Profit and loss Flashcards
What is the Profit and loss-tree?
E(P=R-C)M
How can profits be increased?
- Can we increase the revenue?
2. Can we decrease the costs?
How can we increase revenue?
- Can the sales volume be increased?
2. Can the ex-factory price be raised or lowered?
Can the product costs be lowered? (1)
- Is the design too expensive?
Is the design specification too expensive? (2)
Yes: Are the consumers likely to favour a quality product?
No: Are the fixed costs too high?
Are the consumers likely to favour a quality product?
No: Redesign and use VA en VE analyses
Yes: Reflect quality in marketing strategy
Are the fixed costs too high?
Yes: Cut down on indirect personnel, control accounts receivable and payable, reduce fixed assets.
No: Are the variable costs too high?
Are the variable costs too high?
Yes: Is the company making uneconomic purchases?
No: Is the work pace too slow?
Is the company making uneconomic purchases?
Yes: Improve purchasing methods, replace suppliers
No: Improve production process control
Is the work pace too slow?
Yes: Improve employee education and training, install incentive systems
No: Are there many reworks?
Are there many reworks?
Yes: Tighten quality control?
No: Is there too much downtime?
Is there too much downtime?
Yes: improve maintenance, replace obsolete machines, analyse work process
No: Reconsider skill level and capabilities of employees
Can the sales volume be increased? (4)
- Can the market share of product A be increased in segment M?
- Can the market for product A be expanded beyond segment M?
- Will the market segment M expand?
- Can we develop a new product?
Can the market share of product A be increased in market segment m? (4)
- Can Product A’s fit with segment m be improved?
- Can the strength of the sales network be increased?
- Can consumer awareness of product A be improved?
- Can share be increased by a change in pricing policy?
Can product A’s fit with the segment m be improved? (2)
- Basic customer needs analysis
2. Analysis of value (real and perceived) offered by competing products
Can the strength of the network be increased? (2)
- Trends in sales channel and geographical coverage
2. Comparison of servicing capability, delivery time
Can consumer awareness of product A be improved? (2)
- Survey of customer awareness in brand and product
2. Analysis of purchasing decision-making process
Can share be increased by a change in pricing policy? (2)
- Price elasticity
2. Influence of payment terms and trade-in conditions
Can the market for product A be expanded beyond segment m? (3)
- Possibility of geographical expansion
- Possibility of expansion in final customers outside the segment
- Cost-benefit analysis of expansion
Can we develop a new product? (4)
- Analyse product cannibalisation
- Analyse possible lay offs
- Analyse investment into new machinery/training
- Analyse the advantages and disadvantages
Will the market segment m expand? (2)
- Will the total market M grow?
2. Will the share of segment m in the total market grow?
Will the total market M grow? (1)
- Anticipated demand 3-5 years ahead for product constituting the total market M
Will the share of segment m in the total market M grow? (2)
- Factors determining the size of segment m within the market M
- Trends and forecasts of the factors
Can the ex-factory price be raised? (2)
- Can the market price be raised?
2. Can distribution margins be reduced?
Can the market price be raised? (2)
- Is a simple increase of the list price possible?
- Is it possible to raise the price by changing the product model so as to more than cover the increased costs incurred?
Is a simple increase of the list price possible? (3)
- Price elasticity
- Possibility of price rises differentiated by geographical areas, models, or by distribution channels
- Results achieved by competitors (Follow the leader)
Is it possible to raise the price by changing the product model so as to more than cover the increased costs incurred? (3)
- Basic consumer needs in each market segment
- Price elasticity
- Cost-benefit analysis
Can distribution margins be reduced? (3)
- Would integration or retail outlets enable margins to reduced?
- Could volume be maintained if only low margin channels were used?
- Could a switch to direct sales reduces distribution margins?
Would integration of retail outlets enable margins to be reduced? (3)
- Basic economic analysis of distribution system
- Analysis of economies of scale
- Correlation between number of sales outlets and market coverage
Could volume be maintained if only low-margin channels were used? (2)
- Flexibility of physical flow of goods by distribution channels
- Degree of motivation and sales efforts exerted by different channels
Could a switch to direct sales reduce distribution margins? (3)
- Analysis of long-term strategic effect
- Analysis of short-term cost-benefit
- Possibility of maintenance of sales skills
