Companies want to make more money and more profits, thus there will be a push for revenues to go up and costs to remain stable. ILLUSTRATION | SHUTTERSTOCK Organisations have an economic and social responsibility to make healthy sustainable profits. It is only through profitability that a company will make a fair return to its stakeholders.
Profitability is also a demonstration that a company has utilised the economic resources in a socially responsible way by retaining a surplus and eliminating wastages.
The taxman equally expects firms to be profitable so that they provide the local capital necessary to drive the national development agenda.
Profitability is the number one measure of business success. No matter what you do, if you are a commercial enterprise and you are unable to retain a fair return to your stakeholders, you are not going to get far. Consequently, managers must think and focus on profitability, within the confines of ethical, moral and legal obligations.
Being a function of revenue and costs, profitability requires proactive and creative approaches on twin cost and revenues management. In some companies with dwindling fortunes, the panic mode invariably pushes managers to rush and push the cost-cutting button, while leaving out the price strategy to market forces.
This is a recipe for failure and you are more likely to face a vicious attack on price when a close competitor detects your woes, leaving your company vulnerable on the two uncomfortable fronts.
Defensive cost management practices by capping your costs and investing in a clear and robust pricing strategy could set you apart from the competition in ways that will transform your business beyond imagination. The key goal of every company is thinking of creative ways of becoming different and better than the competition.
Companies that have their pricing strategies right, among other things right, not only dominate at the Nairobi Securities Exchange but also the global securities exchange as well and the list is an open secret.
The conception of a pricing strategy starts at a very basic level. Companies want to make more money and more profits, thus there will be a push for revenues to go up and costs to remain stable. Revenue, being a function of price and quantity, is variable and you will need a robust sales effort and correct pricing to push the required numbers.
To increase revenue, a company can either increase quantity sold, price charged or both price and quantity, holding price […]