Marketing Consultant Global Instrument Systems, Inc.

Marketing Consultant Global Instrument Systems Inc. The situation in which the profits of the firm are falling even though the overall sales volumes have been increasing may be a signal of poor marketing policy and product strategy of the firm and must be taken care of as the increasing sales costs due to increased sales volumes will not be offset by the profit. In order to develop the strategy for profit maximization, a precise and detailed analysis of the available firm operational history must be implemented.

The first vital step would be to carry Cost Driver Analysis and Activity-Based Cost Accounting, which are "tools" for gathering data on your costs of doing business: costs to serve your customers, costs to purchase, carry, and sell your vendors' products and services, and your costs to engage in various "activities" (ordering products, receiving products, selling products, delivering products, etc.) and thus will put light on the fixed and variable firm costs and the total price formation of the product and which segment of price formation chain may be reduced with no negative impact on firm profit.

Fixed company costs may have increased during the last years and this has had negative influence on marginal profit received from selling extra unit and overall company profit. As the subject company is a manufacturing company, the costs for all the inputs must be taken into account as this will affect the end cost of the product produced.

Ways to minimize the raw materials costs in terms of finding better suppliers or estimating the optimal purchasing volumes and discount rates that may be generating by doing so is another step in the cost driver analysis.

The next perfection step is to improve delivery prices of raw materials to the company and delivering them to the end customers by means of operating on mutually useful long-term conditions with a delivery company or estimating whether it will be less expensive to purchase trucks and make all the deliveries at company's expense rather than outsource this service.

Within the production process, the optimal production volumes for the product line must be calculated taking account of economies of scale and basing decisions on the effective demand for the company products and company's potential and possible market share. Calculating the time-cost efficiency of each production phase and comparing with factual data will estimate its' contribution to overall production efficiency. Purchasing better technical equipment with the purpose of production time and cost reduction may be decided upon as a worthy investment with net present value.

Within this cost break-down process, estimation of all variable costs: costs to serve customers, costs to purchase, carry, and sell products and services, to engage in various "activities" (ordering products, receiving products, selling products, delivering products, etc.) is a necessary stage .