Business managers could engage deliberate measures to target a certain category of clients at the expense of others for their products. This is influenced by the possible return on investment heralded by each choice settled for. To achieve this, managers ensure alteration of product quality to reflect commensurate increase or decrease in prices. Improvement on product quality can be initiated which incites increase in price to target the high end clients or compromising quality hence reduced product prices to target the general populace. Alternatively Schatski proposes the mode of conducting business could be changed to reach a specific scope of clients with certain product or convenience needs (2003). The decision by Walmart to keep both their value chain outlets and indulge online commerce was mainly due changes in shopping trends in the current technological dispensation.
Product Line Offerings
Business managers often are faced with difficult decisions to determine which product line should cease in cases where they produce more than one product in their value chain (Rosen, 1974). Some of the factors that dictate the plausibility of a certain product line include profits/losses incurred. If a product exhibits weakness in the market then its production would most likely cease compared to that product whose return on investment is better. Product acceptability by the consumers determines the market share of the product. When the market share in plausible and the product is a monopoly or competes favorably in the market then it is imperative that the managers would be more inclined towards capitalizing on that value chain compared to products that struggle in the market.
Make-or-Buy decisions. The decision to buy finished products or manufacture a product line is determined by factors including; sustainability of suppliers of inputs, economies of scale likely to be enjoyed from bulk purchases from the suppliers, availability of input products. This is a dilemma experienced when a company is involved in the production of more than one product in their value chain, which are equally competitive in the market. i.e. manufacture of tiles and selling of furniture. The management could be faced with a decision of whether to buy and resale ready made furniture or make and sell their furniture. In this case the general cost of production as well as sunk costs are the biggest determinants of the course of action.
Additionally the company will evaluate the availability of relevant human resources and overhead incurred by the factory in meeting costs of production including labor remunerations, shipping of production equipment, installation and supervisor’s salary.
Role of Qualitative Information. Qualitative information gives insights on information concerning the company’s reputation in the market. Does it pay its suppliers on time? Are the employees paid on time? Etc. through qualitative information investors are able to determine the brand strength in the market, which is an indicator of the probable market share, hence returns on investment. Additionally it sheds light on employee morale hence their productivity based on their remuneration etc. qualitative information enlightens marketers and management the perceptions the clients have concerning certain products in terms of the numbers of warranty claims, returns of product due to defectiveness etc.
Sunk and Opportunity Costs. Sunk costs impact on the general capital investment of a venture but remain beyond the influence of management. These could include taxation and levies paid for venture startup etc. Opportunity costs are investments foregone in order for a business to engage in a certain production line. Decisions surrounding these are important for management in case they feel the need to indulge a different line of production in an attempt to diversify their enterprise (Schatski, 2003). They are important at ensuring that the line of business indulged has the best returns for the company.
Wildcard Managerial Decisions Management of businesses in novel cases requires pro-activity and rational thinking for best practice to be achieved. A business upon starting may appear to be unsustainable, but government policy could later favor or disadvantage its performance in the market (Cook, 1983). A business in a remote area could face logistical challenges in supply of goods to the consumers and even face insolvency at some point. However, when the government improves access so that the transport cost and time are addressed then the company could regain competitiveness in the market. Qualitative analysis would fail due to unforeseen forces including government policy, which affect the business performance in the market but cannot be controlled by the business. Management decisions in such cases are choreographed to be in tandem with government policy.
Cook, V. J. (1983). Marketing Strategy and Differential Advantage. Journal of Marketing , 47 (2), 68-75.
Rosen, S. (1974). Hedonic Prices and Implicit Markets: Product Differentian in Pure Competition. Journal of political economy , 82 (1), 34-55.
Schatski, T. (2003). Options, uncertaintyand sunk costs:: an emperical analysis of land use change. Journal of Environmental Economics and Management , 43 (1), 86-105.