Increasing Profit Margins

Topics: Profit margin, Operating expense, Gross profit margin Pages: 4 (1514 words) Published: January 15, 2007
Increasing Profit Margins Proposal for Artemis Sportswear
Profit Margin is a ratio that is calculated by dividing net profits of a company by its sales. This ratio measures how much of every dollar generated by sales is retained in company's earnings. Generally speaking, a higher profit margin indicates that a company is more profitable and has better control of its operational expenses. Gross profit margin can also be used to set and monitor sales goals for your company. Because the costs of raw materials and labor all play a major part in gross profit margin it is imperative to revisit the bottom line in comparison to operational expenses. A change in suppliers, materials used, pricing structure labor and productivity are all factors that could change the profit margin ratio. When cutting costs, there is almost always a tradeoff between achieving lower actual expenses and sacrificing something of value -- time, operational efficiency or staff energy, for example. It's important to analyze the total effect of cost cutting, examining the ripple effect throughout the organization for each cost reduction in terms of what is given up. To improve profit margins we need to understand two things, If everyone offers the same product customers will choose on price If what we offer appears to be the same as everyone else's offering, what can we do to differentiate it? As products reach maturity and more competitors come into the market prices fall. Unfortunately many sports and retailing products and services fall into this category. If we don't adapt or differentiate our offering, then we too will slip down the commodity slide to enter a commodity market, where goods and services really are bought on price. Retailers at the bottom of the slide can still survive but they have to reinvent their offering by getting closer to the end users and finding a new way of meeting their needs. Often this involves a broader offering and a new distribution channel that is...
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