what might an employer do to maximize profits?

Question

I'm getting ready for a test and this question is getting me stressed out, and I really need help!

Answer 1

Hallo!

 

This is a good question. Anil gave the succinct answer, and let's see if we can expand a bit with real-life examples.

 

Essentially, an employer is one who creates/runs a business for a specific purpose - profit as a result of selling products/services being common. The profit margin is what is left over from the incoming sales of the product/services after the money goes into building, sustaining, and maintaining business and product/service needs. These needs include a lot, like

• Research, development, and production
• Marketing and distribution
• Employees 
• Infrastructure (space, tools, resources)
• Systems (accounting, safety, etc.)
• Fees (taxes, discounts, healthcare, shareholders, etc.)

 

The higher the costs are for all of the above, the less profit margin (left-over fun moolah) there is left over. And profit is part of the recognition of the company owner(s). Also, the lower the sales, the lower the money to work with.

 

In a solid, well-run, and efficient business, there should be a balance between the costs to run the company and produce the product/service. If there are too many employees, or the taxes are too high, or the costs to make the product are extreme, the profit is lower. If the costs are all forced down to get a higher profit margin, things in the company itself suffer - employee morale and safety, deteriorating infrastructure, flaws in the products and customer service, fines for shoddiness.

 

Ideally, an employer will focus on reasonable and adaptable efficiencies, investing somewhat in the company's soundness, and keeping up with research and development to keep the workflow costs down. Also, the employer should focus on effective marketing, communication, and building of customer loyalty to keep income from sales growing. Prices might be adjusted on the product/services, discounts and deals given or cancelled, to encourage more incoming money. Finally, the employer should juggle growing the company's product/service reach, amount, and even varieties, to also bring in more money.

 

Does this help?

 

Answer 2

Profit = Revenue - Expenses

 

To maximize profit, employer will need to maximize Revenue and minimize Expenses.