0
How can such interrelationships affect the profitability of a firm or industry?
Wiki User
∙ 9y agoWant this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
Can the firm's financing decisions affect its profitability?
Yes, a firm's financing decisions can play a major role in determining its profitability. A firm can opt for different methods of financing, i.e. raising money for business needs. For example, finance may be required to invest in a building or machinery or materials. Finance may also be needed for ongoing business expenses like salaries or rent or telecom costs. There are different ways to arrange for these funds for the firm, and funds cost money. If the firm borrows the funds from a bank, then it incurs an expenditure which is the interest charged by the bank. This expense is reduced from profit, so profitability reduces. Another way of raising funds is to sell shares, i.e. the equity of the company. The owners of the shares then become part owners of the company, and can also exercise management control over the company. In this way, distribution of equity can also affect profitability.
How do the Five Forces of Competition in an industry affect its profit potential?
The five forces of competition (the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and the rivalry among competing firms) jointly determine the profitability of an industry due to the way they shape the prices which can be charged, the costs which can be borne, and the investment require to compete within the industry. Leadership will use the five forces framework to determine the competitive structure of an industry. The risk of entry by competitors increases the industry's capacity, starts a greater competition for market share, and generally lowers current pricing. Extreme rivalry among competing firms poses a strong threat to profitability to all firms within the industry. The bargaining power of buyers can reduce the profits within an industry by lower the prices and increasing the costs due to purchasing power (large quantity purchasers can drive down prices at a firm -- or the firm risks losing these large quantity sales to a competitor). On the other side of buyers, the bargaining power of suppliers can reduce a firm's profitability by increasing costs to the firm (or firms if the supplier provides multiple firms within an industry). Lastly, the threat of substitute products is a real threat to profits in that a large number of close substitutes for any product greatly increases competition in pricing and in turn drives profits down. Cheers! Mike H.
Which type of system would you use to determine what trends in your supplier's industry will affect your firm the most in five years?
ESS
What happens to profits as firms leave an industry?
When a firm closes down its business, it implies less competition in the field and hence, lesser need to cut prices and stay afloat. Therefore, though a firm shuts down, the overall profitability increases. It has been said that competition is waste, monopoly is efficient.
The representative firm in a purely competitive industry?
will
Explain how the general environment and the industry environment are highly related how can such relationship affect the profitability of a firm or industry?
explain how the general environment and industry environment are highly related. How can such interrelationships affect the profitability of a firm or industry?
Is profitability of a firm an adequate measure of its efficiency?
to what extent does profitability of a firm measure its efficiency
Can safety and health affect a firm's profitability?
Yes, it can be a major factor in the profitability- and in some cases, the financial survival of the company. There are several firms that have been bankrupted by fines, lawsuits, and increased insurance costs due to a poor safety program.
Can the firm's financing decisions affect its profitability?
Yes, a firm's financing decisions can play a major role in determining its profitability. A firm can opt for different methods of financing, i.e. raising money for business needs. For example, finance may be required to invest in a building or machinery or materials. Finance may also be needed for ongoing business expenses like salaries or rent or telecom costs. There are different ways to arrange for these funds for the firm, and funds cost money. If the firm borrows the funds from a bank, then it incurs an expenditure which is the interest charged by the bank. This expense is reduced from profit, so profitability reduces. Another way of raising funds is to sell shares, i.e. the equity of the company. The owners of the shares then become part owners of the company, and can also exercise management control over the company. In this way, distribution of equity can also affect profitability.
What is Substantiality?
Substantiality refers to the size of the segment in terms of profitability for the firm
Distinguish between a firm and an industry?
A firm is an entity where as an industry is a group of firms.
How do the Five Forces of Competition in an industry affect its profit potential?
The five forces of competition (the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and the rivalry among competing firms) jointly determine the profitability of an industry due to the way they shape the prices which can be charged, the costs which can be borne, and the investment require to compete within the industry. Leadership will use the five forces framework to determine the competitive structure of an industry. The risk of entry by competitors increases the industry's capacity, starts a greater competition for market share, and generally lowers current pricing. Extreme rivalry among competing firms poses a strong threat to profitability to all firms within the industry. The bargaining power of buyers can reduce the profits within an industry by lower the prices and increasing the costs due to purchasing power (large quantity purchasers can drive down prices at a firm -- or the firm risks losing these large quantity sales to a competitor). On the other side of buyers, the bargaining power of suppliers can reduce a firm's profitability by increasing costs to the firm (or firms if the supplier provides multiple firms within an industry). Lastly, the threat of substitute products is a real threat to profits in that a large number of close substitutes for any product greatly increases competition in pricing and in turn drives profits down. Cheers! Mike H.
Which type of system would you use to determine what trends in your supplier's industry will affect your firm the most in five years?
ESS
Does firm size affect the firm profitability?
There si no simple answer to this question. A general theme is that companies have the tendency to increase in size over time in an industry unless new entrants appear which challenge them. This would ultimately lead to higher profits over time. But if profit becomes too high compared to the type of business new entrants should enter the market (under ideal competition) to take away market share and therefore profit. The higher the entrance barrier (the costs to enter a market) the higher normally the size of a firm and the potential profits. Examples are aircraft industry, car industry but also beer and hundred of other market structure examples.
What is the difference between firm and industry?
An industry is a type of business in the economy while a firm is a unit or entity carrying a portion of the business in an economy.
What happens to profits as firms leave an industry?
When a firm closes down its business, it implies less competition in the field and hence, lesser need to cut prices and stay afloat. Therefore, though a firm shuts down, the overall profitability increases. It has been said that competition is waste, monopoly is efficient.
What is the meaning of the term business by design?
The meaning of the term business by design is Conceptual blueprint of a firm, it shows interrelationships between the firm's major processes and main resources required in achieving its objectives and in providing value to its customers.
