Shrinking Profit Margins Case Study

The change in the contribution margin for all the products is responsible for the change in profitability.

· The standardization of industry product: Vehicles products are standardized even though we still can find some differentiation between auto companies. For the consumers who feel they can find the equivalent vehicles between companies, they will compare them. However, since there are brand loyalty among the consumers in choosing a vehicle related to its differentiation, the switching costs for consumers may be high. Thus, the bargaining power of buyers seems to be moderate.

There are many products and services available in the market today. The automobile market is no different. There are many brands, styles, and price ranges when it comes to vehicles. One specific area of the automobile market are trucks, more specifically is the Ram truck. Dodge Ram has been around since 1981. Truck sales have hit an all time high since 2007 proving that fuel prices are not affecting sales as much (Ross, J. 2013). The big three, Ford, Chevy, and Ram continue to fight each other in the truck selling business and have cut-throat marketing to try to be the best and on top of truck sales. Ram has gotten rid

During the last two quarters of 1999-2000, the company has experienced increasing revenues but profit margin contraction. There is insufficient information disclosure in the financials to source the driving factor. However, the largest driver of sales is through its distributors and Bonny Doon’s EuroDoon products (Figure 2). From a P/L standpoint, we believe that the margin fluctuations can be ignored, with a view of focusing on strategic initiatives to maximize revenue and the quantity sold.

In addition to affecting profits by adjusting useful life and depreciation; key ratios will also be affected. The net profit margin can be influenced both ways to fit the purpose of business strategy. It could be increased to make it seem more profitable, or it can be influenced in a negative way to write off as much expenses as possible – if the year held disappointing results – in order to show next year more positively in comparison.

Change in revenue criteria increased both sales and cost of sales by $ 28 Million. The profit margin was decreased from 1.55% to

In terms of industry profitability, it appears that profit margins have a tendency to fall. This is because competition is high and customers tend to buy low-priced high-value items. The average gross margin and net profit margin is 37.1% and 14.3%, respectively (MSN Money, 2010).

The United States is one of the large fossil fuel consuming country. Most of the automobile vehicle in the country run on the fuels like gasoline and diesel. These fuels are responsible for the increase in pollution. The demand for this fuel is increasing day by day. It is necessary to find alternative fuels because at some point these fuels are going to end. To encourage users to use cleaner vehicles to avoid pollution federal and state governments provide users significant incentives.

The Net profit margin increased in 2001 and 2002 but declined sharply in 2003 and even further in 2004.

Day by day the profit margin is increasing because of budget products, supply chain management, dedicated staff and unique variety are the add value for primark brand.

Operating profit margin figures in the table above show the return from net sales[13]. However profit margin ratios are high enough for the 3 years, there is a fall from 12.86% to 11.26% during 2011-12. Sales revenue increases with a higher rate than gross profit so there is a poor

Sales Solutions Corp’s products and services will be priced at the upper edge of what the market will bear, competing with similar dealership products and services in the North Atlanta area.

have more “pricing power” than when demand is much weaker and falling (e.g. during a recession).

The economies of scale in the retail industry are huge. All of the companies in this industry have first mover advantage. Many of the competitors in this industry already have immense and diverse relationships with many of the suppliers they obtain and any new competitor will have a tough time trying to squeeze into the dealer network in order to establish themselves as any type of threat to another retailer.

Dealerships contributes to the regional economies and government revenues. They are related to their core automobile industries. For instance, in the declining era of General Motors and Chrysler on 2009-2010, the franchise dealerships were also affected. According to company restructuring plans, during those years, about 2000 GM and Chrysler dealership closed (Center for Automotive Research, 2015) . Based on the same source, the number of operating dealerships in the US has been declining on average nearly 200 units per year (from 1988 to 2007). By January 2008, there were 20,770 new-vehicle dealerships in the US, declined to 17,540 units by January 2012, then expanded slowly to become 17,665 by January 2014.