Environmental Scan Essay Example | Topics and Well Written Essays - 1000 words

Environmental Scan - Essay Example Their focus for the past few months has been to form strong relationships with their current customers, including car dealerships, repair shops, and the used car market, through strategic marketing and PR platforms. But at the moment they cannot gain customers in the car manufacturing sector as they don’t have the capacity to bring in large orders of the quality demanded by those. The major players all have private negotiations with the larger processing plants or they source them directly through imports. The current financial standing of the business is not enough to ensure profitability or expansion, modification strategies. Variable Cost per month- $ (100*70*20) + 2000 142,000 Average Variable Cost- $ 142,000/6000 23.67 Total revenue per month -$ 32*6000 192,000 The calculations indicate that the firm is not performing enough to generate a steady profit as the revenue is less than the total cost of producing. However, it would not be advisable for the firm to shut down ope rations as the loss being incurred now might well be less than the total fixed costs, which is what the firm would suffer if the management decides to shut down. The revenue per unit received is $32, according to economic rules an â€Å"in the short run, a firm will maximize profit or minimize by producing the output at which marginal revenue equals marginal cost (as long as producing is preferable to shutting down† (McConnel et al., 2008) The firm is producing output at the MC of $30, which is near enough to the marginal revenue of $32 and is following economically sound practices. From the calculation, we can see that the Average variable cost is $23.67, which means that the MR of $32 covers the ATC as well as contributing $8.3 to covering up the fixed costs incurred in the process... As the variable cost of workers is the greatest cost they incur in production, one possible venue is to bring greater automation in the plants along with the implementation of software like ER P or specific manufacturing software to take over the manual jobs in the factory. While the process requires hiring experts as consultants (or creating a new position in the firm) along with the capital requirements for new hardware and software, in the long run, the variable costs will go down and the increase in fixed costs will be offset by greater revenue and profits. Financial formulas can be applied to forecast the expected change in profit and cost structure; including interest expenses from the loans that will be taken or the bonds which will be floated to fund the project. Another way to generate liquid capital can be through making the firm public and floating shares in the market, but the current standing does not indicate that the response will be good and the owners are better off by taking liabilities and keeping control of their business in their hands.