Grosgover Ltd

Profits hinge on budding sales and handling variable and fixed costs. Businesses attempt to increase profit by applying various approaches. Some merely cut costs and anticipate preserving sales/ revenue. Others cut production and channel the savings to the customers in an effort to radically increase sales to surge profit. As in our scenario above Grosgover Ltds decision to change from a local to an overseas supplier is projected to drop 10% in material cost, a variable cost. Variable costs are contingent to sales since they rely on costs of direct materials as well as labor; it is pertinent to mention that all businesses sustain fixed costs irrespective of sales made. Foreign trade has to be approached rationally and with a strong thought process in order to maximise the
• unnecessary transportation costs, reducing the need for storage and reducing the costs associated with inventory storage expenses
• The overseas suppliers exclude the idea of last minute changes and flexibility that a local supplier would welcome.
• Selecting suppliers that are reliable and provide quality material that conform to business needs not on single order but as long as the business bond lasts is hard to judge for an overseas supplier. It requires a thoughtful and careful selection of the supplier resulting into lasting and mutually beneficial relationship.
• Selecting approachable suppliers with a rapid follow-up and response to problems will save time when time is of extreme importance.
• If a business depends on one market and directs all its funds in it may turn out to be riskier. Whereas even if the home market is contracting or faces a socio economic or political crisis the business may still flourish due timely availability of material from an overseas