Would firms increase their revenue if they were to lower hearing aid prices? Evaluate the situation by doing a critical analysis?
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When the price of a product increases tremendously the demand for that particular product tremendously decreases. The given situation is that the firm wants to maximize its profit by lowering the price for the product. The concept of the profit has been augmented to take into description ambiguity faced by the firm and the value of the money as the time passes. Profit maximization is the subject matter to a range of restriction confronted by them. This is mainly related to resource scarcity, the changes in technology, the legal restrictions, contractual obligations and the changing rules and regulations. All these factors play a significant role in defining the profit maximization objective of the concern. A contemporary firm is commonly controlled as a conglomerate in which shareholders are the authorized possessor of the firm, and act as on behalf of their managers. Under the present competitive world, the managers in the organization are forced take crucial decisions against the upcoming challenges. The growth maximization strategy has a strong impact on the overall development of the concern and it acts as a guiding principle for the maximization goal of the organization. In an organization there will be a number of goals and it is the responsibility of the managers to link al the goals in an organization and bring them all together to achieve the predetermined goals and objectives of the organization. The profit is composed of many costs that are involved in the over all functioning of the organization. when the prices of the hearing aids reduce, ultimately the demand for the product increase and thus this will enable the firm to generate more revenue and this will enable the firm to increase the profit.
Evaluate different possible strategies that companies could implement to gain a sound position among their competitors in this hearing aids market. Use relevant theoretical concepts discussed in chapters:
It would not be wrong to suggest that perhaps, the hearing aids market in the United States is of the oligopolistic type, since it manifests certain characteristics that are typical of oligopolistic businesses. For one thing, these markets consist of relatively large firms whose influence is determined by in differentiating their products from their competitors through product innovation, use of advanced technology or some other special benefits, which may also perhaps carry a higher price tag for the ultimate user of such sophisticated and hazard free hearing aids, adding to sophistication, comfort, convenience and aesthetic appeal. The competitive elements in business makes it intrinsic to become market sensitive and to monitor the activities of competitors very closely and guardedly. Pricing is also a major deterrent, and as explained, may be one of the main reasons for circumspection and non-committal attitude on the part of buyers to invest around $2000 to $4000 on them, without Medicare or governmental aid of any kind. In other words, in the absence of government aid, hearing impaired adults and children would need to source hearing aids from their own private sources. The main strategic aspects that need to be considered are whether the competition in the market could be in terms of product differentiation, or cost leadership. Product differentiation would mean providing select brands and charging higher prices, due to superior quality and performance of such products. Again, in an oligopolistic setup, cost leadership would mean that this company sets the price for products which are carried on by the others as followers. Thus, the company has to decide whether it wishes to be in the role of a product differentiator or a cost leadership status.
What economic conditions are relevant in managerial decision-making and how are they related with the typical types of risk faced by a firm?
The decisions made by the managers are critical to the victory or collapse of a business. As the complexity in the business world grows, the effort that has to be taken by the managers is also growing. The business judgments are progressively more reliant on constriction forced from outside the economy in which a particular business is supported– both in terms of manufacturing of commodities as well as the markets for the commodities produced. The swift technological change, modernization in product and processes, contemporary marketing and sales technique occupies a major position towards increase in the complexity of the business environment. The globalization in the market consign has amplified the precariousness in both put in and product prices. The incessant changes in the economic and business atmosphere, craft it as ever more complex to exactly evaluate the effect of business decisions.
The managerial decisions are taken to solve certain issues such as decisions related to pricing of the product, the quantity of the products to be produced, deciding whether to make or buy, deciding upon the production techniques to be used, deciding the inventory level to be maintained in the organization, deciding the “advertising media” and campaign, decisions related to making employment and training and finally on the investment and financing the investments. (Sahu, 2010, para.4).
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Critically analyze the importance of the factors that managers must consider in forecasting? Elaborate with examples on the prerequisites of a good forecast?
Forecasting involves making estimates of the future requirements of the firm. This could be in terms of sales forecasts and projection of estimated expenses for the future. The importance of forecasting could be gleaned from the fact that it offers a roadmap and direction for future course of actions. Forecasts need to be compared with actual performance and their variance determined and honestly analyzed. The importance of the factors that managers must consider in forecasting is as follows:
- Forecasts needs to be based on realistic and practical aspects of business.
- Forecasts need to be based on data that are itself above doubt and reservation.
- Forecasts, though based on past estimates, need to reflect current and future impact on businesses. There is no point in making forecasts based on obsolete data, when business conditions have changed, or when the product lines for which data has been sought has been scrapped, or discontinued. Moreover, there are many aspects in business that are constantly evolving, or changing, like Research and Development (R&D), sales linked incentives and bonuses, etc. Since turnover itself is now subject to several fluctuations over time, it is necessary that accurate forecasting, taking into account the margin of error need to be made. “To prepare our first pass forecast we determine how each asset, liability, and expense should behave as sales change. Sometimes the changes in the assets, liabilities, and expenses occur on their own… Whether the changes occur on their own or whether we must force the change, before forecasting we must determine these relations” (Dave, 2010, para.5).
Dave, N.W. (2010). Financial forecasting and management decision: Excerpts. AICPA. Web.
Sahu, P.A. (2010). Managerial economics. Encyclopedia of business, 2nd Ed. Reference for Business. Web.