Managing external environment Essay Example | Topics and Well Written Essays - 2500 words

Managing external environment - Essay Example the survival of a business requires strategies like; assets’ diversification, total cash reserves’ revving up, products’ quality, part-time workers’ employment, and application of cheaper materials as well as employer options. (Sahoo, 2009) In the process of building a business there is the point of a business’s break even and this is the point at which the costs of the company equal the sales revenue of the same business. At this point it is vital to note that the business has neither made gains nor losses. (Pinson, 2008 p98) Breakeven involves a technique of pricing applied to ensure the minimum volume of sales that a given commodity has to generate at the set level of price so as to ensure coverage of all cost outlays. This calls for strategies like, firstly, penetration pricing which refers to setting a low price as the main weapon of marketing especially for new commodities. Secondly, there is the skimming pricing which is the setting of a bit higher prices for a commodity in comparison to the competing ones. This aids in making marketers set price levels that differentiate a company’s products from the rivals’. There is also the strategy of discount or low pricing that maintains products at low prices thus attracting many customers. (raritanval.edu, 2009) Subsequent to breakeven, a company crosses over to the zone of profits. For instance, according to Tracy, taking that a company’s breakeven point is at the level of sales revenue at USD 10 million, anything beyond that like a sales revenue of USD 12 million is in the zone of profits. After breakeven point all the margin becomes dedicated to profits. For example; if margin is 25%, profits at sales revenue of USD 12 million is $500,000. (Tracy, 2008 p84) At the profit maximisation stage, a business sets output and price level that ensures that it earns the biggest profit. If a firm successfully ensures survival through; demand of its commodity, production as well as inputs’ supply, it