Thomas Money Service Inc. established in 1940 with the intent of providing small loans for household needs. The success of the company has led them to expand their services which include business loans, business acquisition financing, and commercial real estate loans. In 1946 Thomas merged with a company that specialized in equipment financing called Future Growth Inc. This merger, although was a risky move was a proven success for The company as they became a competitive company in forestry and construction industry with an advantage in the market. For over 67 years, the company has seen continual growth and financial success. Because of the current economic conditions this past year ...view middle of the document...
Because of the decrease in sales, the company must first look at the marginal revenue and the marginal cost profit maximizing guide to determine if it is profitable to continue producing their building and forestry equipment. Based on the data, after completing the analysis it proves that the output at each marginal revenue exceed the marginal cost thus proving that no more would be added to cost than to revenue. If profits are to be maximized, prices must be in excess of the average total cost where (P=MC output) as prices are kept at the equilibrium point to maximize revenue.
Production differentiation is a must to the consumers, as this awareness will influence their demand for the product. This is accomplished through means of advertising. A strong marketing team must show the consumers what FGI can offer not just in pricing but also in terms of the benefits of buying FGI equipment as opposed to the other brands. Another way of increasing revenue is for Thomas Money Inc. to include its employees in the plan. This can be accomplished through quality customer service and since hospitals and nursing homes are in demand for new buildings there is potential for new revenue.
Another recommendation for Thomas Money Inc. is in finding ways to improve the production levels. Since the company produces its own brand of forestry and building equipment they have an advantage to create or increase barriers to entry by their rivals by branding, patenting, or licensing its products. Investing in other subsidiaries within the medical industry with a focus on new construction of nursing homes and hospitals will also increase revenue. Based on the information provided prices are higher than the marginal revenue at every level of output thus putting the company in a position to produce the amount of demand for the product. Reducing prices and a strong advertising campaign are ways the company can boost its production levels.
Thomas Money Inc. has the potential to maximize profits especially since the information stated that marginal revenue exceeds marginal costs. Increasing revenues and limiting variable costs are the primary motives for the company therefore FGI will need to shift from its consumer targeting from new equipment to used equipment. By focusing on the used equipment and liquidating the repossessed units will generate an increase to marginal revenue since the variable costs for those units do not exist.
The company does not have to stop producing new equipment, but the level of new production need to follow the economic condition and markets to retain normal profit. In calculating the data provided additional revenue can be achieved by integrating resource and production efficiency. In using a series of short-run production analysis and application techniques FGI can maximize profits using the total revenue and total cost approach. With total revenue of $2,600 and total cost of $1,050, it...