Profit Margin Case Study

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 shorter. Or maybe they decide to sell the basic core product at the lowest price. At this competitive end of the market there is only room for one large player. Unfortunately, many companies in the sport retail industry haven't yet understood this which is why they are still complaining about low prices and margins. It is all in their hands!
There are many negative effects on personnel such as cutting overtime, cutting non monetary rewards, and in some cases drastic changes to insurance. Most people have begun to become accustom to working long hours and getting rewarded by doing so. Now a lot of companies are trying to save their bottom lines by cutting and getting away from monetary rewards. This is on the other hand having a negative effect on the workforce. Workers are not in high sprits anymore, they are not coming to work very enthused. In some other cases companies are taking away some of the health benefits from what they would call overpaid white-collar workers. In one such case Chrysler has delayed merit pay raises, reduced health care benefits, limited overtime pay, and canceled new assembly plants that were scheduled to open in Ontario. Ford, GM and some other big name car companies are taking the same path. GM are cutting jobs and doing early buyouts for its tenured employees. This saves them from paying for healthcare cost of the retried employees. With healthcare cost rising everyday companies are taking all kinds of steps to save money. When taking away monetary and non monetary rewards from workers you put them in a mind frame of not wanting to come in and take on more responsibility, knowing that they are not going to be rewarded for it. This puts a big strain on employee moral and that in turns brings down productivity and also brings down the bottom-line. As a employee you want to come to work and have a goal to work toward, this makes what you do that much more pleasing to do
Productivity is one big advantage a company looks upon with their employers due to the competition they are facing. A sportswear company has a variety of companies seeking to make it big from the consumers. There are so many other companies that are copy-cats, not offering the same quality for consumers. Most companies that are profitable offer more advantages and incentives to their employers. Benefits are affordable and are what employees' are seeking due to the rising cost of healthcare. Like some of the competitive companies, they do not have to worry about healthcare; the jobs are shifted out of the country for cheaper labor and some poor quality jobs and their employees does not worry about healthcare.
Training is an effective tool, when new employees come aboard.
Professional trained personnel will lead an employee to great standards on the job. Let them be solely responsible for the area that is required of them. Good quality products will stand openly for consumers that will help make added job task for a good employee. Leadership plays a major role in companies' effects on productivity. When a company has a successful leader and is committed to their employers, during difficult time they tend to watch for the unexpected they may face, employees understands and don't get themselves worked up on time they may loose do to lack of work make sure all employees understand what's expected of them. What is needed if you don't already have it—is a long-term expense management goal. It all starts with an annual expense ratio target. People must understand why this objective is needed so they can do their part to contribute.
A negative effect on a job that has offers good benefits, is when employees break off for the summer season and vacation time arises. Always keep production at a steady level that would not affect the business. It is not beneficial for an employer to overwork their employees looking toward this time. Keeping production at a good level will allow situation like this to be at a positive state. Leadership will be more comfortable and employees will be at
ease.
Always have a back-up plan to keep productivity at a level where the employees' and employers are comfortable. Have on hand a temporary force to come in and maybe fill only one slot when vacation time arises. Some companies' offers shut down time of the facility, to make up negative time during that period. That would help the effect and not be negative when paying out other fringes to other resources. C. S. Stewart (personal communication, December 15, 2006). Expense allowances help employees grasp this concept. An expense allowable is a formula that determines how much money your team or unit can afford to spend, based on what they do and the value they bring to their stakeholders. These numbers should tie into your company's strategic plan and product pricing assumptions. Your teams or units eventually evolve into mini-profit-centers that manage revenue and expenses to attain operational profits. Expenses are allowable to keep people focused. They translate into manageable individual and team goals. This is critical to achieving your expense goal. This resolves such problems as serf-serving fiefdoms, fractured work processes, poorly designed jobs, inefficient computer systems, too many managers, and dead-end career paths for technical people. Your employees, guided properly, should create and implement the desired changes for best results. Companies often struggle with this second step. Most are often traditionally structured companies with defined functions such as underwriting, claims and loss prevention. These areas typically evolve into fiefdoms that resist change, protect budgets and communicate poorly with their functional peers. The result is an internally focused silo.
Frustrated customers deal with multiple insurer contacts, and often the left hand isn't sure what the right is doing. Fractured work processes plague other insurers. A claim file passes from one employee to another, and then gets buried in a manager's paper stack. These firms have more handoffs than an Olympic relay race. Many carriers suffer from dead-end career paths. Gifted technical people get promoted to managers in these organizations. Sometimes, these technicians-turned-supervisors are successful. Usually they're not, the Peter Principle gets upheld yet again, and the employee goes elsewhere with their expertise. The good news is these problems are solvable, and you don't even have to uproot the tree. An expert can guide you. They'll use industry experience, best practices and your brightest employees to help create and implement the desired
changes.
Once people understand how their contributions and those of their profit center impact the bottom line and their own pocketbooks, private enterprise instincts take over. They design more efficient work processes and eliminate hand-offs. Slackers disappear as peer pressure mounts to work hard. Amazingly, interpersonal conflicts even diminish. You referee fewer squabbles as teams settle their own differences to prevent quality issues. Customers get excellent service because it makes sense to do so.