Thomas Money Service Inc. Revised
February 25, 2013
Fred Tadros, Ph.D.
Thomas Money Service Inc. is a company that has been in business since 1940. The business started as a consumer finance company providing small loans for household needs. With time, Thomas Money Service Inc. expanded its business and grew into a company that was providing its services by issuing business loans, providing business acquisition financing, and commercial real estate loans.
In 1946, Thomas Money Service Inc. decided to branch out into equipment financing creating a subsidiary named Future Growth Inc. (FGI). This changed turned out to be very profitable because ...view middle of the document...
First by "Functionally satisfy at least the minimum; emotionally satisfy the maximum. Second, Don't compete on price. Third, Drive expectations. Fourth, Measure causes over outcomes. Fifth, Critical change occurs once competitors start to follow the company's lead. Last, Deep, sustainable strength takes time." (Information Strategies, Inc. 2013).
By following the six rules for increasing revenue and profits, FGI should look at investing into another subsidiary within the medical industry. Even though there has been a decline in the construction business, there are needs in other places where FGI can take advantage from and concentrate on new construction projects such as hospitals and retirement homes. The ability to enter into a new market will allow FGI as an organization to increase its revenues and add third market financial services. Considering the goods and services FGI contributes to the economic market one of the concerns would be the productivity quantity in association with the variable costs and a specified quantity of output. When analyzing the data provided for the production levels, the fixed costs and variable costs are some of the concerns that need attention.
Determine the Profit-Maximizing Quantity
As part of its new strategy, FGI should look at the current demand and shift its consumer target from purchasing new equipment as the primary option to also incorporate used equipment for customers to choose from; thus, creating a market profit and increase in revenue. As part of this change, FGI can take the 500 units of equipment it repossessed and liquidate them will increase its revenue because in one way or another, the equipment's cost in not existent as they already sold it and made a marginal profit on the units. By liquidating the 500 units it will gain FGI a marginal benefit of increased revenue. However, the production of the equipment needs to continue; but at a pace that would allow the economy to sustain the output of the products.
Concepts of Marginal Cost and Marginal Revenue to Maximize Profit
Marginal revenue is the result of the sale of one additional unit of output. For this reason competitive firms tend to produce output until the marginal revenue equals the marginal cost. As for marginal cost is the cost of producing an additional unit. In this case FGI should maintain a production output that will allow it to equal the total sales; thus, not inflicting extra costs and be able to maximize profit on the units that it currently produces.
Creating price, Non-price Strategies
FGI's primary goal is to be able to sustain and eventually increase profitability during the existing economic condition. An approach will be to limit the increase of incurring marginal costs and by sustaining a fair selling price. This will cause for the consumer to remain loyal and remain with the company instead of looking for another company. However, when the marginal cost is increased, it affects the market price which...