago I worked for a company dedicated to selling automobiles. The changes in the prices of different car models affected the demand for the product. Due to the fact that the demand of cars is elastic the sales managers were able to manipulate the level of sales based on the pricing decision they made. At the end of the year when the new car models were coming in the dealer had to reduce its inventory.

The company would have blowout sales to liquidate the lot. The pricing strategy used to increase the demand was to reduce prices. Companies with elastic demands cannot increase revenues by increasing prices. There are other things companies can do to increase revenues that has nothing to do with their pricing strategy. For example a firm can increase their marketing budget in order to generate higher sales. Another way to increase revenues is to increasing the amount of vendors that distribute and sell the company’s products.

Expanding into other markets is another good way to increase revenues. An increase in revenue most of the times means more profit. Usually when a company gets more revenues its total profits increase as a consequence. This assumption is not always true because a second factor that must consider along with revenues in order to determine profitability is cost. If the costs or expenses increase more than the increment in revenues the profit of the company will be lower. A decrease in revenues usually means that the profits of the company will go down as well.

There are circumstances in which a company’s profit can increase despite a decrease in its revenues. If a firm becomes more efficient at controlling its costs it can lower the cost more than the decrease in revenues. Outsourcing is a strategy used by many companies in order to reduce the cost of doing