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Factors that affect the profitability of firms. The essence of profitability is a firms revenue . The degree of competition a firm faces. If a firm has monopoly power then it has little competition, therefore demand will be more inelastic. This enables the firm to increase profits by increasing the price. For example, very profitable firms, such as Google and Microsoft have developed a degree of monopoly power, with limited competition. However, in theory, government regulation may prevent monopolies abusing their power e. The 2012 International Conference on Business and Management 6 – 7 September 2012, Phuket - Thailand ~ 236 ~ Factors Affecting Bank Profitability in Indonesia Syafri Faculty of Economics of Trisakti University. Key Factors Affecting Profitability in Beef & Dairy Farming Systems Willem A. Schultheiss Tel: +27. SOCIO-ECONOMIC FACTORS AFFECTING GROUNDNUT PRODUCTION IN SABONGARI LOCAL GOVERNMENT OF KADUNA STATE. Socio-Economic Factors Affecting Groundnut Production. 1 FACTORS AFFECTING SMALL-SCALE BUSINESS PERFORMANCE IN INFORMAL ECONOMY IN LAGOS STATE-NIGERIA: A GENDERED BASED ANALYSIS By Olabisi, Sherifat Yusuff. Department of Sociology Lagos State university E-Mail address: soyusuf@. 2 ABSTRACT Factors Affecting Profitability: An Empirical Study on Ethiopian Banking Industry Amdemikael Abera Addis Ababa University, 2012 This study examines the bank-specific, industry-specific and macro-economic. Factors affecting the profitability of city banks during the years 2012-2009.Internal factors affecting the profitability of banks, including; deposit amount, the payment facilities, credit risk management. If the market is very competitive then profit will be lower. This is because consumers would only buy from the cheapest firms. Also important is the idea of contestability. Market contestability is how easy it is for new firms to enter the market. If entry is easy then firms will always face the threat of competition; even if it is just . The strength of demand. For example demand will be high if the product is fashionable, e. Products which have falling demand like Spam (tinned meat) will lead to low profit for the company. Some companies, like Apple have successfully carved out strong brand loyalty making customers demand many of the new Apple products. However in recent years profits for mobile phone companies have fallen because the high profit encouraged over supply, negating the increase in demand. The state of the economy. If there is economic growth then there will be increased demand for most products especially luxury products with a high income elasticity of demand. For example manufacturers of luxury sports cars will benefit from economic growth but will suffer in times of recession. A successful advertising campaign can increase demand and make the product more inelastic demand, however the increased revenue will need to cover the costs of the advertising. Sometimes the best methods are word of mouth. For example it was not necessary for You. Tube to do much advertising. Substitutes, if there are many substitutes or substitutes are expensive then demand for the product will be higher. Similarly complementary goods will be important for the profits of a company. An increase in costs will decrease profits, this could include labour costs, raw material costs and cost of rent. For example a devaluation of the exchange rate would increase cost of imports therefore companies who imported raw materials would face an increase in costs. Home > Micro-economics > Factors that affect the profitability of firms. The essence of profitability is a firms revenue. These factors will all determine the profitability of firms. EFFECTS OF BANKING SECTORAL FACTORS ON THE PROFITABILITY OF COMMERCIAL BANKS IN KENYA Tobias Olweny. The general objective of this study was to determine and evaluate the effects of banking sectoral factors on the. Sci., 7 (1): 106-113, 2012 108 months (72 weeks) and involves three distinct phases, as follows: Phase 1: Small chicks or brooders. This phase lasts from 0 to 2 months (0-8 weeks) during. Alternatively if the firm is able to increase productivity by improving technology then profits should increase. If a firm imports raw materials the exchange rate will be important. An depreciation making imports more expensive. However depreciation of the exchange rate is good for exporters who will become more competitive. A firm with high fixed costs will need to produce a lot to benefit from economies of scale and produce on the minimum efficient scale, otherwise average costs will be too high. For example in the steel industry we have seen a lot of rationalisation where medium sized firms have lost their competitiveness and had to merger with others. Dynamically efficient. If a firm is not dynamically efficient then over time costs will increase. For example state monopolies often had little incentive to cut costs, e. Therefore before privatisation they made little profit, however with the workings and incentives of the market they became more efficient. If the firm can price discriminate it will be more efficient. This involves charging different prices for the same good, so the firm can charge higher prices to those with inelastic demand. This is important for airline firms. Successful management is important for the long- term growth and profitability of firms. For example, poor management can lead to decline in worker morale, which harms customer service and worker turnover. Also firms may suffer from taking wrong expansion plans. For example, many banks took out risky sub- prime mortgages, but this led to large losses. Tesco suffered from expanding into unrelated business, like garden centre. This led to over- stretching the company and losing site of core- business. Not all firms are profit maximising. Some firms may seek to increase market share, in which case profits will be sacrificed to gain market share. For example, this is the strategy of Walmart and to an extent Amazon.
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