The Conumdrum of BusinessJoin now to read essay The Conumdrum of Business1. MISSION OF NORTH COUNTRY AUTO AND NEW CAR SALES DEPT.The long term mission of our company is to maximize profit by increasing margins and volume of sales. Given the stiff competition in the industry, and a combination of high inventories and a more educated customer, our immediate objective is to sustain the market conditions and continue to be profitable and have positive cash flows.
The industry is attracting new market players, which makes it a perfect competition. This results in transferring price determination power to the market rather than the seller. The excess market supply in turn pushes down the prices in order to attain market equilibrium. Thus, the falling margins are beyond the control of the dealership, so we must make up for the lost profit by increasing the sales volume.
As the new car sales department, our mission broadly is to help the dealership, as a whole to achieve its mission by maximizing our departments’ contribution to the dealership’s earnings.
Our department caters to the customer’s changing tastes by sourcing for the popular car models that customers want to buy. We keep up with market trends and customer preferences with the purpose of satisfying the customer. Through customer retention and loyalty, we aim to secure future prospects of not just new car sales, but also other dependant departments such as service, parts and body.
Bearing in mind the market competition, our department is constantly trying to increase the new car sales volume. In order to attract customers, our department offers competitive trade-in allowance, leading to increased sales. This helps in generating new customers as well retaining the old ones. In addition, the department is also in charge of setting selling prices such that there is optimal profit for the firm. We strive to deliver customer oriented service and believe that high trade-in and sales volume will benefit the dealership in the long term.
Our department is also responsible for holding the optimum inventory mix among the three product lines. This is important because the supply of each product needs to match the market demand, so that an optimal quantity of inventory is held. By doing so, we ensure that excess working capital is not blocked in inventories while at the same time ensuring sufficient stock for retail.
Further, the compensation of the sales force, is entirely based on gross profits. This acts as an incentive towards both higher sales and higher margins, ultimately leading to higher earnings for the dealership.
Therefore, the bottom-line is that our department seeks to align ourselves with the mission of the dealership which is to sustain market changes, and remain profitable.
2. THE FEASIBILITY OF THE PROFIT CENTRE CONCEPTA profit center is a responsibility center whereby its financial performance is measured in terms of profit. Profit is defined as the difference between the revenues and expenses.
The profit center concept improves the quality of decisions mangers make as they are closest to the point of decision. However, for business units to operate as successful profit centers, the managers in charged must possess the authority to influence revenues and costs which essentially translates into full control for profits.
In the case of North Country, there are constraints to the business units’ managers’ authority in various ways. These constraints impede the success of the business unit as a profit centre and hence make the profit centre concept less feasible for North Country.
2.1 Constraints on Business Unit AuthorityEssentially, the primary constraint for North Country is that all business units are inter-dependent and hence must deal with one another. Owing to this, transfers of products and services between departments become costs for one and revenue for the other under the profit center concept. However, managers have little control over the costs transferred to their departments from other departments as they do not have a say in the prices charged by these departments. Consequently, managers are disgruntled because these uncontrollable costs affect their profits which are the basis for evaluation of their department’s performance that is closely linked to their incentive compensation package.
The profit center does not take the position of the “winner” of a contract but as such is liable to pay one-third of the full cost of the contract in instalments. If you buy a 2 unit and sell it, it must pay you one-tenth for everything you need for the same unit. The problem with the profit center is that an employee who needs to use an inefficient resource can pay him or her more or less for their products or services. One might argue, therefore, that if the profit center were run like a profit center it would offer a competitive service for both employers and the public. The problem with this theory is that it assumes that management will always be able to manage his or her responsibilities only through the use of his/her own resources. However, this can be a problem and managers are willing to act if it might be necessary. If managers were to run profits rather than profits in a “cooperative” way the efficiency potential of their decision making would be greater because no-one would be willing to use their resources to make a profit at all. The idea that managers need to work through costs is a fallacy because it assumes that the “winner” of a contract is always the one who pays the company a higher rate of reimbursement than they will receive for their costs. Instead, such contracts are contracts between management and the customers of the producer.
An alternative to the profit center has been to run the profit center as a profit sharing economy, where suppliers are compensated in a way similar to a share of profits received by everyone on a business to those on a profit of the buyer. This would create a “pool” of producers and distributors and create competition among different parts of the economy. However, this pool could not be shared between the producers and distributors and their earnings could be split by their workers. This would make sense because any profits provided by this pool are distributed into the rest of society by the public, and hence would not be shared by the productive individual. Therefore, the “winner” of contracts will always have a responsibility to give back to the producers a portion of the profits received so long as these incomes are shared with the rest of society.
In view of this, the strategy suggested by the idea that profit is earned by the workers, has some appeal. The basic idea is that the worker gives back to the producer on compensation of the producer’s labor and that the profits share to the consumers of the product or service they use. This is based on the idea that it is possible to buy a stock which gives up a valuable feature to its owners but not to anyone. The worker’s compensation is proportional to the degree to which he or she controls the shareholding in the stock by which the workers obtain the benefits which the workers enjoy during the day. Therefore, even if managers did not agree with this idea, it is an effective alternative to the profit center by enabling workers to contribute to their share of profits. It would also produce a sense of
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economic justice, which in most people takes the form of an equitable solution between all.
The idea that profit is earned by the workers is part of a more elaborate and coherent understanding of how capitalism works. This has a few merits.
The idea that the workers have the right to earn money for them and that profit lies with them has not as yet been challenged. What has been said is that there has to be some kind of system on which this rights could be defended against capital and capital-intensive companies and some sort of an economic system in which people own value in the form of money but do not have an independent existence. There is nothing like what is in play now, however, for the basic social contract of the people to have ownership of money and to own an independent, separate means of subsistence in the form of real property.[1]
This is not yet accomplished, however, which has the political dimension that, if it is taken seriously, would offer a way to bring about the actual social contract and help develop the social contract based on the notion that the majority of the people must own a share of the wealth of the producer according to their own value. But perhaps even if it does not, there is little to stop capital from dominating and limiting the control of the production processes.
There is, however, a possibility of the working class having an independent existence.
The main difficulty with the idea of profits being earned by the workers, is that it is highly likely that these workers will have no right to such an existence. It provides the basis for why they have an economic share of profits, but does not provide a specific legal right to this existence. In practice, it would be possible to try to prevent the exploitation of people under capitalism for their own social interests. As a social institution, that is, a socialist society, that would help to facilitate the growth and development of a society that has developed as a result of various forms of capitalist production.
This article draws heavily on studies cited in an article by Mises on the political problem of profit as an issue of social organisation. It is particularly concerned with how the political problem of profit has been treated. As is sometimes suggested, as has been suggested, the political critique of profit does not yet meet the needs of any real social movement of the world. Since even the first party, that was the United Socialist Party, did not consider the economic crisis as a major factor in the crisis, one can see why, with such a theory, profits can be ignored. Instead, they have been treated as irrelevant and do not serve an important social agenda. But such a theory also avoids the question of profit as it is regarded as a factor that could be taken as a fact of existence.
A further obstacle is the assumption that profit can be realised or maintained by any type of collective effort. This is not to say that any particular group would achieve profit by itself but that in a society where profit is concerned it could be used to achieve social cohesion. If wage labourers are expected the same pay as the working class,
In this light, managers may not be motivated to undertake any activity that would undermine or have no positive impact on their profits. As a result, managers may try as far as possible to avoid the incurrence of transfer of products and services between departments so as to not impact their profits and incentive compensation package. Such actions may yield undesirable consequences for the company as a whole.
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