Margins and Sales Volume (Essay Sample)

Barbarito Capote
American Intercontinental University
Margins and Sales Volume
Project Type: MKTG310 Unit 4 Individual Project
Date of submission
Abstract
The paper tries to explain how the companies apply the mark up that in order to come up with the appropriate profit margins levels. The industries under the study are the clothing, furniture and the electronic industries. It also explains consumer application of mark ups and companies profit margins to make their buying decisions.
Researching Industries on mark up and margin
Introduction
Margin is refers to the difference between the sales price of the product and the cost of the product while markup refers to the process of calculating the price of the product based on its cost. Companies and businesses use mark up to determine the selling price of their products and services according to (Hamlett, 2006). It is used mainly because it indicates if the business is selling its products or services at a higher price that the cost that were bought.
Industry 1 description
The mobile phone industries use mark ups and contribution margins on their goods and services. Nevertheless, the electronic industries are worst affected by the markups because they have the lowest mark ups. Their margin is smaller nearly 8% percent between the whole sale and the retail prices.
Other Economic for Industry
The profit margins of the industries lie between their contracts and the usage charges. Mostly the manufactures do not worry because they gain profit from the services they provide. The low markup comes as a final reflection on the profits they gain from selling their brands and advertisement.
Industry 2 description
The other industry that incorporates mark up and profit margins is the furniture industry. They apply the manufacturer suggested (MSRP) retail price thus gain the highest mark up of nearly 200-400%.
Other Economic for Industry
Their success comes from the strategy they apply to their sales people. (Waits, 2009) They promise them higher commission as a trick for them to sell at an inflated price. The high mark up prices enables them to have the highest profit margins in the market enabling them to thrive more.
Industry 3 description
The other industry that applies mark up in its products is the clothing industry. Retail clothes companies are concerned with the mark up and the profit margins. Jeans are the greatest item targeted in the industry. The sellers try as much as possible to bargain the item from the factories at the least price possible and when they come to dispose them, they inflate their prices. (Waits, 2009) notes that the enjoy a higher percentage of mark up 250-400%.in order to stay in the business other sellers selling similar clothes as jeans should sell higher merchandise.
Other Economic for Industry 3
The mark up and the profit margins changes because of various economic factors in the company. The main factor being, the cost price and other related costs including the freight, storage. If the cost price rises, then definitely the mark up and the profit margin reduce. Competition in the market also deters the mark up in that if there is tough or high competition, the industries have to reduce the price to increase the sales. Reduction in prices of the product in turn reduces the mark up and the profit margin. (Waits, 2009)
Comparison of the three Industries
When the three industries compares in terms of the mark up, the clothing industry takes the lead. This is because of the jeans. Then, the furniture industry follows secondly. The main reason for their high mark ups is the manner in which their sold and their demand in the market. The higher the demand of the product, the higher the profit margin as illustrated above by the furniture and jeans. In addition, the rate of usage can be the factor in that the more basic the product the more the mark up because of fast sales.
Conclusion
In conclusion, it is important to note that when determining the mark up of the products, it is good to consider what the industry can afford or bear, (Hamlett 2006). If the mark up of the product compromises on that which the industry tries to offer, then the cost structure of the products needs correction. The net profit margin also shows the financial stability of the industry.
Part 2
Consumer application of markup and margins
Mark up is the most preferably used by the companies when setting prices but it often overstates the profitability of the product because its large compared to the margin. By using mark up often, the company thinks that they gain more from the customers of which it is not the reality. The customer always determines the selling price of the product through their willingness to purchase. The key measure of the business is to determine what it maximizes its profit while maintaining the sales.
As per the customer application of the mark up and margin, the consumers may consider going for products whose prices are lower if the market is more competitive. Smaller mark ups translate to smaller profit margins to the industry thus the products would have low prices. A customer has wide variety products to choose from in the market. In order for them to correct analysis, they should have a good knowledge of mark up and margin. This will enable them make wise purchase decisions.
While making purchases in the clothing industry, there is need for a customer to go for the low priced clothes such as jeans. Jeans are cheaper compare to other clothes in the market mainly because of their low mark up and profit margins. This is mainly because sellers purchase them in large volumes thus when they sell at a lower price will not go at a loss. In relation the mobile and furniture industries, the customers should only consider going for quality the reason being their profit margins are widely equal.
The profit margin trend is the most powerful indicator of the company’s financial strength .In order to increase profit margin in the business, the managers should adopt various strategies either in terms of marketing or in terms of management. As the profit margins decline, the companies need to increase their sales and marketing efforts to meet the required profit margin. If they are increasing, they should be formulating plans on how to maintain.
The first technique the company can adopt in order to increase the profit margin is to focus their energy on products that are useful and unique that give a competitive edge to the firm. The executives should dwell on increasing sales and employing product improvements. (Hall, 2008)The company should come up with different marketing techniques from their competitors and blend their products to come up with unique ones.
The second and more effective strategy is to expand the business and to move beyond borders in terms of marketing. This will happen by creating network of supplies at different markets either locally or internationally. This method of marketing will enable the products to find their way in bigge...