أنشئ حسابًا أو سجّل الدخول للانضمام إلى مجتمعك المهني.
There is no one and best rule. There are many factors affecting this decision. Some of them I present below:
1. Life cycle of the product
In the early stages product is new, innovative and there is no so many customers and competitors. Company can compensate the high production costs by high margin. When the product is well known by customers and there are many competitors, lower margin could be compensated by high sales volume.
2. Product characteristic (e.g. food products, food raw materials usually have smaller profit margin)
3. Marketing strategy and brand positioning (e.g. premium products have higher margin and segmented, demanding customers)
4. Size of the production and economies of scale (If you double the production size , your costs will increase only by 70-80 %. You will generate additional margin even if you decrease the price)
5. Pricing strategy - Lower margin (e.g. attract customers on highly competitive market, penetration pricing) or High margin (e.g. market skimming)
6. Uniqueness of the product is main reason of high margin (e.g. Iphone some years ago, Tesla car at the present)
7. Promotion (e.g. sell your products now at lower margin because 'best before date' on the product label is comming)
High profit and low turnover.
1:- Low Profit Ratio and high Turnover or
Companies can follow many different paths to success. One strategy is to sell many products at low prices and rely on high sales volume to create profits. This strategy requires a company to be efficient, because a low profit margin leaves little room for inefficient operations. Management, analysts and investors study financial ratios to assess how well a company operates. Asset turnover and profit margin measure efficiency and profitability.
